A. Difficulties Obtaining Probate for Small Estates
This section considers in more detail what elements of the probate process may be disproportionately costly and complex for small estates. One issue is the extent to which legal assistance is or should be necessary in navigating the process. Larger estates are almost always administered with legal advice. However, for smaller estates, the cost of legal assistance may well be the factor that tips the balance and dissuades family members from applying to administer the estate. Small estate processes in other jurisdictions are typically designed to be accessible to laypeople without legal assistance. However, lawyers play an important role in the current Certificate of Appointment of Estate Trustee (COA) process, both in safeguarding against fraud and in educating their clients as to the legal responsibilities of being estate trustee. It will be important for the Law Commission of Ontario (LCO) to balance both the costs and the benefits of legal assistance in the probate process in order to develop recommendations maximizing access to justice.
There are also specific application requirements under Rule 74 of the Rules of Civil Procedure that may be particularly onerous for applicants attempting to administer small estates. Here are some examples raised during the LCO’s preliminary interviews:
- Ontario wills are not valid unless there are two witnesses to their execution. Therefore, an affidavit of execution of the will is required before a COA will be issued. This affidavit is not always with the will and it may be difficult to locate the witnesses to obtain an affidavit after the fact. A search for witnesses can increase application costs, disproportionately affecting small estates. If the witnesses cannot be found, it is sometimes possible to have a financial institution swear an affidavit on the basis of the testator’s signature card on file.
- It may also be difficult in some circumstances to identify and locate the beneficiaries in order to serve them with notice of the application. The cost of a private investigator may be prohibitive for small estates. Currently, there are no guidelines addressing how far applicants must go in satisfying themselves that all potential beneficiaries have been located. However, the value of the estate is one factor to be taken into account.
- The application for a COA also requires a valuation of the estate. This may be difficult to obtain quickly in some circumstance, such as where the estate includes unusual assets or real property located in rural settings. Many estate practitioners use an estimated value for the purpose of the application form with the undertaking to correct this when the actual value is available. However, this option may not be readily apparent to applicants without legal assistance. The government’s proposed audit and verification regime, discussed below, is also likely to complicate this step.
- The Rules require that applicants for a COA without a will must post an administration bond with their application. Administration bonds are also necessary in some cases where there is a will, such as where the executor resides outside of the Commonwealth. In practice, estate practitioners normally apply to have the court waive the bond requirement and the court often grants this order where the beneficiaries consent. However, without legal assistance, applicants may not be aware of this practice or may not be able to take advantage of it.
- Another potential roadblock for small estates is where an applicant cannot afford to pay the estate administration tax required for the issuance of a COA. Courts may vary this requirement where there are sufficient assets in the estate to cover the tax. Otherwise, it is up to the discretion of the financial institution whether or not to release this amount from the estate before the COA is issued. Financial institutions may be cooperative particularly where there is a will but, if not, the result may be that applicants are unable to afford the upfront fees necessary to discharge their obligations or obtain their inheritance.
Questions for Feedback:
4. What difficulties tend to arise in obtaining probate specifically for small estates? Please briefly explain the basis for your answer. (For example, handwritten or altered wills, difficulty obtaining affidavits from witnesses to a will, difficulty locating beneficiaries, difficulty valuing the assets, minor or incapable beneficiaries, family disputes, other)
B. Difficulties Administering Small Estates Without Probate
The cost of legal assistance and complicated application requirements are both reasons why estate representatives may be discouraged from obtaining probate for small estates. However, estate representatives may have just as much difficulty administering the estate without probate. In particular, they often have difficulty collecting the deceased’s assets since they must rely on the discretion of bank managers and other financial institutions to waive the COA requirement. These institutions will sometimes do so where the estate is small and the risk of liability is perceived to be low. They may agree to release assets to the estate representative on the basis of a personal indemnity agreement executed by the estate representative or the beneficiaries or both. However, this is a discretionary practice that varies from institution to institution and in respect of different kinds of assets.
Estate representatives requesting a waiver of probate are typically subject to an individual risk assessment that takes into account factors such as the value of the estate, whether the estate representative is a client of the institution or otherwise known to the manager and whether there is any controversy over the terms of the will. The result is that there is no standard practice as to when the COA requirement will be waived, and apparently similar cases may be dealt with inconsistently. An estate representative may be successful having the assets held by one institution released but be unable to gain possession of assets held by another institution. From the perspective of an estate representative or family members of the deceased person, this may seem unfair, particularly where the size of the estate is such that the legal assistance practically necessary to obtain probate is unaffordable.
Although there are important legal reasons for financial institutions to require probate, the effect of this may put estate representatives of small estates in an impossible position. They must obtain probate in order to gain possession of the assets making up the estate and, yet, if they do so, there may not be sufficient assets left to make administering them worthwhile.
Questions for Feedback:
5. What difficulties tend to arise in administering small estates without probate?
a. How difficult is it to get financial institutions or others to release the deceased’s assets?
b. How difficult is it to file the deceased’s final tax return with the Canada Revenue Agency?
Please briefly explain the basis for your answer.
6. Where financial institutions release small value assets without requiring probate, do you think that this increases the risk of the assets falling into the wrong hands? If so,
a. How serious is this risk?
b. Are you aware of cases where the assets of an estate have fallen into the wrong hands? Explain.
7. Where financial institutions agree to release small value assets to an estate representative without probate,
a. Should financial institutions be protected from liability?
b. What standard of care should be expected of financial institutions before they are protected from liability?
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