- Debts of the deceased must be paid from the estate before any gifts in the will go to beneficiaries.
- When an estate cannot cover everything, Saskatchewan sets a priority order that starts with secured creditors and ends with ordinary unsecured debts.
- An executor who distributes assets before getting a CRA clearance certificate can be personally liable for unpaid tax up to the value of what was distributed.
You have been named executor, the bills are arriving, and the estate account looks smaller than the debts. Who gets paid first is not a matter of who calls the loudest or who you feel most sorry for. Paying in the wrong order can cause real trouble for you as the person in charge.
This article explains the order Saskatchewan guidance sets out for paying an estate's debts when money is short, where taxes fit in, and the steps that help protect you. Every estate is different, so treat this as a map and not a substitute for advice on your own file.
This article covers the law of Saskatchewan.
Debts come before gifts
The debts of the person who died are paid from the estate, and they must be paid before any gifts in the will go to beneficiaries. That means you should not hand out cash, jewellery or other gifts early just because a beneficiary is asking.
Before paying, the executor should run a personal property lien search and a judgment registry search, so that you know about debts nobody mentioned. You should also publish a Notice to Creditors (Form 16-48) under section 32 of The Administration of Estates Act, once a week for two consecutive weeks, in a newspaper nearest the deceased's last residence. Paying debts by priority and putting estate money in an estate account are both on the province's list of common executor duties.
The order of payment when the estate cannot pay everyone
If the estate is insolvent, meaning there is not enough to pay all debts, the province sets out the following priority. Each level is generally paid in full before the next level receives anything.
| Priority | Who is paid | Notes |
|---|---|---|
| 1 | Secured creditors | Up to the value of their security |
| 2 | Reasonable funeral and testamentary expenses | Only what is reasonable |
| 3 | Costs of administration | Includes executor fees |
| 4 | Debts with legislative priority | Child maintenance, landlord rent, unpaid wages, certain Income Tax Act and Bankruptcy and Insolvency Act debts |
| 5 | Other unsecured debts | Paid ratably if funds are not enough |
At the last level, if the money runs out, unsecured creditors share what is left ratably, which means in proportion and not first come, first served.
Where funeral costs, taxes and credit cards fit
- Funeral bills: reasonable funeral and testamentary expenses sit second in the order, after secured creditors.
- A mortgage or loan secured against an asset: secured creditors come first, but only up to the value of the security.
- Executor fees and administration costs: these rank third. The executor's out-of-pocket expenses are paid by the estate, and the court can review them.
- Tax debts: certain Income Tax Act debts fall within the fourth level, the debts with legislative priority. Which tax debts qualify depends on the facts, so confirm with a lawyer or accountant.
- Credit cards and personal loans without security: these are ordinary unsecured debts at the bottom of the order.
If you are unsure how a particular debt is classified, ask before paying it. The province recommends consulting a lawyer for an insolvent estate and, if needed, applying to the court for directions.
Tax and personal liability for the executor
Taxes deserve special care. If a legal representative distributes assets before getting a Canada Revenue Agency clearance certificate and tax is still owing, they can be held personally liable up to the value of the assets distributed. The certificate is requested on Form TX19 only after returns are filed, notices of assessment are received and tax is paid, and assessment can take up to 120 days.
The final income tax return is generally due April 30 of the following year if the death was between January 1 and October 31, or six months after death if the death was between November 1 and December 31. If the deceased or their spouse ran a business, the filing date may instead be June 15 of the following year (for a death between January 1 and December 15), but payment is still due on the regular date. Payment is due on the same date as the regular filing deadline, and late filing with a balance owing attracts a penalty of 5% plus 1% per full month up to 12 months. Final distribution to beneficiaries cannot occur until the clearance certificate is received.
What to do next
- Open an estate account and keep every receipt and record of what you pay and why.
- Run the lien and judgment searches, and publish the Notice to Creditors.
- List every debt and sort it into the priority levels, with secured creditors first and reasonable funeral and testamentary expenses second, before paying anything if the estate may be insolvent.
- Hold back distributions to beneficiaries until debts are dealt with and the CRA clearance certificate has been received.
- If the debts look larger than the assets, talk to a lawyer before paying anyone, and ask whether to apply to the court for directions.
A short conversation with a lawyer early on is usually far less costly than correcting a payment made in the wrong order.
Frequently asked questions
What debts get paid first from an estate in Saskatchewan?
When the estate is insolvent, secured creditors are paid first, up to the value of their security. Reasonable funeral and testamentary expenses come next, then costs of administration, then debts with legislative priority, and finally other unsecured debts.
Can beneficiaries be paid before the debts?
No. Debts must be paid before any gifts in the will go to beneficiaries. Paying early can leave the executor exposed if the money later runs short.
Can I be personally responsible for the deceased's tax?
Yes, in some cases. If you distribute assets before receiving a CRA clearance certificate and tax is still owing, you can be held personally liable up to the value of the assets distributed.
What if I do not know whether the estate is insolvent?
Gather the debt information first, including lien and judgment searches. The province recommends consulting a lawyer for an insolvent estate and, if needed, applying to the court for directions.
Sources
- Government of Saskatchewan – Executor or administrator duties — saskatchewan.ca
- Government of Saskatchewan – Creditors, debts and expenses — saskatchewan.ca
- Canada Revenue Agency – Clearance certificate — canada.ca
- Court of King's Bench – Probating an Estate — sasklawcourts.ca
- Canada Revenue Agency – Filing and payment due dates (someone who died) — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
This is a wills & estates question
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