An administration bond is a promise to the court, with a surety, that the executor of an estate will be honest in performing his/her duties in the administration of the estate and in distributing the property of the estate to the beneficiaries. It protects the beneficiaries and creditors of the estate in the event of an improper administration of the assets of the estate.
Under the Estates Act, R.S. O. 1990, c. E.21 (the “Estates Act”), an administration bond is required to be double the amount of the assets of the deceased as sworn in the application for probate. However, the courts have discretion to direct that more than one bond be given, and, under “special circumstances”, to reduce the amount of the bond or dispense with the bond completely.
An administration bond is required where:
- An application for a certificate of appointment without a will is made;
- An application for a certificate of appointment with a will is made and there is no executor appointed in the will; and
- An application for a certificate of appointment with a will is made and the named executor in the will is a non-resident of Ontario.
Nevertheless, in limited circumstances, an executor may be exempt from obtaining a bond. These situations include:
- Where an application to act as estate trustee is made by the Government of Ontario or any Ministry thereof, or any Provincial Commission or Board created under any Act of the legislature;
- When, on an intestacy, the surviving spouse applies for a certificate of appointment of estate trustee without a will, the value of the estate does not exceed the preferential share and an affidavit is filed setting out the debts of the estate;
- When a trust corporation is appointed as estate trustee; and
- When an individual successfully applies to the court for an order dispensing with the requirement to post a bond.
Given the cumbersome application process to obtain an administration bond, increasingly, executors seek an order to dispense with the bond requirement. In order to dispense with the bond requirement, the executor must satisfy the court that the protection afforded by a bond to creditors and beneficiaries is not required or will otherwise be met. The Estates Act provides no direction as to when the court will be satisfied in this regard and what is meant by “special circumstances”. As such, it is unpredictable when such an application would be granted.
Fortunately, the Ontario Superior Court of Justice decision, Henderson (Re), provides guidance on when a court will dispense with a bond: “this is usually done if all beneficiaries are sui juris and consent to the order AND all debts have been paid or the affidavit lists the debts and the judge is satisfied the creditors are protected.”
The following guidelines have been provided to the applicant filing affidavit evidence in support of the request:
- The identity of all beneficiaries of the estate;
- The identity of any beneficiary of the estate who is a minor or incapable person;
- The value of the interest of any minor or incapable beneficiary in the estate;
- Executed consents from all beneficiaries who are sui juris to the appointment of the applicant as estate trustee and to an order dispensing with an administration bond should be attached as exhibits to the affidavit. If consents cannot be obtained from all the beneficiaries, the applicant must explain how he or she intends to protect the interests of those beneficiaries by way of posting security or otherwise;
- The last occupation of the deceased;
- Evidence as to whether all the debts of the deceased have been paid, including any obligations under support agreements or orders;
- Evidence as to whether the deceased operated a business at the time of death and, if the deceased did, whether any debts of that business have been or may be claimed against the estate, and a description of each debt and its amount;
- If all the debts of the estate have not been paid, evidence of the value of the assets of the estate, the particulars of each debt – amount and name of creditor – and an explanation of what arrangements have been made with those creditors to pay their debts and what security the applicant proposes to put in place in order to protect those creditors.
Executors end up spending much time and money to dispense with the administration bond, as the application process, itself, is quite extensive. The saving grace? … The courts have readily granted such requests.