A. The Purpose of Probate
1. The Purpose and Benefits of Probate
The primary purpose of probate is to validate the will, where there is one, and confirm or establish the authority of the estate trustee to act on behalf of the estate, depending on whether there is a will. From a legal perspective, probate ensures that the estate is administered by the correct person according to the wishes of the testator or, where there is no will, according to principles of succession law. By ensuring that the correct person is in charge, probate goes some way to protecting the entitlement of the beneficiaries and others with an interest in the estate. Probate also protects the estate trustee by establishing his or her authority to act and shielding him or her from liability for actions taken pursuant to a will if the will is later set aside.
Probate also has a number of other associated functions. Interaction with the court system serves to educate an estate trustee to some extent as to the legal responsibilities that come with his or her role. Probate also provides a public record of estates so that individuals potentially interested in an estate may learn about it and assert their claim. Probate is also used to trigger certain limitation periods for claims against the estate.
Therefore, the primary purpose of probate is to protect a range of different interests, most specifically the following:
- the testator’s intentions (as expressed in the will)
- the beneficiaries and others with interests in the estate
- the creditors, and
- the estate trustee
In a paper commissioned by the LCO for this project, Christine Hakim explains,
The over-arching rationale behind probating estates seems to be safeguarding the estate against fraud and mismanagement. Whether by way of an unsanctioned representative, by way of falsely reporting or mishandling estate assets, or by probating a testamentary document other than the true last will of the deceased, the rationale behind estate administration today is to protect the deceased’s estate from being mishandled, wasted, or otherwise misused.
The danger which probate is designed to address has been colourfully expressed by legal blogger Lloyd Duhaime:
Probate is the fulfillment of a dead person’s decisions in the absence of the most interested party, the decedent/testator. When a dishonest person who would be entitled to a large part of the estate if there were no will (intestate) comes across an original will which leaves him or her next to nothing, there is but that person’s conscience preventing him or her from destroying the will and acting as if it never existed. It is a feeding ground for dishonest people and these opportunities for abuse need sharp, effective law to protect the citizenry.
Of course, probate is not a guarantee against occurrences of fraud or improper administration. Probate is intended to prevent anyone other than the legally authorized estate trustee from taking control of the estate. However, a properly-authorized estate trustee may be just as inclined to act fraudulently as an estate representative who has not been approved by the court. The converse is also true. An estate representative who is acting without probate may be just as likely as the estate trustee to administer the estate faithfully in accordance with the deceased’s wishes.
In spite of the protective benefits of probate, there is no explicit legal requirement that estate representatives file for probate. And, since estate administration tax is payable as part of a probate application, there is strong disincentive from doing so.
However, there is also another important benefit of obtaining probate. Financial and other institutions holding the deceased’s assets rely on probate as authoritative evidence that the estate trustee is legally entitled to receive them on behalf of the estate. Without this stamp of authority, institutions will often refuse to release the assets since they risk liability by releasing the assets to the wrong representative. Some institutions may refuse to deal with an estate representative who has not obtained probate in order to prevent the risk of liability for improperly disclosing confidential information.
Financial and other institutions will sometimes agree to waive the requirement for probate where the assets in issue are small in value or other circumstances suggest that the risk of liability is low. For example, these institutions are more likely to waive probate where there is an uncontested will appointing the estate representative as executor or where the beneficiaries are limited to a spouse or spouse and adult child. Many institutions will require that the estate representative and, sometimes, the beneficiaries sign an indemnity. Larger institutions have established waiver policies. However, the decision to waive probate is ultimately a discretionary one based on the institution’s internal risk assessment.
There is a great deal of theoretical literature in the United States questioning the continued need for a court-supervised probate system in modern economic and social conditions. The LCO reviews some of this literature in section II of the Consultation Paper in this project. However, the LCO has not drawn conclusions about the continuing desirability or efficacy of the probate system generally. Most stakeholders in this project clearly believe that the probate system continues to be necessary in Ontario to regulate the transmission of wealth after death. Instead, the LCO has focused on the specific needs of small estates in Ontario. In particular, it has considered whether a new separate small estates process is merited in Ontario and, if so, whether it should be incorporated into the existing probate system or operate outside the probate system. This Report should not be interpreted as a comment on the probate system in the context of larger estates.
2. Public Misperception about Probate
Probate plays a valuable role in validating the will, if one exists, and establishing the authority of the estate trustee regardless of whether there is a will, as well as protecting the interests of various other persons affected by the administration of the estate. However, the legal protection offered by probate is not typically front and centre in the minds of estate representatives deciding whether or not to file an application. Usually, the more immediate concern is whether or not probate is practically necessary in order to gather in the estate assets. If probate is not required by institutions holding the assets, then the estate representative will be very tempted to administer the estate outside the probate system and save the cost of the estate administration tax and legal fees, as well as avoiding the administrative burden.
Therefore, the primary protective purpose of probate may be lost in the financial calculus to determine whether or not it is necessary to bring in the assets. This is unfortunate. Probate brings financial benefits, too, in providing some insurance against fraud or improper administration. More immediately, it might well dissuade disgruntled family members from pursuing disputes that would otherwise be subject to expensive litigation. As the Trusts and Estates section of the Ontario Bar Association noted in its submission to this project, probate may be particularly valuable to beneficiaries of limited means who do not have the resources to protect their own interests through litigation.
Although the benefit of probate as proof of authority to receive estate assets is valuable in its own right, this benefit should not be viewed in isolation from the primary protective role of probate. Otherwise, the costs of probate may appear to overwhelm its benefits. And where an estate is small in value, it may seem particularly egregious to require the estate representative to complete the necessary application requirements, thereby exhausting much of the estate’s value.
During the LCO consultations, a surprising number of stakeholders, professional and otherwise, seemed to view probate as little more than a bureaucratic impediment to administering the estate. In their view, the goal was to convince institutions to waive the probate requirement and liberate the assets. These stakeholders did not seem to appreciate that anything is lost by avoiding the probate process altogether.
Some individual stakeholders who have acted as estate representatives held an even more negative view of probate. They considered that probate is nothing more than a revenue stream for government:
Why pay the probate fees for a simple estate with no real estate. The government doesn’t deserve a share of everything… [Probate is] just a death tax, plain and simple. And the required lawyers are just another unwanted expense. Let’s not pretend that the probate system is there to ‘help’ anyone. Beneficiaries are always free to hire a lawyer and pursue legal action should they feel that an estate is being handled improperly.
This limited understanding of the function of probate is, perhaps, to be expected given how closely probate and Ontario’s estate administration tax are intertwined. The probate process is used as an administrative vehicle for collecting estate administration tax. The amount of tax due is based on the value of the estate recorded in the probate application and the tax becomes payable with the filing of the application. However, the probate system itself is both conceptually and functionally distinct from the tax.
Probate fees such as the estate administration tax in Ontario, as well as the other costs of probate, have had implications for estate planning as well. There is a widespread practice of planning to avoid probate. One popular technique is for people to put their property in joint ownership with their heirs with the intent that it will be transferred directly to their heirs when they die. According to several stakeholders, this practice has led to grave concerns about financial abuse where, for example, an adult child takes control of the property for his or her own benefit before the parent’s death.
Probate plays an important function in providing legal protection to beneficiaries and others interested in small estates as well as to the trustees representing these estates. It is perhaps difficult to convey this message to estate representatives where probate is so closely wrapped up with the estate administration tax regime. The result is public misperception that probate is to be avoided at all costs. This misunderstanding may be contributing to the problems that some small estates face under the current probate system. A more balanced understanding of probate, where the protective function of probate is appreciated along with its costs, would allow small estate representatives to make a more informed decision as to whether or not a probate application is merited.
B. The Probate Process
Probate applications in Ontario are divided into non-contentious and contentious matters. Contentious matters involve a challenge to the will or the authority of the applicant and these are dealt with as court proceedings under Rule 75 of the Rules of Civil Procedure. This project is not concerned with contested probate matters.
Non-contentious probate applications are regulated by Rule 74 of the Rules of Civil Procedure. Although supervised by the Ontario Superior Court of Justice, these do not usually require a court appearance. Instead, applicants complete a number of application requirements designed to ensure that the will, if any, is valid and that the applicant has legal authority to administer the estate. A completed application is filed with the court’s estate office in the county or district of the deceased’s permanent residence. Court staff review the application to ensure that it is complete and there are no readily apparent problems with the information provided. Court staff also search to ensure that there has been no other application filed in respect of the estate. If there are no concerns, the Registrar may issue a Certificate of Appointment (COA). If there is any doubt about the information contained in the application, it is referred to a judge. Currently, approximately 80 per cent of probate applications are approved by the Registrar without the need for referral to a judge.
There are different requirements for applications involving estates with wills and those involving estates without wills. Applications for estates with a will are subject to Rule 74.04. The applicant must complete F