This LCO project has reviewed the probate system in Ontario as it affects small estates. Probate is a court process establishing the validity of a will, where there is one, and an estate representative’s legal authority to act on behalf of the estate. Although probate is not mandatory, it is practically necessary to administering most estates. The concern motivating this project has been that the cost of obtaining probate does not necessarily relate to the value of the estate being probated so that the cost can be disproportionately high for small estates. The smaller the estate, the more likely this is the case. In some cases, the cost of probate will outweigh the benefits altogether so that these small estates are not administered and whatever assets there are in the estate are not distributed. These small estates are effectively shut out of the system.
This is a practical problem and, in this Report, we develop a practical solution. We recommend the creation of a small estates process for estates valued up to $50,000. (Recommendations 1 and 2) This would be a different stream of probate parallel to the regular stream used by larger estates. (Recommendation 7) It would be designed to be much simpler to navigate without legal assistance. (Recommendation 3) At the same time it would retain essential legal protections of the regular probate stream, most particularly the notice requirement. Recommendations 4 and 5). The small estates process would be available whether or not there is a will and regardless of the assets contained in the estate or the identity of the beneficiaries. Recommendation 5) Applicants would be required to be resident in Ontario and be able to attest to the declarations on the application form. (Recommendation 3) No security bond would be necessary. (Recommendation 6)
We emphasize that this is a practical solution that it involves a compromise: to reduce the cost and improve the accessibility of probate for small estates, we propose eliminating some of the evidentiary requirements of the process intended to establish the applicant’s legal entitlement to administer the estate. However, we believe that the small estate process we are recommending succeeds in striking an appropriate balance between the principles of accessibility to the process, on the one hand, and the legal protection afforded by the process, on the other hand.
The Report proceeds as follows. After an introduction to the project in chapter I, chapter II discusses the purpose of probate and the process involved in obtaining probate in Ontario. Probate is often perceived as an administrative barrier to obtaining possession of estate assets and as a vehicle for collecting estate administration tax. However, probate also provides important legal protection to testators, beneficiaries, creditors and estate representatives, as well as promoting commercial stability. We conclude that probate is valuable for all these reasons and should be encouraged for small estates as well as large estates.
Chapter III addresses the difficult question of what should be considered a small estate eligible for a small estates process. In order to preserve legal protection while improving accessibility, the procedure should be available only to those estates for which cost is an obstacle to accessing the current system. The recommended value of $50,000 is a bright line cut-off necessary in order to keep the procedure simple enough to be effective. This figure takes into account what we learned during the consultations about the typical cost of probate in Ontario and the value of estates accessing the current system. This figure is also in line with other analogous value limits, such as that used in the formula for calculating estate administration tax.
Chapter IV describes some of the challenges that may be faced by estate representatives applying for probate for small estates and how these challenges may contribute to the overall cost of probate. Most estate representatives hire a lawyer to assist with a probate application and we consider the costs associated with this as well as the practical feasibility of obtaining probate without legal assistance. Chapter V looks at the option of administering small estates without probate and the role of probate from the perspective of financial and other institutions holding small estate assets. Chapter VI considers the principle of proportionality in balancing accessibility and legal protection as it affects the probate process and analogous legal processes.
Our recommendations are contained in Chapter VII. We conclude that Ontario should amend Rule 74 of the Rules of Civil Procedures and the Estates Act to provide for a small estates process for estates worth up to $50,000. (Recommendations 1 and 2) This process would combine the protection of court supervision with a much simpler application process designed to be accessible to small estates without legal assistance. We draw on various models of small estate procedures in operation elsewhere but develop a unique approach that we think most suitable to Ontario. Our recommended process would continue to observe the substantive requirements for probate (validity of the will, if any, and legal entitlement of the applicant) but would lower the evidentiary threshold necessary to prove those requirements. (Recommendations 1, 3, 4 and 7) For example, instead of filing multiple affidavits with the court as evidence of the validity of the will, an applicant would simply check boxes declaring the facts necessary to establish validity. We contemplate a single application form of no more than two pages accompanied by a copy of the will, if any, and the death certificate as well as confirmation that notice was served. (Recommendation 3)
Applicants in a small estates procedure would remain liable for payment of estate administration tax. However, they would be exempt from the additional administrative burden of filing an Estate Information Return with the Ministry of Finance. (Recommendation 8) This would ensure that the procedure remains simple and, therefore, accessible to all small estates.
Another key protection in our recommended small estates procedure would be retention of the notice requirement so that beneficiaries have an opportunity to learn about the application and protect their own interests. However, the forms involved in serving notice would be simplified and the applicant would be required to wait 30 days before filing the application. (Recommendations 4 and 5)
Once issued, a small estates certificate (“Small Estates Certificate”) would have the same legal effect as probate except that the estate representative’s authority would be restricted to the estate assets listed in the application form, with one opportunity to amend the form. (Recommendations 1 and 7) This is important so that other financial and other institutions would be able to rely on Small Estates Certificates to release assets without risk of liability. It would also ensure that other legal regimes referencing the probate system would not be disrupted.
Financial and other institutions holding estate assets would remain bound by their own legislative frameworks and would retain discretion to release assets without probate. However, the promise of statutory protection from liability would create a strong incentive for institutions to require a Small Estates Certificate before releasing assets. This would have the practical effect of providing much needed commercial certainty to asset transfers after death.
The Report also recommends a range of legal supports as part of a small estates procedure that can be tailored to the value and relative complexity of particular estates. These include simplified forms and an online delivery system, a plain-language guide to probate, a telephone help line and cost-sensitive legal advice. (Recommendations 9 to 13)
Finally, the Report makes two related recommendations: one for a public education campaign on the importance of making a will and, two, for the creation of an online estates database that is searchable by third parties so that they may determine whether or not they have a potential interest in an estate. (Recommendations 14 and 15)
We have concluded that, with the protections we have recommended, most particularly the notice requirement, fraud should not be a significant concern detracting from the benefits of a new small estates process. Rather, the adoption of a small estates procedure along the lines described in this Report would be a positive development for Ontario’s probate system. The ease and affordability of the new process should encourage many more estate representatives of small estates to file for probate, thereby protecting themselves in their administration of the estate and facilitating the collection of the estate assets, as well as protecting the beneficiaries and creditors of the estate. The process would significantly reduce the pool of small estates that remain outside the protection of the system. Finally, it would have broader commercial benefits for Ontario in standardizing the practices around releasing assets after death.
|Table of Contents