IV. Small Estates and the Current Probate System

IV. Small Estates and the Current Probate System2017-03-03T18:35:36+00:00

The project was motivated by concerns that probate may be disproportionately expensive for some small estates and that the process may be sufficiently complex that the estate representative may not undertake probate and may abandon the assets or fail to distribute them appropriately. A threshold issue in the project is to assess the extent of this perceived problem. To what extent can we say that estate representatives of small estates in Ontario currently have difficulty accessing the probate system or that difficulties lead them to ignore the probate system? In using the term “small estate”, we refer to estates worth up to $50,000, as explained in the previous chapter. After considering the evidence of a problem probating small estates in Ontario, we consider how particular elements of the current probate process may contribute to this problem.

 

A.  What We Know about the Use of the Probate System

Unfortunately, there is no empirical evidence addressing these questions. Ontario gathers very few statistics on probate applications and there are no statistics at all on the administration of estates outside the probate system.  We do know that between 2009 and 2012, there were about 17,000 probate applications with a will and 3,000 applications without a will filed in Ontario annually.[79] We do not know the value of the estates subject to these applications, nor whether the applications were made by individuals or lawyers acting on their behalf. According to a very informal poll of estates court staff throughout Ontario, anywhere from 10 to 40 per cent of probate applications are for estates worth less than $100,000.[80]

There are even fewer statistics on the number of estates that are administered without probate. A rough idea can be inferred by comparing the number of probate applications to the number of deaths in Ontario over the same period. Between 2009 and 2012, there were approximately 90,000 deaths in the province annually.[81] Thus we may surmise that less than one quarter of Ontario estates are being probated. Of those not being probated, many will be large estates using estate planning techniques to avoid the need for probate. There is no way of knowing how many small estates are administered without probate in Ontario.  Similarly, there is no way of knowing how many small estates are not administered at all.

There is some empirical evidence available in other jurisdictions. The British Columbia Law Institute (BCLI) reported that in 2004/2005, 44 per cent of British Columbia probate applications were valued at less than $100,000.[82] In 2011, the Law Commission of England and Wales released a report on Intestacy and Family Provision Claims on Death. The Commission found that more than half of all estates are administered without a formal grant and that these are most likely to be intestate.[83] Intestate estates are generally of a lower value than where there is a will.[84]

Although there is no empirical evidence in Ontario confirming that estate representatives of small estates do not access the probate system, the consultations revealed significant anecdotal evidence of a problem. This was particularly the case in speaking with court staff and government representatives. Court staff members are on the front lines dealing with small estates. They described frequent situations where bereaved family members are told by financial institutions or other agencies that they must fill out a form at the court office before the financial institution will release the deceased’s assets. These family members are not aware of the significance of probate and the estate assets are not sufficient to cover the cost of a probate application in any event. Court staff cannot give legal advice but they typically try to explain the nature of estate administration and some suggest that the person try to negotiate with the bank.

Most estates practitioners agreed with the need for small estate reform in Ontario. Although a few practitioners denied that there was any problem, particularly given the dearth of statistics, the majority of practitioners had either experienced disproportionate costs probating small estates themselves or were aware of the problem anecdotally.

There were differing views on the extent of the problems experienced by small estates. Many estate practitioners felt that the current probate system needs only minor reforms to accommodate small estates, such as simplifying the forms.  One noted that the problem is not with the procedure itself but whether it is economically feasible to get involved.[85] According to another, “the system is not broken. It lumbers along.”[86]

Other estates practitioners felt that there are problems with the probate system but that these are not unique to small estates. They suggested that the scope of the project was artificially narrow and that the system should be looked at globally:

The current system is not terrible. It has problems but they exist for most estates. It is possible to get probate for small estates on an affordable basis in most cases. Some of the problems that exist are created by the deceased failing to do basic planning. Therefore, I am reluctant to see time and money spent to solve only part of a larger problem when overall reform could benefit a wide range of estates.[87]

The system is laborious and hard to explain; the time involved in obtaining probate is unduly long and the restrictions and demands imposed by banks makes [sic] it almost impossible to avoid. I do not know that it actually protects creditors.[88]

Still other estates practitioners reported particular problems probating small estates and they supported the idea of a new streamlined process directed specifically at small estates.

The LCO also heard stories from individuals who have acted as estate representatives, both of problems obtaining probate for small estates as well as problems administering small estates without probate.[89] However, there were also reports of probate being obtained without much problem.

The extent of the problem probating small estates in Ontario is unclear not only because of the lack of empirical data on the probate system, but also because there is no shared conception of what is a “small estate” in Ontario. Although most stakeholders agreed that some kind of reform is necessary, their suggestions as to the nature and extent of reform varied widely depending on their personal definition of a “small estate”. 

 

B.              Evidence of a Systemic Problem with Small Estates and Probate

In addition to the anecdotal evidence of a problem, there is also evidence of systemic challenges with the way that financial and other asset-holding institutions deal with small estates both within and outside the probate system. Institutions, both public and private, rely on probate to satisfy themselves of the estate representative’s legal authority to represent the deceased. Without this stamp of authority, these institutions bear the risk of liability if they pay estate assets to or otherwise deal with the wrong estate representative. Stakeholders from certain institutions explained that they have a legal duty to require probate in these circumstances even where the cost of obtaining probate exceeds the value of the estate.

For example, some financial institution stakeholders expressed concern about managing their risk of liability while being responsive to waiver requests in appropriate circumstances. Other financial institutions saw the problem not so much as risk management as in complying with their legal duty to deal only with properly authorized representatives. A third problem commonly expressed was the unpredictability and client dissatisfaction caused by inconsistent waiver policies among different financial institutions and even within the same institution.

The Canada Revenue Agency (CRA) is a particular example of an institution that is legally obliged to require probate of estates in certain circumstances. The estate representative is required to file the deceased’s final tax return with the CRA. The CRA is required under section 241(1) of the Income Tax Act to deal only with the legally authorized representative of a deceased taxpayer.[90] Therefore, the CRA views probate as a legal requirement rather than a matter of cost/benefit analysis, particularly in the case of intestacies. However, the CRA will exercise discretion to waive probate in limited cases where there is evidence of undue hardship.[91]

There are also other government agencies with similar ambiguous situations to address. For example, under section 515(2)(d) of the Criminal Code, an accused may post cash bail personally.[92] Typically this amount is not more than $5,000. Once the case is concluded, so long as there is no forfeiture order, the cash is returned. Where the accused has died in the interim, family members may claim the money instead. However, it is not clear what evidence should be required by government officials in order to establish that the claimant is legally entitled to receive the money. As of yet, no rules have been developed to address this issue.[93]

Evidence of a systemic problem is particularly acute for administrators of pension plans attempting to pay out death benefits where the beneficiary is the employee’s estate. The pension plan administrator has a statutory duty under section 45 of the Pension Benefits Act to require from the person entitled to a benefit the information necessary to calculate and pay the benefit.  So long as the administrator requires this information, he or she may rely on it in determining who is legally entitled to receive the benefit.[94] However, the administrator will not be discharged where there is actual notice that the person is not entitled to the payment or where there is “an inaccuracy in or impropriety with respect to the information provided”.[95] Therefore, administrators will generally require probate before paying out death benefits to an estate. Where there is a will, some pension plans have adopted policies to waive probate in the case of benefits worth less than $50,000 for example. However, where there is no will, the claimant has no presumptive authority to act on behalf of the estate and there is nothing an administrator can rely on to indicate that it has met its statutory obligation in section 45.[96]

This can be a problem on an institutional level for pension plans with many small accounts.[97] Estate representatives are often unwilling to apply for probate for these small amounts and instead choose to abandon them. The LCO heard in consultations this happens in a “substantial number” of cases even where the benefit is as much as $2,000 or $3,000. The problem for these estate representatives is not only the cost but also what they see as the aggravation, time, energy and “hassle” of the probate process.

In spite of the absence of empirical data on the extent of the problems experienced by small estates in Ontario’s probate system, it seems clear that a problem exists. There is a problem for individual estate representatives who must pay for a legal process the purpose of which they do not understand, yet the effect of which may be to eat up a substantial portion of their inheritance. The precise nature and extent of this problem depends on how “small estate” is defined.  There is also a systemic problem in that probate is the commonly accepted means of establishing legal authority under several statutory regimes, both provincial and federal. Where the practical reality is that there is no money in the estate to pay for probate or to make it worthwhile to do so, this creates gaps in those regimes and leads to uncertainty about who should be entitled to collect estate assets.

 

C.    Particular Probate Requirements that May Pose a Challenge for Small Estates

In order to determine whether a small estates process makes sense for Ontario and, if so, how best to design it, it is necessary to understand the specific difficulties experienced by estate representatives of small estates under the current probate system.

The LCO heard a range of views from practitioners about the degree of difficulty experienced by small estates under the current process. A few practitioners were adamant that the existing forms are easy to complete and there is no problem with the process. Other practitioners reported having trouble justifying the cost of probate to their clients with small estates. Rural practitioners, in particular, spoke of clients who were caught between the bank’s requirement that they obtain probate and the disproportionate cost of doing so.

These perspectives from practitioners are useful but they do not tell the whole story. The estate representatives of very small estates will not go to a lawyer. They are more likely to seek advice from their financial institution or court staff. In the LCO’s consultations with these stakeholders, a somewhat fuller picture emerged with respect to small estates. For many of these estates, the probate process is, for practical purposes, inaccessible.

What is it about the current system that complicates the probate process for small estates and drives up costs? There are numerous factors that may come into play and some (not all) are discussed below. Some of these affect small estates in particular but most are difficulties that may arise in any probate application, regardless of value. Some factors, such as strained relationships among surviving family members, would complicate even an ideal probate process.

 

1.     Absence of a Will

Roughly 50 per cent of Canadians do not have a will and, for 30 per cent of these, the reason given is that they do not have enough assets to justify making a will.[98] Unfortunately, there are no statistics available on the relative value of Ontario estates with and without wills.  It might be assumed that estates without wills tend to be smaller in value but this is not necessarily the case, particularly where a will exists but has been lost (or hidden).

In consultations, estates practitioners consistently reported having fewer files involving intestacies. It may be that estate representatives of estates without wills are less likely to hire a lawyer to assist with probate. Again, it does not necessarily follow that estates without wills are smaller in value. 

Whatever the incidence and value of small estates without wills in Ontario, the absence of a will is a key factor (perhaps the key factor) tending to complicate the probate process. A will naming an executor establishes the testator’s intentions so that the role of the court is limited to authenticating the will and ensuring that the applicant is, indeed, the executor named by the testator.[99] However, where there is no will, the deceased’s intentions are unknown and the court must exercise its discretion to appoint an appropriate estate trustee according to the statutory framework in the Estates Act.[100] This additional responsibility on the part of the court necessitates additional information from the applicant including: renunciations from anyone with a prior entitlement to be estate trustee, consents from beneficiaries entitled to a majority of the value of the estate assets and evidence that the applicant has obtained an administration bond.[101]

Applying for probate in intestacy may be particularly complicated where the deceased was living in a common law relationship. Although a common law spouse may act as estate trustee in intestacy, he or she is not a “spouse” for the purposes of the Succession Law Reform Act and, therefore, is not entitled to inherit under the distribution scheme in Part II of the Act.[102]

The additional requirements for obtaining probate in intestacy may also pose practical difficulties for an applicant or his or her lawyer. For example, according to practitioners, it is more often necessary in an intestacy to track people down. Usually, no one, including the client, will have all the information necessary to complete the probate application.

Also, as is the case with any negative assertion, it may be difficult to establish that there is no will. Family members frequently do not have that kind of personal information about the deceased. One survey found that only 54 per cent of Canadians have spoken to their family about their intentions for their will.[103] The fact that the estate representative has not heard about a will does not mean that one does not exist. Most concerning, and a significant gap in the current probate system, is the possibility that a family member may hide a will that is not in their best interests.

Form 74.14 under Rule 74 of the Rules of Civil Procedure requires the applicant for probate in an intestacy to swear the following oath:

I have made a careful search and inquiry for a will or other testamentary document of the deceased person, but none has been found. I believe that the person did not leave a will or other testamentary document.

Even estates law specialists in Ontario are not clear on the extent of this duty to make a “careful search”. Applicants represented by a lawyer may pay $400 to $800 to post a notice in the newspaper or a professional journal seeking information about the existence of a will. However, it is hard to say how often these notices are read. The LCO heard that some communities of estates practitioners have developed informal email systems to alert each other to new estates and will searches. Neither of these avenues is likely to be available to an estate representative of a small intestacy who cannot afford a lawyer.

These factors will tend to complicate the probate process and increase costs for all intestacies. But for small intestacies, the increased costs are more likely to discourage estate representatives from accessing the probate system at all. This can have particularly severe consequences where there is no will. The existence of an apparently valid will is often sufficient to convince financial institutions to waive the probate requirement for small estates.[104] However, where there is no will, financial institutions generally refuse to waive probate even for small estates. This is understandable. Financial institutions are faced with the same dilemma that courts have in these circumstances. Without a will, there is no clue as to the testator’s intentions and no presumptive authority on the part of the estate representative. The institution must rely heavily on its own risk assessment to determine who is entitled to administer the estate. Without a will, most financial institutions are unwilling to take this chance. Often, the result is that the estate representative is stuck. He or she may not be able to afford or be willing “to front” the cost of probate and cannot access the estate assets without probate.  As a result, the assets are abandoned.

As will be discussed further below, the difficulties faced by small estates without wills in Ontario’s probate system is the most immediately urgent problem identified in this project. Ideally, a small estates procedure would bring these small intestacies into the probate system thereby ensuring that estate assets are not left languishing in institutional accounts but, instead, find their way into the hands of the beneficiaries as provided for in Ontario’s Succession Law Reform Act.[105]

 

2.     Where There is a Will (There May Not Always Be a Way)

Where there is a will, the probate application requires evidence that the will is legitimate and that it is the final will of the deceased. The original will and any codicil must be attached to the application.[106] Additional evidence is provided in a series of forms appended to the application.

One requirement that sometimes poses problems for estates of any value is the requirement that a witness to the execution of the will file an affidavit of execution (Form 74.8).[107] Ideally, this affidavit is sworn at the time the will is executed and is stored with the will. However, it is not uncommon that the affidavit is missing and the witnesses have died or cannot be found. In this case, the applicant must seek other evidence of “due execution”. Banks have traditionally been asked to provide an affidavit based on the testator’s signature card. However, bankers are becoming increasingly reluctant to do this since, with the advent of electronic banking, they are less likely to know their client. One practitioner recalled a case where the testator had signed his signature card at age 16. By the time he died at age 57, his signature had changed and the bank refused to provide an affidavit.

Even if it is possible to obtain an affidavit, it may not be enough on its own to convince the court that the will is legitimate. Costs of probate may be increased by any of these factors: searching for witnesses to the will, assembling alternative evidence of due execution and obtaining legal advice when the application does not go as planned.

Probate will also be complicated if the will is a holograph will (entirely in the testator’s handwriting) or has been altered. This increases the risk that the will is not authentic or does not represent the testator’s true intentions. The probate application must include additional elements to address this risk. In the case of a holograph will, the applicant must file an affidavit (Form 74.9) that the handwriting and signature are that of the deceased.[108] Where the will has been altered, the application must include another affidavit (Form 74.10) comparing the will then to its condition at the time of execution.[109]

Form 74.9 requires the affiant to attest to the statement: “I was well acquainted with the deceased and have frequently seen the deceased’s signature and handwriting.” Whether or not this will lead to increased probate costs will depend on how easy it is to find someone who can satisfy these conditions. Form 74.10 must be sworn by someone who witnessed the execution of the will.

The practical reality is that any will may raise a red flag and result in increased probate costs, particularly those that are not professionally drafted. Estate representatives may find it difficult not only to complete the forms, but also to navigate any complicating factors that may arise without legal assistance.

What would be the consequences if a small estates procedure were available for small estates unable to bear the costs of assembling the evidence that the will is valid? Eliminating some of the evidentiary requirements would likely lower the associated application costs and make it possible for more small estates to access probate. On the other hand, reducing the standard of proof that the will is valid would increase the risk that the estate will be administered under the wrong will. There is a clear conflict between accessibility and accuracy of the process here, one that must be balanced in developing any small estates process.


3.     Family Dynamics

Family disputes may be an overarching complication in probating estates of any value. Family disputes lead to other complications such as difficulties obtaining a copy of the will and identifying the estate assets. Common law or subsequent marriages increase the likelihood of disputes, especially where there is no will. Disputes are more likely to arise when the deceased is the last member of a family group and inheritances pass outside the more usual avenues from spouse to spouse or parent to child.

These are difficulties that are shared by estates of any value. Just because the monetary value of an estate may be small does not mean that family members will not fight about it. As one government representative pointed out, “[p]eople get as angry and bitter about $1,000 as $100,000 when it is ‘family’”.[110]

The complications caused by family disputes affect the entire estate administration process and in many cases are simply irresolvable. Once disputes move into the litigation process, estate assets are quickly eaten up by court costs. Parties are emotional and will sometimes fight far beyond the point that it makes financial sense to do so. However, depending on the form it takes, a small estates process could ensure that more of these disputes are played out within the structure and protections of the court system.

 

4.     Finding a Willing Applicant

Rather than fighting for control of an estate, some families will not be interested in administering an estate at all. Particularly for small estates, it may be difficult to find someone willing to take on the cost and responsibility of acting as estate representative. Family members may not be able to cover the upfront cost of obtaining probate. Or they may shy away from taking on responsibility where executor fees are not sufficient financial incentive. Where an estate is so small that it is possibly insolvent, lawyers may advise estate representatives to renounce their position so that they avoid becoming responsible for paying creditors where there is not enough in the estate to cover the deceased’s debts.[111]

The Ontario Public Guardian and Trustee (OPGT) has authority under the Crown Administration of Estates Act to apply to be estate trustee where there is no one else to take on that role.[112] However, this jurisdiction is exercised only as a last resort and only in relation to estates with a net value of $10,000 or more.[113]

Where there is no one willing to act as estate representative, it can be difficult to deal with immediate problems such as making funeral arrangements. A longer term concern is whether the estate will be administered at all.

 

5.     Capacity Issues

Capacity issues involving one or more beneficiaries necessarily complicate probate applications of any value. Minors or incapable persons having an interest in an estate are protected by the requirements in Rule 74 that notice of any probate application be provided to the OPGT or the OCL or both.[114] The OPGT or the Office of the Children’s Lawyer (OCL) or both will play a supervisory role over the probate proceedings with the degree of their involvement determined by the nature of the interests at stake.

For example, where minors have a beneficial interest in an estate, the OCL will ensure that the minor is paid according to the terms of the will and may seek an accounting where there is no will or no trust terms in the will. Where the minor’s share exceeds $10,000, the OCL will ensure that it is paid into court as required under section 51 of the Children’s Law Reform Act (CLRA).[115] If the OCL has concerns about the administration of the estate, it will require the estate representative to bring a court application to pass the estate accounts.

It is important to note that the OPGT and OCL receive notice of vulnerable beneficial interests in an estate only where a probate application is filed.[116] Under the current probate system where it seems that many estate representatives of small estates may not file probate applications, vulnerable beneficiaries may not be receiving this protection. One of the arguments in favour of introducing a simplified probate process for small estates in Ontario is that it would encourage more estate representatives of small estates to file for a Small Estates Certificate. This would bring these small estates within the protection of the probate system and would trigger legal protections such as notice to the beneficiaries (including OPGT and OCL in respect of vulnerable beneficiaries). On the other hand, the opposite argument can be also made, that small estates with vulnerable beneficiaries should not be eligible for any small estates process because the current court supervised probate system affords crucial protection to these beneficiaries. The OCL took this latter position in its submission to the LCO.[117] However, again, this argument is premised on the assumption that the estate representative applies for probate in spite of disproportionate costs.

 

6.     Obligation to Post Security

Some probate applications are significantly complicated by the requirement that the estate representative post security with the application. This is a requirement where

  • there is no will,[118]
  • there is a will but the applicant is not named in the will as executor,[119] or
  • there is a will but the applicant is not resident in the Commonwealth.[120]

According to the Estates Act, the security must be for an amount that is double the value of the estate (subject to the court’s discretion).[121]

The security requirement acts as a safeguard against improper administration of the estate where the testator has not vouched for the estate representative in the will or where the estate representative is beyond the jurisdictional reach of the court. Several stakeholders emphasized that, in spite of the trend to seek a waiver of the bond requirement, it continues to be an important protection against misappropriation of the estate assets in many cases and, most particularly, where there are minor or incapable beneficiaries. However, in the case of small estates, the current bond requirement is generally thought to be impractical. In consultations, court staff indicated that one of the biggest difficulties people experienced with small estates is meeting the security requirement where there is no will. Estate representatives may not know where to get a bond or may not have the personal assets to qualify for a bond. For estates worth less than $100,000, Rule 74.11 allows the use of a personal surety, such as a family member or friend, but the amount of the bond still must be double the value of the estate.[122] Bonds also add time pressure to complete the administration since they are subject to a yearly fee.

Where an estate representative is unable to obtain a bond, there may be no one else to apply for probate. This will be particularly detrimental to minor or incapable beneficiaries who are not in a position to protect their own interest in the estate.[123]

The practice has developed for applicants to file a motion to dispense with the bond requirement as part of the probate application.[124] This is a paper proceeding and is frequently successful.[125] However, there is no standard form for bringing this motion and it is an area where estate representatives with no legal representation may be particularly disadvantaged.

 

7.     Identifying, Finding and Notifying Beneficiaries and Creditors

Rule 74 requires that notice of a probate application be served on “all persons entitled to share in the distribution of the estate”.[126] There is no guidance on how legal entitlement is to be determined and establishing who is entitled would presumably be a significant challenge for many applicants without legal assistance.

Once identified, beneficiaries must be found. In an increasingly global world, beneficiaries are more likely than in the past to be living in areas far from Ontario. However, in an increasingly online world, electronic searches are more often successful in locating them. Other modern tools such as DNA testing may also come into play here. Complications in identifying and finding beneficiaries may occur in a small estate just as in a large estate, but will result in disproportionate costs in the former.

Once beneficiaries are found, the rules provide that the estate representative must send notice of the application in set forms. There is a different form to be completed depending on whether there is a will or no will (forms 74.7 and 74.17 respectively). Service is by regular letter mail to the person’s last known address.[127] Notice is also to be sent to OPGT and OCL where there are minor or incapable beneficiaries.[128]

During the consultations, several stakeholders indicated that contacting beneficiaries was not a problem even where, for example, there were seven or more beneficiaries or where a beneficiary lived overseas. One practitioner indicated that, in 17 years of practice, there was rarely any extra effort required to locate beneficiaries. Some court staff agreed that, in their experience, locating beneficiaries is not usually a problem.

Nonetheless, this requirement may be particularly challenging for estate representatives without legal assistance. As Hakim notes:

It is critical to remember that the average Ontarian has little or no experience with court forms or affidavits. In my practical experience, and in the experience of the practitioners I spoke with, preparing the Notice, deciphering who exactly should receive the Notice, understanding and completing the prescribed method of service, correctly preparing an Affidavit, and having it properly sworn, is a daunting task for most people and one of the biggest barriers to accessing the probate system.[129]

Again, these difficulties may be greater in the case of small estates where the estate representative is less likely to have legal assistance.

 

8.     Valuing the Assets

Another requirement on the application form for probate is a valuation of the assets of the estate.[130] In Ontario, the valuation must be divided into real estate (net of encumbrances) and personal property. However, until recently, there was no need to break the value down into individual assets.[131] The valuation is used to calculate the estate administration tax payable.[132] If the estate representative is unable to determine the value at the time of the application, an estimated value may be provided along with an undertaking to provide a final figure within six months of the Certificate of Appointment (COA) being issued.[133]

During consultations, there were mixed opinions about the difficulty involved in valuing property for the purpose of the probate application. Some practitioners felt that valuing rural property can be problematic. Others felt that professional appraisal reports were reliable and that the process worked fine.

According to Hakim,

In my practical experience, it can be a lengthy proposition to ascertain all of a deceased’s assets and liabilities, and obtain valuations of them. If disclosure from financial institutions is required for such valuation to occur, or where the deceased’s estate may require valuations of stock, corporate shares or personal property, or if the estate representative has low financial literacy, the requirement of the valuation and/or inventory can be a bar to accessibility, as it can present too many difficulties for estate representatives to complete without professional assistance.[134]

Valuation difficulties are not unique to large estates. Small estates are not necessarily simple estates. They may contain assets that are difficult to value although they are not valuable.

Court staff expressed concern about the reliability of the valuation figures contained in probate applications. For example, apparently some practitioners have a practice of always claiming $50,000 as the value of real property and will not include an undertaking to correct this number. Court staff will scrutinize applications to determine whether there is any reason to doubt the valuation provided but they cannot look behind that valuation. Where an estimated value has been provided, court staff traditionally followed up with the estate trustee at the six month point.[135] However, there was no means for taking into account assets discovered thereafter. Presumably, the new verification and audit regulations introduced by the Ministry of Finance are intended to address these kinds of concerns. These regulations are discussed in the next section immediately below.

Problems with the valuation of property may affect estates both large and small depending on the assets involved. They are of concern to this project only to the extent that they may increase the overall cost of probate beyond the resources of estate representatives of small estates.


9.     Estate Administration Tax and Estate Information Return

If valuing the assets may currently be difficult for some unrepresented estate representatives, then the new audit and verification regulation introduced by the Minister of Finance in January of this year will most likely increase this barrier.[136] This regulation will add a new layer to the probate process by requiring estate trustees to complete and file a form listing details about each of the assets in the estate. The form must be filed with the Ministry of Finance within 90 days after the issuance of a COA.

This new regulation completes Ontario’s estate administration tax regime which has been under development since 1992. That was the year that the government tripled the amount payable in probate fees at that time.[137] This resulted in a legal challenge and in 1998 the Supreme Court of Canada held that what had been called a “fee” was effectively a tax.[138] The Court explained that “probate fees do not ‘incidentally’ provide a surplus for general revenue, but rather are intended for that very purpose.  The revenue obtained from probate fees is used for the public purpose of defraying the costs of court administration in general, and not simply to offset the costs of granting probate”.[139] Ontario passed the Estate Administration Tax Act that same year in order to provide legislative authority for the collection of this tax.[140] However, the tax continued to be collected as part of the probate process and was paid into court. For this reason, there was little oversight of the amounts received.

Finally, in 2011, the Ministry of Finance was given direct authority over the tax and it designed the new Estate Information Return to provide it with information allowing it to better enforce payment of the tax.[141] The new return requires a high degree of detail about each individual estate asset, its value, where it is located and so forth. Although estate representatives may find it daunting, a representative from the Ministry noted that it is much less complicated than the Canada Revenue Agency’s income tax return. The Ministry has also issued a guide to completing the return targeted at laypeople.[142]

The new return must be completed by all estates regardless of value. The Ministry representative explained that this was necessary in order to collect baseline information about estate assets.

Some estates practitioners have challenged the idea that the new return is easy to complete and accessible to estate representatives. According to one estates practitioner,

This is going to really drive up the costs – legal and otherwise – of administering an estate. There will be extra cost in preparing the Return, as well as obtaining valuations where proper valuations perhaps were not sought before and ETs [Estate Trustees] were basing value on research.[143]

Barry Corbin has criticized the new audit regime suggesting that, among other things, it may create delays in the distribution of estates and dissuade people from being willing to step forward as estate trustee.[144]

The new audit and verification regime took effect only in January of this year; therefore, it remains to be seen to what extent the requirement to complete the Estate Information Return will create an additional barrier to obtaining probate in Ontario.

During the consultations, several stakeholders suggested that the estate administration tax regime should be modified to benefit small estates. Some suggested that the minimum amount at which the tax applies (currently at $1,000) be increased in order to exempt small estates from the tax altogether. Others suggested imposing a flat tax on small estates. One practitioner suggested that the estate administration tax be abolished altogether to save resources and, instead, a surtax be added to the deceased’s terminal provincial tax return. Consideration of whether to reduce the amount of estate administration tax payable by small estates is beyond the scope of this project which has been focused specifically on the probate process. The revenue implications of reduced estate administration tax are simply unknown. That being said, the impact of the new Estates Information Return on the accessibility of the probate process is directly in issue in this project and is discussed further in chapter VII below.

 

10.  Real Property

Almost all of Ontario real property has been transferred from the Registry system to the Land Titles system.[145] Under the Land Titles system, most estates containing real property must file for probate since the Director of Titles requires a COA as part of the property’s transfer from the deceased to the estate and from the estate into the hands of the beneficial owner.[146] The Director of Titles has established a policy exempting real property worth less than $50,000 from this requirement where there is a will indicating who is entitled to the property and where certain other requirements are met including an indemnity agreement.[147]

A probate waiver for the transfer of the deceased’s real property is not available in intestacy. This is not a problem for most small estates. Given the average value of property in Ontario, there are just not that many small estates that will contain real property. However, real property in some rural locations may be of sufficiently low value that the owner may be considered to have a small estate. Where there is no will, a COA is currently required in order to transfer this property.

 

11.  The Forms and Court Procedures

A key barrier for small estates accessing the probate system is the cost of legal representation. And yet, legal representation is often practically necessary in order to successfully navigate the forms and procedures leading to the issuance of a COA. Legal assistance may be necessary to decipher the language used in the forms, as well as to appreciate the responsibilities that accompany a successful application.

There are 65 different forms under Rule 74, most of which are at least potentially applicable to an uncontested probate application. Even for someone with legal training, it can be bewildering sorting out the purpose of all these forms in order to determine which ones pertain to a particular application.

Once the relevant forms have been identified, a layperson must figure out the meaning of the words used in each form. Even where the questions are clear on their face, many laypeople will not appreciate the legal significance of their answers. Several of the questions invite the applicant to explain their answer but without context as to what kind of information is being requested. For example, if the applicant is the deceased’s spouse, the form asks whether or not the applicant has elected to receive the entitlement under section 5 of the Family Law Act. If “yes”, the form provides space for the applicant to “explain why the spouse is entitled to apply”. These kinds of questions about legal entitlement presume that the applicant has the legal knowledge necessary to provide an answer. It is safe to say that the majority of Ontarians are unaware of the legal principles governing who is “entitled” for these purposes.

Some key problems with the current forms were described during the consultations. The section of the form asking about the deceased’s divorces can raise practical difficulties. An executor who is the child of the deceased may not know these details and must obtain them from Family Court.

Some observed that the requirement for the application for a COA to be commissioned is a problem for some people. The court office offers a service for unrepresented applicants to have affidavits sworn for $13 but, according to several practitioners, this practice does not appear to be well known.

Even if the legal requirements for a successful probate application are navigable by a layperson, the time and effort necessary to devote to the process can constitute a barrier for some.[148]

In spite of several suggestions for improving the forms, stakeholders generally felt that each of the forms had a valuable purpose and should not be eliminated. Court staff pointed out that the Ontario probate system is recognized world-wide as being authoritative. Even individual stakeholders did not complain about the forms as might be expected. 

 

12.  Lack of Public Knowledge about Probate

The seemingly wide misperception among the public about the purpose of probate was discussed above. This lack of public knowledge also extends to the probate process itself. A number of government representatives among other stakeholders expressed concern that estate representatives do not understand their responsibilities or the significance of the process they are following. People do not read the online guide but simply print off the forms and fill them in. There are also specific areas of misinformation. For example, many people mistakenly believe that all intestacies are dealt with by the OPGT.

This confusion also extends to the substantive issues of legal entitlement. According to one stakeholder:

…[M]any people who are quite honest and aboveboard have come to erroneous conclusions as to who is entitled to what, and what should happen with the money, or are quite ready to ignore creditors. Or, they are reluctant to do anything, as they believe they will have to personally pay debts.[149]

Certainly, misinformation or lack of knowledge can complicate the probate process for estates of any value. However, here again, this concern is augmented in cases of small estates where there may be no extra money to obtain the assistance of a lawyer.

 

13.  Personal Barriers 

There is much literature detailing the racial, ethnic, linguistic, gender and other personal barriers that can prevent people from accessing the justice system generally.[150] Some comments during the consultations suggest that at least some of these barriers also extend to the probate system. For example, some individual stakeholders pointed to practical problems such as distance, health, age and other barriers as impediments to navigating the process. One individual noted that court staff would not communicate by phone or email so that she had to go to the court office several times in person, an hour and a half trip from her home.[151] Another individual explained that the process can be particularly trying for same-sex couples because they often have difficulty proving their entitlement.[152]

A small estate procedure designed to improve access to the probate system will only be fully successful if it improves access for all estate representatives of small estates, regardless of personal barriers.

 

14.  Rural Communities

It became apparent early in the project that people in rural communities may have very different experiences with the probate system from those in urban communities. Therefore, the LCO reached out to stakeholders from a range of communities.

According to practitioners and court staff consulted, urban communities such as Toronto tend to probate larger and more complex estates.[153] There may be both primary and secondary wills and sophisticated assets. The estate representative is more likely to hire a lawyer.

In rural communities, estates are more likely to be smaller and straightforward. “Once you step outside the money bubble”, as one practitioner put it, probate practice is less formal, more relationship-based. One rural practitioner observed that, with less wealth, people are grateful for a little windfall and there is less worry about notifying beneficiaries and risk of fraud. People are more likely to abandon assets rather than incurring the cost of probate.

There are several distinctions between urban and rural communities that might impact on the probate experience, including the following:

  • The value of real property is typically lower in rural communities, selling for less than $50,000 in some cases, so that even estates with real property may be small in value.
  • Real property can be difficult to value in rural communities. There are many unique properties and a property may sit on the market for many months. Without a firm valuation, court staff are more likely to reject the application.
  • Large families are more typical of rural communities. More beneficiaries complicate the probate application and drive up the cost.
  • Some rural communities were originally settled by one family so that many people have the same last name. This can complicate identifying and tracking down beneficiaries.
  • In some small communities, beneficiaries may have problems obtaining independent legal advice before signing an indemnity in favour of a financial institution. This may be because there are fewer lawyers practicing in the community or because the lawyers are unable to act due to a professional conflict of interest.
  • Access to information is relatively limited in rural areas. People do not necessarily have broadband internet access. They are more likely to rely on lawyers or other professionals to disseminate legal information although this does not necessarily lead to legal representation
  • It is more likely in rural communities that testators and estate representatives will have a personal relationship with their financial institution. Where this is the case, it is more likely that the financial institution will agree to waive probate.

Of course, these are generalizations and there is just as much chance that a small estate probate application will be filed in Toronto as in Kenora. An accessible small estates procedure must be equally available everywhere.

 

15.  Public Resources

Government programs offering public services will always struggle with funding issues and limited resources. The probate system is no exception. Counter staff at registry offices have the constant challenge of assisting people with small estates who ask for probate without understanding what it is or the full process involved.  These people have no money for a lawyer. Staff must attempt to be helpful without stepping over the line and giving legal advice.

Resource constraints are also evident in the amount of time necessary to process probate applications in different registry offices and different times of year. A number of stakeholders offered rough estimates of processing times in locations across the province. Delays were widely seen to be a problem in Toronto. Other smaller centres, such as Kingston and Windsor, reportedly issued probate in as little as a couple of weeks. An application in Brampton was said to take two and a half months but in Milton only three weeks. In Ottawa, the estimate was six weeks. While waiting for a COA, nothing can be done. Debts cannot be paid and this can be stressful for estate representatives.

The OPGT noted its own resource limitations. The OPGT takes over the administration of estates and applies for probate in about 200 to 250 cases per year. The office is involved in about 1,100 applications at any one time. Most of these are in regard to intestacies. The average value of estates dealt with by the OPGT is creeping up to about $100,000 and it is not unusual for them to administer intestacies worth up to $1M. They do not administer insolvent estates or estates worth less than $10,000.The OPGT only administers estates as a last resort and it does not have the resources to take on a bigger role.

In order to be workable, a small estate process must take into account the realities of limited resources.

 

D.   How is the Probate System Working Currently?

Overall, most practitioners and registry staff felt that the current probate process is reasonably satisfactory as a means of proving wills and establishing the authority of estate representatives for the majority of Ontario estates. The current application requirements were generally felt to be appropriate to protect larger estates without undue cost. Although numerous complications might arise in the application process depending on the existence of a will, the number, identity and location of beneficiaries, the type of assets and so forth, these do not undermine the value of the process generally.

However, many stakeholders from each of the stakeholder groups believed that the situation was different in the case of small estates where the cost of probate poses an obstacle to accessing the process at all. These are estates with just enough assets that it might be worth obtaining probate but for the cost of a lawyer. Or, there is effectively no money in the estate but probate is required for some other purpose such as filing the final tax return or even for sentimental reasons. For these estates, difficulty accessing the probate system is not so much related to any particular flaw in the process, but rather to financial barriers pure and simple.

In these circumstances, it does no good to insist that these estates go through the current probate process. There needs to be some alternative means for increasing the likelihood that these estates are protected by probate and administered for the benefit of those interested. In chapter VII below, we make recommendations to address these small estates.

 

E.     Probating Small Estates without a Lawyer

The cost of hiring a lawyer to assist with a probate application will typically represent a significant portion of the total cost of probate. The smaller the value of an estate, the more disproportionate legal costs may be relative to total cost. One of the key and most controversial issues in this project is the extent to which legal assistance is or should be necessary in filing for probate, particularly in the case of small estates.


1.     Currently Most (But Not All) Estate Representatives Hire a Lawyer

We do not know how many estate representatives currently file for probate without legal assistance. Some practitioners we consulted had never heard of a successful application by a layperson.  On the other hand, it is clear from court staff and others that there are applications by laypersons being granted. During consultations, we heard many informal “guesstimates” of the percentage of self-represented probate applications. None of these is reliable on its own, but together they suggest that self-represented probate applications are not inconsequential although they are in the minority overall.

For example, several court staff suggested that approximately 90 per cent of probate applications are filed by lawyers, but that the number of self-represented parties is increasing every year.[154] Apparently, applications by laypersons have become more frequent since the forms were put online in 1995 and the rule requiring staff to help people with estates less than $1,000 was repealed.[155] This 90 per cent estimate was also supported by an informal review of a random stack of court files.

Of the 24 questionnaire responses received by the LCO, 13 of these involved probate applications. Of these, 7 were filed by individuals without a lawyer. These individuals used various tools for assistance, including relying on court staff, reading the Law Society of Upper Canada’s guide and talking to friends who had been through the process.

Rural practitioners reported that estate representatives for small estates with no real estate typically do not hire a lawyer, but get advice from their banker or other financial institution instead. This practice is not ideal since financial institutions are generally motivated to have estate assets stay with the institution.

It is also common in rural communities for lawyers to offer free initial consultations on estates matters. Of the estate representatives taking advantage of free consultations, it was estimated that only perhaps 55 to 60 per cent went on to hire a lawyer.

Therefore, it is reasonable to infer that, although most probate applications are filed with legal assistance, there are an appreciable number of applications currently being filed by laypersons.

 

2.     Current Challenges in Obtaining Probate without a Lawyer

Currently, an individual attempting to navigate the probate process without a lawyer faces a number of roadblocks.

The terminology used in Ontario’s probate system is clumsy and unintuitive. The word most likely to be recognized by a layperson, “probate”, was essentially eliminated from Rules 74 and 75 in 1994 and replaced by the less recognizable phrase “Certificate of Appointment of Estate Trustee”.[156] Twenty years later, the underlying legislation continues to refer to grants of probate and letters of administration.[157] Also, the term “probate” continues to be widely used by estates practitioners as well as estate representatives.[158]

Some of the rules for obtaining probate are technical and may be confusing for laypeople. For example, although it is not always necessary to obtain a COA, there are no clear rules as to when an application is or is not necessary.[159] There are also rather arcane rules around the location in which the application must be filed. That is, an application must be filed with the court in the county or district where the deceased’s property is located or where the deceased resided, depending on the circumstances.[160]

The sheer number of forms required for an application is unwieldy and it is not clear which forms are applicable to any particular estate.[161] Also, although there are forms for almost every contingency, there is no form for a motion to dispense with the requirement to post an administration bond. An unrepresented applicant must draft this motion from scratch.

The court forms are available online and they may also be completed online. However, the completed forms must be printed out, commissioned and filed in person. Therefore, attendance at the courthouse remains necessary.

There is no easy way for laypeople to become aware of Ontario estates and applications for probate, save for periodically phoning the court registry office for an update.

Finally, there is no official guide to filing for probate and no single internet access point for information and forms relating to the COA process. There is useful information contained on the “Frequently Asked Questions About Estates” page on the Ministry of the Attorney General website. It links to the court forms.[162] It also links to information about common errors encountered when completing applications.[163] Yet this information is incomplete and does not take the reader through the application process step by step. The Law Society of Upper Canada (LSUC) has created online guides which do provide step by step information.[164] However, these guides are intended for lawyers and are not in plain language. For example, the guides define a “will” as a “testamentary instrument that must be made in writing.” The phrase “testamentary instrument” is undefined.

Beyond the MAG and LSUC sources, there is a distinct lack of information directed at the public on navigating Ontario’s probate system. Established providers of legal information such as Community Legal Education Ontario (CLEO) do not offer information on probate, but tend to focus on higher priority areas such as criminal law, refugee law and family law.[165] For example, there are no materials specific to probate on CLEO’s Your Legal Rights site.[166] LegalLine does offer an online article on probate but this is too brief to be of assistance on its own.[167] The LSUC’s online service Your Law includes information on wills and estates but this does not seem to include information on filing for probate.[168] Pro Bono Law Ontario (PBLO) does not deal with probate matters.[169] Nor is there information on probate on their website.[170]

The public information on probate that does exist emphasizes its complexity, rather than demystifying it, and, in some cases, discourages the layperson from acting without a lawyer. For example, the Service Ontario site, What To Do When Someone Dies, states, “Without a will, an estate is distributed according to the law. This can be a complex process. If you are in this situation, you might want to contact a lawyer.” The reader is advised to contact the Lawyer’s Referral Service.[171] Similarly, the Ministry of the Attorney General site, Frequently Asked Questions About Estates, notes that a lawyer is in the best position to provide legal advice on whether probate is necessary or not. Where legal assistance is encouraged at the very start of the probate process, a reader may reasonably conclude that legal assistance is advisable generally.[172]

Most other Canadian jurisdictions also fall short of offering a probate system navigable without legal assistance.

British Columbia recently revised its probate forms to improve the instructions on how to complete them.[173]  However, there is no general guide with the forms that explains the process or how each form relates to the overall process.[174] There is a forms user’s guide but this provides only technical information on how to fill out the forms.[175] The Ministry of Justice website includes some general information about estates but the website suggests that, for more information, the reader should consult a lawyer or a commercial self-help guide.[176] The website does list Clicklaw and Dial-A-Law as resources. Clicklaw provides a slightly better although brief guide to the forms.[177] B.C.’s Wills, Estates and Succession Act and the accompanying Probate Rules are still new and it may be that more material will become available. However, at this point it seems that British Columbia has not yet fully succeeded in its effort “to establish a more user-friendly probate system”.[178]

Information on Saskatchewan’s small estates procedure is perhaps even more elusive.[179]  Although the Saskatchewan Court of Queen’s Bench has a webpage on applying for probate, there appears to be no information specifically addressing the summary administration procedure.[180] The Court website does link to the Wills and Estates webpage of the Public Legal Education Association of Saskatchewan (PLEA) which provides basic public legal information about the summary administration process in Saskatchewan. [181] However, there is no information on how to follow the summary procedure.

Manitoba has made more effort to deliver publicly accessible information on its small estate procedure and this is discussed below in chapter VII.B.

No matter how well designed a small estates procedure may be and how carefully it weighs the relative significance of legal protection and accessibility, it will not be entirely effective unless estate representatives are able to learn about it and navigate it without the cost of legal assistance. Therefore, a key goal in this project is to facilitate the use of the probate system by laypeople administering small estates.

The law underpinning the probate system is complex and oversimplifying the process risks eroding the legal protections it provides. However, any concern that probate may be oversimplified is largely hypothetical in Ontario at present. There has not been a significant effort to make the system more accessible to laypeople, at least since 1995 when the forms were put online. And, in fact, the probate system in Ontario remains poorly understood, convoluted and overly technical for laypersons. There are several ways that the system might be made more accessible to laypeople without large public expenditure. Possibilities for getting around these roadblocks and improving access to the probate system for small estates will be discussed in chapter VII below.

 

 

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