Tag: estate trustee

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WHAT HAPPENS TO MORTGAGE WHEN YOU DIE CANADA: AMAZING DEBT PHILOSOPHY EXPLAINED

what happens to mortgage when you die Canada

Check out our 2023 update “What happens to your mortgage when you die?”

What happens to debt if you die?

When discussions of debt come up, individuals frequently joke around and claim they’ll be rid of financial debt when they pass away. However, is that real? I have actually blogged about this before. One of our most-read ever Brandon’s Blog is WHAT HAPPENS TO DEBT WHEN YOU DIE CANADA: ARE YOU FREE OF DEBT.

Similarly, my Brandon’s Blog CREDIT CARD DEBT AFTER DEATH IN CANADA: WHO IS RESPONSIBLE is also about debt and death and is also popular.

So although I have written about what happens to debt if you die before, from my blog stats, I see it is a very popular topic. So, I thought this would be a great opportunity to drill down a bit more to write about what happens to mortgage when you die Canada?

what happens to mortgage debt when you die canada
what happens to mortgage debt when you die canada?

What happens to mortgage at death?

The short answer is, usually, nothing. A homeowner’s loan of this kind is a secured loan debt registered against the asset, the house. Except for one situation which I will talk about in a minute, the pledge and its related debt stay and must be dealt with.

Before being able to answer the question properly, there are several possible situations. Is the deceased:

  • The sole owner?
  • Owns the home jointly with his/her spouse or partner who is still alive?

Either way, the contract and its debt at the date of death does not go away. If the deceased is the sole owner of the home, then it is an asset that the Estate Trustee named in the person’s Will must deal with. The home will need to be cleaned up and perhaps some repairs are done to get it ready for sale. Either the existing furniture works or the home will need to be staged to show it off in its best light.

The Estate Trustee will also have made sure that there was proper insurance on the home, obtained one or more appraisals and made arrangements for the home to be checked on a regular basis to make sure no damage occurs. Then the home will be put up for sale and sold.

Upon the sale, the home debt will have to be paid off in order for a discharge of the homeowner’s loan contract to be registered. This will be a requirement of the purchaser and it will be impossible to convey title to the home without paying off the pledge and getting a discharge.

If there is a surviving spouse or partner, and the home was owned jointly, then the ownership of the home continues automatically in the name of the surviving spouse. The home also does not need to go through probate in Ontario. The surviving spouse’s lawyer will take care of getting the name of the deceased eliminated from the home loan and title.

If the surviving spouse or partner wants to remain in the home and can afford to keep up the payments, then that is what he or she will do. If not, then the spouse will need to sell the home and downsize. As discussed previously, to sell the home, the loan contract debt will have to be repaid in full and the mortgage discharged.

Is my mortgage paid off if I die?

There is only one way that the debt will be paid off when the owner dies. That is if the owner had taken out specific home loan insurance. Upon the death of the insured, the insurance company will pay the lender the amount needed to pay off the mortgage in full. The Estate Trustee or surviving spouse or partner will have to make sure that the lender discharges the mortgage.

In a similar way, if the deceased had a current life insurance policy, but not necessarily a specific mortgage insurance policy, that may also come into play. A surviving spouse or partner who is the designated beneficiary will receive the life insurance proceeds directly. The proceeds will not have to go through probate in Ontario. They could use all or a portion of the life insurance proceeds to pay off the mortgage and remain in the home.

This is how life insurance can be used to answer the question, what happens to mortgage when you die Canada.

what happens to mortgage debt when you die canada
what happens to mortgage when you die canada

Joint mortgage what happens if one dies?

Where both spouses or partners owned the home jointly, they will also be joint on the mortgage. As I mentioned above, when one of the spouses or partners dies, the family’s lawyer will notify the mortgagee lender.

What if the lender was relying upon the creditworthiness of the deceased spouse or partner and not that of the surviving spouse? If the mortgage payments are kept current, then in the interim, probably nothing. But what will happen when the mortgage comes up for renewal and the remaining spouse or partner cannot repay it and wishes to renew it?

Only time will tell. The lender can either just offer a renewal or can require the sole owner to requalify the mortgage. If the now sole owner cannot qualify, then the mortgagee will demand that the mortgage be repaid in full upon maturity. This might pose a hardship for the now sole owner spouse.

What happens to a mortgage when the lender dies?

If the mortgage lender is a Bank or corporation, then, of course, this question does not apply. What happens if the mortgagee is an individual who lent on what is called a private mortgage? In this case, the mortgage debt and the mortgage does not go away. The mortgage is an asset of the deceased lender’s Estate. The lender’s Estate Trustee will be responsible for collecting everything properly owing on that debt, subject to the terms of the mortgage document. If the mortgage does not mature for many years and is kept current, then the deceased lender’s Estate Trustee will have to keep the administration open.

what happens to mortgage debt when you die canada
what happens to mortgage when you die canada

What happens to a house with a reverse mortgage when the owner dies?

So far, I have written about what happens with a traditional mortgage. What if the mortgage is actually a reverse mortgage? What happens to a house with such a mortgage when the owner dies?

A Canadian reverse mortgage is financing that allows any person of the age of 55+ to get a mortgage loan relying upon their residence equity. The mortgage loan is secured using a mortgage registered against the house. This is typically called an “equity release”. You have the capacity to raise up to 55% of today’s worth of your home. The actual percentage and the dollar amount you will have the ability to obtain relies on your age, your residence’s appraised value and the lending terms of your reverse mortgage loan provider.

You do not need to make payments on a reverse mortgage up until it is due for repayment. This is usually when you sell your house or the last owner passes away. The loan interest accrues on a reverse mortgage. It must be paid on the payout of the mortgage, but no payments are required while you are living in your home.

The longer the funding is outstanding, the more time you go without paying. Consequently, the longer the interest accrues. This clearly reduces the equity in your house.

For a full discussion of how a reverse mortgage works, check out my Brandon’s Blog – CANADIAN REVERSE MORTGAGE: SENIORS MOVING FORWARD WITH INCREASED DEBT.

Summary: What happens to mortgage when you die Canada?

The death of a loved one is probably the most traumatic life event you will encounter. It is doubly so when you relied on the income of the deceased for your own well-being. I hope you have found this what happens to mortgage when you die Canada Brandon’s Blog informative.

Do you have way too much financial debt? Prior to you getting to the phase where you can’t make ends meet and you need to borrow against the equity in your house, reach out to a licensed insolvency trustee (previously called a bankruptcy trustee). In fact, if you understand that you can’t pay your financial debts heading into or in your retired life, contact us.

We understand the pain and stress excessive financial debt can trigger. We can aid you to get rid of that discomfort as well as address your financial problems by offering prompt action and the ideal plan.

Call Ira Smith Trustee & Receiver Inc. today. Make an appointment with one of the Ira Smith Team for a free, no-obligation consultation and you can be on your way to enjoying a carefree retirement Starting Over, Starting Now. Give us a call today so that we can help you get back to a stress and pain-free life, Starting Over, Starting Now.

what happens to mortgage when you die canada
what happens to mortgage when you die canada
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Brandon Blog Post

CREDIT CARD DEBT AFTER DEATH IN CANADA: WHO IS RESPONSIBLE?

Introduction

The other day I received a phone call from a fellow wanting to know who is responsible for credit card debt after death in Canada. He was, unfortunately, suffering from a terminal illness and wanted to get his affairs in order. His wife will be both the Estate Trustee and beneficiary under his will.

This is not the first time I have received such inquiries. In dealing with the bankruptcy of deceased estates, this question, amongst others, is quite common. So, given the phone call, I thought it might make for an interesting blog to answer, what I have found to be, the most asked questions dealing with what happens to debt when you die Canada.

The 8 most asked questions

The 8 most asked questions I have found around credit card debt after death in Canada are:

  1. Who is responsible for credit card debt after death?
  2. Is my spouse responsible for my credit card debt in Canada?
  3. If your parents die with debt who pays it in Canada?
  4. Is an executor responsible for the debt in Canada?
  5. Am I inheriting my parents’ debt in Canada?
  6. Is there credit card debt forgiveness upon death?
  7. What happens to debts after death with no assets in the estate?
  8. Am I responsible for my spouse’s debt in Ontario?

Who is responsible for credit card debt after death?

The deceased’s estate is responsible for the credit card debt incurred by that person while they were alive. Therefore, any assets in the estate must first be used to pay off the person’s creditors, including tax amounts owing to Canada Revenue Agency. The creditors must be paid in full before any distribution is made to the beneficiaries.

If any person has co-signed the credit card agreement, or has guaranteed the debt or indemnified the credit card issuer for the debt incurred by the person on their credit card account while alive, then that person is liable if there are not sufficient, or any assets in the estate to pay off the credit card debt in full.

If any person holds a supplementary card on that person’s account, then under the credit card agreement, that person is normally held responsible by the credit card issuer for any unpaid debt on the account. That individual is also responsible to repay the bank card debt completely if the estate cannot pay the debt off in full.

Is my spouse responsible for my credit card debt in Canada?

Just like in the last situation, your spouse will be responsible if your spouse:

  1. has guaranteed the debt;
  2. indemnified the bank that issued the credit card; or
  3. is a holder of a supplementary credit card on the same account.

If none of the above conditions are present, then your spouse cannot be held responsible for your debt.

If your parents die with debt who pays it in Canada?

Many times parents name all their children as Estate Trustee. They do so to make sure that the children know that their parents loved them. Hopefully, all the children are also beneficiaries too.

The fact that children are either an Estate Trustee, a beneficiary or both, does not make them liable for their parents’ debts upon their death.

There are however three situations where the children may be liable. They are:

  1. Where there are assets in the estate, the children as Estate Trustees fail to pay all the debts prior to distributing funds to the beneficiaries.
  2. One or more of the children have guaranteed or co-signed for a debt of one or both of the parents or has indemnified a creditor on behalf of one or both parents.
  3. Is a supplementary cardholder on an account of one of the parents and at the date of death, there is an amount owing.

In any of the above cases, hopefully, there are sufficient assets available to pay off the debt(s) so that the individual child won’t be called upon to make good on the debt. In the case where there are no, or there are not enough assets AND one of the above situations exists, then the child will be called upon to pay off the debt.

Is an executor responsible for the debt in Canada?

If an Estate Trustee (previously in Ontario, this person was called the executor or executrix) disregards the financial obligations and disburses the money to the beneficiaries, then yes. The Estate Trustee will most likely be held directly responsible for those financial debts.

If the estate has no assets, or if what it had was insufficient to satisfy all debts, the Estate Trustee does not need to utilize his or her personal funds to satisfy the remaining debts. In this situation, there also will not be any distribution to the beneficiaries.

In the situation where there are some assets, but not enough to pay all liabilities of the deceased, the Estate Trustee would be well advised to seek the advice of both the lawyer and perhaps even a licensed insolvency trustee (formerly called a trustee in bankruptcy). The Estate Trustee should not be in the position after paying off testamentary costs and income tax obligations, to start choosing which debts will be paid and which will not be.

In the situation where the estate is insolvent, the Estate Trustee may be well advised to go to Court for an order allowing the deceased estate to be placed into bankruptcy. Then the funds that are remaining can be distributed in accordance with the Bankruptcy and Insolvency Act (Canada).

By doing so, the Estate Trustee is not making any decisions about cherry-picking creditors who will get paid, while others won’t. This will protect the Estate Trustee from attack by any creditor who will not be paid or be paid in full.

Am I inheriting my parents’ debt in Canada?

You cannot inherit debt. As a beneficiary, if there are more debts than assets, you won’t receive an inheritance either. But, you can’t inherit debt. You can only be responsible if any of the conditions I explained above exist. The one exception is that if you are a blood relative, your parent owes money to Canada Revenue Agency (CRA) and you received a transfer of their property while the debt to CRA was outstanding.

Is there credit card debt forgiveness upon death?

There is no automatic credit card debt forgiveness upon death. As I have discussed above, the person’s estate is responsible for paying off the credit card (and any other) debt. However, if there are no assets in the Estate, then the credit card issuer has no choice but to write off the debt if there is no other person to claim against. You will recall that I have previously discussed the situations where there may be a third party the credit card issuer can claim against.

One more possibility exists. If the bank that issued the credit card offered credit card balance insurance, and the person paid for it, then there will be an insurance policy that will pay off the debt. In that situation, the bank will get paid through the insurance policy. In this case, the credit card debt will neither be forgiven nor written off.

What happens to debts after death with no assets in the estate?

If there are no assets in the estate, then there are no funds to pay debts with. In this case, the Estate Trustee would notify all known creditors of the death of the person and that there are no assets. The creditors will have no choice but to write off the debts if there is no other person to claim against.

Am I responsible for my spouse’s debt in Ontario?

As I have discussed above, there is no automatic personal financial responsibility where one spouse is liable for the debts of the deceased spouse. However, if the remaining spouse has guaranteed, indemnified, co-signed or was otherwise jointly responsible for the same debts, then they will be. Specifically, with credit card debt, there is also the issue of being a supplementary cardholder on your spouse’s credit card account.

If none of those exceptions come into play, then one spouse is not responsible for the other spouse’s debt in Ontario.

Credit card debt after death in Canada summary

I hope you have found this credit card debt after death in Canada Brandon’s Blog informative. 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.

credit card debt after death in canada

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DYING WITHOUT A WILL IN ONTARIO: DISTRIBUTION TO HEIRS NOT EASY

Introduction

The official term for dying without a will in Ontario, or anywhere else, is that they have died intestate. The consequences of dying without a will in Ontario are significant. A recent Court decision about this famous Canadian’s Estate highlights the issue.

Toller James Montague Cranston, deceased

Toller Cranston was a popular Canadian figure skater and artist. He passed away on January 23, 2015, in Mexico where he lived for some

23 years. The departed passed away without leaving a will. His 3 siblings, Phillippa Baran, Goldie Cranston and Guy Cranston were proclaimed the sole heirs of the Estate by the Second Civil Court in San Miguel de Allende, Guanajuato, Mexico in August 2015.

Phillippa is the Estate Trustee. She was initially named “Executor” of the estate by the court in Mexico on September 2015. A Certificate of Appointment of Foreign Estate Trustee’s Nominee as Estate Trustee without a Will was issued by the Superior Court of Justice in Ottawa on December 8, 2016. This also includes a certificate of appointment of estate trustee without a will.

The assets of the Estate were located both in Canada and in Mexico. Upon his death, the Estate consisted of about 20,000 items of original art, bank accounts and other property. The initial worth of the Estate was around $6,258,520.

According to Phillippa, the unsold or unrealized property includes $429,958 in money and around $1,577,371 in the artwork. The deceased’s original artwork was placed on consignment at several art galleries for sale.

Siblings disagree on what to do with the remaining original artwork

At first, the siblings collaborated to carry out what needed to be done in the Estate. After Toller Cranston’s death, they took a trip to Mexico to deal with the Estate. Along with selling the real estate, a variety of paintings as well as other assets which were split between them.

Consequently, Goldie and Guy Cranston came to be worried regarding Phillippa’s management of the Estate. They stated that Phillippa has actually mishandled the Estate and they are worried about how she will deal with the remaining Estate assets.

Especially bothering to Guy and Goldie Cranston is Phillippa’s views on dealing with the rest of the Estate. It is the artwork that is a significant emphasis on disagreement. These are among the main reasons Goldie and Guy are asking that an Estate Trustee During Litigation be assigned right now.

Goldie and Guy were particularly disturbed over the following:

  1. Concerning the artwork in storage, they have repeatedly requested that they receive their share of the actual artwork. They don’t want or need it to be sold. Phillippa has ignored their requests.
  2. There was evidence that the art gallery where a major amount of artwork was placed on consignment was having financial difficulties. The concern was that the gallery may not continue in business and the artwork could be lost.
  3. The law firm acting for Philippa also acts for the art gallery in financial trouble.
  4. Neither Guy nor Goldie requires the paintings to be sold. In fact, Guy owns an art gallery in Nova Scotia. They do not want to lose up to 50% of the value of the artwork they are entitled to because of art gallery commissions. Therefore, Phillippa’s insisting that the artwork must be sold is an unreasonable loss for them.
  5. Toller Cranston’s legacy. They say that Phillippa’s actions related to marketing and licensing opportunities that the artwork could yield once the passing of accounts is concluded are unreasonable. She is more focused on that, without any consultation with the other heirs, than she is in administering the assets currently in the Estate.
  6. They are surprised that the Estate Trustee has paid herself the amount of $528,228 from the Estate. They also have issues regarding the $315,774 spent by Phillippa in legal fees.

Guy and Goldie request the appointment of an Estate Trustee During Litigation

Goldie and Guy Cranston state that Phillippa ought to be replaced as Estate Trustee in order to avoid causing incurable damage to the heirs if the artwork is sold off in the current fashion. They propose that an Estate Trustee During Litigation should be designated to protect the assets of the Estate and to disperse the artwork in-kind amongst the heirs.

They nominated a specific lawyer as the Estate Trustee During Litigation. The Court found that his credentials are not a problem and that he is capable of acting in that capacity. Phillippa opposed this request.

The Court reviewed the relevant case law. The decision also states that Phillippa’s handling of the artwork in either marketing it over the arguments of the other heirs or in creating strategies when it comes to the future rights of the artwork without notifying or speaking with Goldie or Guy is unreasonable. The Court also found that it runs opposite to her

responsibilities as an Estate Trustee to act in the best interests of the heirs. The Court concluded that Phillippa remains in a conflict of interest.

The Court’s decision

The Court ordered that:

  1. The lawyer is selected to act as the Court-appointed Estate Trustee During Litigation of the estate of Toller James Montague Cranston.
  2. He is to act without posting an Administration Bond.
  3. He will immediately file his written Consent with the Court and take immediate control of all properties of the Estate.
  4. Phillippa will totally co-operate in the hand-over of the Estate property and documents
  5. The Estate Trustee During Litigation is to examine and prepare for circulation a plan for the distribution of and liquidation of the remaining artwork.
  6. To determine his plan, he must consult with all three heirs.

Conclusion – Dying without a will in Ontario

Dying without a will in Ontario is not helpful to anyone, especially your loved ones you wanted to have the benefit of your property when you die. There are many times where a neutral third party should be considered either to act as Estate Trustee or Estate Trustee Under Litigation. Consider these examples:

  1. Moms and dads select all their kids to serve as Estate Trustee. Each child has a various degree of abilities, and some none, in what is called for to administer an Estate. Some children identify that either they do not have the necessary abilities or simply do not desire the obligation. Anxiousness, clashes and pain results.
  2. Many affluent family members have disagreements over exactly how the family wealth should be handled. These fights can become very public and expensive when they resort to the courts.
  3. A person passes away with assets yet no will. Many people think, deservedly or not, that they are entitled to the assets in the deceased’s estate.
  4. You are a lawyer, estate planner or financial advisor. You hesitantly consented to be the Estate Trustee of the estate of the person that was the owner of your best corporate client. The person passes away and you find yourself in the middle of an illogical dispute of passion between the heirs. The problem is so extreme, it threatens your capability for maintaining the company as your client and therefore your future earnings.
  5. As the Estate Trustee, you are not in conflict. Nonetheless, the time required to handle all the complicated estate problems is like a second full-time job. It is having a negative impact on your business as you cannot devote the necessary time to it. You have to get out, however, you do not have an option to replace yourself.
  6. The heirs and the Estate are involved in significant expensive lawsuits. There is no end in sight. Nevertheless, there are live problems that require to be attended to in managing the Estate so that the assets are protected and do not dissipate. There is an instant need for an Estate Trustee Under Litigation.

These are all real-life examples. Nothing has been made up. This is why we started Smith Estate Trustee Ontario.

If you find yourself in the middle of an Estate problem, contact the Smith Estate Ontario Team. We will sit down with you and listen to the issues. We will provide you with a plan for moving forward and ending the pain, frustration and cost being caused by the Estate issues. There is no charge for this initial consultation.

Call the Smith Estate Trustee Ontario Team today. We will help you move forward. We do so with compassion, experience and impartiality. Call the Smith Estate Trustee Ontario Team now.

dying without a will in ontario

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PROBATE IN ONTARIO – SMITH ESTATE TRUSTEE ONTARIO BEGINS

probate in ontario

Introduction

I have written several blogs on the topic of when someone dies and their estate is insolvent. One of our most popular blogs is WHAT HAPPENS TO DEBT WHEN YOU DIE CANADA: ARE YOU FREE OF DEBT? I have also written on estate matters including probate in Ontario. Not from an insolvent estate perspective, but as to why a licensed insolvency trustee (formerly called a trustee in bankruptcy) has the skill set to be an estate trustee.

Historically, estate trustees have been a trust company, a lawyer or family of the deceased, such as children. Based on our work with insolvent deceased estates, we have learned all about the emotions and even pain that family and business ties can cause and place parties in conflict.

So, I am pleased to announce that today we have opened up a new business division, Smith Trustee Estate Ontario. You can click on the button above or below to take you to our website. Have a look and let us know what you think.

Why use a licensed insolvency trustee as an estate trustee?

We have the skillset to perform the duties of an estate trustee. We also understand the role and responsibilities that the statutes demand, such as the:

Estate trustee problems we can help solve

In Ontario, an estate trustee is the only person with the lawful authority to look after an estate. Probate in Ontario is a process to ask the court to:

  • give a person the authority to work as the estate trustee of an estate; or
  • verify the authority of a person named as the estate trustee in the deceased’s will.

Sometimes an objective and experienced party have to be assigned to function as the independent estate trustee. Take into consideration the possible circumstances:

  1. Moms and Dads select all their kids to work together as an estate trustee. Each child has various degree of abilities, and some may have no desire, to do is called for to carry out the estate trustee duties. Stress and anxiety, clashes and pain results without any end in sight.
  2. Lots of well-off family members have disagreements over just how the family’s assets need to be invested. Rich family members aren’t beyond turning family squabbles into public fights in the courts. Often the circumstance simply calls out for a caring, skilled and neutral party to become the Officer of the Court to aid everybody gets to a good and fair outcome. This also will ideally decrease or prevent the demand for costly lawsuits.
  3. Somebody passes away with assets however no will. Many people think they are entitled to all or part of the deceased’s estate. Somebody without a financial interest yet with the abilities and experience is required to intervene to work things out in a reasonable and objective and cost-effective method.
  4. You are the lawyer or financial advisor to a great client. You have hesitantly consented to be the estate trustee of the estate of the person that is the driving force behind one of your best corporate clients. The person passes away and you find that you are now in the middle of an illogical dispute amongst the beneficiaries that is driven not by business sense but by passion and hate. The dispute is so serious, it endangers your capability to maintain the corporate client and the prospective future earnings to your business that this client can generate.
  5. As the lawyer or financial advisor to a person, acting as the estate trustee is not a problem. Nevertheless, the time required to take care of all the intricate estate problems may be that it takes you far from the remainder of your professional practice. You believe that you really cannot afford to do so. You want to relinquish the estate trustee duty, however, you don’t have a reasonable alternative to make sure that the estate can be effectively carried out.
  6. The person names as the Estate Trustee has a real conflict and must be replaced. Again, a skilled party who has no financial interest in the outcome and is easily recognized as an expert by the Court is required, and fast!
  7. There is a crucial demand for an Estate Trustee Under Litigation. Our experience in working as an Officer of the Court has actually resulted in our being identified for acting in a proficient and neutral way. We comprehend exactly how to navigate the different regulations and Court procedures associated with being an estate trustee. The Court acknowledges our capabilities and approves our qualifications without question.

The fact of the matter is with many problems such as these, the estate is most likely to be involved in significant expensive lawsuits. It will certainly not finish anytime quickly. Nevertheless, in the meanwhile, there are actual time problems that require to be attended to in managing the estate assets so they do not dissipate or otherwise are at risk.

Probate in Ontario – Why work with us?

Our mix of empathy, experience and impartiality provides us with a distinct viewpoint and the capability to appropriately administer the estate, minimize problems and accomplish outcomes for all stakeholders in an economical way.

Professional and impartial Officer of the Court

  • Acting as estate trustee
  • Obtain probate in Ontario
  • Asset management
  • Investigation and valuation
  • Monetization of assets
  • Trust accounting
  • Beneficiary reporting and distribution

Estate Trustee Under Litigation

  • Professional and impartial Officer of the Court
  • Asset investigation, valuation and safeguarding
  • Trust accounting
  • Reporting to the Court and all stakeholders

Conflict resolution

  • Protecting assets
  • Experienced as Officer of the Court if estate trustee has conflict – perceived or real
  • Minimize costs
  • Stakeholder strategies

Insolvency

  • Planning and strategy to safeguard assets
  • Restructuring and Turnaround
  • Acting as Trustee of an insolvent estate

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 free 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 on the button below. All our details are there.

probate in ontario

 

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Brandon Blog Post

ESTATE TRUSTEE ONTARIO REMOVAL ISSUES

Estate trustee

If you would prefer to listen to the audio version of this Brandon’s Blog, please scroll down to the bottom and click on the podcast.

Estate trustee Introduction

One of the most popular Brandon’s Blog article is:

WHAT HAPPENS TO DEBT WHEN YOU DIE CANADA: ARE YOU FREE OF DEBT

That led me to start looking more deeply into deceased estate matters, past the insolvency issues. So a few months ago I wrote a series of blogs on estate trustee matters. The series of blogs are:

In one blog I wrote how the duties and responsibilities of an estate trustee (formerly called either an executor or executrix) are very similar to the fiduciary duties and activities are undertaken all the time by a licensed insolvency trustee. In another, I wrote about the Court’s ability to remove and replace the estate trustee. In a third blog, I wrote about how all children are not fit to be an estate trustee.

A recent Court decision

I recently became aware of an Ontario Court decision about the removal and replacement of an estate trustee. The decision was handed down a couple of weeks after I wrote my blogs.

The recent decision is a very interesting case. Many of the issues I wrote about are all there. So, I thought it would be interesting to provide the information to you as it is a real-life example that actually took place, of many of the things I previously wrote about that could take place.

The case citation is Lanari V. Kay, 2019 ONSC 1506. It was heard in the Ontario Superior Court of Justice. The deceased was Patricia Anne Kay. She had eight children. Tragically, one daughter predeceased her. Of the seven remaining, in her will, three were appointed trustees. Along with the remaining four children, Ms. Kay’s granddaughter, the child of her dead daughter, was asserting that she was entitled to be a beneficiary.

The Applicant

The applicant insists five reasons to get rid of the estate trustees: (1) conflict of interest; (2) misbehaviour, violation of trust fund as well as violation of fiduciary responsibility; (3) animosity between the trustees; (4) conflicts between the trustees and the beneficiaries; and (5) delay and wastage of the assets.

The respondents

The trustees insist that:

  1. Any kind of conflict of interest can be relieved by guaranteeing the trustee with a conflict will not take part in any decision making in connection with the matter or thing where there is that conflict.
  2. There is no displeasure between the trustees, and there never was.
  3. Any bitterness between trustees and beneficiaries is not a sufficient ground to get rid of trustees.
  4. There has been no significant hold-up in the management of the estate and they have properly provided the necessary disclosure.
  5. From a functional viewpoint, the elimination of current trustees will increase expenses in this modest estate.

The Trustee Act

As I discussed in my earlier blogs, under the Trustee Act, R.S.O. 1990, c. T. 23 (the Act), the court can remove trustees and select brand-new trustees.

The basic concept adhered to in an estate and trust matter by the Court for removal applications like this one is that a Court will not easily remove an estate executor, executrix or trustee picked by the testator. Nevertheless, where there is a clear instance of conflict of interest, elimination is a suitable course of action. The well-being of the beneficiaries has to be an important factor to consider. Also, conduct by the trustee that jeopardizes the estate property or that reveals a lack of honesty or absence of proper ability to carry out the trustee’s duties and obligations are a basis for removal.

The Judge and his ruling

Therefore, the Judge kept in mind that the estate trustees have actually insisted in written documents that the estate might lack sufficient property to disperse if estate litigation continues. He found that the trustees’ activities have actually resulted in unnecessary litigation. The significant legal costs which have actually been sustained are partly due to the unreasonable positions taken by the trustees. This was a major variable to think about.

The Judge stated that:

  1. Bitterness between a beneficiary and a trustee might not be sufficient to cut a trustee.
  2. When that displeasure influences the management of the estate, it is a significant problem.
  3. If the animosity has actually been created by the failure to supply disclosure, it increased the time spent by the respective lawyers on behalf of the trustees and the beneficiaries.
  4. The additional time spent as a result of the lack of disclosure is matched by a matching boost in legal costs which might be the obligation of the estate.

The Judge felt that the problems in this situation have and remains to raise the costs associated with the estate management. He additionally stated that bitterness between the trustees might also exist.

Ultimately, the Judge determined that he was satisfied that the estate trustees have to be removed and he ordered that. The Judge assigned an independent person as the alternative estate trustee and approved a specific hourly rate to be billed by the brand-new trustee. Trustee compensation, just like that of a licensed insolvency trustee acting in Court matters, is subject to taxation by the Court.

Finally, the Judge referred to the various other disputes between the parties back to the Judge seized with this estate litigation.

Our role in estate matters

As I mentioned in one of the earlier blogs, my Firm had successfully completed a mandate as Court-appointed Estate Asset Manager. In that file we had to find common ground between two beneficiaries who could not agree on anything. We were able to do that. So, on consent, our plan to prepare for sale and then sell the assets and distribute the cash to the beneficiaries, on consent, was done. Our fee and that of our lawyer was also approved by the Court without any objection from the beneficiaries.

We were recently appointed by the Court in another estate matter. We will be receiving funds from a party purchasing the only real asset in the estate and attempting to find a missing beneficiary. Based on the results of our hunting, we will then prepare a distribution plan for the Court to approve.

As I have previously written and state above, a licensed insolvency trustee is an officer of the Court. We have the necessary skill set to act as either an estate trustee or perform many potential roles in estate matters. This is in addition to our normal work in the insolvency field.

If you are involved in a messy estate matter, call the Ira Smith Team today. We work cooperatively with lawyers and other professionals.

As a licensed insolvency trustee, we are natural problem solvers. We will be able to create a plan unique to your circumstances so that we can end the pain, stress and anxiety that you are feeling. This will allow you to reduce your overall costs and return to living a stress-free life.

Call the Ira Smith Team today for your free consultation. We will reduce your overall costs and end your pain points, Starting over Starting Now.

 

 

 

 

 

 

Categories
Brandon Blog Post

SUCCESSION LAW REFORM ACT OPPORTUNITIES FROM A TORONTO BANKRUPTCY TRUSTEE

succession law reform act

If you would prefer to listen to the audio version of this Succession Law Reform Act Brandon’s Blog, please scroll down to the bottom and click on the podcast.

Succession Law Reform Act: Introduction

I wish to focus on the last provincial statute that is also important for the administration of a deceased estate; the Succession Law Reform Act, R.S.O. 1990, c. S.26.

This is my last blog in this collection to show how it would certainly be proper to appoint a licensed insolvency trustee (LIT or bankruptcy trustee) (formerly known as a bankruptcy trustee) as the estate trustee (formerly called an executor or executrix) of a solvent deceased estate.

As always, given that we are not lawyers, and I am not offering in this or any of the other Brandon’s Blogs in this series, suggestions on wills or estate issues. For that, you have to consult your lawyer.

My estate trustee blogs

In my blog TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I discussed some crucial issues when it entails a deceased estate and why a LIT would certainly be exceptionally knowledgable and qualified to serve as an estate trustee.

In the blog, TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?, I discussed why many times moms and dads attempt doing the correct thing by selecting their youngsters as estate trustees and the several times it simply ends up all wrong.

In ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET, I describe how the needs and stipulations of the Estates Act are already very familiar to a bankruptcy trustee. As a matter of fact, a lot of the tasks called for by the Estates Act are currently carried out in the insolvency context by a LIT.

My blog ADMINISTRATION OF ESTATES ACT CANADA: EASY FOR TORONTO BANKRUPTCY TRUSTEE TO DO, I clarified why a LIT is an appropriate specialist to lead the management of Estates Act Canada.

In the blog TRUSTEE ACT ONTARIO BY A TORONTO BANKRUPTCY TRUSTEE, I describe the duties of a trustee under the Trustee Act Ontario and how a bankruptcy trustee is experienced to carry out those duties.

In this blog, I will explain why a bankruptcy trustee would be extremely comfortable working with this provincial legislation.

Things an estate trustee must be aware of

The Act has 79 sections and regulations. Sections 1 through 43 inclusive, set the ground rules for establishing wills and their validity.

The Act figures out how your estate and assets will be allocated to family members based on based upon guidance and a collection of policies.

This statute is different from the other ones I reviewed affecting acting as an estate trustee in a deceased estate. The Act is really just a set of guiding rules.

Intestacy and the entitlement of spouse and the preferential share

Section 44 of the Act deals with a person who has a spouse and no living children who die intestate. This section says that his or her spouse is entitled to all the property.

Section 45(1) of this Act deals with the situations where a person dies intestate and has both a spouse and living children. It says that where the value of the deceased’s property is not more than the preferential share, which is a defined term, then the spouse is entitled to all the property.

Preferential share is set by Ontario Regulation 54/95. It says that for the purpose of section 45 of the Act, the preferential share is $200,000.

Section 45(2) of the Act deals with the person who dies intestate, has a spouse and living children, and whose property is worth more than the preferential share. This section says that the spouse is absolutely entitled to the preferential share or the amount of $200,000. Presumably, the spouse and children then have to either agree or litigate about who is entitled to how much of the value above $200,000.

Just to add another wrinkle, Section 45(3) deals with the situation where the deceased dies with a will dealing with some property but intestate to the balance of the property and is survived by both a spouse and children. This section states that the spouse is always entitled to the preferential share out of the property not governed by a will. If the spouse is entitled to property under a will having a value of more than the preferential share ($200,000), then there is no need to be concerned with the workings of the preferential share.

Residue: spouse and children

Section 46(1) of this provincial statute says that where a person dies intestate and has a spouse and one living child, the spouse is entitled to one-half of the residue of the property AFTER payment of the preferential share.

Section 46(2) states that if the intestate dead person has a spouse and more than one child, the spouse is entitled to one-third of the residue. Again, this is after payment of the preferential share. Section 46(3) deals with the situation of any children predeceasing the parent who died intestate. This section says that for the purposes of calculating the spouse’s share, assume the deceased child(ren) is alive.

Distribution of kin

Section 47 of the Succession Law Reform Act deals with how property should be distributed when a person dies intestate. The general principle starts with the property being divided between the spouse and living children as described above. The balance of the section deals with the treatment of grandchildren, parents, siblings and nephews and nieces when a person dies intestate.

This section ultimately says that if there are no kin, then the intestate property becomes the property of the Crown under the Escheats Act, 2015.

Succession Law Reform Act: Designation of beneficiaries of interest in funds or plans, survivorship and support of dependants

The balance of the Act deals with specific rules about:

  • the designation in plans or funds of specific beneficiaries;
  • how to deal with the death of two or more persons at the same time who either hold property together or may be entitled to all or some of the other’s property; and
  • support of dependants.

Summary

I really hope that this collection of blogs show to you just how the various provincial statutes describing the obligations of a trustee or estate trustee tracks actually near to exactly how a LIT executes in either a Court-appointed receivership or bankruptcy mandate.

If you have any type of concerns about a deceased estate and the requirements for an estate trustee, whether it is solvent or insolvent, call the Ira Smith Team. We have decades and generations of experience in helping people and companies overcome their financial problems. You don’t need to suffer; we can end your pain.

If you have any questions at all, contact the Ira Smith Team.

 

Categories
Brandon Blog Post

TRUSTEE ACT ONTARIO BY A TORONTO BANKRUPTCY TRUSTEE

Trustee Act Ontario: Introduction

I want to highlight a provincial statute that is also important for the administration of a deceased estate; the Trustee Act, R.S.O. 1990, c. T.23 (Trustee Act Ontario). This blog continues my blog series to show how it would be proper to appoint a licensed insolvency trustee (LIT or bankruptcy trustee) (formerly known as a bankruptcy trustee) as the estate trustee (formerly called an executor or executrix) of a solvent deceased estate.

As always, since we are not lawyers, and I am by no means providing in this and upcoming Brandon’s Blogs advice on wills or estate planning matters. For that, you must consult your lawyer.

My prior estate blogs

In my blog TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I looked at some essential matters when it involves a deceased estate and why a LIT would be extremely knowledgable and competent to act as an estate trustee of a deceased estate with those basic requirements.

In the blog, TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?, I explained why many times parents try doing the proper thing by appointing their children as estate trustees and how many times it just turns out all wrong.

In ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET, I describe how the requirements and provisions of the Estates Act are already very familiar to a bankruptcy trustee. In fact, most of the duties required by the Estates Act are already performed in the insolvency context by a LIT.

My blog ADMINISTRATION OF ESTATES ACT CANADA: EASY FOR TORONTO BANKRUPTCY TRUSTEE TO DO, I explained why a LIT is a right professional to lead the administration of Estates Act Canada.

In this and my next blog, I will focus on two more Ontario statutes that impact the administration of a deceased estate by an estate trustee. The three statutes are:

  1. Trustee Act, R.S.O. 1990, c. T.23; and
  2. Succession Law Reform Act, R.S.O. 1990, c. S.26

As you have by now correctly guessed, in this blog, I will show how a bankruptcy trustee would be very familiar with the workings of this provincial legislation.

Things an estate trustee must be aware of

There are various sections of the Trustee Act Ontario that affects the duties and responsibilities of an estate trustee in administering a deceased estate. All the concepts are very familiar to a LIT.

Power of court to appoint new trustees

Section 5(1) of this statute gives the Ontario Superior Court of Justice the authority to make an Order for the appointment of a new trustee. This is the same Court that we attend for Court-appointed receivership and bankruptcy matters. So, a LIT is very familiar with the workings and requirements of this Court.

Who may apply for the appointment of a new trustee, or vesting order

Section 16(1) of this provincial statute says that anyone who has a beneficial interest in the property of the trust can apply for the appointment of a new trustee. This is very similar to how a Court-appointed Receiver is appointed. Although it is normally a secured creditor who makes the application, in theory, it could be any party that has an interest. Section 101(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 states that a receivership Order may be made “…where it seems to a judge of the court to be just or convenient to do so.”. It is the “just and convenient” clause that was relied upon by the judge when we were appointed Receiver and Manager of the assets, properties and undertakings of The Suites at 1 King West condo strata hotel back in August 2007.

For this reason, as a LIT, we are very familiar with this aspect of appointing a trustee.

Power and discretion of trustee for sale

In my blog ADMINISTRATION OF ESTATES ACT CANADA: EASY FOR TORONTO BANKRUPTCY TRUSTEE TO DO, I referred to sections 16 and 17 of the Estates Administration Act. Section 17 in particular, provides the estate trustee with the power to pay off the debts of the deceased. It also allows a trustee to distribute or divide the estate among the beneficiaries.

Section 17 of the provincial Act provides the trustee with the authority to sell, but subject to the requirements of the Estates Administration Act.

A LIT, either in receivership or bankruptcy, is extremely acquainted and experienced in the sale of real and personal property. The LIT likewise makes certain that the creditors are paid in the correct order of priority.

Sales by trustees not impeachable on certain grounds

Section 18(1) deals with a certain aspect of the sale of the property. It states that unless it is proven that there was an inadequate sales price, a sale properly made cannot be impeached by any beneficiary. Any beneficiary wanting to try to impeach a sale must prove that the process used resulted in a sales price at less than fair market value.

Similarly, in a Court-appointed receivership or bankruptcy, the LIT must be able to prove that both the conditions of the sales process and the sales price achieved, was right for the types of assets in the circumstances.

The leading case is the Ontario Court of Appeal decision in Royal Bank of Canada v. Soundair Corp., 1991 CanLII 2727 (ON CA). The process a LIT must follow is known as the “Soundair principles”. This is the test used when deciding whether a receiver or trustee applying for Court approval of a sales process and the authority to sell assets has acted properly. The Court must decide whether the receiver or trustee has:

  • made a sufficient effort to get the best price and has not acted improvidently;
  • considered the interests of all parties;
  • Devised a fair process that has integrity by which offers were obtained; and
  • Introduced any element of unfairness in the working out of the process.

Therefore, I submit, that a LIT is very experienced in devising a sales process and selling assets in a way that is fair to all stakeholders or beneficiaries to attempt to maximize sales proceeds.

Trust funds and investing

Section 26 of the Act deals with the area of the requirement for a trustee to maintain trust accounts and to invest trust property in a way that will maximize the return while not putting the capital at risk to swings in investment pricing, inflation or income tax.

The LIT is very familiar and experienced in trust accounts and the investing of trust funds. Section 25 of the Bankruptcy and Insolvency Act (Canada) (BIA) deals with the requirement of a trustee to establish trust accounts. Also, the Superintendent of Bankruptcy Directive no. 5R5 deals with Estate funds and banking. The Superintendent also monitors the banking of trust funds by all LITs across Canada.

Therefore a LIT is very knowledgeable and experienced in the banking, investing and protection of trust funds.

Security by the person appointed

If letters of administration were granted under the Estates Act, R.S.O. 1990, c. E.21, section 37(2) of the provincial legislation requires every trustee to post security.

I discussed in my blog ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET, the experience of a LIT in the posting of security by way of an insurance company bond.

Actions for torts

Section 38(1) of the provincial statute gives authority to an estate trustee of a deceased person to maintain an action for all torts and injuries to the deceased person or his or her property, except in cases of libel and slander. Any recovery forms part of the deceased’s personal estate. Section 38(3) provides for a limitation on such actions. The action cannot be brought after the expiration of two years from the date of death.

As a LIT, this is a familiar concept to us. When a person or company is insolvent and has a chose in action against one or more parties, such action can be started or continued by a receiver or bankruptcy trustee. In fact, in a bankruptcy, the action actually vests in the trustee.

The receiver or trustee has to make sure that they have a legal opinion on the likelihood of success. The receiver or trustee also has to make sure that they can afford to fund the litigation. The litigation cost cannot reduce the value of the assets under administration. This includes the issue of costs if the action proves unsuccessful.

Distribution of assets under trust deeds for benefit of creditors, or of the assets of the intestate

Section 53(1) of the Act lays out the requirements of a trustee to make a distribution for the general benefit of creditors. As I have described in previous blogs, Section 135 of the BIA deals with the admission and disallowance of proofs of claim and proofs of security.

A LIT is an expert at sorting out creditor claims and could certainly do so under the Trustee Act also.

Trustee Act Ontario: Summary

I hope that this blog reveals to you how the provisions of this provincial statute, detailing the duties of a trustee or estate trustee tracks really close to how a LIT performs in either a Court-appointed receivership or bankruptcy administration.

Therefore, the LIT is used to acting as a Court officer and could very easily perform the requirements and duties of a trustee as described in this provincial legislation.

If you have any questions about a deceased estate and the need for an estate trustee, whether it is solvent or insolvent, contact the Ira Smith Team. We have decades and generations of experience in helping people and companies overcome their financial problems. You don’t need to suffer; we can end your pain.

In my next blog, I am going to write a similar comparison. It will be about the requirements outlined in the Succession Law Reform Act and how a LIT is most familiar with it also.

In the meantime, if you have any questions at all, contact the Ira Smith Team.

 

trustee act ontario

Categories
Brandon Blog Post

ADMINISTRATION OF ESTATES ACT CANADA: EASY FOR TORONTO BANKRUPTCY TRUSTEE TO DO

administration of estates act canada

If you would rather hear an audio version of this administration of estates act Canada, please scroll down to the bottom of this page and click on the podcast.

Administration of estates act Canada: Introduction

I want to discuss with you another provincial statute that is very important for the administration of estates act Canada; the Estates Administration Act, R.S.O. 1990, c. E.22. It continues my series of blogs to show how it would be very natural to appoint a licensed insolvency trustee (LIT or bankruptcy trustee) (formerly known as a bankruptcy trustee) as the estate trustee (formerly called an executor or executrix) of a solvent deceased estate.

In my blog TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I looked at some essential matters when it involves a deceased estate and why a LIT would be extremely knowledgable and competent to act as an estate trustee of a deceased estate with those basic requirements.

In the blog, TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?, I explained why many times parents try doing the proper thing by appointing their children as estate trustees and how many times it just turns out all wrong.

In ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET, I describe how the requirements and provisions of the Estates Act are already very familiar to a bankruptcy trustee. In fact, most of the duties required by the Estates Act are already performed in the insolvency context by a LIT.

In this and the next two blogs, I want to focus on the three more Ontario statutes that deal with the duties and responsibilities of an estate trustee of a deceased estate. The three statutes are:

  1. Estates Administration Act, R.S.O. 1990, c. E.22;
  2. Trustee Act, R.S.O. 1990, c. T.23; and
  3. Succession Law Reform Act, R.S.O. 1990, c. S.26

As you have by now correctly guessed, in this blog, I will show how a bankruptcy trustee would be very familiar with the workings of the Estates Administration Act.

As always, since we are not lawyers, and I am by no means providing in this and upcoming Brandon’s Blogs advice on wills or estate planning matters. For that, you must consult your lawyer.

Administration of estates act Canada: Things an estate trustee must be aware of

Payment of debts out of the residuary estate

Section 5 of the Estates Administration Act states that both the personal property and the real property (subject to the rights of mortgagees) is available to pay the debts, funeral and testamentary expenses and the costs of the estate trustee in administering the deceased estate. The LIT is familiar with such a provision.

Section 136(1)(a) of the Bankruptcy and Insolvency Act (Canada) (BIA) prioritizes the reasonable funeral and testamentary expenses incurred by the deceased’s legal representatives. In a bankruptcy, those costs are paid as a preferred unsecured claim, behind trust and secured claims but before payment of ordinary unsecured claims.

Vesting of real estate not disposed of within 3 years

Section 9(1) of the Estates Administration Act states that real property not disposed of or conveyed within three years after the date of death is automatically vested in the persons beneficially entitled to such real property. The exception is if the personal representative or estate trustee has registered a caution on the title, then the three-year period starts from the date the last caution was registered.

The purpose and intent of the BIA is that all property of the bankrupt, not subject to a valid trust claim, security interest or is otherwise exempt, will automatically vest in the bankruptcy trustee. Section 40(1) of the BIA establishes the rules a trustee must follow to return to the debtor any property that could not be realized upon, despite the LIT’s best efforts.

Powers of executors and administrators about selling and conveying real estate

Sections 16 and 17 of the Estates Administration Act gives the power to sell real estate to a personal representative or estate trustee. It also says that additional powers are not just for paying off the debts of the deceased, but also for distributing or dividing the estate among the beneficiaries.

A LIT, either in a receivership or bankruptcy, is very familiar with and experienced in the sale of real and personal property. The LIT also ensures that the creditors are paid in the proper priority.

Protection of purchasers from personal representatives and beneficiaries

Sections 19 and 21(1) of the Estates Administration Act protects a purchaser of real property in good faith and for value from a personal representative or estate trustee. The purchaser can hold the asset free and clear from any debts or liabilities of the deceased, or any claims of the beneficiaries. The only exception would be those claims secured by a specific charge on title against the real property, such as a mortgage.

In an insolvency context, and especially in a Court-appointed receivership or bankruptcy, a purchaser would be wise to insist on the receiver or bankruptcy trustee obtaining the approval of the Court and vesting Order. The purpose would be to have Court orders approving the sale to the purchaser and vesting the assets in the purchaser.

In this way, the purchaser gains protection against any claims to the assets. The vesting Order vests out the asset(s), replacing it with the cash paid by the purchaser. Those with claims against the asset(s) now have to prove their claim against the cash. A LIT is very familiar and experienced in this aspect of selling assets.

Powers of personal representative about leasing and mortgaging

Section 22(1) of the Estates Administration Act gives the power to the personal representative or estate trustee to lease out real property to provide the deceased’s estate with income. It also allows for the mortgaging of real property to pay off the debts of the deceased.

Section 30(1) of the BIA gives various powers to a bankruptcy trustee. The leasing out of the real property and borrowing money, including giving mortgage security against real property, are two such powers. A Court-appointed receiver would get the same powers from the Order appointing the Receiver. A privately appointed receiver could also, with the permission of the secured creditor who made the private appointment, does the same thing. Therefore, a LIT is very familiar and experienced in exercising these powers and making the necessary business decisions.

Administration of estates act Canada: Summary

I hope that in this blog I have shown you that the provisions of the Estates Administration Act outlining the responsibilities of an estate trustee tracks very closely what a LIT does in either a Court-appointed receivership or bankruptcy administration.

Therefore, the LIT is used to acting as a Court officer and could very easily perform the requirements and duties of an estate trustee as described in the Estates Act Ontario.

If you have any questions about a deceased estate and the need for an estate trustee, whether it is solvent or insolvent, contact the Ira Smith Team. We have decades and generations of experience in helping people and companies overcome their financial problems. You don’t need to suffer; we can end your pain.

In my next blog, I am going to write a similar comparison. It will be about the requirements outlined in the Trustee Act and how a LIT is most familiar with them also.

In the meantime, if you have any questions at all, contact the Ira Smith Team.

Categories
Brandon Blog Post

ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET

Estates Act Ontario: Introduction

I am continuing my series of blogs to show how it would be very natural to appoint a licensed insolvency trustee (LIT or bankruptcy trustee) (formerly known as a bankruptcy trustee) as the estate trustee (formerly called an executor or executrix) of a solvent deceased estate under the Estates Act Ontario. In this blog, I am going to focus on that piece of provincial legislation that guides the activities of an estate trustee.

In my blog TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I set the stage by going over some basics when it comes to a deceased estate and why a LIT would be very comfortable with those basic requirements for an administration of a deceased estate. In the blog, TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?, I described why in some cases parents trying to do the right thing by making all their children an estate trustee could turn out very wrong.

In this and the next two blogs, I want to focus on the three main Ontario statutes that govern the conduct, duties and responsibilities of an estate trustee of a deceased estate. The three statutes that I will talk about are:

  1. Estates Act, R.S.O. 1990, c. E.21;
  2. Estates Administration Act, R.S.O. 1990, c. E.22; and
  3. Trustee Act, R.S.O. 1990, c. T.23

As you have probably guessed by now, in this blog, I will show how a bankruptcy trustee would be very familiar with the workings of the Estates Act.

Since we are not lawyers, and I am by no means providing in this and upcoming Brandon’s Blogs advice on wills or estate planning matters. For that, you must consult your lawyer.

Provisions a LIT is familiar with

Jurisdiction

Section 5 of the Estates Act Ontario states that letters of administration shall not be granted to a person not residing in Ontario. Similarly, a bankruptcy trustee must be licensed by the Superintendent of Bankruptcy in each province the LIT wishes to practice in.

Posting of security

Section 14(2) of the Estates Act Ontario requires that the administrator appointed to administer a deceased estate may be required to post security as the court might require.

Section 5(3)(c) of the Bankruptcy and Insolvency Act (Canada) (BIA) states that the Superintendent of Bankruptcy can:

“…require the deposit of one or more continuing guaranty bonds or continuing suretyships as security for the due accounting of all property received by trustees and for the due and faithful performance by them of their duties in the administration of estates to which they are appointed, in any amount that the Superintendent may determine…”

The posting of security is another common area that a LIT understands well.

Court can appoint

Section 29 of the Estates Act Ontario deals with the appointment of an estate trustee. This section gives the Ontario Superior Court of Justice the authority to appoint an estate trustee where:

  • a person dies intestate;
  • the estate trustee named in the will refuses to prove the will;
  • where the named estate trustee(s) ask another person be appointed to administer the deceased’s estate; or
  • where there are special circumstances.

Section 243(1) of the BIA gives the Court the power to appoint a receiver. So, assessing the appropriateness of acting as a Court officer and providing consent to do so is something a LIT is quite familiar with.

Accounts to be rendered

Section 39 of the Estates Act Ontario requires the estate trustee to “…render a just and full account…” of the estate trustee’s activities. The LIT is fully familiar with this process. In both a Court-appointed receivership and a bankruptcy administration, the LIT must submit full and detailed accounts showing its activities, fees and disbursements for approval by the Court. This approval process is called taxation. This is another common area between the duties of an estate trustee administering a solvent deceased’s estate and the duties of a LIT.

Admitting and disallowing claims

Sections 44 and 45 of the Estates Act Ontario deals with the rules to be followed in contesting claims made against the deceased’s estate. The LIT is very familiar with this process. Section 135 of the BIA deals with the admission and disallowance of proofs of claim and proofs of security.

The LIT is a perfect party to be able to decipher claims made against a deceased’s estate and follow the provincial statute in the allowance and disallowance of claims.

Disputes as to ownership

Section 46 of the Estates Act Ontario describes the process for handling the claim by any third party to ownership of personal property in the estate not exceeding $800 in value. There are steps in the BIA that a LIT must follow when faced with claims of ownership of property by a third party in the possession of the bankrupt. So resolving such disputes is very familiar to the LIT.

Summary

I hope that in this blog I have successfully made the case that the provisions of the Estates Act Ontario outlining the responsibilities of an estate trustee tracks very closely what a LIT does in either a Court-appointed receivership or bankruptcy administration.

Therefore, the LIT is used to acting as a Court officer and could very easily perform the requirements and duties of an estate trustee as described in the Estates Act Ontario.

If you have any questions about a deceased estate and the need for an estate trustee, whether it is solvent or insolvent, contact the Ira Smith Team. We have decades and generations of experience in helping people and companies overcome their financial problems. You don’t need to suffer; we can end your pain.

In my next blog, I am going to write a similar comparison. It will be about the requirements outlined in the Estates Administration Act and how a LIT is most familiar with them also.

In the meantime, if you have any questions at all, contact the Ira Smith Team.estates act ontario

Categories
Brandon Blog Post

TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?

If trustee of parents estateIf you would prefer to listen to the audio version of this Trustee of parents estate

Brandon’s Blog, please scroll to the bottom for the podcast.

Trustee of parents estate: Introduction

I want to talk about an issue which is all too common. I am also going to give you two real-life examples. The issue is that of children being named as the estate trustee of parents estate.

I caution that I and my firm are not lawyers, and I am by no means providing in this and upcoming Brandon’s Blogs advice on wills or estate planning matters. For that, you must consult your lawyer.

Why the children?

Many times in drafting a will, parents want their children to know that the parents trust and love them. So, they not only have their children as beneficiaries of their estate, they also make them the estate trustees (formerly known as executor or executrix). This is natural, but may not be the best choice.

The reason I say this is because the role of the estate trustee is a demanding one that requires a specific skill set. Children don’t always have the necessary skills. What if one or more of the children have great financial skills and have sound judgment, but others don’t. This can lead to differences of opinion and major arguments. In the most extreme case, it can lead to costly and lengthy litigation to dissipate estate assets. Executors must act in the best interests of all beneficiaries. If personal agendas get in the way, then everyone’s best interests can’t be met.

Adult children are probably married. Now you have daughters-in-law and sons-in-law involved in the background. This can lead to a whole host of issues that has nothing to do with the efficient administration of the parents’ estate and being even-handed with all beneficiaries.

What if some of the children have personal financial issues. There will be a temptation for self-dealing or self-enrichment. Again this can lead to major problems.

What if you have an even number of children? Two or four estate trustees can lead to many problems. With two, the estate trustees will always be deadlocked if they don’t see eye to eye. With four, not only can you have a deadlock, but too many cooks may spoil the broth!

Splitting the tasks

Sometimes parents split the tasks. One child will be the estate trustee because she has great financial acumen. The other child will be made responsible for health and living decisions if the parents first become incapacitated. Sounds great in theory. However, the way the health decider child wishes the parents to live may be at odds with the financial person seeing the estate shrinking away. Or, the health decider may make decisions for the parents to live in a way that does not shrink away from the estate, but is demeaning to the parents and does not give them a good quality of life in their final days.

So, as you can see, what started out as the parents wanting to “do right” by their children, can lead to many problems.

What an estate trustee should not do

In my last blog, TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I spoke about some basic elements of the role of an estate trustee. I described the process of becoming an estate trustee, and what the responsibilities are.

Now, I want to touch on some practical matters of what an estate trustee should not do.

The first is communicating with some beneficiaries and not others. As I have previously described, one of the roles and responsibilities of an estate trustee is to deal with all beneficiaries even-handedly. The estate trustee cannot tell certain details to some beneficiaries, and not others. So, all communications should be with all beneficiaries at the same time; either in writing or orally. Everyone should get the same information at the same time. The estate trustee does not wish to be accused of favouring some beneficiaries over others.

The second thing not to do is to rush to distribute smaller personal possessions of the deceased. The estate trustee may be pressured by family members to distribute certain items quickly. Possibly because the family member is the proper beneficiary of those small items and wants them as quickly as possible. Alternatively, perhaps they are not the rightful beneficiary of all the items they are claiming. However, they want to get their hands on certain items to stop other family members from getting them. Or perhaps there is a home involved that must be sold, so family members will pressure the estate trustee to clean out the home immediately so that the home can be put up for sale as soon as possible.

As tempting and easy as it might be, the estate trustee must first take steps to:

  • get a copy of the will and the deceased’s financial records
  • take possession and control of all assets
  • ensure that a proper inventory is made and that appraisals are obtained where necessary
  • make sure that all required insurance and bonding is in place

There is another reason. An estate trustee will be putting more pressure on themselves than they should bY making piecemeal distributions. Regardless of value, making a quick distribution to one of the beneficiaries will only give rise to all the other beneficiaries clamouring for their entitlements. The estate trustee may not be in a position for some time to be able to make a proper distribution to all other beneficiaries. This will only lead to headaches for the estate trustee.

Why some children may not want to be an estate trustee

There can be danger in being an estate trustee. In my last blog, I highlighted specific expertise and knowledge that an estate trustee must have. I also discussed how a licensed insolvency trustee (formerly called a bankruptcy trustee) also possesses the same skill set required of an estate trustee.

A trustee, including an estate trustee, acts in a fiduciary capacity. The estate trustee is fully accountable for all decisions made and steps were taken with respect to the assets. Not only is it important to have the necessary financial skills, but an estate trustee also has to be aware of the myriad of income tax issues. Final income tax returns must be filed. The estate trustee has a duty to ensure that all income tax legislation requirements are met, including the obtaining of clearance certificates. Any loss to the estate as a result of things an estate trustee either did or did not do, the estate trustee will be personally liable for.

The steps required in formulating an appropriate sales process for the different asset types not being directly distributed to beneficiaries is not totally scientific. There is some art to it as well. Making wrong decisions can expose the estate to loss of value, which will blow back right onto the estate trustee.

For these reasons, children may not wish to take on responsibility. The smart ones will understand that they do not have the required skill set. In other cases, the children may see the real possibility of creating family strife if they were to take on the role of an estate trustee. So what if children are named in the will as the estate trustees, but they don’t wish to take on the role. Must they anyway?

Renunciation of estate trustee Ontario

If you have not yet applied for probate or have otherwise not started to administer the estate, you do not have to be an estate trustee. There is a specific form to complete in order to renunciate your position as an estate trustee. Again, it must be done before you take any action as the estate trustee. If you have already applied for probate, or have started administering the estate and now find that you are in over your head, you cannot renunciate your position. You must make application to Court for an Order removing you as the estate trustee. I would suggest that if you are the sole estate trustee, you should have someone else lined up to succeed you. Otherwise, the Court may not allow you to be removed.

Two real-life examples

Example 1

In my blog, COURT APPOINTED ESTATE TRUSTEE CASE STUDY: IF IT WAS EASY YOU WOULDN’T NEED US, I described one of our case studies where we were appointed estate trustee to sell real estate. In that case, neither of the beneficiaries were capable of agreeing on anything. They were also incapable of carrying out the role of taking possession and control of the real property, Insuring it and selling it. Legal counsel for one of the beneficiaries made an application to Court seeking an Order appointing Ira Smith Trustee & Receiver Inc. as an estate trustee.

The Court made the Order. With the approval of the Court, we listed the property for sale, obtained approval to our actions and activities, including a sale of the property. We then proposed a distribution of funds which also was approved by the Court. We made the distribution and obtained our discharge. This is a perfect example of how our skill set as a licensed insolvency trustee was recognized by the Court and allowed us to carry out the mandate in an efficient way.

Example 2

Recently, one of Ira Smith’s cousins needed to update her will and name an estate trustee. This cousin has three children. None of the children believed that they had the necessary skills and knowledge to be an estate trustee. They also agreed that it was not a good idea for any of them to take on that role.

However, there was one thing that the mother and her three children could all agree on. That was that Ira had the necessary skills to be the estate trustee. They unanimously agreed that it would be a good idea for Ira to take on that role. Ira’s cousin asked him if he would. He told his cousin that he was honoured that they all thought so highly of him. He agreed to be named in her will as the estate trustee.

The children were smart. They knew what they didn’t know. They all agreed on the estate trustee being proposed. A huge weight was taken off of the mother’s shoulders.

Trustee of parents estate: Why not appoint a Toronto bankruptcy trustee?

I hope that you can see that the knowledge, experience, and expertise of a licensed insolvency trustee would stand him or her in good stead to act as executor, executrix or estate trustee of a deceased estate. Many times, it may be a smart move to allow an independent neutral third party act as the estate trustee. Especially one like a licensed insolvency trustee who is used to acting as the independent Court officer.

If you have any questions about a deceased estate and the need for an estate trustee, whether it is solvent or insolvent, contact the Ira Smith Team. We have decades and generations of experience in helping people and companies overcome their financial problems. You don’t need to suffer; we can end your pain.

In the meantime, if you have any questions at all, contact the Ira Smith Team.

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