Opening an Estate Bank Account as Executor in Ontario

One of the first practical jobs for many executors is finding somewhere to put the estate's money. Incoming refunds, final pay and sale proceeds need a home, and paying bills from your personal account quickly becomes confusing.

This article explains in plain terms when an estate account is usually opened, what it helps you do, and why mixing estate and personal money is risky. What a particular bank asks for depends on its own policies, so confirm with your bank.

When can you open an estate account?

If the deceased owned real property or assets held by a financial institution, the estate normally must be probated, although Ontario's official page also says probate is not always required to administer an estate. What a bank asks for before it opens an estate account or releases funds depends on its own policy, so ask your bank directly. There is no Ontario statute on what banks release before probate.

Once you have the certificate of appointment, you have 180 calendar days to file an Estate Information Return. A bond must be filed with the probate application in some cases, for example where the person died without a will or the applicant was not named as estate trustee. A small estate does not need a bond unless a beneficiary is a minor or incapable.

Why keep estate money separate

The deceased's property, other than property passing by survivorship, vests in the personal representative as trustee, subject to payment of the deceased's debts. You hold it for others, not for yourself. Property held with a right of survivorship, such as a home owned as joint tenants, passes to the survivor and is not part of the estate you manage.

A separate account makes your duties easier to meet. Estate trustees must keep accurate records of the estate's assets and transactions, and accounts filed with the court must include assets at the date of death, all money received, all liabilities and a statement of the compensation claimed. A beneficiary can compel accounts. Mixed funds make it hard to prove where each dollar went, and that can look like misuse even when it is not.

What goes in and what comes out

• Money in: final wages or refunds, sale proceeds, and cash from closing the deceased's accounts, once you are able to collect them.
• Funeral and burial costs and debts: these are paid before the estate is distributed, and as legal representative you must also make sure any balance owing to the CRA is paid before you distribute.
• Reasonable expenses of carrying out the trust: you may pay from estate property, or pay personally and recover from the estate, and the court may later disallow a payment or recovery.
• Executor compensation: a fair and reasonable allowance as allowed by a judge, unless the will fixes it.

If the estate pays executor fees, it must file a T4 Summary and the related T4 slips. Fees paid to someone not acting as an executor in the course of a business are employment income reported on a T4, while professional executors' fees are business income reported on a T4A. Do not pay yourself a fee without getting advice on the amount and tax treatment.

If you invest estate money while waiting to distribute, a trustee must exercise the care, skill, diligence and judgment of a prudent investor.

Tax and timing points that affect the account

As legal representative, you must file all required returns for the deceased, make sure any balance owing is paid before distributing, and confirm that balances owing to the CRA are resolved. The final T1 return is due April 30 of the following year for a death from January 1 to October 31, and six months after death for a death from November 1 to December 31. If the deceased or a spouse or common-law partner living with them was running a business, the filing date can move to June 15, though payment is still due on the regular date.

A T3 trust return must be filed within 90 days of the trust's tax year-end, and any balance owing is due in the same 90 days. A trust must file if its income is more than $500, or if it makes a capital distribution to beneficiaries. Keep enough in the account to cover tax. Distributing without a clearance certificate when tax is owing can make you personally liable up to the value of assets distributed.

What to do next

• Obtain the certificate of appointment, if the estate requires probate.
• Ask your bank what documents it needs and what account type it offers for estates.
• Deposit estate money into the estate account and keep it apart from your personal money, so your records stay clear. If you pay a proper estate expense personally, keep the receipt so you can show it later.
• Keep receipts and a running ledger from the date of death.
• Diarize the Estate Information Return deadline and tax filing dates.
• Ask a lawyer or accountant before you pay any fee to yourself or make any distribution.

Frequently asked questions