Reference Articles > What You Need To Know About Estate Administration: In Three Parts- Part 2 

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This article is the first of three articles that reviews the process of estate administration in Ontario. The second part examines the roles of the various players in the administration process and the third reviews the accounting responsibility and process.

PART II – THE PLAYERS IN THE ADMINISTRATION PROCESS

There can be different players involved during the administration of an estate. These players include the estate trustee (formerly in Ontario the executor or executrix) or the person appointed by the testator (testatrix) to administer the estate, the beneficiaries, and the advisors – usually an estate solicitor and perhaps an accountant. Each player has a unique and mutually exclusive role.

The Estate Trustee

At the beginning, the solicitor for the estate should explain to the estate trustee the duties and obligations of being an estate trustee as well as the steps to be taken to administer the estate. In summary, these duties mean the estate trustee is a fiduciary --- he or she is not administering the estate for him or herself or even as he or she would like it to be administered; rather the estate trustee takes on the task of administration for the beneficiaries in accordance with the directions given in the will. This explanation should also include the expectations and rights of the beneficiaries.

Generally speaking, the duties of an estate trustee include ascertaining the deceased’s assets and debts, paying debts, filing income tax returns, dealing with claims, distributing assets and winding up the estate. In more detail, a beneficiary can expect an estate trustee to do the following:

• Make the funeral arrangements
• Retain a solicitor for advice
• Locate, inventory, value and secure the assets
• Determine and provide addresses for all beneficiaries
• Discuss any potential claims of dependants
• Determine the debts of the deceased and pay them after contestation and settlement as necessary
• Obtain investment advise
• File tax returns, pay taxes owing and obtain appropriate tax clearance
• Distribute assets as directed by the will (or intestacy rules)
• Invest assets for the establishment of any testamentary trusts
• Maintain proper records
• Prepare periodic accounts detailing the administration of the estate for beneficiary information and review
• Report to beneficiaries as required
• Respond to inquiries promptly.

Although they are entitled to receive compensation for their efforts, an estate trustee must act selfishly and always for the beneficiaries. Where the estate trustee is also or may also be a beneficiary this can give rise to a conflict. Accordingly, an estate trustee must:

• Act honestly, prudently and with the appropriate level of skill
• Must follow the directions contained in the governing documents (or intestacy rules)
• Must treat all beneficiaries equally (unless the will directs otherwise)
• May not delegate his or her authority to make decisions
• May not personally profit from his or her dealings with the estate.
• May not place themselves or act or perceived to be acting in conflict with the interests of the beneficiaries,
• Must keep and maintain records and produce accounts on reasonable notice
• Must not unreasonably delay the administration of the estate.

The Estate Solicitor

The estate solicitor has a limited role. The estate solicitor is hired or retained by the estate trustee. Although called the solicitor for the estate, he or she is not hired by the beneficiaries. If a dispute arises, the beneficiaries may be required to seek separate legal representation.

The duties of the estate solicitor are generally to:

• Advise the estate trustee
• Determine the appropriate testamentary document(s)
• Read and if necessary interpret (or seek the guidance from the court on the interpretation) the testamentary documents
• Meet with the estate trustee to review assets and debts
• Determine if probate is necessary
• Obtain necessary information to complete legal documentation required
• Prepare legal documentation
• Advertise for creditors
• Arrange for the settlement of creditor’s claims
• Assist the estate trustee with the preparation of the estate accounts
• Assist the estate trustee with the preparation of income tax returns (or direct to an accountant)
• Advise with respect (or direct to an accountant) to income tax returns, holdbacks, non-resident tax liability and necessity for final tax clearance certificate
• Prepare releases for execution by beneficiaries
• Protect the interests of the estate trustee

If the estate trustee also happens to be a lawyer who acts as the estate solicitor then the beneficiaries are entitled to insist that the solicitor make a very clear distinction in his or her legal accounts between services rendered as solicitor and those rendered as estate trustee. The level of compensation acting in these different capacities is not the same in calculation or quantum. This distinction should also be made where, by default, the estate solicitor ends up carrying out the duties of the estate trustee. If this happens, then the estate trustee’s compensation should be reduced accordingly.

The Beneficiaries

The beneficiaries are all the individuals or organizations that benefit from the deceased person’s estate according to the deceased person’s law will or, if there is no will, in accordance with the rules of intestacy.

There can be a single beneficiary or a long list of beneficiaries. Most individuals want to leave the assets they have accumulated over their lifetime to their family, sometimes also to friends and favourite charity. In Ontario, until very recently, estate practitioners and the courts use to say that a person is free to do as they wished with their assets. If they wanted to exclude a family member they could – they did not even have to have a “good” reason (although it was preferred to record a good reason to defend against any litigation). Now however, the Ontario Court of Appeal in a recent decision of Cummings v Cummings Estate [(2003) ETR (3d) 81, affd 5 ETR (3d) 97 leave to appeal to Supreme Court of Canada refused 2004 CarswellOnt 99] followed the British Columbia courts and stated that a testator when making a will must have due regard to his or her “moral obligations”, at least in the context of dependants. It is still too early to realize the complete implications of this decision.

The Advisors

An estate trustee is entitled to seek the assistance of professional advisors to assist in the administration of the estate. Typically, legal assistance is obtained. The lawyer retained by the estate does not have to be the deceased’s lawyer, even if the will has been left for safekeeping with the deceased’s lawyer. The choice is up to the estate trustee (although some wills do suggest that the deceased would like his or her lawyer to act on the estate administration).

Another typical advisor is an accountant. Again, if the services of an accountant are needed the choice of who to use rests with the estate trustee, not the deceased. If the administration is on-going then investment advisors may also be retained.

Sometimes particular expertise is required to administer an estate. If it is reasonable for the estate trustee to retain a professional then generally speaking this is a permitted act. Although the case law is not clear, the prevailing view is that if professional expertise was required by the estate trustee then the cost of the professional is borne directly by the estate and is not a deduction to the estate trustee’s compensation. Whether the retainer is reasonable or not will depend upon the particular circumstances of each estate.