As Estate Lawyers or Will and Probate Lawyers a question often asked is how does an estate end? How does the executor finish their work in administering an estate? The courts have held that there are two methods.
Realistically there are three, going from the least to the most expensive. They are, ONE do nothing. The executor simply does their work in collecting the assets of the estate, making sure the debts are paid, making sure income tax returns have been filed, taxes paid and that the assets of the estate have been distributed in accordance with the terms of the Will. The executor realistically does not have to do anything more than that. More often than not this is how an estate ends and you encounter this in a close-knit family in which no one has any objections over how the executor has acted, and the executor is confident that no one ever will complain.
TWO When there are some concerns, if the executor is not a member of the family or a prime beneficiary, the lawyer will prepare a detailed schedule reflecting how the estate’s assets have been administered often including banking records, setting out the executor’s compensation sought, see our blog article on How are Executors Fees Calculated, the taxes and other expenses incurred and the proposed distribution. Detailed releases are prepared and accompany the schedule which are to be signed by each of the beneficiaries before the estate is distributed.
THREE Lastly, the estate trustees can apply to the court for a passing of accounts. Passing of accounts is an extremely formal and in some ways an arcane method of detailing every penny in and out, and every action taken by the executors which is subject to approval by the court.
All parties who have a financial interest, primarily the beneficiaries, may object and executor’s compensation is reviewed and approved. Passing of accounts only takes the Estate to one point in time, the date of the judge’s order. Actions taken after that date should an estate not have been finally administered might very well require a further court appearance. This is a very expensive process, but it is an estate expense and in that way all the residual beneficiaries are paying for that process.
An important aspect of administering an estate are the collection and distribution of the assets of the estate, after the payment of the Estate’s debts. One of the debt obligations is to ensure that the income tax returns of the deceased and the estate have been properly prepared, filed and the taxes have been paid.
The court has reviewed the issue of the last 2 methodologies of ending an estate. It has been reviewed in the Sheard Estate, a 2023 decision of Justice Mesbur. Justice Mesbur held that she had no problem with the concept of the executors asking for a release from the beneficiaries before a distribution of the estate can be made, however the beneficiaries must be made aware of no. THREE, the alternate of passing of accounts, which would give them the opportunity to object. The beneficiaries can make their submissions on any steps the executors have taken in managing the estate. Mesbur cited the 2016 Superior Court Eve v. Phillips case, which held that while an estate trustee is entitled to request a release and waiver before making a distribution the beneficiaries must be advised that if they do not agree the estate trustee will be required to formally pass their accounts and the beneficiary will have an opportunity to make their objections. It is important that the executor’s request for a release is not simply stated as an absolute condition as was held in the Brighter Estate, a 1998 decision. There the beneficiaries were told that their share will remain in the estate account and will not be released until the release has been signed. The executor has no right to do so. However, as was pointed out in Eve above, the better practice is to point out the realistic alternatives, and there is nothing improper about explaining the cost of a formal passing of accounts. Not only should the estate trustee when asking for a release, mention the alternative of a formal passing of accounts, but strongly urge the beneficiaries to seek independent legally advice before they sign any document, and that they should not be relying upon the executor’s lawyers for independent legal advice. It is a quirk of the Law of Ontario, the lawyers assisting the executor on an estate acts only for the executors not the beneficiaries.
This is a common part of estate litigation and is an issue that has arisen a number of times in our practice. This is something that as Estate litigation lawyers we encounter regularly.
