Notice to Creditors of an Estate in Ontario: How It Works

As an estate trustee, you may worry that a debt will surface after you have paid out the estate. Nobody knows every account, loan or bill a person left behind. Ontario law gives trustees a way to reduce that risk by giving notice to creditors.

This article explains in plain words how that works, what it protects you from, and what it does not. The exact notice steps are worth confirming with a lawyer before you rely on them.

What a notice to creditors does

A notice to creditors, often called advertising for creditors, is a step a personal representative takes to deal with debts they may not know about. Under the Trustee Act, a personal representative who has given the required notices may distribute the estate and is not liable to a creditor whose claim they had no notice of at the time.

In other words, it is a way of closing the door on debts you did not know about, once the notice steps have been properly followed.

What it does not do

The protection is tied to claims you had no notice of. If you know about a debt, you still deal with it. The estate is distributed only after funeral and burial expenses and debts are paid.

Other claims on the estate work on their own timelines. For example, a dependant who was not adequately provided for can ask the court for support, and that application generally must be made within six months of the grant of the certificate. A surviving married spouse has six months from the death to file an election. Whether a creditor notice affects these claims is a question for a lawyer.

When the estate cannot pay everyone

If the assets are not enough to pay all debts, they are paid proportionately, with no debt of one kind taking priority over another. That is why it matters to learn the full picture before you pay anyone in a hurry. Paying one creditor in full while others go unpaid can create problems for you.

Timing around distribution

Several timing rules can affect when you distribute. On an intestacy, an estate cannot be distributed until one year after the death. No distribution may be made within six months of a spouse's death unless the surviving spouse consents in writing or the court authorizes it. Selling real property only for the purpose of distribution is not valid without the beneficiaries' concurrence, or approval from the Children's Lawyer or the Public Guardian and Trustee.

Records, accounts and court oversight

The deceased's property vests in the personal representative, who holds it as trustee for the people entitled, subject to the payment of debts. That is one reason careful records matter if anyone later questions how you handled the estate.

An executor or administrator does not have to account to a court except by inventory, unless a person interested in the estate or a creditor requires it. If accounts are required, the judge may fully inquire into the deceased's whole property and its administration, and may hear complaints of misconduct, neglect or default that caused loss.

• An interested person may move for an order requiring the estate trustee to pass accounts.
• Any person with a financial interest may apply or move for directions, for example where co-trustees are deadlocked.
• The Superior Court of Justice may remove a personal representative on any ground that would justify removing another trustee.
• A personal representative is entitled to a fair and reasonable allowance for their care, pains, trouble and time, as allowed by a judge.

How these points apply to your estate depends on the facts, so it is worth confirming with a lawyer.

What to do next

• List every debt you know about, including funeral costs, credit cards, loans and tax.
• Confirm with a lawyer how to give the required creditor notices and how long to wait.
• Keep copies of every notice and proof of when and how it was given.
• Do not make the final distribution until the notice steps and known debts are complete.
• Consider the timing rules for spouses, dependants and intestacies before paying out.

Frequently asked questions