Passing of Accounts: When Estate Trustees Must Account in Ontario

If you are a beneficiary, it can be hard to wait while an estate is settled and see nothing about where the money went. If you are the estate trustee, you may be wondering how much you owe the beneficiaries by way of explanation.

This article explains the two broad ways an estate trustee accounts: informally, by sharing records, and formally, through a court process called the passing of accounts. The details of when and how to start a formal passing depend on your facts, so a lawyer can confirm them.

What it means to account

An estate trustee is handling someone else's property. After a certificate is issued, estate trustees wind up the deceased's affairs, pay taxes, bills and other debts, collect the estate assets, and distribute the residue to those entitled to it. Accounting is the trustee's explanation of all of that: what came in, what went out and what is left.

A good account lists the assets at the start, income received, each payment made and why, any compensation the trustee took, and what remains to be distributed.

Informal accounting

Many estates are accounted for without a court. The trustee prepares a summary and shares supporting records with the beneficiaries, and the beneficiaries review and approve it. This is often quicker and less costly, and it works well when everyone trusts one another.

• Bank statements for the estate account.
• Appraisals or statements supporting date-of-death values. Assets are valued at fair market value on the date of death, and values must be supported by documents such as account statements or an appraiser's opinion.
• Receipts for funeral costs, debts paid and professional fees.
• The Estate Information Return, which lists each asset and its value on the date of death and is due within 180 calendar days after the certificate is issued.
• Records of tax filings and any CRA clearance certificate.

For the Estate Information Return and any amended return, records must be kept for four years. If a trustee finds new assets or learns the return was incorrect or incomplete, an amended return is due within 60 days of becoming aware.

Court passing of accounts

How a passing of accounts would work in your situation is worth confirming with a lawyer. The Trustee Act refers to it directly: a trustee is entitled to a fair and reasonable allowance for care, pains, trouble and time spent, as a judge of the Superior Court of Justice allows, and that allowance can be fixed when the trustee's accounts are passed.

Whether a formal passing makes sense in your situation, who can start it, which forms are needed and how long it takes all depend on the facts. Because a judge may fix the trustee's compensation when the accounts are passed, it is worth getting legal advice before filing anything.

Trustee compensation and taxes

Section 61 of the Trustee Act does not apply where the will or trust document itself fixes the trustee's allowance. A trustee who is a lawyer and provided necessary professional services to the estate may be allowed more for those services.

For tax, CRA treats fees earned to administer an estate as income from an office, reported in box 14 of a T4 slip, when the executor does not act in that role in the regular course of business. Professional executors, such as a trust company, are treated differently.

Taxes also matter to timing. The legal representative should get a CRA clearance certificate before distributing, and one who distributes first is personally liable for any tax debt, up to the value of the assets distributed.

What to do next

• Beneficiaries: ask the trustee in writing for a summary and supporting statements.
• Trustees: keep every receipt and bank statement, and a log of your time.
• Both: note the dates of the certificate, the tax return due dates and the 180-day return deadline.
• If informal accounting stalls, speak with a lawyer about whether a court passing of accounts makes sense.
• Do not distribute or sign off until you understand the tax position.

Frequently asked questions