Currently in Ontario, the same probate process applies to all estates regardless of value, although the estate administration tax varies with value. Therefore, there is no legal concept of small estate in Ontario. In this project, the LCO has considered what should be a small estate for the purpose of accessing a simplified procedure, assuming such a process is introduced in Ontario.
There are several factors to take into account here. This chapter first considers the current understanding among members of the estates community as to what constitutes a small estate. Next, the variability of the concept of small estate and the challenges of measuring this concept are discussed. Third, we consider the particular value limit and other eligibility criteria most appropriate for a new small estate procedure in Ontario. We conclude by recommending that any new small estates procedure should be available to estates with a gross value of no more than $50,000, regardless of the type of assets.
A. Current Ideas about the Meaning of “Small Estate”
If there was one statement consistently heard during the consultations, it was that there is no typical small estate for probate purposes. The monetary value of an estate simply does not correspond to its complexity. A $5,000 estate may require probate and a $100,000 estate may not. In consultations, we heard several stories of practitioners probating very small estates for a variety of purposes. For example, one practitioner probated an estate worth $2,000 in order to prevent the risk of an earlier will being recognized.
It is this lack of correspondence between value and complexity that explains why the cost of probating small estates can be disproportionate to their value. The possible complexity of even very small estates caused some stakeholders to argue against the adoption of a small estates procedure with reduced procedural protections. One practitioner noted:
Difficulties in probate applications are not unique to small estates. However, the low value creates a perception of unreasonableness about the need to comply with procedures to protect beneficiaries, creditors, third parties and others with a potential interest in the estate.
On the other hand, although practitioners acknowledged the potential complexities of even small estates, they also noted that many small estates are straightforward and would benefit from a simplified procedure. Most practitioners, as well as court staff, supported the goal of improving access to the probate process for those “simple” small estates.
When asked to set a dollar value defining a small estate, stakeholders expressed a wide range of opinions. Some urban practitioners suggested $100,000 as a meaningful value since they find it easier to justify a probate application to their clients where the estate is worth at least this amount. They reported that clients are less likely to return after an initial meeting with the practitioner where the estate is worth less than about $80,000 to $90,000.
One court staff member suggested $100,000 to correspond with the Simplified Procedure under Rule 76 of the Rules of Civil Procedure. However, other court staff suggested $25,000 as an appropriate value limit for a small estate procedure, noting that this amount would not pose as much of a liability risk as higher amounts would. This amount was also thought to be reasonable because it aligned with the jurisdictional limit for small claims court.
Individual estate representatives also had a variety of opinions as to what constitutes a small estate. These ranged from $5,000 to $1,000,000. The most common value limit mentioned was $100,000. However, several individuals felt that an estate should be worth less than $25,000 to be considered small.
The wide range of opinions as to what is a small estate is evident from the following responses from stakeholders:
- minor assets such as a few thousand dollars in the bank or a vehicle or RRSP or similar
- $10,000 in the bank and no real estate
- $25,000 – $30,000
- $50,000 net (calculating on gross value would push more estates with limited resources into the standard stream)
- $50,000 without real estate
- a few thousand dollars or, if there is a life insurance policy, $50,000 to $100,000
- $100,000 with no single asset worth more than $25,000
- $100,000 without real estate but $50,000 in rural areas of Ontario
- $500,000 taking into account real estate
- anything without real estate – monetary value is irrelevant
- one asset, one beneficiary – monetary value is irrelevant
- one person who is both executor and sole beneficiary, or a widowed person is the executor and there is one child – monetary value is irrelevant
Clearly, there is no consensus on what currently qualifies as a small estate in Ontario. In addition to the monetary value of the estate, factors such as the type of assets in the estate, the presence of real estate and the number and identity of beneficiaries may also be considered relevant.
Stakeholders also offered several case examples of small estates for which probate was problematic in some way. These ranged widely in terms of monetary value as well as other attributes as is evident from the following examples:
- The deceased died intestate with a car (jointly-owned with her common law husband) and a bank account of $1,400. The bank told the deceased’s daughter that she must go to a lawyer and be appointed trustee in order to obtain the $1,400.
- The deceased’s estate consisted primarily of tax free savings accounts worth $33,000. The deceased had not understood that he could designate his wife as beneficiary of the accounts. The bank insisted on probate. The issue was complicated because of the client’s language barriers.
- A will provided for the testator’s estate to go to his issue “per stirpes” (each branch of the family receives an equal amount and if the heir has predeceased the testator, that share is distributed equally among his or her children). The testator had 9 children but 3 of these predeceased him. Of those 3 deceased children, 2 had their own children. One had 2 children and the other had 5 children. Of these latter 5 grandchildren, the practitioner was unable to locate 2 of them. In total, there were 13 beneficiaries to locate and particular problems locating 2 of them. This was all for an estate worth approximately $70,000.
- A testator with an estate worth $60,000 had prepared his own will by filling out a form obtained from the internet. A search for the witnesses to the will came up empty. A banker’s affidavit was filed in place of an affidavit of execution but was rejected by the registry office as insufficient proof of the authenticity of the will. As a result, it was necessary to hire a private investigator for $6,000 to track down the witnesses to the will. One witness was found in England so that it was necessary to have an affidavit sworn in that jurisdiction. In total it ended up costing $30,000 to probate a $60,000 estate.
- The deceased left a will naming an adult child as executor. The estate was worth approximately $20,000 and was made up of a bank account, the Canada Pension Plan (CPP) death benefit, a small investment account and an entitlement to pension benefits. There were seven or more beneficiaries including minors. The bank refused to release the assets without probate even though the executor had been the deceased’s attorney for property several years before the death. The executor hired a lawyer to obtain probate. Although the executor was unhappy having to pay lawyer’s fees ($2,000), the overall process was described as “easy”. The executor explained, “Because there was very little money left I had no problem with my family.” The executor had no problem with the probate system but was upset with the bank’s refusal to waive probate.
Clearly, there is wide variation in what stakeholders perceive to be a small estate as well as the range of circumstances perceived to be problematic.
B. Definition of Small Estate for this Project
Since there is no predetermined or commonly understood concept of what is a small estate in Ontario, the definition chosen for the purpose of this project should relate to the primary goal of the project to improve access to probate for small estates while maintaining its legal protections. Therefore, the definition of small estate should target those estates for which cost is likely to be an obstacle to accessing the current system.
Generally speaking, cost tends not to be an obstacle to probating large estates. Where probate is required in order to collect the assets necessary to administer a large estate, the estate representative may object to the cost of probate, perhaps with good reason, but will be resigned to proceed with an application and pay the associated costs out of the estate. However, for smaller estates, the cost of probate may be close to or even exceed the value of the estate so that it is no longer financially worthwhile to probate it. One stakeholder referred to this as the “walkaway” point, that is, the point at which the estate representative and beneficiaries are willing to walk away from the assets rather than proceed with a probate application. This captures the idea of a small estate but it is too narrow for our purposes. Some small estates will be probated even where it is not financially worthwhile to do so. For example, the estate representative may probate and administer the estate out of a sense of duty or loyalty to the deceased. Or probate may be sought in order to verify the validity of the will where there is a risk that a third party will bring a will challenge in the future. Therefore, a small estate for the purpose of this project should also include small estates that are probated but only by incurring disproportionate costs. These will include estates worth probating in strictly monetary term