While it is often the case that an Estate Trustee may be very familiar with the deceased’s financial affairs, it also may be the case that the person appointed or seeking to be appointed as an Estate Trustee may be a distant relative or someone who does not possess an intimate understanding of the deceased’s assets.
This article provides a basic list of items that an Estate Trustee may look into in navigating their role as an Estate Trustee:
1. Locate Assets
A general recommendation would be to start with a search at the deceased’s place of residence. This includes accessing deceased’s personal papers, financial records and tax filings. Common sense suggests that for an individual who maintained a strong online presence, the electronic devices, websites and platforms would need to be explored and reviewed. This will provide information about various accounts and assets the deceased owned. Note that if the deceased did not maintain up to date passwords log, there can be difficulties in accessing websites and information required for the administration to continue.
Once this search is complete, it is necessary to look outside the deceased’s residence. Even when an estate trustee claims full knowledge of the deceased’s financial affairs, it is a good idea to make inquiries with banks and other institutions in the area where the deceased lived. The inquiry would relate to whether the deceased had any personal or investment accounts or any other assets with the institution including any safety deposit boxes. Local brokerage firms should be written to if the deceased had investment assets.
2. Secure Assets
Was cash found at the deceased’s premises? Did the deceased leave behind valuable items such as jewelry that needs to be secured? If so, such items should be gathered and deposited in a safe place. Is the property a rental property? If so, arrangement must be made to collect rent and take over other matters related to running the same.
The Estate Trustee should complete a thorough inventory of all the assets and include things considered to be personal items of the deceased. Items such as jewelry and other household goods may require a valuation and may require more attention and should be held for safekeeping prior to any distribution to beneficiaries. Written records, photo and video evidence of contents will help with any claims from beneficiaries.
For certain items such as cash or payments collected, the Estate Trustee should inquire whether a bank will allow an Estate Trustee to deposit into an account opened for the estate. If the deceased owned real estate, the property must be secured and insured. If the property is vacant, the insurance company should be notified and coverage should be arranged accordingly. The message is to treat the property as if it was your own and take care of the assets in your possession. If a beneficiary is occupying the property, a clear understanding should exist in terms of that individual’s repair and rent obligations, if any. Speak to a lawyer for additional input. Key is to avoid disputes and conflict if there are additional beneficiaries who may feel unfairly treated.
Now that you have a complete list of assets the deceased owned and they are secured, it is important to have them valued. This will be necessary for both tax filings under the Income Tax Act along with detailed reporting requirements imposed on personal representatives in order to file an Estate Information Return. This may apply to stocks and bonds, real estate (personal) or investment use, shares in corporations along with personal items.
The list above is just a starting point for administration of an estate. It is important to protect yourself from liability and ensure that assets are being safeguarded and accounted for in the right manner. Our office provides services to executors, administrators, estate trustees and guides them through this process. Contact your Estate Administration Expert for assistance.
When acting as a prospective estate trustee in Ontario, it is often necessary to apply to the court for a certificate of appointment of estate trustee. Although it is commonly referred to as “probate”, the certificate of appointment is essentially a validation of a will or, in a scenario where no will exists, an authorization for the estate trustee to manage and distribute the estate of a deceased person.
This certificate may be required in circumstances where the deceased owned real estate or held assets in accounts for which various offices and institutions require the court’s validation. In fact, most financial institutions or land registry offices want to be certain of the appointment in order to avoid being wrapped up in any litigation in the event that money or assets are transferred to the wrong parties.
The application for probate also involves the payment of estate administration tax, or as commonly known as “probate tax” under the Estate Administration Tax Act. The amount payable for this tax depends on the size of the estate and the current tax rates are as follows:
- For an estate valued less than $1,000, there will be no probate tax payable.
- For an estate valued up to $50,000, the rate is $5 for each $1000 or part thereof.
- For an estate valued at over $50,000, the rate is $250 (for the first $50,000) plus $15 for each $1000 or part thereof.
For example, an estate with a value of $240,000 will be required to pay $3,100 in estimated estate administration tax. A larger estate of $1,000,000 will attract $14,500 in estate administration tax.
For estate administration tax calculations, the total value of the deceased’s estate may include assets such as:
- Bank accounts
- Investments (bonds, trust units, stocks, etc.)
- Vehicles and vessels
- Real estate in Ontario (net of encumbrances such as mortgages)
- Insurance proceeds (where proceeds pass through the estate)
- All other property including business interests, goods, intangibles, etc.
There are some assets which flow outside the estate such as those which are held jointly or, pass by way of beneficiary designations. When considering estate planning, a number of steps may be taken to reduce probate fees payable. However, some of these options present other risks which need to be carefully assessed.
Along with the above, there are very onerous requirements placed on an estate trustee to not only manage and distribute the estate, but also to file a detailed estate information return to the Ministry of Finance within 90 days of obtaining probate. It is important to consult a professional to help you with estate planning or, administration services, to ensure you limit your exposure to potential liability. Should you require any assistance or, other estate related services, we would be glad to assist you.
Please note the above serves as general information and not legal advice and is not intended to be relied on as such.Read More
Today’s post highlights some important items that an Estate Trustee must turn his or her attention to during the administration of an Estate.
In a nutshell, an Estate Trustee’s role includes tasks such as gathering and managing assets, paying debts and expenses, locating the beneficiaries an distributing the estate to those entitled. However, from start to finish, there are multiple items to be taken care of by the Estate Trustee – some simple but others which can be appear more daunting to the unfamiliar. Listed below are some of these tasks:
Certificate of Appointment: depending on the assets that form a part of the estate, an Estate Trustee may be advised that he or she is required to ‘probate’ a Will which is the process of obtaining formal authorization from the Court. This authorization is formally known as the Certificate of Appointment of Estate Trustee and essentially confirms that based on the information provided, the Will, if one was submitted, would be deemed to be the last known Will of the deceased and lists the appropriate individual(s) as the proper personal representatives of the estate. A similar authorization exists if there was no Will to begin with. In order to prepare this application, it will be important to ascertain value of the estate. There are various rules in relation to which assets form a part of the estate and those that are exempt which are important know as they impact the amount of estate administration tax that may be payable into the court. Along with all this, proper notice is required to be provided to those entitled to the estate.
Income Tax: The Income Tax Act of Canada provides that when an individual dies, there is a “deemed disposition” of assets which may give rise to capital gains (or losses) as at the date of death. To determine these figures, an inventory of assets is crucial along with filing the necessary tax returns – and the estate trustee may be required to file the following returns:
- T-1 General return – if the deceased had not filed for previous taxation year(s);
- T-1 Terminal return – covers the year of death;
- T-3 Estate return – this covers income received from any estate assets including interest earned
- Final distribution returns
- Designation of an estate as a Graduated Rate Estate, if applicable, which is entitled to marginal tax rates.
Clearance Certificates: before making final distributions to the beneficiaries, it is important to obtain a Clearance Certificate from the Canada Revenue Agency. The Estate Trustee risks personal liability in relation to the distributions made if it is found later that there are taxes owing which were to be paid. Obtaining this certificate provides assurance to the Estate Trustee that no additional tax is payable.
As one can imagine, a number of other tasks need attention, such as:
- Searches in relation to any judgments owing in the deceased’s name
- Preparation of Estate Accounts
- Preparation of Statement of Accounts as well as releases from Beneficiaries
- Preparing necessary notice to creditors
- And many more…
As an estate trustee, you are entitled to claim compensation in connection with time spent during estate administration. The calculation is based on a percentage of the estate and depends on the nature of the work involved and the amount is usually determined after the estate administration is completed.
It is highly advised that if you have been appointed as an Estate Trustee or want have such an appointment made by the courts, you speak to a professional to gain a clearer understanding of the nature of the role.
This content is only for information purposes and does not constitute legal advice and should not be relied on as such. Please speak to a lawyer for more details.Read More