Is an Executor Personally Liable for Debts in Manitoba?

Being named executor can feel like being handed someone else's financial problems. If the deceased left unpaid bills, loans or taxes, it is natural to wonder whether the bill could end up in your own pocket.

The short answer is that serving as executor does not by itself make you the debtor, but mistakes in how you handle the estate can create personal exposure. This article explains the main risk points under Manitoba law and the steps that help you protect yourself.

This article covers the law of Manitoba.

Where personal risk usually comes from

How debts are paid, and in what order, depends on the estate, so it is worth confirming with a lawyer before you pay anything. Personal risk tends to arise from what the executor does or fails to do, such as handing out money too early, losing track of property or ignoring tax steps.

Manitoba's Trustee Act sets out a protective rule: a trustee is chargeable only for money and securities actually received, and is answerable only for their own acts, receipts, neglects or defaults, not those of another trustee or a banker, broker or other person. That means careless personal conduct is what matters, not simply holding the office.

• Distributing assets to beneficiaries before debts and taxes are dealt with.
• Not reporting or collecting all of the deceased's property.
• Missing tax filings or failing to get tax clearance.
• Keeping poor records so you cannot show what happened to estate money.

Tax: the clearance certificate

Taxes are the most common trap. Before distributing a deceased person's assets, the legal representative should get a Canada Revenue Agency clearance certificate (Form TX19), and if assets are distributed first and tax is owing, the legal representative can be held responsible.

The final T1 return has its own timing. If the death was from January 1 to October 31, the return is due April 30 of the following year, and if the death was from November 1 to December 31, it is due six months after the date of death. Confirm the current dates on the CRA pages, because an accountant can also tell you whether other returns are needed.

Inventory, investments and accounts

Before a grant of probate or administration, the applicant must file a true and complete inventory of everything the deceased owned at death, verified by oath. If you later find property that was not listed, you must file a sworn inventory of it within 30 days, or any longer period a judge allows. An incomplete inventory is an avoidable source of trouble.

If you invest estate money, the Trustee Act offers some comfort: a trustee is not liable for loss on a particular investment if they satisfy the court that the investment resulted from a general investment policy. Whether that applies depends on the facts, so get advice before investing significant sums.

Accounts matter as well. A trustee may file accounts in the court office to have them passed, but not more often than once in each year. A court can also require an executor or administrator to account, on its own motion or on application by an interested person, a creditor or a surety.

Ways to protect yourself

• Keep every receipt, statement and record of money in and out of the estate.
• Prepare a full inventory and update it if more property turns up.
• Wait for tax clearance before you distribute.
• Consider having the trust accounts examined by an independent accountant; trustees may do this in their discretion, but not more than once in every three years.
• Ask the court to pass your accounts if you want formal approval.
• Get legal advice before distributing if the estate looks short of money.

A bond is a separate matter. The bond rule applies to an administrator, for example one appointed because no executor will act, who must generally give a bond totalling double the sworn value of the property. A judge may waive the bond or sureties if all beneficiaries are capable adults who consent. No surety is required if the sworn value is $50,000 or less, and no more than one surety is required if it is over $50,000 but under $100,000. A bond is not required of the Public Guardian and Trustee.

If you do not want the risk: renouncing

A named executor can renounce probate. Renouncing ends the executorship and any trusteeship, and administration passes as if you had never been named executor. The renunciation can expressly reserve the trusteeship, in which case the trusteeship under the will does not end.

The form to renounce as named executor is Form 74N, filed with an Affidavit of Execution of Renunciation, Form 74X. An executor who has renounced or has not proved the will is excluded from the Trustee Act definition of personal representative. Do not simply ignore the role, because the court may summon a named executor to prove the will.

What to do next

Before you pay out anything, list what the deceased owned and owed, speak to an accountant about the final return and clearance, and keep a written record of each decision. If debts seem larger than the assets, or beneficiaries are pressing for money, speak with a lawyer first. They can confirm how creditor claims and priorities apply to your estate.

Frequently asked questions