What Is a Beneficiary of an Estate in Ontario? Plain Answer

Someone tells you that you are a beneficiary of an estate, perhaps after a relative has died. It is natural to wonder what that actually gives you, whether you have to do anything, and whether you are now in charge of anything.

In plain terms, a beneficiary is someone who is to receive a share of the estate. That is different from the job of running the estate. This article explains the difference, what you can expect along the way, and when it makes sense to get legal advice.

What a beneficiary is, in plain words

A beneficiary is a person or organization that stands to receive property from a deceased person's estate. With a will, the estate is normally distributed as the will directs once assets are turned into money and funeral costs and debts are paid. Without a will, the Succession Law Reform Act decides who inherits, which generally means the spouse and closest next-of-kin, and a common-law spouse does not inherit under that Act.

Being named does not mean you receive anything right away. Debts, taxes and expenses are dealt with first, and the amount left over is not known at the start. With a will, what you receive depends on what the will says.

Beneficiary versus estate trustee

An estate trustee is responsible for winding up the deceased person's affairs, paying taxes, bills and debts, collecting assets, and carrying out the will's wishes in line with the law. A person named in a will as trustee can decline to act. The same person can be both a trustee and a beneficiary, which is common when a spouse or adult child is named to do both.

What a beneficiary can expect along the way

When someone applies for probate, the applicant must send or give the application to the estate beneficiaries before filing with the court. The copy must be signed before a Commissioner for Taking Affidavits, and can be sent by email to the last known address, regular mail or courier. A person with a financial interest can use Form 74P to ask to be notified of estate proceedings.

If any beneficiary is under 18, the Office of the Children's Lawyer must be served when applying for a certificate of appointment of estate trustee, and may act for that child. For small estates valued at $150,000 or less, the applicant gives the signed application to everyone entitled to a share at least 30 days before filing.

• You can expect to be told that a probate application is being made.
• You can ask to be notified of estate proceedings by filing Form 74P if you have a financial interest.
• If you are a surviving spouse, you may have a choice between what the will or intestacy gives you and an equalization payment under the Family Law Act, and the election form must be filed no later than six months from the date of death.

What you do not control, and what protects you

As a beneficiary you do not run the estate; that is the estate trustee's job. The trustee decides how to carry out administration within the law. There are limits on what the trustee may do, though. For example, a trustee may take compensation ahead of time only if everyone with a vested or contingent interest agrees (and is able to), the court approves it, or the will allows it. Doing so otherwise risks liability for breach of trust, a reduced allowance and repayment on a passing of accounts.

Trustees are entitled to a fair and reasonable allowance for their care, pains, trouble and time, as a judge allows, unless the will fixes the allowance. If you have concerns, a person who appears to have a financial interest in an estate may apply for directions on the procedure for bringing a matter before the court. Whether a concern is worth raising, and how, depends on the facts and is worth discussing with a lawyer.

Tax and next steps

The CRA lists most gifts and inheritances among amounts that are not reported or taxed, but income earned on those amounts is taxable. The deceased person's own tax picture is separate. Property they owned is treated as disposed of immediately before death at fair market value, reported on the final return. If you later sell inherited property, the gain is measured from the fair market value reported on the deceased's final return, and you report the sale on your own return.

• Ask for a copy of the will, if there is one, and read what it says about your gift.
• Confirm who the estate trustee is and how to reach them.
• Keep any notice or probate application you receive, and note the dates.
• Consider filing Form 74P if you want to be notified of estate proceedings.
• Keep records of anything you receive from the estate, and speak to an accountant about income earned after you receive it.
• Speak to a lawyer if you are a spouse weighing an election, a parent of a child beneficiary, or concerned about how the estate is being handled.

Frequently asked questions