Do You Have to Notify Creditors Before Probate in Ontario?

If you are the estate trustee, one worry matters more than most: what if a creditor turns up after you have paid out the beneficiaries? In Ontario, the answer can depend on whether you gave the notices the law provides for.

This article explains why notice to creditors matters, how it connects to your personal liability, and what else affects when you can safely distribute.

Why notice to creditors matters

Under s. 53 of 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.

The protection is tied to the notices. A trustee who distributes without giving them may be exposed if a valid claim appears later. The exact steps and wording of the notices are worth confirming with a lawyer before you act.

Debts come before beneficiaries

The estate is distributed only after funeral and burial expenses and debts are paid. The Trustee Act refers to the personal representative paying the debts, funeral and testamentary expenses.

Even before probate, the deceased's property vests in the personal representative, who holds it as trustee for the people entitled, subject to the payment of debts.

If the assets are not enough to pay all debts, debts are paid proportionately, with no debt of one kind taking priority over another. That is one reason to know the full picture of claims before paying anyone.

Other deadlines that affect timing

Creditors are not the only people with claims on an estate. Several other rules can slow a safe distribution:

• A surviving married spouse must elect between taking under the will or claiming an equalization payment, and the election must be filed within six months of 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.
• A dependant who was not adequately provided for may apply for support from the estate, generally within six months of the grant of the certificate.
• An estate cannot be distributed on an intestacy until one year after the death.

Estate tax and debts

Be careful not to confuse debts with the value used for Estate Administration Tax. Unsecured debts such as credit card balances, loans, interest and lines of credit cannot be deducted to reduce the estate's value for that tax. A mortgage on Ontario real estate is treated differently, because Ontario real estate is valued less its encumbrances.

Accountability and compensation

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. On a passing of accounts, the judge may fully inquire into the deceased's whole property and its administration.

A personal representative is entitled to a fair and reasonable allowance for their care, pains, trouble and time, as allowed by a judge.

What to do next

• List every known debt, including the funeral account, and keep the paperwork.
• Speak with a lawyer about the notices you should give and how to give them.
• Keep records of when each notice was given.
• Wait before distributing until notice, spousal and dependant timelines have been considered.
• Keep clear accounts of what comes in and goes out of the estate.

Frequently asked questions