When a loved one passes away, it is a difficult time for everybody, but it is especially difficult for those who were appointed estate trustee and who, at the same time as mourning, have to handle the affairs of the estate, pay urgent bills, deal with beneficiaries, try to find the original will, etc. The closest analogy is being thrown into a deep lake whether one knows how to swim or not.
To top everything off, the estate trustee has a fiduciary duty to the beneficiaries, and all decisions they make can be highly scrutinized if there is a chance of conflict in the estate matters.
In my experience of handling both estates with a will and without a will, it is much easier on the loved ones left behind if the deceased had planned their estate by drafting a will and by preparing proper investment instructions with their investment advisor such as setting up beneficiaries of their registered accounts and life insurance products etc. Some other interesting clauses included in the will which cannot be taken into account if the deceased passed away without a will are: funeral instructions, instructions regarding donation of organs or body parts, appointment of guardians for minor children, helping beneficiaries safeguard their assets in case they experience marital problems, excluding a certain person from ever being appointed as estate trustee or from receiving a gift, limiting estate trustee compensation to a lower amount than allowed by the courts, creating special trusts for disabled beneficiaries. The list goes on and on.
But if the deceased didn’t have a will, you may wonder what happens.
Here is what can happen:
- Somebody needs to step forward to be appointed as estate trustee, which means that anybody else who is before them in line or equal in line to be appointed needs to approve the appointment; moreover, the ones ahead in line also need to renounce and a majority of beneficiaries need to approve the appointment; this can be a problem is there is a disagreement between such persons and can leave the estate at a stand-still;
- If the person who wants to be appointed as estate trustee is not a resident of Ontario, the law does not allow them to be appointed as estate trustee, so they need to find someone in Ontario willing to act instead of them;
- The deceased’s estate is divided according to intestacy laws, and not according to the deceased’s wishes, the estate trustee’s wishes or the beneficiaries’ wishes – this can be devastating to hear for some beneficiaries who want to exclude other beneficiaries who they don’t get along with and that unfortunately is not possible.
The order of priority which determines someone’s right to apply as estate trustee is: spouse, child, parent, brother or sister, niece or nephew, next of kin of equal degree of consanguinity.
Similarly, the residue of the estate (the value of the estate after all the debts of the deceased have been paid) is to be distributed as follows: first $350,000.00 to the spouse, and if there is one child, the remainder is to be divided equally between the spouse and the child, and where there are two or more children, the spouse is entitled to one third of the estate and the children share in equally. The matter gets more complicated where there is no spouse, or no spouse and children, or when a child has predeceased.
There is also the matter of the requirement to post a bond double the value of the estate in order to provide the court with security that the estate trustee won’t run away with the money. The way to circumvent this is to buy a bond from an insurance company or to apply to court to dispense with it, but the court doesn’t always approve this route.
As one can see, administering an estate can be very time intensive and many issues can arise throughout the administration, which is why the estate trustee is entitled to compensation, within limits. Once one accepts the appointment of estate trustee, one is held to a high standard and has a fiduciary duty to make decisions in the best interest of the estate beneficiaries. The liability is very high, including being held liable for debts of the estate if not properly administered.
If you have any questions about this topic, I would love to help!
PLEASE NOTE THAT THE CONTENT OF THIS BLOG IS MERELY FOR INFORMATION PURPOSES AND DOES NOT CONSTITUTE LEGAL ADVICE.
