The preceding chapters of this Final Report have described a number of problems that may arise in probating small estates under the current probate system in Ontario. These complications are not specific to any particular component of the probate process. That is, none of the current legal requirements is inherently inappropriate for small estates. On the contrary, with one or two exceptions, it seems that the current application requirements for probate continue to be important to protect Ontario estates from fraud or improper administration. Instead, the problem for small estates is one of economic feasibility. Regardless of the value of obtaining probate, at some point the cost of doing so may exceed the benefits, or at least make it not worthwhile. At that point, estate representatives may decide that the probate system is effectively inaccessible. They may decide to administer small estates without probate or may abandon the assets and fail to administer the estate at all.
This problem accessing the probate system is, in some circumstances, a systemic one. Some asset-holding institutions such as pension plans interpret their governing legislation as requiring them to insist on probate as proof of authority before releasing assets. For these institutions, the probate requirement is more than a matter of risk management. It is a statutory duty that strictly precludes them from waiving probate, at least where there is no will. As a result, these institutions may be left holding many small accounts that have been abandoned due to the disproportionate cost of obtaining probate.
Although Ontario does not currently have a small estates process, small estates procedures are in operation in two Canadian jurisdictions, Saskatchewan and Manitoba, and throughout the United States and Australia. In these jurisdictions, the problem of probating small estates has been significant enough that a legislative solution has been deemed necessary.
Not every jurisdiction has determined that a small estates procedure should be adopted. In 1999, the Law Reform Commission of Nova Scotia prepared a report on probate recommending against a small estates procedure for fear that it would overly complicate the probate system. More recently, a 2013 Alberta Law Reform Institution (ALRI) report on estate administration chose not to address the problem of small estates directly. ALRI did acknowledge that some estates are administered informally but it concluded that this practice was not a matter for legislative reform:
If banks want to pay out assets informally on the basis of some indemnity or undertaking, this is a matter of policy for financial institutions.
As discussed above, British Columbia chose not to bring into force the small estates procedure recommended by British Columbia Law Institute (BCLI) in its 2005 Interim Report and written into the Wills, Estates and Succession Act (WESA). The government chose instead a procedure designed to facilitate the administration of simple estates.
The LCO has considered the example of these jurisdictions and observes that the context is quite different here. Nova Scotia and British Columbia were both engaged in law reform projects on probate generally. A more particular concern for small estates was perhaps subsumed within the broader goal of simplifying the system overall. For example, the British Columbia government ultimately concluded that a small estate procedure was not needed since the new probate rules were already very similar to those proposed for small estates. And Alberta’s project focused on the duties of estate representatives after appointment rather than the appointment process. ALRI’s comment, above, was only indirectly related to the issue of small estates under the probate system. Furthermore, it is the LCO’s view that while financial institutions are free to apply their own policies for paying out assets, the matter is not entirely separate from a public concern about an accessible probate process.
In any event, the LCO has concluded as a result of its consultations with the identified stakeholder groups that Ontario would benefit from a streamlined small estates procedure. This is to encourage the estate representatives of small estates to access the benefits of probate and, ultimately, ensure that these estates are administered according to the intentions of the testator or the principles of succession law. At the same time, this procedure must be designed so as to preserve a proportionate degree of legal protection for the beneficiaries, creditors and the estate representative.
In considering what estates should be eligible for a small estates procedure, we have focused on those estates for which the cost of probate is likely to impede access to the process. Access may be impeded either because the cost exceeds the value of the estate or because the cost is sufficiently disproportionate to the value of the estate that probate is not worthwhile. As discussed in chapter III above, this point is indeterminable. It will vary depending on both the value of the estate and the cost of probate. However, the LCO has concluded that, consistent with other jurisdictions with a separate process for small estates, in order to make a small estates procedure practically effective, eligibility for the procedure should be defined by a bright line monetary value limit. More specifically, we have concluded that a small estate procedure should be available to estates with a gross value up to $50,000.
The remainder of this chapter delineates the elements of a low cost, small estates procedure that the LCO believes would give estates worth up to $50,000 an alternative to incurring the cost of the full probate system. This small estates procedure would exist alongside the regular or standard probate stream. It would involve a one or two page application form by which the applicant would attest to his or her entitlement to administer the estate. There would be few evidentiary requirements, although the requirement to serve the application on those interested in the distribution of the estate would be retained. A successful application would result in the issuance of a Small Estates Certificate with the same legal effect as a Certificate of Appointment (COA) in the regular probate stream except that authority would be limited to the specific assets listed in the application. The estate would remain liable to pay the estate administration tax, but would be exempted from filing the Estate Information Return. The procedure would be designed to be accessible to estate representatives without legal assistance. Ideally, applicants would be able to file applications online.
During consultations, many stakeholders from all stakeholder groups expressed concern for those estates with a value just beyond the value cut off (for example, $52,000). Why should they lose out on the benefits of a small estates procedure? This is a concern that applies to all “bright line” cut-offs. However, some of the LCO’s recommendations below (such as recommendations for a plain-language guide to probate and simplified forms) have the potential to benefit estates of any value, including those only slightly above eligibility for the small estates process.
A. Possible Models for a Small Estates Procedure
A pivotal issue in developing a small estates process is the degree to which it should be supervised by the court alongside the regular stream probate process. Currently, there is a wide range of small estates procedures operating in different jurisdictions. They were created to respond to local probate traditions and have evolved quite differently in different legal contexts.
Some procedures are administered by the court and result in a legal grant of probate similar to the usual probate process. These tend to offer a relatively significant degree of legal protection but may be more procedurally involved and, thus, somewhat more costly for the applicant. At the other end of the spectrum is informal administration. This may be no more than a statutory provision protecting asset-holding institutions from liability where they release assets to estate representatives without probate. There is no court involvement here at all and little or no legal protection for those interested in the estate. But neither are there costly procedural requirements. So long as the estate representative is legally authorized in fact and is acting properly, the full value of the estate is available for distribution to the creditors and beneficiaries.
Between these two ends of the spectrum are a myriad of other models that attempt to balance some degree of court supervision with simplified procedures designed to keep costs down. In this section, we describe some of the advantages and disadvantages of key models in operation in other jurisdictions. Next, we explain why the LCO has concluded that a court supervised small estates process would be the most appropriate model for Ontario.
2. Alternatives to a Court-Based Small Estates Procedure
a) Informal Administration
As noted above, the informal administration model lies at one end of the spectrum and involves no court supervision at all. Instead, financial and other institutions are simply given statutory protection from liability where they release assets worth less than a certain value without proof of probate. If it turns out that the assets are given to the wrong person, the institution is protected and the loss is borne by the estate.
This approach facilitates the release of specific estate assets held by specific institutions. However, institutions are not required to release the estate assets they hold and it is still possible that a probate application may be necessary to obtain possession of certain assets.
There would be some benefits to a small estates procedure based on informal administration. The comfort of statutory protection would encourage most financial institutions to waive the probate requirement for small asset transfers. The result would be the industry-wide adoption of the particular value limit established by legislation. This would address the commercial uncertainty caused by institutions having different value limits for waiving probate. It would also be commercially friendly solution since it would facilitate the release of small value assets directly to those entitled to them.
Practical benefits aside, the key drawback of the informal administration model is that it would continue, and indeed promote, the current practice where larger estates benefit from probate protections and small estates are more likely to be administered outside the probate system. This model would not retain any of the protective benefits of probate. It would not authorize the applicant to act on behalf of the estate generally. It would not involve any assessment of the validity or terms of a will. Most importantly, it would provide little or no protection against fraud.
b) Affidavit Procedures
A model that may or may not involve some degree of court supervision is the affidavit procedures common in U.S. jurisdictions. This model is provided for in the Uniform Probate Code (UPC) and has been widely adopted into state legislation. Under this model, persons entitled to estate assets may prepare an affidavit which is given directly to financial or other institutions to authorize the release of particular assets held by that institution. Some jurisdictions, but not all, require that the affidavit be filed with the court. Affidavit procedures are available only where the total value of the estate is under a legislated value limit. The maximum value set out by the UPC is $25,000, but states tend to set higher amounts. The procedure typically applies both where there is a will and in intestacies, although in some jurisdictions it applies only to intestacies. Legislation provides that financial or other institutions are statutorily protected from liability where they release assets on the basis of an affidavit. No estate representative is appointed under this model.
For example, New York has a small esta