An emerging trend in estate administration in the past few years seems to be an increase in the number of insolvent estates. An estate is insolvent if it has liabilities in excess of its assets and therefore is unable to meet financial obligations with creditors as the debts become due.

There are two primary methods for administration of insolvent estates: common law and statutory schemes under the Trustee Act or bankruptcy under theBankruptcy and Insolvency Act. Both methods have benefits and drawbacks and should be considered in the context of the facts of the estate, not just at the beginning, but also during the course of the administration. As estate practitioners we sometimes forget about the bankruptcy option, which can be a viable alternative to an insolvency administration under the Trustee Act.

This emerging trend seems to call for us, as advisors, to ensure the named estate trustee carefully examines the assets and liabilities of the estate and to be careful with the timing of distribution and payment of the debts. Often times more investigations should take place before the Certificate of Appointment is applied for. While attention to these details in the beginning of estate administration may help, often the full extent of the assets and liabilities cannot be known until after the Certificate of Appointment is granted and sometimes fairly along in the administration process, requiring us and our clients to keep on top of the administration. Estate trustee insurance may also need to be considered if insolvency is suspected.

Lesson Learned: During an estate administration keep an eye on the liabilities vs. the assets and keep in mind the various options for administration.

Until next time,

Jasmine Sweatman /Leigh Sands