A Guide for Estate Trustees (formerly Executors) 

It is the legal duty of the Estate Trustee (formerly Executor) to carry out the terms of the will. In practice this means that you are to bring to final conclusion all the affairs of the estate. You will manage the estate’s assets, collect all income, pay all debts, file income tax returns, and distribute the assets to the beneficiaries.

You are under no legal obligation to act as Estate Trustee. You can renounce the appointment, but you should do so before taking on any responsibility.

Duties of an Estate Trustees need not be onerous. The process of settling an estate follows three main steps: preparing for what is commonly called probate, probating the will, and administering and distributing  the estate.

This web page is intended to give you an overview of these steps and your duties and responsibilities. 

Preparing for “probate”

A. Immediate Concerns

1. Locate the will. Familiarize yourself with its  provisions and the powers given to you.

2. Arrange for the burial of the deceased. Normally this is undertaken by the family, but the Estate Trustee is legally responsible for the arrangements.

3. Arrange for the immediate needs of the family. Usually the bank manager can authorize the release of sufficient emergency funds.

4. Protect estate assets. Take custody of personal property such as cash, securities, and jewellery. Protect and make secure all real estate and vacant property. Review personal papers, business transactions, bank accounts, insurance coverage, etc., and take all necessary steps to preserve and protect the estate assets.

5. Arrange for the continuance of a family business.

B. Planning Concerns

1. In most cases, you should engage a lawyer to file legal papers and to guide you through the settlement process.

2. Determine if there is to be an election under provincial dependents’ relief legislation. This legislation allows dependents in financial distress to apply for the maintenance of support if no provision was made in the deceased will to do so. 

C. The Estate Inventory

When you make application for what is commonly called probate, you will need the original copy of the will, together with an inventory of all estate assets and liabilities. This involves listing all assets together with their market value at the time of death. You may need to obtain professional appraisals for certain items such as real estate, jewellery, silverware, works of art. 

Probating the Will

Your first major task is to “probate” the will. This is usually done by an application to the court by your lawyer. “Letters Probate” are simply a document giving court approval that the will is the valid ‘last will and testament’ of the deceased, and confirming the appointment of the person named in the will as the Estate Trustee. “Letters probate” are essential documents in the settlement process, as it may be impossible to transfer certain assets without them. Notarized copies of the “probate” papers should be made and presented when transacting business with banks, trusts and brokers.

Administering and Distributing

Having obtained tailed “probate”, you are now in a position to administer the estate and prepare for distribution of the assets.

A. Accounts and Record Keeping

Set up a bank account in the name of the estate as soon as possible and use it for all transactions. You will also need to establish a system of record keeping to record the business you have undertaken for the estate. Keep receipts of payments made and request releases from the beneficiaries. Careful records are essential, as you may be required to account for action regarding the estate.

B. Notifications

To obtain all funds due the estate and to pay all liabilities, many individuals and third parties will need to be notified of the death, the most obvious being beneficiaries, creditors, employer/employee groups, pension plans and insurance companies. You should publish notice of the death in local newspapers, giving notification to creditors that claims against the estate must be filed by a certain date. This will protect you against personal liability if a claim is lodged after you have distributed the assets.

Don’t overlook banks and credit unions, annuity issuers, CPP, OAS, as well as clubs and fraternal societies. Have the mail redirected to your address. Cancel all subscriptions, credit cards, charge accounts, memberships, etc.

C. Debts of the Deceased

Pay all debts owed by the estate prior to distributing any assets. Pay careful attention to each claim. Determine that the debt was in fact incurred by the deceased and that it has not previously been paid. If in doubt, review bank statements and ask the creditors to provide further information. Other payments to consider will be funeral expenses and “probate” fees, transfer costs. property maintenance, insurance, or other property costs; fees for lawyers, advisors and agents; and Estate Trustee’s compensation. Maintain sufficient funds to cover these expenses.

D. Income Taxes

Obtain Canada Revenue Agency’s “Guide for Preparing T1 Returns for Deceased Persons” and follow its instructions carefully.

Generally, you will need to file only one return, a T1 personal tax return for the year in which death occurs. However, multiple filings may be necessary. You may elect to file more than one return for the year of death. You may need to file returns for prior years. You may also need to file a T3 estate tax return for income generated during the period of your administration.

Returns for the year of death must be filed by the later of April 30 of the following year or six months from the date of death. Returns for prior years must be filed within six months of death.

As the deceased is deemed to have disposed of all assets on the date of death, you should pay careful attention to the handling of taxable capital gains and capital losses. This may be a difficult area and could involve special elections, spousal rollovers, the application of losses to prior year returns, etc. In such cases, seek legal or financial advice.

Once you receive the assessment notices for all the returns you have filed, you should request an Income Tax Clearance Certificate from Canada Revenue Agency acknowledging payment of taxes owed by the deceased to the date of death. Remember that you are personally liable for any unpaid taxes, interest or penalties, and  should thus make no transfers to the beneficiaries until you receive this certificate. If you also have to file a T3 return you will need a further clearance certificate to close the administration of the estate.

E. Distributing the Assets

Consult your lawyer before distributing any assets. Remember to follow any relevant legislation such as that involving dependent relief or the devolution of real property.

Your tasks may include:

• conveying, selling or holding those estate assets not specifically bequeathed—real estate, household goods, automobiles, stocks, bonds, royalties, etc;

• paying legacies and making interim distribution to residual beneficiaries;

• preparing an account of your administration, including your fee;

• setting up trust funds if so directed;

• determining the identity of beneficiaries where the will specifies a “clan” of persons, such as children or brothers and sisters;

• distributing bequests and obtaining releases from further liability from beneficiaries; and

• obtaining final clearance from Canada Revenue Agency and making final distribution.

F. Provision for Charities

There are several ways that the deceased may have made provisions for charities; a set dollar amount or per cent share of estate residue; the remaining principal from a spousal trust; or the residue from a charitable remainder trust.

The estate may be the beneficiary of an RRSP or RRIF or retirement annuity. The will may provide for a charitable bequest (gift) of an equivalent amount.

Charitable gifts are a highly effective means of offsetting taxes on your estate. Gifts that flow through the estate will receive a tax credit of up to 100% of net annual income. Any excess can be carried back to the immediate preceding year.

A Final Word

The items contained herein have been reviewed by expert financial and legal counsel and are believed to be accurate interpretations of federal tax law. You should be sure, however, to consult with your own legal advisors about the applicability to your situation.  

The information presented here is a general overview and is not a substitute for professional advice. The authors and editors are not responsible for the results of any actions taken on the basis of information presented here, nor for any errors or omissions.

For more information please contact us by calling us at 519-837-6422 or by email at foundation@gghorg.ca .