This Blog was written by: Alicia Mossington (Godin), Estate and Trust Consultant, Scotia Wealth Management 

An estate trustee, also known as an executor, is responsible for administering the estate of the deceased and carrying out the terms of the Will (or other testamentary documentation). The recent article by Rebecca Studin titled “Pass Your Accounts, or Risk Jail Time” led me to think about the consequences of acting (or failing to act) as an executor.

Ms. Studin references the Estate of Nordby 2023 ONSC 821, where an executor failed to comply with court orders to pass his accounts and was sentenced to 5 days in jail![1]

An executor is responsible for, among other tasks, the payment of debts, taxes and expenses, and carrying out the terms of the Will including the distribution of the estate to the beneficiaries. The executor owes a fiduciary duty to the beneficiaries of the estate including the obligation to account to the beneficiaries. As highlighted in Ms. Studin’s article, there are serious consequences for failing to act, or failing to act properly, as an executor.

a) Assets of the Estate

Executors are required to investigate and ascertain estate assets. Failure to identify, ascertain and protect the deceased’s assets can lead to liability, especially where an asset diminished in value because the executor failed to act.

b) Debts

Legitimate debts of the estate should be paid prior to the distribution of the estate to the beneficiaries. Executors can be held personally liable for the debts of an estate in certain situations. For example, if an executor distributes estate funds without advertising for creditors, the executor can be personally liable for any creditor who is subsequently identified.

c) Probate Tax

In Ontario, it is common for an executor to apply for a Certificate of Appointment of Estate Trustee with a Will (colloquially referred to as “probate”) and through the application process to pay estate administration tax. Lay-executors may not fully appreciate the consequence of failing to comply with the Estate Administration Tax Act.[2]

It is an offence to fail to comply with the requirements in the Act, or to provide false or misleading statements, or to omit any facts which make the statement misleading or false. A person who is guilty of an offence under the Act could be liable on conviction:

     (i) to a fine equal to an amount that is at least $1,000 but does not exceed twice the amount of tax      payable by the estate if that amount is greater than $1,000.00; or

     (ii) imprisonment for a term of not more than two years; or

     (iii) to both

     (iv) Income Tax

Executors are required to file and settle the income tax obligations for the deceased and the estate including the terminal T1 and any T3’s necessary from the date of death until the estate administration is complete. Executors have the option to request a Clearance Certificate from CRA but if an executor distributes estate assets without obtaining a final Clearance Certificate, they may be personally liable for any unpaid taxes, interest and penalties.

     (v) Other liabilities

Negligence can cause an executor to be personally liable to the beneficiaries and creditors of an estate. There are a host of situations where executors could be found negligent, for example:

• Improperly interpreting the terms of a Will
• Paying the wrong amount to the wrong people
• Missing a beneficiary or heir
• Self-dealing
• Unreasonable delay in distributing the estate to the beneficiaries
• Unreasonably prosecuting or defending litigation on behalf of the estate
• Improperly delegating the executors’ duties

Under the Estates Ac[3]t in Ontario, a judge may order damages against the executor for misconduct, negligence or default which results in loss to the estate. For example, in Zimmerman v McMichael Estate[4], a trustee was found to have been negligent in the administration of a trust and was required to repay the estate personally. In addition, the trustee was ordered to pay over $270,000.00 in costs to the beneficiaries.

It is often said that being named as an executor is an honour but carrying out the role can be a burden. Executors should be aware of the risks that the honour entails before accepting the position.

[1] https://www.allaboutestates.ca/pass-your-accounts-or-risk-jail-time/

[2] Estate Administration Tax Act, 1998 S.O. 1998, c. 34, Sch.

[3] Estates Act, R.S.O. 1990, c. E. 21.

[4] 2010 CarswellOnt 3481. And see “Executors Insurance” by Jordan M. Atin (Canadian Bar Association, April 2014) retrieved from: https://www.cba.org/Publications-Resources/CBA-Practice-Link/solo/2014/Executor-s-Insurance