The role of an estate trustee in Ontario is complex and demanding, mainly as estate administration is not always a quick process. A core responsibility of estate trustees is the meticulous management of the deceased’s assets and liabilities. Central to this role is the process of “passing accounts,” which involves seeking court approval for the executor’s financial management of the estate.

This blog post delves into the intricacies of passing accounts, outlining the process, its importance, and the potential challenges involved. It will also provide practical tips for estate trustees to consider during the estate administration and probate processes.

An Executor’s Duty to Account

Passing accounts is the formal process of obtaining court approval for an executor’s management of an estate. An executor has a fiduciary duty to act honestly and in good faith for the estate’s beneficiaries. Because the executor is responsible for identifying the estate assets, paying estate debts, and distributing assets to beneficiaries, the executor has a subsequent duty to account to the beneficiaries to prove that these steps have been followed according to the will or trust.

What is Passing of Accounts?

Passing the accounts is a process that involves preparing detailed financial records, submitting them to the court in the proper format, and potentially facing scrutiny from beneficiaries. The goal is to demonstrate that the executor has acted diligently and fulfilled their obligations in relation to the estate assets and debts. It also allows the executor to justify their commission, if claimed.

Passing the accounts before the court allows all parties to review the executor’s actions before the estate is closed with the court.

When is the Passing of Accounts Necessary?

While not always mandatory, passing accounts are typically required in the following situations:

• Executor’s Discretion: An executor may voluntarily apply to the court for a passing of accounts. This is especially common if there is a dispute between any of the parties involved, although an executor may seek to demonstrate transparency and accountability to the beneficiaries.
• Estate Disputes or Beneficiary Dissatisfaction: A beneficiary may also apply to the court requesting a passing of accounts if they are dissatisfied with the executor’s management of the estate.
• Minor or Incapacitated Beneficiaries: If beneficiaries cannot manage their own financial affairs or are minors, passing of accounts and court approval is necessary to protect their interests.

The Process for Passing of Accounts

In Ontario, the process of passing accounts can be time-consuming and complex; however, this process is made easier if the executor maintains organized and detailed records throughout administration. Passing of accounts involves several key steps, regardless of the reason as to why court approval is sought, including:

• Preparing the Accounts: The executor must prepare a detailed financial report outlining all income, expenses, assets, and liabilities of the estate. This includes attaching receipts, invoices, and bank statements to support the submitted amounts.
• Filing the Application: The executor must then file a Notice of Application to Pass Accounts with the Superior Court of Justice, along with the prepared accounts and supporting documentation, and pay a filing fee.
• Serving Beneficiaries: The executor must serve a copy of the Notice of Application on all estate beneficiaries. At this time, beneficiaries are afforded an opportunity to challenge the executor’s accounts, which will result in a contested hearing.
• Court Hearing: If there are no objections to the accounts, the court may approve them without a hearing. It is also possible to resolve a beneficiary’s concern or objection prior to the hearing. If this occurs, the beneficiary may file a Notice of Withdrawal of Objection. However, if beneficiaries raise concerns, a court hearing may be necessary to address specific issues, such as missing amounts or questioning specific expenses incurred by the estate.
• Court Order: If the court approves the accounts, it will issue an order discharging the executor from liability for their administration of the estate.

Challenges in Passing Accounts

Potential challenges that may arise when passing accounts include:

• Disputes: Disagreements between beneficiaries regarding the executor’s actions or distribution of estate assets can lead to delays or increased legal costs.
• Executor Compensation: In some cases, determining a fair executor’s commission, or claiming an executor’s commission at all, can be a contentious matter, particularly if the beneficiaries challenge the amount claimed.
• Tax Implications: Complex tax matters, such as capital gains tax, can impact the estate’s finances and requires careful accounting.
• Complex Estate Assets: Estates with multiple assets, liabilities or beneficiaries can significantly complicate the process of preparing and presenting accounts.

Final Thoughts of Passing Accounts in Ontario

Passing accounts can be a crucial step in the estate administration process. While it can be a complicated, tedious and time-consuming process, it provides an opportunity for executors to prove their due diligence and accountability to beneficiaries, whether the accounts are required to be passed or an application has been commenced voluntarily. Due to the complexity of this process, it is helpful for executors to seek legal advice and guidance when necessary to ensure that the accounting is accurate and the application is filed correctly, as this can save all parties time and money. By working with a skilled estate administration lawyer, you can ensure that you navigate the estate administration process effectively and ensure a smooth closure of the estate.

Contact the Estate Planning and Administration Lawyers at Bader Law for Assistance with Passing Accounts

The skilled team of estate planning and administration lawyers at Bader Law help families, individuals, and business owners with estate planning and administration needs in Mississauga and Oakville. Our wills and estates lawyers advise clients on best practices in both simple and complex estate matters to ensure they have a complete plan in place to protect their interests and minimize estate tax obligations. We also represent estate trustees and beneficiaries in various probate and administration matters. Contact us online or by phone at (289) 652-9092 to arrange a consultation with a member of our team.