A. The Practical Necessity of Probate in Administering Ontario Estates
Obtaining a Certificate of Appointment of Estate Trustee (COA) is a court-supervised process establishing the authority of an estate representative to administer a deceased’s estate. Where the deceased has left a will naming an executor, that executor is authorized to act by the terms of the will. In this case, obtaining a COA simply confirms that appointment by establishing that the will is valid and that the estate representative is indeed the executor named in the will. On the other hand, where a deceased dies intestate or where there is a will but no named executor, it is the COA itself that conveys to the estate representative the legal authority to administer the deceased’s estate.
It is not mandatory that an estate representative obtain a COA. However, it is practically necessary to do so in most cases depending on the nature of the estate assets. For a financial institution holding the deceased’s assets, a COA is authoritative evidence that it may release the assets to the estate representative without risk of liability. Even where an executor is named in a will, a COA is usually necessary to assure financial institutions that the will is valid and that the testator did not make a later will naming someone else executor. Therefore, financial institutions most often require a COA before they will release these assets.
An estate representative who administers an estate without obtaining a COA takes a significant risk. He or she may be held personally liable to the beneficiaries, creditors or other claimants for any improper payments made out of the estate. This is so even if the payments were made pursuant to the terms of a will which is only later found to be invalid. In contrast, estate trustees with a COA are protected by subsection 47(1) of the Trustee Act which provides that actions taken in good faith remain valid even if the COA is subsequently revoked.
It is also often advisable for an estate representative to obtain a COA in order to trigger certain limitation periods for claims against the estate. For example, under section 61 of the Succession Law Reform Act (SLRA), a dependent of the deceased has six months after the grant of a COA to seek a support order where the deceased has not otherwise made adequate provision for him or her.
B. The Current Process of Applying for Probate
A COA has essentially the same effect whether it is based on a will or an intestacy. In both cases, it confirms the authority of the estate trustee to administer the estate. However, the different purposes of a COA with and without a will (confirming the authority of the executor under the will in one case and making an original appointment in the other case) requires that the court establish different criteria for issuing them. For example, where there is a will, an important purpose of the COA process is to test its validity by considering whether the formal requirements of the SLRA have been met. This reflects the importance placed by our society on the fulfillment of a testator’s wishes.
The applicable rules for obtaining a COA are summarized in Appendix B below. Generally, Rule 74.04 of the Rules of Civil Procedure addresses cases where there is a will. The application form consists of a number of questions about the deceased and the will (designed to establish validity of the will) and a question about the value of the assets in the estate. The applicant must also attach several documents intended to establish the following:
- the validity of the will (the original will and any codicils, an affidavit of execution of the will, or other evidence of validity)
- that beneficiaries, particularly vulnerable beneficiaries, have notice of the application (in some cases this requires notice to the Children’s Lawyer and the Public Guardian and Trustee), and
- the entitlement of the applicant to act as estate trustee (where, for example, the applicant is not named as executor in the will or lives outside the jurisdiction)
Rule 74.05 addresses cases where there is no will. This application form consists of questions designed to establish that the applicant is legally entitled to administer the estate and includes questions about the search for a will, the persons entitled to share in the estate and other circumstances affecting the applicant’s entitlement to be estate trustee. It also requires a valuation of the estate. The applicant must attach documents establishing that:
- beneficiaries, particularly vulnerable beneficiaries, have notice of the application
- beneficiaries entitled to a majority of the value of the assets consent to the appointment of the applicant as estate trustee
- any person with prior entitlement to administer the estate has renounced that right, and
- the applicant has posted security in the form of an administration bond in the amount of two times the value of the estate.
Both application forms (with and without a will) require that the applicant swear an oath attesting to the truth of the contents and undertaking to faithfully administer the estate according to law.
In addition to the application materials, the estate representative must pay a deposit equal to the estate administration tax owing under the Estate Administration Tax Act. The amount of estate administration tax (or “probate fees” as it is also called) is calculated as a percentage of the estate’s value. Estates valued at less than $1,000 are exempt from the tax. Estates valued at more than $1,000 must pay as follows:
- $5 for each $1,000, or part thereof, of the first $50,000 of the value of the estate, and
- $15 for each $1,000, or part thereof, of the value of the estate exceeding $50,000.
For example, an estate worth $50,000 must pay $250 and an estate worth $100,000 pays $1,000.
Once the application materials are received and the deposit paid, a COA may be issued by the Registrar or, if there are deficiencies in the information submitted, the Registrar may send it back to the applicant to be corrected and resubmitted. If the application is not complete or there is some doubt as to the information contained in the application, the Registrar will refer the application to a judge.
After the COA has been issued, the estate trustee proceeds to gather in the assets, identify creditors, pay debts and taxes and distribute the remainder to the beneficiaries as dictated by the terms of the will or by succession law in the case of an intestacy. Unless a dispute arises, this often takes place without any further involvement of the court.
Currently, there is no specialized small estate process in Ontario. The only estates legislation specifically addressing small estates is the Estates Administration Tax Act which provides that estates valued at less than $1,000 are exempt from the tax. However, even these very small estates must go through the full application process in order to receive a COA.
C. The Cost of Obtaining Probate
The cost of obtaining probate will include the cost of compiling the material necessary for a successful probate application as well as the estate administration tax payable. This project is primarily concerned with the application costs which are not proportionate to the value of the estate in the same way that estate administration tax is.
Application costs may vary widely depending on the complexity of the estate among other factors. Cost is influenced by whether or not there is a will, the number and location of beneficiaries, whether there are minor or incapable beneficiaries, the likelihood of a family dispute, the type of assets in the estate and whether or not there are creditors to be paid. The cost may also depend on the local availability and cost of legal services and the local estate registry’s practice in scrutinizing applications.
There is anecdotal evidence that Ontarians typically hire a lawyer to prepare and file the application materials to obtain probate. To the extent that this is so, most application costs will be in the form of legal fees. Legal fees may be calculated as a flat rate, an hourly rate or some combination of these. The Law Commission of Ontario (LCO) has heard of cost estimates for probate applications ranging from less than $1,000 up to $30,000 (for estates ranging in value and complexity). During this consultation process, the LCO hopes to hear from many more Ontarians about their experiences probating estates, including whether they felt it necessary to hire a lawyer and how much it cost in total.
One factor that does not necessarily affect application costs is the value of the estate. Probating a small estate may cost as much as or more than a much larger estate depending on the above factors.
For example, an estate worth $300,000 may consist of a home, a pension and two bank accounts. The testator has left a will appointing her adult child as executor and sole beneficiary. Although it would likely be necessary to obtain probate in these circumstances, the cost of doing so should be relatively low. There is no need to track down other beneficiaries and the assets are standard and should not be difficult to value. A reasonable lawyer’s fee plus estate administration tax of $4,000 still leaves the beneficiary with a significant inheritance.
In contrast, consider an estate worth $60,000. The testator has left a will appointing one of his adult siblings as executor and listing his parents and siblings as beneficiaries. It is a holograph will (handwritten) which raises questions about its validity. There is no affidavit of execution so that the executor must find someone to confirm the testator’s handwriting. The registry office rejects the probate application several times for this reason. In addition, the testator was an independent contractor and the estate assets include several small accounts. Poor record keeping makes it difficult to locate these assets and value them. In these circumstances, the legal expense necessary to successfully probate this estate may chew up a large proportion of it. Depending on the number of beneficiaries entitled to a share of the remainder, the amount received by any one beneficiary may be seem disproportionately low relative to the size of the estate and the cost of probating it.
In this kind of situation, where probate is costly compared to the value of the estate, the decision to seek probate involves some form of cost/benefit analysis. Other expenses related to administering the estate, such as executor fees, will also be factored in. There is a concern that, in these circumstances, estate representatives may administer the estate without the protection of probate or that they may choose not to administer the estate at all.
There is also a slightly different situation where obtaining probate will not be financially feasible. This is where the estate is so small that there is really nothing to administer but probate is required for some legal purpose like filing the deceased’s final tax return. In this situation, there is no cost/benefit analysis but simply a legal obligation that may need to be personally funded by the estate representative. For example, the LCO heard about a parent whose adult child died without a will. Since there were no assets in the estate, the parent did not apply for probate. Later, a very small pension was discovered with the estate listed as beneficiary. This required the parent to file a tax return and the Canada Revenue Agency required probate as proof of the parent’s authority. Since the parent lived outside Ontario, obtaining probate was complicated and would involve a court application. The value of the pension was nowhere near enough to fund such an application.
There are endless permutations and combinations of circumstances that may complicate a probate application and drive up costs. Probate might also lead to increased administration costs since administration will take place under the scrutiny of the beneficiaries and, potentially, the court. In any event, the key point is that t