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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.

 

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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

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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.

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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

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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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Brandon Blog Post

TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS

Trustee of deceased estate: Introduction

I have previously written on what happens when a person dies insolvent, i.e. their debts are greater than the value of their assets. My blogs on being a trustee of deceased estate that is insolvent are:

I am now switching a bit. Over the next few weeks, I am going to be writing a series of blogs and vlogs to explain why I believe that a licensed insolvency trustee (formerly called a bankruptcy trustee) is the professional you should be thinking of making the executor of a deceased estate and recording it in your will. I am talking about solvent estates. Those with many assets and beneficiaries. I will be making the case why over the next few weeks. I will not be on insolvent estates of deceased persons.

I repeat that these blogs and vlogs will have nothing to do with debt, insolvency or bankruptcy. However, I will show how, based on the knowledge and expertise possessed by licensed insolvency trustees, it makes them the perfect candidate to serve as an executor of a deceased estate that is rich with assets. I will also be focussing my comments on the Province of Ontario. There may be some variations from province to province.

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.

In this blog, I wish to set the stage by going over some basics when it comes to a deceased estate.

Trustee of deceased estate: The executor/executrix or estate trustee

In Ontario, an estate trustee (also known as the executor or executrix) is the only individual with the lawful authority to handle or disperse an estate. When an individual dies they might leave items, property, real estate, cash and investments and other possessions which is called their estate.

Probate is a treatment to ask the court to:

  • provide an individual with the authority to work as the estate trustee of an estate;
  • verify the authority of an individual acting as the estate trustee named in the deceased’s will; and
  • officially accept that the deceased’s will is their legitimate last will.

You can apply for probate in the Ontario Superior Court of Justice. The procedure is governed by the Estates Act and the related Rules of Civil Procedure.dece

If your probate application succeeds, the court will provide a Certificate of Appointment of Estate Trustee, which is evidence that an individual has the lawful authority to manage the estate. If there is a will, it is also evidence that the will is valid.

Trustee of deceased estate: Must I always apply for probate?

A probate Certificate is not needed in every situation for a deceased estate. Prior to beginning an application for probate, you might want to establish whether the deceased estate actually needs a probate Certificate.

An application for a probate Certificate is normally made if:

  • the departed individual passed away without a will
  • the deceased’s will does not show an estate trustee
  • a financial institution desires evidence of an individual’s lawful authority to get the cash or financial investments of the deceased
  • the estate’s properties consist of real estate which does not pass to an individual by right of survivorship
  • there is a disagreement about who ought to be the estate trustee
  • there is a conflict or possible conflict about the legitimacy of the will; or
  • some of the beneficiaries are unable to supply legal consent.

Trustee of deceased estate: Trustee of estate responsibility

What should the estate trustee’s first steps be? Here is where the actions the estate trustee should immediately take are almost the same as when a licensed insolvency trustee is first appointed either as:

The will and financial records

Assuming the family has already made arrangements for and the funeral has taken place, the estate trustee should first find a copy of the will and any books and records of the deceased that will explain the deceased’s financial affairs. If the estate trustee cannot find a copy of the will, he or she should consult with the deceased’s family and lawyer. Hopefully one or both will have a copy.

As the licensed insolvency trustee, we must also find the books and records of the company or person, so that we can start learning about the financial affairs of the insolvent or bankrupt.

Proof of authority

The estate trustee will also require a certified copy of the death certificate, to prove the death to financial institutions and the government. The will, and/or the probate Certificate, will be proof of the estate trustee’s authority to act.

In the same way, the licensed insolvency trustee requires a copy of its Appointment Letter in a private receivership, the Court order in a Court-appointed receivership, or the Certificate of the Superintendent of Bankruptcy in a bankruptcy. These documents evidence the appointment of the licensed insolvency trustee.

Taking possession and control of the assets

The estate trustee must now take control of any assets that do not automatically by operation of law transfer to another person by right of survivorship. The estate trustee must establish physical control, take an inventory of the assets and arrange for appraisals to be performed where required. The estate trustee should establish the market value of the assets as soon as possible.

In the same way, upon being appointed as either receiver or trustee, a licensed insolvency trustee must establish control and/or possession of the assets, properties and undertakings of the insolvent/bankrupt debtor, whether in the debtor’s possession or that of a third party. The licensed insolvency trustee must make an inventory of the assets and where required, arrange for appraisals.

Insurance and bonding

The estate trustee must make sure that, in the case of real property and chattels, that the assets are properly insured. As well, if an application was made to Court for probate and the Court issued the Certificate, the Court may also require the estate trustee to get a bond for a specific value to protect the beneficiaries. The amount of the bond will have a relation to the estimated value of the assets.

In the same way, the receiver/trustee must make sure that the hard assets are properly insured. In a bankruptcy, the Superintendent of Bankruptcy sometimes requires the trustee to get a bond to protect the bankruptcy estate.

The bond will be issued by an insurance company licensed to provide such coverage in Ontario.

Trustee of deceased estate: The responsibilities of the estate trustee

In general terms, an estate trustee has the following responsibilities:

  • be impartial amongst beneficiaries
  • act in a commercially reasonable way
  • to act in the best interests of the beneficiaries
  • not make decisions for individual gain
  • keep accurate records of all decisions made and actions and activities; and
  • acting in accordance with the will if one exists

In every Court appointment, be it a receivership or bankruptcy, the licensed insolvency trustee must live up to these same standards. Rather than beneficiaries, there are stakeholders. The Court officer must be impartial and must act in the best interests of all stakeholders.

Trustee of deceased estate: Trustee vs executor of an estate

So hopefully from this blog, you can see that the knowledge, experience and expertise of a licensed insolvency trustee would stand him or her in a good position to act as executor, executrix or estate trustee of a deceased estate.

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 about a topic that is becoming more and more common in deceased estates; picking the right estate trustee. As you will see, it is much more than just finding the right skill set.

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

trustee of deceased estate

 

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Brandon Blog Post

GTA VAUGHAN BANKRUPTCY TRUSTEE: BANKRUPTCY AND DIVORCE FINANCIAL SOLUTIONS

gta vaughan bankruptcy trusteeIntroduction to bankruptcy and divorce from a Vaughan licensed insolvency trustee (“GTA Vaughan bankruptcy trustee”)

As a GTA Vaughan bankruptcy trustee, I’ve never met anyone who had something good to say about bankruptcy and divorce. At times both are a necessary evil, but it’s never fun. Although divorce has been the butt of jokes by comedians for decades, it’s no laughing matter, especially financially.

This quote may be more telling than funny:

Let’s be blunt: If you hire a divorce lawyer today, there is a good chance you will hire a bankruptcy lawyer within two or three years.

Gene Meyer

GTA Vaughan bankruptcy trustee discusses debt issues and divorce financial solutions

When couples decide to divorce, few have any idea of what the split is really going to cost and what each party will be left with after the divorce. The goal of divorce and the divorce process and results are two very different things. Here’s the reality of most Canadians’ financial situations:

  • The debt-to-disposable income ratio was 165.3% for the first three months of 2016 (Statistics Canada)
  • Households owe $1.65 in debt for every dollar of disposable income they have (Statistics Canada)
  • Total household debt, which includes consumer credit, and mortgage and non-mortgage loans, totalled $1.933 trillion at the end of the first quarter (Statistics Canada)
  • Balances on consumer loans including credit cards and lines of credit grew by 2.6% year-over-year, driven primarily by the continued popularity of lines of credit and auto loans (RBC)
  • Mortgage loan balances were up 6.2% from the same quarter of the prior year (RBC)
  • The average Canadian owed $21,580 in non-mortgage debt during the most recent quarter (TransUnion)

Many Canadians are already teetering on the edge of financial disaster without throwing divorce into the mix. Even if you have an amicable divorce, the cost of an uncontested divorce ranges from $1,000 to $3,500, according to a 2015 Canadian Lawyer’s legal fees survey. If your divorce gets messy the fees can be astronomical. Living two separate lives costs a lot more than living together as a couple. Do you have a clear understanding of what your monthly expenses are? Do you have a budget? These are just some of the divorce financial solutions that as a Vaughan bankruptcy trustee we recommend to people that they have to know about it beforehand.

What can I do if I have too much debt – divorce or no divorce?

Whether you live in the GTA or elsewhere, take the advice of a GTA Vaughan bankruptcy trustee and get your financial house in order before you begin divorce proceedings or you may be looking at bankruptcy and divorce or bankruptcy alternatives down the road. Contact the Ira Smith Team for advice and a solid plan to deal with serious debt issues. We will give you a free first consultation to discuss your options and we can help you get out of debt Starting Over, Starting Now.

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Brandon Blog Post

ECONOMIC DOWNTURN CAUSES MORE PEOPLE TO CONSIDER BANKRUPTCY OR PERSONAL BANKRUPTCY ALTERNATIVES

bankruptcy, alternative to bankruptcy, personal bankruptcy alternatives, alternatives to personal bankruptcy, Bankruptcy and Insolvency Act , BIA, bankruptcy solutions, lines of credit, credit card debt, credit counselling, debt consolidation, consumer proposals, budget, student loan debt, trustee, economic downturn, starting over starting now, information about bankruptcy, Toronto bankruptcy trusteeWhen do people generally want information about personal bankruptcy alternatives?

Personal bankruptcy alternatives are always sought after an economic downturn. The economic downturn is causing more people to rely on credit to supplement their income and/or their lifestyle. This mountain of debt will ultimately result in bankruptcy or hopefully, an alternative to bankruptcy.

What Bank of Montreal and Statistics Canada say about Canadian household debt

In BMO’s Annual Debt Report, the average household debt of those surveyed is $92,699, more than $4,000 higher than the four-year average dating back to 2012. And servicing that debt, which includes mortgages, lines of credit and credit card debt, is costing $1,165 a month.

According to Statistics Canada:

  • The debt-to-income ratio of Canadian households is 163.3% which means for every dollar Canadians earn, they owe $1.63 in debt
  • Canadian households now owe $1.841 trillion in various forms of debt
  • More than $1.1 trillion is from mortgages
  • $519 billion is consumer debt, like credit cards

Debt + More Debt = a Solution?

Adding debt to more debt is not a solution to the problem; it compounds the problem. If you are using credit cards to supplement your income or your lifestyle, you have a serious problem that needs professional help. Don’t wait until bankruptcy is your only option. You should be learning about personal bankruptcy alternatives before it is too late.

Is there such a thing as bankruptcy solutions?

We are asked this question all the time. Before even considering bankruptcy, I always want to discuss 3 formal alternatives to personal bankruptcy:

  1. Credit Counselling
    Credit counselling is in reality debt counselling. Professionals provide assistance with a host of issues related to debt including budgeting, finding debt solutions, working with your creditors and rebuilding credit.
  2. Debt Consolidation
    Debt consolidation is a single loan that allows you to repay your debts to several or all of your creditors at once, leaving you with only one outstanding loan.
  3. Consumer Proposals
    Consumer proposals are formal offers made to your creditors under the Bankruptcy and Insolvency Act (BIA) to modify your payments. e.g. paying a lesser amount each month for a longer period of time and paying a total lesser amount than you owe, all on an interest-free basis!

In addition there are informal personal bankruptcy alternatives including budget review, contacting your creditors (including your mortgage lender), selling an asset and contacting the Federal Government’s Repayment Assistance Plan (if you’re having difficulty repaying your student loan debt).

Just ask your Toronto bankruptcy trustee

A professional trustee can open up a world of possibilities for you. Contact Ira Smith Trustee & Receiver Inc. for help with your financial problems. With just one phone call you can be well on your way to a debt free life Starting Over, Starting Now.

 

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