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WHAT HAPPENS TO YOUR MORTGAGE WHEN YOU DIE? OUR AWESOME COMPREHENSIVE GUIDE FOR CANADIANS

what happens to your mortgage when you die
what happens to your mortgage when you die

What happens to your mortgage when you die? Introduction

There comes a time in everyone’s life when we must face the inevitable truth of our very own death. While it may not be the most pleasant topic to discuss, it is vital to consider the financial ramifications that may arise after we die. Specifically, have you ever questioned what occurs to your home mortgage loan when you pass away in Canada? In this Brandon’s Blog, we will explore this important topic, clarifying the function of beneficiaries, mortgage protection insurance, as well as estate preparation in addressing what happens to your mortgage when you die.

When a loved one passes away, the problem of dealing with their assets, liabilities, and all financial issues falls upon the shoulders of one or more of their survivors. One of the most substantial issues among all the types of debts the deceased may have had is the remaining mortgage loan balance and how it will be managed. Will your beneficiaries inherit this financial obligation, or can it be removed through specific processes? Feel confident, we will certainly provide you with valuable information as well as the positive steps to guarantee your legacy continues to be secure.

Comprehending the function of beneficiaries in mortgage affairs is of utmost importance. There is a way during your lifetime that you can shield your loved ones from acquiring the concern of your financial commitments. We will certainly guide you with the details of beneficiary classification, helping you move through the needed paperwork to choose the most ideal option(s) for your particular situation.

In addition, we will explore the essential role of life insurance coverage in the context of mortgages after death. A life insurance policy can function as a financial safety net that not just covers funeral expenditures yet can also be used to settle your mortgage debt. We will review various sorts of life insurance policy plans and their benefits, enabling you to make knowledgeable choices that protect your loved ones from unnecessary financial pressure.

Lastly, we will certainly explore the value of estate preparation in ensuring a smooth transition of your home, your other possessions and your mortgage. Appropriate estate planning allows you to manage just how your assets are dispersed, including your home mortgage. We will walk you through the elements to take into consideration when developing an estate strategy, such as creating a trust or thinking about joint ownership, providing you with the tools to secure your heritage and also supplying financial safety and security to your loved ones. We will discuss all the concepts but what we won’t talk about is how to draft your Will. That is a discussion you need to have with your lawyer.

Now is the time to gain a detailed understanding of what happens to your mortgage when you die in Canada. By taking proactive steps, you can safeguard your loved ones from a prospective financial concern and make sure a smooth changeover for your estate. Join us as we delve into this subject, supplying our thoughts and guidance to assist you in securing your legacy. Read more now!

What happens to your mortgage when you die? Understanding the basics of a mortgage

Defining a mortgage and its key components

A mortgage is a financial contract in which a mortgage lender offers funds to a consumer to acquire a property. It consists of numerous vital parts, such as the funding amount, rates of interest, payment duration, and regular monthly installments. Comprehending these elements is necessary to realize what occurs to a mortgage when you pass away. It is vital to acknowledge that the responsibility for making the monthly mortgage payments lies with the consumer, despite their life conditions. Nonetheless, there are actions you can take to protect your loved ones from the problem of a mortgage obligation after your death, including beneficiary classification, life insurance, and estate planning.

Understanding the Basics of a Mortgage

To grasp the ins and outs of what happens to your mortgage when you die, it is essential to initially understand the basics of a mortgage and your specific mortgage document. This section intends to supply a clear description of regular mortgage conditions. By familiarizing themselves with these terms, individuals can better navigate the complexities of the home mortgage process. People need to fully understand everything about their mortgage, including, the rate of interest and payment schedule, insurance policy requirements and penalties for defaulting, to be able to plan your estate properly. By acquiring a strong understanding of the essentials, readers can have self-confidence when considering their estate options.

The role of a co-borrower or co-signer

When it involves mortgages, understanding the role of a co-borrower or co-signer is critical as there is a difference if there was just a sole owner responsible for the mortgage obligation. A co-borrower is somebody that authorizes the mortgage contract as well as shares equivalent responsibility for the mortgage loan.

They have possession rights over the home and are just as accountable for making the mortgage loan repayments. On the other hand, a co-signer is someone that gives their credit reliability to help secure the loan but does not have any type of ownership legal rights. They are only responsible for the payments if the primary borrower stops making the payments.

Having a co-borrower or co-signer can provide extra security for the lending institution as well as may improve the opportunities for lending approval.

what happens to your mortgage when you die
what happens to your mortgage when you die

What happens to your mortgage when you die? The impact of death on a mortgage

Exploring the implications of death on mortgage payments

When a house owner dies, their home loan doesn’t simply disappear. The lender still has a lawful right to the home until the mortgage is paid off. If the mortgage remained in the property owner’s name alone, the estate will require to repay the balance. This can be done by selling the building or making use of funds from the estate.

If the mortgage was jointly held because there is a joint owner of a property, the surviving co-borrower will take control of the obligation of making the regular monthly payments, assuming they can afford to do so on their own. It is necessary to plan for the effect of death on a home mortgage loan by thinking about life insurance and your will to make sure that loved ones are not strained with mortgage payments after a house owner passes away.

Discussing the lender’s rights and options in such scenarios

When it pertains to what happens to your mortgage when you die, it is essential to recognize the rights and also choices of the loan provider. In such situations, lending institutions have the right to examine the situation and make a choice concerning the mortgage loan. They can choose to accelerate the loan and demand the need for instant payment or they can allow the surviving co-borrower to continue making payments.

In Ontario, lenders have the option to initiate the power of sale proceedings if the mortgage falls into arrears. It is important to be familiar with these options and plan for them when you are alive to protect your estate.

Sale clause in a mortgage agreement

In every standard mortgage, there is a sale clause. This stands as a typical provision included in the majority of mortgage contracts. This provision empowers the lender to demand complete repayment of the mortgage balance in the event of a property sale. The sale clause aims to safeguard the lender’s stake in the property since they have invested a substantial amount in the mortgage.

For borrowers, it becomes crucial to grasp the terms of their mortgage agreement and the possible ramifications of triggering the sale clause. Should a borrower intend to sell their property, seeking consultation with their lender becomes imperative to ascertain the terms and conditions required to steer clear of triggering the sale clause.

What happens to your mortgage when you die? Outlining the options available to settle a mortgage after death

When managing to settle a mortgage debt after death of the borrower, there are 2 choices offered to Canadians:

  1. Pay off the balance of the mortgage utilizing life insurance plan proceeds. Making certain that you have appropriate mortgage loan insurance in place permits you to utilize those funds for home mortgage payments, alleviating the worry of the family members you left behind.
  2. Another choice involves the estate of the deceased person. Depending on the conditions, the estate may have the capability to cover the mortgage loan by making use of other assets.

It’s essential to extensively think about these choices and consult estate planning professionals to make certain you protect your loved ones by adequately covering this financial debt.

Exploring the possibility of paying off the mortgage using life insurance proceeds

When it involves what happens to your mortgage when you die in Canada, one possibility is to explore using a life insurance plan to pay off the home mortgage loan balance. By having a life insurance plan in place, you can make use of the funds to repay the loan, thereby saving your family from that financial stress. This can be either a separate life insurance policy or specific mortgage insurance offered by the lender. You should carefully check out both types, as costs and qualifying for each type could vary significantly.

This enables them to save residential real estate without the obligation of a mortgage loan. Participating in this proactive method demonstrates a degree of financial responsibility and insight, ensuring your family members’ security and also safeguarding your legacy. Consider reviewing this choice with an experienced financial expert to evaluate the possibility of obtaining such insurance policy protection as well as understanding what the insurance premiums will be.

The role of the deceased individual’s estate in mortgage settlement

When considering what takes place on your mortgage loan upon your demise, recognizing the function of the departed person’s estate in mortgage settlement is critical. The estate, encompassing the dead person’s properties as well as obligations, plays an important part in identifying just how the mortgage will be settled. This may require selling off the property or selling off various other assets of the estate to raise funds for clearing the mortgage loan balance.

It is essential to have a well-prepared estate plan to make certain a seamless strategy for your Estate Trustee to follow, benefitting your beneficiaries and family after your passing away. Seeking support from legal and financial experts can assist navigate you with this process.

what happens to your mortgage when you die
what happens to your mortgage when you die

What happens to your mortgage when you die? Transferring the mortgage to another party

The concern surrounding your home mortgage’s destiny after your passing presents a possibility to plan ahead of time for the transfer of ownership to a loved one while at the same time knowing that the house will be protected and transferred according to your wishes. This mortgage transfer requires considering legal and financial elements and preparing the required documentation. This will require experienced guidance to navigate the procedure with the utmost skill.

Experts fluent in this area can assist with preparation, giving detailed guidance on the necessary actions while offering beneficial insights right into possible obstacles that may develop. By planning ahead of time for the transfer of both the mortgage as well as the property, you can protect your loved ones from the burden of needing to deal with this added burden after you are gone, ensuring financial safety and convenience.

The transfer of a mortgage following your death necessitates careful consideration of possible obstacles as well as legal and financial repercussions. You need to account for various elements, such as guaranteeing the prospective borrowers fulfill the loan provider’s requirements for assuming the home mortgage, in addition to fulfilling different obligations, such as making sure that the appropriate registry is updated and all necessary parties are alerted to the change of ownership.

In the context of what happens to your mortgage when you die, looking for specialist guidance for your planning is essential to make sure a smooth transfer of both the property and the mortgage happens after your death. The intricacy and also ins and outs involved in transferring both the mortgage obligation and its connected property can be overwhelming and challenging for the majority of individuals.

By getting in touch with seasoned specialists, you can guarantee a smooth and dependable change. These specialists have the needed expertise to navigate any prospective obstacles, using tailored options to match your special situation and assist in completing a smooth and orderly process easily when the time comes.

What happens to your mortgage when you die? Joint mortgages and death

For your basic estate planning when you are a joint mortgage borrower, understanding the complexities involved in a joint mortgage for the surviving borrower holds paramount relevance. Upon the death of one of the joint mortgagors, the remaining borrower might run into various issues with the mortgagee that were not anticipated. The obvious issue will be the ability of the remaining borrower to make all necessary mortgage payments without the joint borrower being alive to continue contributing. There will also be certain administrative details such as assuming sole possession of the property. If the remaining borrower cannot afford to keep the property, then marketing it to settle the mortgage debt is an obvious solution.

To proactively plan for this situation, both borrowers need to have an agreement and a plan in place as to what will happen upon the death of one of the joint borrowers. Seeking guidance from an estate planning expert is well-advised. By looking for professional recommendations, you can get a clear and detailed understanding of your legal rights and also obligations, thereby allowing you to choose the optimal course of action to safeguard the situation for both your joint borrower and your beneficiaries.

In such scenarios, it comes to be critical to confer with your lawyer to ensure the solution of a well-crafted strategy that meets everyone’s requirements. Thorough estate planning is of the utmost value. Protecting your interest in the property and also making sure the seamless transfer of your mortgage upon your death needs a comprehensive plan, including the relevance of your will.

what happens to your mortgage when you die
what happens to your mortgage when you die

What happens to your mortgage when you die? Importance of estate planning

Discovering the utilization of wills, trusts, and other legal strategies is pivotal in safeguarding your mortgaged property in the event of your passing. These tools allow for proper estate planning. A diligently prepared will certainly makes certain that your mortgaged property is duly resolved, assuring the protection of your loved ones from problems after you are gone.

Additionally, should the family situation be such that added protection is necessary, the use of a trust can offer added security by selecting a trustee to manage the property as well as disperse funds for mortgage payments. This is especially useful either where a minor child is involved or the adult child beneficiary may not be able to properly handle all aspects of property ownership.

Seasoned professionals can focus on these intricacies as well as can adeptly lead you through the procedure, assuring the protection of your legacy. In Canada, proper estate planning holds the utmost significance when a mortgage is also attached to the property, particularly when pondering the fate of the home and the mortgage after death. To navigate the complicated legal terrain, involving the services of a professional estate planner and lawyer becomes crucial.

What happens to your mortgage when you die? Conclusion

Recognizing what happens to your mortgage when you die in Canada holds vital relevance. This knowledge proves important in protecting your loved ones and cementing your legacy. Beneficiaries will be considerably affected by the ongoing mortgage obligations following your death. However, relying only on beneficiaries might prove insufficient or inappropriate.

To make sure extra safety and security and to ease the economic concerns after you are gone, it is advised to invest either in a life insurance policy as well as participating in thoughtful estate planning. By gaining valuable insights and taking aggressive steps, you can make certain that your mortgage won’t end up being an encumbrance rather than an ongoing way that your property will be protected and available for your beneficiaries.

I hope you enjoyed this what happens to your mortgage when you die Brandon’s Blog. In our role as a licensed insolvency trustee, we have had to administer the bankruptcy of many insolvent deceased estates. But what about when the deceased estate is not insolvent but there are other seemingly insurmountable problems?

That is why several years ago, we opened up a division of Ira Smith Trustee & Receiver Inc. called Smith Estate Trustee Ontario. We act as Estate Trustees for solvent estates where various problems arise requiring the appointment of an independent Estate Trustee. Some of the reasons why this service is necessary are:

  1. There is no will so the person died intestate.
  2. There is a will but the Estate Trustee(s) named in the will do not wish to act so they recuse themself(ves).
  3. Ongoing litigation makes it a requirement that an independent Estate Trustee be appointed to safeguard and liquidate the assets while litigation continues or until a settlement is reached.

As the independent Estate Trustee, we provide solutions for complex estate issues to end the pain and frustration the stakeholders are experiencing. We apply our expertise and creative thinking to take care of all details to end your pain and achieve the goals of the beneficiaries and other stakeholders.

We saw there was a need for an Estate Trustee, Executor/Executrix service that was much more than just the impersonal statutory walk-through offered by a large financial institution. We saw that not every person nominated to act as an estate trustee under a will has the desire or the skill set to handle the situation.

We have the skill set to solve the many complex problems in the administration of solvent deceased estates. We also have the compassion and experience to understand, relate to and empathize with the unique issues facing each stakeholder. We use our decades and generations of experience in acting as an Officer of the Court to bring parties together in a meaningful way.

If you have any questions about our independent Estate Trustee or Licensed Insolvency Trustee services, call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

what happens to your mortgage when you die
what happens to your mortgage when you die
Categories
Brandon Blog Post

EXECUTOR DUTIES ONTARIO: OUR COMPLETE GUIDE TO MAKE A 1ST TIME EXECUTOR LOOK LIKE A PRO

executor duties ontario
executor duties ontario

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom of the page and click play on the podcast.

Executor duties Ontario: What is an executor or estate trustee?

Executors, or Estate Trustees as they are now called in Ontario, are people named in a Will to become the personal representatives of the deceased. Executor duties Ontario is a complicated process.

The Estate Trustee accepts the role, authorizes the liquidation of the estate assets and the payment of money. The Executor directs and administers the deceased estate both in accordance with provincial and federal laws while abiding by the declared wishes of the deceased.

Executors are people who are legally responsible for the estate of someone who has died. They are required to manage the estate according to the wishes of the deceased person. To be an executor, you must meet certain minimum legal requirements. You should:

  • have already turned 18;
  • be financially stable;
  • reside in Ontario;
  • have good organizational skills;
  • be able to keep complete records of all the estate’s transactions;
  • have a good knowledge of financial matters; and
  • be able to make effective decisions about the estate.

Suppose there were no Will? What happens? Without a Will, a court can appoint an Estate Trustee Without A Will.

Through our other business, Smith Estate Trustee Ontario, my Firm acts as a Court-appointed Executor/Estate Trustee. Far too often, the person who ends up with the responsibility of settling the estate of a deceased family member or friend is unprepared to do so. This commonly leads to emotional stress, confusion, and financial hardship.

From this Brandon Blog, you’ll learn everything you need to know about effectively fulfilling your duties as an Estate Trustee in Ontario. You will learn how to handle the estate settlement process in Ontario and properly fulfill the duties using our Executor duties Ontario checklist.

Executor duties Ontario: What does an Executor/Estate Trustee Do Right Away?

Executors are people who are appointed to carry out the Will or trust of a person who has died. They are given the authority to make decisions on behalf of the deceased, as long as those decisions are consistent with the wishes expressed in the deceased’s Will or trust. There can be as many Estate Trustees as are indicated in the Will or trust document. When there is a Will, in Ontario, the role is one of Estate Trustee Under A Will.

Once you are notified that you are named as the Executor or one of the Estate Trustees, the first thing you need to do is to decide if you wish to act. Are you capable of doing the job and are you free from any conflict of interest? It is possible to recuse yourself before taking any steps to act as the Executor. However, once you start acting as the Executor, it is very difficult to resign.

An Executor will obtain a copy of the Will as one of the first things they do. As a result, the person’s most recent Will automatically becomes the last Will of the deceased. Some people are unaware that a Will is only as good as its Executors and how they perform their Executor duties Ontario.

Executor duties Ontario: Follow this guide to look like a professional Estate Trustee

Action #1 – Funeral Arrangements and other Day 1 action

If the family is not taking care of this themselves, then you must arrange for the funeral immediately after death. Religious observance of the family and the wishes of the deceased should be your guide. Other things Executor duties Ontario include are:

  • Arrange for organ donation if applicable.
  • Find the Will.
  • Coordinate with family members to notify friends and family of the passing.
  • Request multiple copies of the Proof of Death Certificate from the funeral director.
  • Apply for a provincial Death Certificate.
  • Make necessary arrangements for the ongoing care for dependents/minor children and pets.
  • Contact the deceased’s bank to ensure that all amounts on deposit are safeguarded, access to any safety deposit box is secured and change signing authorities to Executor(s) so that necessary payments can be made.
  • Confirm payment to the funeral home.

Action #2 – Submit official paperwork on behalf of the Estate

There are many other notifications that should be made within say, 1 to 2 weeks after the funeral. These Executor duties Ontario consist of:

  • File the CPP death benefit claim.
  • Transfer the pension to the spouse by applying for CPP Survivor’s Benefits.
  • Canada Revenue Agency Notification to Update Record.
  • Submit OAS/CPP/GIS notifications.
  • Send the Notice of Death to Equifax and TransUnion, the two Canadian credit bureaus.

    executor duties ontario
    executor duties ontario

Action #3 – Protect the hard assets

Concerning any hard assets, as soon as possible after the funeral, Executor duties Ontario include:

  • Identify and secure all assets: the home, the contents of the home, and other real estate assets.
  • Direct the post office to forward the mail care of the Estate Trustee.
  • Inform utilities, landlords, and other service providers.
  • Review all documents associated with asset ownership, business, investment, including insurance, mortgages, and leases.
  • Analyze all financial documents, including contracts, divorce papers, or separation agreements, court orders.
  • Secure personal property, business, vehicles, perishable goods, and safety deposit boxes.
  • To keep the insurance coverage active, find out what action you need to take if there is a vacant property.
  • Have all the hard assets appraised.

Action #4 – Protecting financial assets

I already mentioned that I would contact any known financial institution. Other Executor duties Ontario to protect financial assets as soon as possible after the funeral, include:

  • Gather information about debts and expenses.
  • Cut off all unnecessary expenses. People rarely think about memberships or subscriptions until the bill or publication arrives in the mail.
  • The other banks or credit unions, investment advisors, and life insurance companies should be notified.
  • All credit cards and debit cards should be cancelled.

    executor duties ontario
    executor duties ontario

Action #5 – Contacting beneficiaries

Other Executor duties Ontario include:

  • Completing the inventory of assets and their values on the date of death.
  • Contacting each of the beneficiaries of Estate individually.
  • Explaining the Estate administration process to them.
  • Estate beneficiaries need to know they only receive distributions upon the probate of the Will, completion and filing of all final tax returns, and full payment of the estate’s debts and debts of the deceased. How the estate is handled will also depend on its size and nature.
  • Depending on the circumstances, the Executor of the estate can make interim distributions.

It is important to keep in mind that Estate Trustees are personally liable. This means if you pay out too much on an interim basis and don’t have enough to cover all the debts, you will be in trouble if you can’t claw back any money.

Action #6 – The probate process

Generally, probate involves completing the necessary Ontario government forms for the confirmation and appointment of the Executor(s), who will manage the estate distribution. The Executor duties Ontario for probate include, say within 30 days after death:

  • Speak to the estate administration lawyer for assistance.
  • Calculate the estate administration tax for the Ontario estate.
  • With the help of the estate administration lawyer, prepare the probate application.
  • The probate application, along with all relevant documents, should be filed with the deceased’s local probate court. The required documents, including the original Will and payment of the estate administration tax.

    executor duties ontario
    executor duties ontario

Action #7 – While you are waiting for the Certificate of Appointment of Estate Trustee With A Will

The court can take many months to respond to your probate application, especially in Toronto. In the meantime, there are things that Executor duties Ontario allow you to do without the need to show the Certificate of Appointment. You can use a copy of the Will. These include:

  • The deceased’s passport, driver’s license, and Ontario health card can be cancelled.
  • Meeting with the investment advisor, banker, and insurance agent to gain a better understanding of the estate’s assets.
  • Finalize the list of assets.
  • Developing a strategy to liquidate the assets of the estate.
  • Choose a real estate broker, negotiate the rate and prepare the listing for posting after the grant of probate is received. Be sure you obtain a professional appraisal first to determine the current market value. You don’t want to rely on just the broker’s estimate of market value.
  • Organize an estate sale to dispose of personal belongings that have not been claimed by the family. When appropriate, arrange donations.
  • Prepare the property for sale. In almost all cases, minor repairs, painting, cleaning, and staging are necessary.
  • Prepare life insurance forms (to be submitted once you have your Certificate evidencing the appointment of the Estate Trustee(s)).
  • Stay in constant contact with the beneficiaries to inform them that you are still waiting for the grant of probate and that things are proceeding normally.

Action #8 – Selling the assets in Estate

Some of the following Executor duties Ontario could be done only with a certified copy of the Will. Some will require a Certificate from the court appointing the Estate Trustee:

  • Open an estate bank account with your preferred financial institution if you have not already done so.
  • Merge all bank accounts into the estate account.
  • List any real property for sale.
  • Request that all mutual funds, stocks, bonds be liquidated and the funds transferred to the estate
    account.
  • Incorporate all estate sale proceeds and any other cash assets into the estate trust account.

    executor duties ontario
    executor duties ontario

Action #9 – Pay all debts and calculate and pay all taxes

To make the final distribution, the creditors and amounts owing to Canada Revenue Agency must be settled in full. In this phase, Executor duties Ontario include:

  • Clear debts.
  • Make sure that tax documents are in order.
  • Prepare all necessary income tax returns, including the estate tax return, with the help of an accountant or other tax specialist.
  • If your Notice of Assessment has been received and the CRA has been paid all amounts owed, you can request a Tax Clearance Certificate from them.

Action #10 – Final distribution to estate beneficiaries and completion of Estate records

Now it is time to make the distribution to beneficiaries and close your file. These Executor duties Ontario are:

  • If you are charging a fee, including a care and management fee for having administered the estate, calculate it and pay yourself.
  • Prepare and issue the distribution to beneficiaries of the remainder of the estate.
  • Prepare a final accounting and issue it to all beneficiaries.
  • Get releases from beneficiaries.
  • Closing the estate bank account.
  • Terminate the deceased’s social insurance number.

    executor duties ontario
    executor duties ontario

Executor duties Ontario: Compensation for estate trustees

The Ontario estate laws and associated regulations provide a framework for the management of a deceased person’s estate and for the distribution of the property. The laws and regulations also deal with the duties and responsibilities of the Executor and compensation for the Estate Trustee.

All Estate Trustees are legally permitted to charge fees. A fee that isn’t in the Will must be an amount that is considered fair and reasonable. The amount depends on the value of your estate and the amount of work your Estate Trustee has to do.

Even though the fee calculation is more complicated than this, for our purposes, you should use as a benchmark 5% of the estate’s value. Additionally, an additional care and management fee of 2/5 of 1% of the average annual value of the assets is sometimes charged.

Executor duties Ontario summary

I hope you found Executor duties Ontario Brandon Blog helpful. If you are concerned because there is an Estate that needs a professional Estate Trustee, Smith Estate Trustee Ontario can help you. Since we are also a licensed insolvency trustee firm, we can also help if the deceased Estate is insolvent. We can also help if you or your business have debt problems.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

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Brandon Blog Post

HST REMITTANCE REVIEW: UNPAID HST & THE DIRECTOR’S JOINT BANK ACCOUNT

Introduction

I have previously written about joint bank accounts and joint credit cards. I recently read a decision of the Tax Court of Canada that will be of interest to every entrepreneur whose company may be behind in their HST remittance and who has a joint bank account with their spouse.

Joint bank account considerations

Opening a joint bank account is a relatively easy procedure. People who share a joint savings or chequing account can each make deposits and withdrawals from the account without the signature of the person they share the account with. As a matter of fact, any person listed on the joint account can close it using proper identification. Data held by a bank on the owners of the joint account, similar to any other account, consists of personal identifiers of the holders of the account, which enables anyone legally authorized to get that information.

I have written before on the dangers of a joint bank account. The dangers have nothing to do with the bank per se. They are more non-bank related. Examples of problems include:

  • Sometimes moms and dads will share an account with a small child. The reason is to begin providing the youngster with financial literacy education. However, if you share a bank account with your minor child and your spouse, you are taking a chance that your partner can access that joint bank account that you share with your child without your authorization.
  • There is a threat with a joint account between partners when you have a saver as well as a spender who each has access to the account without the other’s signature. It can trigger family, relationships or business problems.

I wanted to give this brief background information, but it is not what is of most interest to entrepreneurs. The following Tax Court of Canada decision which I will now describe is.

Tammy White and Her Majesty The Queen facts

This judgement was rendered on February 4, 2020, in the Tax Court of Canada in Vancouver, BC. Ms. White appealed an assessment by Canada Revenue Agency (CRA) against her under subsection 160(1) of the Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)) (Income Tax Act) and subsection 325(1) of the Excise Tax Act (R.S.C., 1985, c. E-15) (Excise Tax Act). You will recall that last week, I spoke about the danger of receiving transfers of property from someone who owes money to CRA in my blog, DO YOU INHERIT DEBT IN CANADA: CRA SAYS YES TO PROPERTY TRANSFERS. That blog dealt with debt in death and the deceased Estate. This week, nobody died. You are probably wondering what this has to do with entrepreneurs and joint bank accounts. I will now tie it all together. I promise!

The appeal deals with the concern of whether the deposit of funds by a person into a joint account held with the entrepreneur’s partner comprises a transfer of property under subsection 160(1) of the Income Tax Act and subsection 325(1) of the Excise Tax Act.

The facts of the case are as follows:

  • On March 1, 2016, Mrs. White was assessed $49,962.45 under section 160 of the Income Tax Act and $90,886.35 under section 325 of the Excise Tax Act. She appealed both assessments to the Court. The assessments are a result of amounts that her husband, former business owner Andy White, apparently moved to his wife between March 15, 2013, and October 30, 2015.
  • On March 26, 2014, Andy filed a consumer proposal under the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA).
  • Department of Justice counsel on behalf of CRA at the hearing backed off part of the claim by agreeing that any kind of purported transfers made after the date of the consumer proposal is beyond the range of the assessments in concern in this appeal.
  • Tammy and Andy were married in 1984 and always held the same joint bank account.
  • For the last 35 years, Andy and Tammy have made use of the joint bank account to pay their personal expenditures and the costs of running their family household.
  • Andy was a part-owner of White & Davidson Logging Limited, a company he started working for from a very young age.
  • The company began to experience financial troubles in 2004 as a result of weak demand in the British Columbia forestry industry and also a government-mandated decrease in cutting rights. These troubles resulted in the business selling its assets in 2006 and discontinuing business. At the time the business stopped operating, it had not remitted all amounts it had held back as payroll source deductions. It also did not make the required payment of the amounts it owed as HST tax obligations. Accordingly, it was not current in its tax obligations and did not make its final payroll or HST remittance.
  • Andy was a Director of the defunct company and therefore was assessed by CRA personally for the company’s unremitted payroll source deductions and unpaid HST.
  • After a while, and after being assessed by CRA, Andy eventually found full-time employment and deposited his pay into the joint bank account he shared with Tammy.
  • Andy owed CRA almost $91,000 for the company’s unremitted HST.
  • Tammy was also employed in a retail store. In the late 1990s, she opened up a bank account only in her name. Her pay was deposited into that new account.
  • Tammy was the sole owner of the family’s home. She admitted under oath that she made payments out of the joint account to pay the mortgage, utilities, property taxes and any other costs of running the home.
  • Certain amounts were also transferred from the joint account into Tammy’s personal account.

The issues

The issues are fairly narrow. In last week’s blog, I went through the criteria a court must look at to determine if there was a transfer of property at a time when the transferor owed an amount to CRA. You can refresh yourself on the criteria by clicking here.

CRA’s position was that a transfer of property from Andy to Tammy took place the moment his pay was deposited into the joint bank account. They also stated that Tammy gave no consideration for this.

Tammy’s position was that no transfer could have taken place by merely depositing the funds into the joint bank account. Andy maintained full control of the money. CRA, or the Sheriff, acting on a valid judgement, could garnishee Andy’s share of the funds in the joint bank account.

At the time in question, Andy’s pay that was deposited into the joint bank account totalled $89,806.72.

The Court’s decision

The court did not agree with CRA. The Judge found that:

  • Just depositing the funds in a joint account does not comprise a transfer. Mr. White did not unload himself of the funds when they were deposited into the joint account. He continued to have complete access to the funds in the account. As a matter of fact, the evidence was that Andy, as he had done since 1984, used some of the funds to pay his personal expenses and specific costs of his household.
  • Andy did not defeat or whatsoever prevent the Minister of Revenue from collecting any tax he owed by placing his compensation in the joint account. CRA could have taken collection activity relative to funds in the joint account. In fact, part of the evidence before the court was that the joint bank account was garnished by a third party to repay one of Andy’s debts.
  • As soon as the funds were put in the joint bank account, Tammy had the ability to impact a transfer. Nonetheless, such transfer did not happen until the funds were removed from the joint account and placed into the account only in Tammy’s name.
  • The Judge was very critical of CRA. They did not properly identify funds taken out of the joint account and put into Tammy’s account. There was limited evidence before the court. So, the Judge had to “guesstimate” as best as possible from the scant evidence how much was transferred from the time Tammy opened up her sole account and the date of Andy filing a consumer proposal.
  • The Judge determined that the amount of property Andy transferred to Tammy during the relevant period for no consideration was the amount of $34,052.
  • Accordingly, the Judge allowed the appeal and vacated the assessment. He referred it back to the Minister of Revenue to reconsider a reassessment of Tammy in the amount of $34,052.

HST remittance and the entrepreneur

So what does this mean for the entrepreneur? It tells me that if you are:

  1. Director of an insolvent company that owes unremitted source deductions or unpaid HST;
  2. the company goes either into receivership or bankruptcy or otherwise has to shutdown;
  3. you are assessed personally by CRA because you were the Director; and
  4. you get another job and deposit your pay into a joint bank account you hold with a spouse or child.

Your spouse or child will not be liable under the property transfer laws of the Income Tax Act and/or the Excise Tax Act by the mere depositing of your money into the joint bank account. What it also tells me is, if you are in this situation and do not have a joint bank account, maybe you should! If so, go back to the “Joint bank account considerations” section of this blog to see if it is the right thing for you to do in your situation.

Summary

I hope you enjoyed this blog on HST remittance and joint bank accounts. The Ira Smith Team is available to help you at any time. We offer sound advice and a solid plan for Starting Over Starting Now so that you’ll be well on your way to a debt-free life in no time.

Do you or your company have too much debt? If yes, then you need immediate help. The Ira Smith Team comprehends just how to do a debt restructuring. Much more notably, we know the demands of the business owner or the person who has too much debt. Due to the fact that you are managing these stressful financial problems, you are anxious.

It is not your fault you cannot fix this issue on your own. You have just been shown the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief now.

At Ira Smith Trustee & Receiver Inc., we take a look at your whole condition and layout a strategy that is as unique as you are. We take the load off of your shoulders as a part of the debt negotiation approach we will create just for you.

We understand that individuals facing financial troubles require a lifeline. That is why we can establish a restructuring procedure for you as well as end the pain you feel.

Call us now for a no-cost consultation. We will certainly get you or your business back on the road to a well balanced and healthy life and end the pain factors in your life, Starting Over, Starting Now.

hst remittance

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Brandon Blog Post

DO YOU INHERIT DEBT IN CANADA: CRA SAYS YES TO PROPERTY TRANSFERS

Introduction

When conversations of financial obligations happen, people usually joke around and state they’ll finally be without debt upon their death. Many people who come to me for their no-cost consultation also ask, do you inherit debt in Canada? A recent decision of the Tax Court of Canada inspired me to write this Brandon’s Blog to discuss the issue.

What happens to debt when you die in Canada?

In general, what happens to debt when you die in Canada is that your Executor or Executrix (in Ontario it is called an Estate Trustee) needs to understand all of the deceased’s assets and liabilities. The Estate Trustee needs to make sure that all debts are paid off before making any distribution to the beneficiaries. Unless you have co-signed for or guaranteed someone else’s loan, you are not responsible for your spouse’s or parent’s debts upon their death. There at generally two exceptions.

The first is credit card debt where usually a spouse has a supplementary credit card on the same account. In that case, you need to look at the credit card agreement because the supplementary cardholder might be responsible for the debt. So if there are insufficient assets in the estate to pay off the credit card debt, the supplementary cardholder may have to.

Section 160(1) of the Income Tax Act (Canada)

Section 160(1) of the Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)) (Income Tax Act), and its equivalent, S. 325 of the Excise Tax Act (Canada), can be utilized by the Canada Revenue Agency (CRA) to assess tax obligation liability to those who received a transfer of property from persons with tax obligations at the time of the transfer. This indicates if a person offers you something of value (virtually anything), while they have a tax debt, the CRA can and will certainly pursue you. CRA’s view is that the original tax obligation debtor ought to have sold whatever was transferred, and the funds used to pay off the tax debt.

This section of the Income Tax Act (or Excise Tax Act) especially comes into play during irathe administration of a deceased Estate or in an insolvency filing.

The Court decision, released on February 10, 2020, highlights this issue that death is no excuse when it comes time to pay the taxman!

The Court case facts

The CRA assessed the two daughters of the deceased father $96,640.96 each under section 160(1) of the Income Tax Act in respect of a transfer of property from their father prior to his death. Each daughter has appealed the assessments to the Tax Court of Canada. The two appeals were heard together as the evidence and facts were identical.

The agreed statement of facts was:

  1. The father was the annuitant of a Franklin Templeton Investments life income fund (the Income Fund) and prior to his death, he designated each of his daughters as his irrevocable beneficiaries under the Income Fund.
  2. In his last will and testament, he named his daughters as Estate trustees and beneficiaries of his estate.
  3. The father died on June 8, 2011.
  4. On or about July 26, 2011, $96,640.96 was transferred to each of the daughters.
  5. Each of the daughters received the $96,640.96 distribution on July 26, 2011, in satisfaction of their beneficial interest following the father’s death.
  6. The daughters provided no consideration in regard to the transfer of the $96,640.96.
  7. On July 3, 2015, the Minister of Revenue assessed each of the daughters $96,640.96 on the basis of subsection 160( 1) of the Income Tax Act.
  8. The father had an outstanding tax liability of not less than $96,640.96 with respect to his 2011 taxation year.

Tax liability re property transferred not at arms’ length

Section 160(1) of the Income Tax Act reads as follows:

“Tax liability re property transferred not at arm’s length

160 (1) Where a person has, on or after May 1, 1951, transferred property, either directly or indirectly, by means of a trust or by any other means whatever, to

(a) the person’s spouse or common-law partner or a person who has since become the person’s spouse or common-law partner,

(b) a person who was under 18 years of age, or

(c) a person with whom the person was not dealing at arm’s length,

the following rules apply:

(d) the transferee and transferor are jointly and severally, or solidarily, liable to pay a part of the transferor’s tax under this Part for each taxation year equal to the amount by which the tax for the year is greater than it would have been if it were not for the operation of sections 74.1 to 75.1 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in respect of any income from, or gain from the disposition of, the property so transferred or property substituted for it, and

(e) the transferee and transferor are jointly and severally, or solidarily, liable to pay under this Act an amount equal to the lesser of

(i) the amount, if any, by which the fair market value of the property at the time it was transferred exceeds the fair market value at that time of the consideration given for the property, and

(ii) the total of all amounts each of which is an amount that the transferor is liable to pay under this Act (including, for greater certainty, an amount that the transferor is liable to pay under this section, regardless of whether the Minister has made an assessment under subsection (2) for that amount) in or in respect of the taxation year in which the property was transferred or any preceding taxation year,

but nothing in this subsection limits the liability of the transferor under any other provision of this Act or of the transferee for the interest that the transferee is liable to pay under this Act on an assessment in respect of the amount that the transferee is liable to pay because of this subsection.”

When identifying the applicability of section 160, you need to also consider the interpretation of arm’s length in subsection 251(1) and the interpretation of related persons in subsection 251( 2 ). Subsection 251(1) defines related persons not dealing with each other at arm’s length.

It likewise considers a taxpayer and certain trusts not to deal at arm’s length. Finally, it offers that, in any other case, it is an inquiry of fact whether individuals not related to each other are, at a certain time, dealing with each other at arm’s length.

Paragraph 251(2)(a) of the Income Tax Act provides that, for the objectives of the Income Tax Act, related persons or persons related to each other are individuals linked by blood relation, marital relationship, common-law or adoption. Paragraph 251(6)(a) specifies that, for the purposes of the Income Tax Act, individuals are connected by blood relationship if one is the child or various other offspring of the other or one is the sibling of the other.

The Federal Court of Appeal

The Federal Court of Appeal had already determined that the following 4 standards must be used when taking into consideration subsection 160(1):

  1. The transferor needs to be liable to pay tax at the time of transfer;
  2. There need to be a transfer of property, either straight or indirectly, through a trust or any other method;
  3. The transferee must either be:
  • The transferor’s spouse or common-law relationship at the time of transfer or a person who has since come to be the person’s spouse or common-law partner;
  • A person who was under 18 years of age at the time of transfer; or
  • An individual with whom the transferor was not dealing at arm’s length.

4. The fair market value of the property transferred needs to be greater than the true value of the consideration given by the transferee.

The position of the parties

CRA’s position was that this was a transfer of property from the father to the daughters prior to his death at a time when he had an outstanding income tax liability.

The daughters stated that they accept that three of the four criteria set out by the Federal Court of Appeal have been satisfied. Particularly, the Appellants agree that their father indirectly transferred the property to each of them, that he owed income tax relating to the tax year in which the transfer took place or a previous tax year and that no consideration was paid by the daughters.

Accordingly, both CRA and the daughters agreed that the only issue before the Court to determine is whether the father and his daughters were dealing with each other at arms’ length.

The daughters’ position was that at the time of the actual cash transfer their father was dead. He did not exist, and for that reason, he was not a related individual within the meaning of Subsection 251(6), and therefore was not in blood relation with them.

CRA’s position was simple. First, the time of the transfer was not when the investment firm paid the cash to the daughters. Rather, it was when the father designated them as irrevocable beneficiaries. Second, the father and his daughters were related not by contract, but by blood. So, even death cannot take away that relationship.

The Court’s decision

The Court agreed totally with CRA’s position, upheld the assessments against each of the daughters and dismissed the appeals. They were found to have received the transfer of the property for no consideration at a time when the father owed income tax of a greater amount. The daughters were each liable to pay the amount of $96,640.96 to CRA. So in this case, if the daughters were asked do you inherit debt in Canada, they would have to answer a resounding YES.

Insolvent and alive

I also come across this issue when providing a no-cost consultation to an insolvent person wanting to know their options. Whenever they disclose that they have an income tax debt, I ask about transfers between the person and his or her spouse or children. I do this to see if there are may section 160(1) transfer of property issues.

If there are, an insolvency filing will merely highlight the transfer issue to CRA. When they get notice of the consumer proposal or the bankruptcy, they start their deep-dive investigation into the affairs of the bankrupt. As a licensed insolvency trustee (formerly called a bankruptcy trustee), I also have to advise the creditors of any issues like a transfer between related parties for no or little consideration. Once CRA determines a transfer took place between blood relations for little or no value being given or paid, they will assess the spouse or child under section 160(1) of the Income Tax Act. The outcome will be the same as in this Court case.

Do you inherit debt in Canada summary

So alive or dead, transfers of property between blood relatives for little or no value is always troublesome when it comes to income tax debt outstanding at the time, insolvency and death. I hope you enjoyed this do you inherit debt in Canada Brandon’s Blog and that you have a better understanding that it is possible.

I am finding that I am getting involved more often in deceased estate matters. My involvement is in advising people who are the Estate Trustee of an insolvent estate. I also have acted as the licensed insolvency trustee of a bankrupt deceased estate.

That work has now naturally led to obtaining assignments where my skill set as a licensed insolvency trustee comes in handy in a deceased estate. Two examples are having acted as the Estate Asset Manager in selling off assets in an estate and as acting as an Estate Trustee where there is no bankruptcy involved.

Because of that work, Ira Smith Trustee & Receiver Inc. has opened up a new business division called Smith Estate Trustee Ontario. In that business, as Estate Trustee, we offer options for the complicated estate concerns. We end the discomfort and irritations the stakeholders are experiencing. We use the experience and integrity that we have built up over the years, with compassion, to help the parties navigate the messy estate issues. We strive for a win for all beneficiaries, adding value by reaching the settlements and distributions they were unable to accomplish by themselves.

We provide a full range of services to provide solutions for the complex Estate issues to end the pain and frustration the stakeholders are experiencing. We apply our expertise and creative thinking to take care of all details to end your pain and achieve the goals of the beneficiaries and other stakeholders. Contact Smith Estate Trustee Ontario today for your free consultation.do you inherit debt in canada

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Brandon Blog Post

WILLS AND ESTATES: SELLING DECEASED ESTATE PROPERTY

wills and estates

If you would like to hear the audio version of this wills and estates Brandon’s Blog, please scroll to the bottom and click on the podcast

Introduction

Earlier this year, I wrote several blogs dealing with the administration of wills and estates. As I previously wrote, Ira Smith and I got very interested in this area. The reason was that we saw that the skill set required and the activities undertaken by an executor of a deceased estate, were quite similar. In Ontario, the executor of a deceased estate is called an estate trustee.

My series of blogs on the administration of a deceased estate in Ontario, in no particular order, were:

  1. DYING WITHOUT A WILL IN ONTARIO: DISTRIBUTION TO HEIRS NOT EASY
  2. TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS
  3. TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?
  4. ESTATE TRUSTEE ONTARIO REMOVAL ISSUES
  5. SUCCESSION LAW REFORM ACT OPPORTUNITIES FROM A TORONTO BANKRUPTCY TRUSTEE
  6. TRUSTEE ACT ONTARIO BY A TORONTO BANKRUPTCY TRUSTEE
  7. ADMINISTRATION OF ESTATES ACT CANADA: EASY FOR TORONTO BANKRUPTCY TRUSTEE TO DO
  8. ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET
  9. PROBATE IN ONTARIO – SMITH ESTATE TRUSTEE ONTARIO BEGINS

The purpose of this Brandon’s Blog is to review a very interesting recent Court of Appeal for Ontario decision appealing a lower Court’s ruling in an estate matter. The appeal was launched by the Estate Trustee who felt the lower court judge erred in approving a sale of an estate asset for a lower price than the Estate Trustee thought was proper. The Court of Appeal for Ontario upheld the lower court’s decision.

This could very well happen to a receiver or trustee in an insolvency file. Again, another similarity between the role we take on in an insolvency file administration and the role Smith Estate Trustee Ontario takes on as Estate Trustee in the administration of a deceased estate.

Wills and estates definition

First some basics. An estate is the property that an individual owns or has a lawful controlling interest in. The term is usually made use of to define the assets and liabilities left by a person after death. A will is a document that states your final wishes. It is a document that becomes operative after your death. It will appoint one or more people to act as an estate trustee. It will also provide for how you want your assets to be divided up amongst your beneficiary or beneficiaries.

On December 6, 2019, the Court of Appeal for Ontario released its decision in the legal case Loran v. Weissmann, 2019 ONCA 962 (CanLII). As I mentioned, the Estate Trustee appealed the lower court’s decision released in January 2019. The issue was one that could easily come up in other wills and estates. Since the issue being appealed was the lower court’s decision on a sales price for an asset, this issue also can arise in insolvency files. Just a different context.

Wills and estates Ontario: What was the issue?

This appeal by the estate trustee occurred out of a disagreement regarding a provision in the will concerning the sale of the business owned by the deceased. Unfortunately, this happens all too frequently. The provision in dispute was regarding the sales price of the business.

The will stated that the respondent, a long-time employee of the business, could purchase the business. The purchase price stated in the will was “…the lesser of $1.75 million or “the price determined by multiplying the earnings of…(averaged over the last three fiscal periods) by a factor of 5.5”.

The will also stated that the price paid by the respondent will be provided by way of a promissory note, with interest payable at 5% per year. There will be an annual repayment to the estate of not less than $180,000, to be made in month-to-month payments. The promissory note was to be secured by a general security agreement against the assets of the business and by the registration of a mortgage against the respondent’s house.

So far it sounds pretty simple, or so you would think.

They couldn’t reach a deal

The long-time employee tried to purchase the business, but the estate trustee and the employee could not agree on the purchase price. That is how they ended up in court.

The lower court judge hearing the evidence ruled that the sales price will be $529,611. He calculated this as $716,921, using the formula in the will, minus $187,310. This latter amount was an amount the Judge ruled was improperly paid by the company to the estate. The Judge also ruled that the employee was not required to provide the collateral mortgage. The estate trustee felt that this went against the will.

The appeal by the estate trustee

The appellant submitted that the application judge made the following mistakes:

  • he treated the respondent as a beneficiary as opposed to a favoured buyer;
  • he ignored the need of a collateral mortgage;
  • he approved the respondent’s evidence about the amount to be attributed to the deceased owner’s wages for the purposes of computing the earnings of the company; as well as
  • he incorrectly subtracted from the sales price the $187,310 paid out of the company to the estate.

The Court of Appeal for Ontario did not agree with any of these grounds for appeal.

The reasons were given by the Court of Appeal for Ontario

Beneficiary vs favoured buyer – The appellate court did not find any error in the lower court ruling on this. The Court of Appeal for Ontario noted that the will did not try to maximize the value of the business. It did not state that the estate trustee had to run a marketing effort to obtain the best price under the circumstances.

You would expect this to be the case in any sale by either an estate trustee or a receiver or licensed insolvency trustee. The appeal court noted this absence of intention. Rather, they agreed with the lower court that the intention was for the long-time employee to buy the business under the formula in the will.

Collateral mortgage – The evidence before the lower court was that at the time the will was written, the long-time employee did not own a home. The will also did not have any language about what minimum amount of equity the long term employee’s home had to have to provide for the collateral mortgage security. There was no argument that the lower court judge had the right to apply commercially reasonable terms. So, since the will was so unclear on what wording and real value the collateral mortgage security had to have, the lower court judge ruled that it would be meaningless and was unnecessary in the circumstances. The Court of Appeal for Ontario agreed again with the lower court judge.

The owner’s salary adds back to normalize earnings – The evidence was that at trial, both the appellant and respondent provided expert witness reports on this issue. The lower court judge preferred the respondent’s expert evidence. The appellant took issue with this. The Court of Appeal found that the lower court judge had the right to rely on one or the other of the expert’s reports and made a judgment call. There was nothing in that decision to be overturned.

Payment of $187,310 – The appellant’s position was that this payment would one day be rectified by the company recording this payment as a dividend. The appellant stated that the company had the right to pay dividends, which it had in the past. The lower court judge agreed that, as long as the payment of dividends did not render the company insolvent, it could do so.

The lower court judge also found that in the past the company had paid a dividend. However, it did not characterize this payment as a dividend, but rather, just payment to the estate. The lower court judge ruled that the purchaser should get the benefit of those funds having been stripped out of the company by a reduction in the purchase price of that same amount.

It turned out that the estate trustee caused the company to make that payment to the estate so that the estate could then pay out those funds to support the deceased’s widow. The company did not record that payment as a dividend or as salary to the widow. The lower court drew a distinction between dividends and gratuitous payments from the company’s bank account. The appeal court found that decision was within his discretion and there is no basis to interfere with the lower court judge’s finding.

So, the appeal court dismissed the appeal entirely and ordered that the appellant pay the respondent’s costs fixed in the amount of $10,000.

Summary

As I stated at the beginning, there are a lot of similarities between acting as an estate trustee and administering an insolvency file. Disputes normally arise in insolvency files. As this case shows, disputes also arise regularly in the administration of a deceased estate.

As a result of the similarities, we started this year Smith Estate Trustee Ontario. We currently have several estate trustee administrations underway. Our mix of empathy, experience and impartiality provides us with a distinct viewpoint. We have the capability to appropriately administer a deceased estate. Through our efforts, we minimize problems and accomplish outcomes for all stakeholders in an economical way.

We provide a full range of services to provide solutions for the complex Estate issues to end the pain and frustration the stakeholders are experiencing. We apply our expertise and creative thinking to take care of all details to end your pain and achieve the goals of the beneficiaries and other stakeholders. Contact Smith Estate Trustee Ontario today for your free consultation. Get our no cost full-scale analysis of your issues and our recommended options to solve your problems allowing you to move forward confidently. Check out our website by clicking HERE.

Call a Trustee Now!