When managing a deceased person’s estate, one of the most crucial responsibilities is proper accounting. In estate administration, accounting involves tracking every penny that comes in and goes out of the estate, ensuring transparent financial management for all beneficiaries.
As a Personal Representative (PR) or estate trustee, you have a fiduciary duty to keep accurate and complete financial records of the estate’s assets and transactions. This responsibility includes ensuring that estate funds are kept entirely separate from personal finances, commingling is strictly prohibited. To fulfill this duty effectively, it is advisable to maintain detailed records from the beginning of the estate administration, so that if a passing of accounts is required, the process can be handled efficiently. Poor record-keeping can lead to significant challenges and delays, even in a relatively short administration.
Opening a dedicated bank account for estate transactions is an essential first step in meeting these obligations.
Estate trustees must provide detailed accounting statements to beneficiaries for their review and approval. These statements should clearly show all financial transactions related to the estate.
Regarding compensation, estate trustees are generally entitled to reasonable remuneration for their services. While beneficiary approval is often sought, it is not always required. A Personal Representative (PR) can take compensation without express beneficiary approval in the following scenarios:
- By Court Order: The court approves the compensation amount.
- As Directed in the Will: The will explicitly provides for compensation and specifies the terms.
- By Agreement: A prior agreement exists between the estate trustee and the beneficiaries regarding compensation.
In all cases, transparency and adherence to legal requirements are critical to avoid disputes and ensure compliance. For more details regarding compensation to estate trustees, please see Compensation to Estate Trustee(s).
While not legally required in every case, the passing of accounts provides protection for both the PR and the beneficiaries. There are two main ways to accomplish this:
- Getting explicit approval from all beneficiaries
- Having the accounts formally audited by the court
Court audits can happen either voluntarily or by requirement. For ongoing estates, it’s considered best practice to have accounts either approved by beneficiaries or audited by the court every three to five years. This becomes particularly important when:
- The estate has been ongoing for an extended period
- The administration is complete but unanimous beneficiary approval isn’t possible
To initiate a court audit, the application must include:
- Comprehensive details about the deceased
- The estate trustee appointment date
- The accounting period covered
- Any compensation claims
- A complete list of interested parties
Under Rule 74.17, accounts must follow specific formatting requirements. The filing package needs to contain:
- Estate accounts with trustee affidavit verification
- The certificate of estate trustee appointment
- Any previous judgments about account passing
Subrule 74.18(3) requires serving (i) the notice, and (ii) a copy of a draft of the judgment sought, upon each person who has a contingent or vested interest in the estate.
Service must be by a method listed under Rule 74.04(7) (personal service, email, mail, or courier). The time for service is 60 days for persons in Ontario and 75 days for persons outside of Ontario.
Beneficiaries have the right to object to the accounts up until 30 days before the scheduled hearing. When this happens, the matter becomes a civil litigation issue, requiring the applicant’s lawyer to pay a LawPRO transaction levy surcharge. While initially charged to the lawyer, this surcharge – which covers additional insurance costs for potential legal disputes – should ultimately be paid by the estate.
By following these accounting procedures carefully, estate trustees can ensure transparent administration and protect themselves from future liability. Regular, detailed accounting helps maintain trust between all parties and facilitates smooth estate administration.
Final Important Note
While this blog series provides a detailed overview of the responsibilities and duties of Estate Trustees, please note that the information offered is a general guide to the process. If you are an Estate Trustee or are about to take on this role and are uncertain about how to proceed, it is essential to seek professional advice.
