Potential Legal Issues for Trustees and Executors

June 30, 2016

Executors and/or beneficiaries may face liabilities in the event that Estate assets are distributed prior to assessment, for reassessment.

Assessment powers are not minor Estate trustees may be personally liable for the claims of creditors that cannot be paid as a result of an improper estate distribution. It will be an offence for an estate trustee to fail to make the required filing with the Minister of Revenue or where anyone makes, or assists in making, a false or misleading or omitted fact in connection with the estate trustee’s filing. Because offences are punishable by fine (minimum $1,000), imprisonment or by both, errors and omission insurance may be needed by executors handling larger estates.

Potential Legal Issues for Trustees and Executors
Imagine if you are a personally chosen friend of a deceased person with $1.5 million in assets, who previously selected you as Executor/Trustee of his or her estate. Though duty-bound, you may feel that the risk is now very high, if an error were to be made. Consequently, you may want to off-load the potential liability to a professional accountant and/or lawyer to process all of the estate probate and/or administration tax (EAT in Ontario). Consider that the costs of such a transfer of liability could rise to the maximum of 6% per professional (two professionals would mean 2 x 6%) of the value of the Estate. This would bring the total cost of dealing with EAT to a maximum of 13.5% of the estate value. In the above case, fees could cost upwards of $202,500.

The Segregated Fund advantage Segregated and Term funds offered by life insurers, in some provinces,  may give investors an edge over other investment products when it comes to planning someone’s Estate. Segregated and Term funds also offer significant privacy regarding the distribution of assets under the insurance act.

Note: Not applicable in Québec as notarial wills do not need to be probated by the court and, for holograph wills and wills made in the presence of witnesses, probate fees are minimal.

We advise that you talk to an accountant or your tax advisor about estate planning and taxation.

 

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