When an individual dies with debts, it is the obligation of the executor to determine the extent and veracity of those debts and to take steps to satisfy them. If an executor distributes the assets of the estate without taking appropriate steps to address outstanding debts, s/he may be personally liable to satisfy them.
In some circumstances, the actions an executor may need to take to determine the extent of a deceased person’s debts may be relatively easy; in others it may be more complex. Specifically though, to avoid any personal liability, section 53 of the Ontario Trustee Act provides a process for an executor to advertise for creditors in the form of what is called a “Notice to Creditors”. The upshot of an executor engaging in posting a Notice to Creditors is that in the event the executor has distributed the estate assets to the beneficiaries, and a creditor thereafter makes a claim, the creditor will have to look to the beneficiaries to satisfy the debt. In effect, engaging in a Notice to Creditors shifts the burden of satisfying debts, if there are insufficient assets remaining in the estate, to the beneficiaries who have received assets from the estate. [Of course, absent special circumstances, a beneficiary will only be liable to the extent of the assets s/he received from the estate.]
While the Ontario Trustee Act sets out the concept of filing a Notice to Creditors, it does not provide any details about the process. Any person who advises executors in this area will typically recommend that you post the Notice to Creditors in a newspaper or newspapers whose circulation may capture those persons or business associates with whom the deceased person would likely associate, and in the jurisdiction where the deceased resided or engaged in his/her business affairs. The advisor would likely suggest that the Notice to Creditors be posted over a number of consecutive weeks, with a deadline listed for when claims have to be received by. Lastly, the advisor would also close off the discussion with the executors by conveying information about the costs associated with placing the Notice to Creditors – typically several thousand dollars. In today’s era of cost-conscious beneficiary, news of the cost typically causes most executors to pause before pulling the trigger on incurring such an expense. Given the potential personal liability to the executors, any decision of this nature, ought to be made with a thorough assessment of the associated risks.
Thankfully, there is a new service we have come across and recently used in our more straightforward estates. The service is called “NoticeConnect”. Details can be found at www.noticeconnect.com. Essentially this is an online Notice to Creditors that is a far more economical choice than placing a print Notice to Creditors. Their marketing materials boast that using the online service is far superior because of the “reach” of the online platforms on which the notice is placed.
Given the Ontario Trustee Act does not detail what is required to satisfy the Notice to Creditors, relying upon NoticeConnect ought to be sufficient protection for the executors of an estate. Ultimately, though, what the executors will do to satisfy themselves as to the debts of the deceased will depend on the personal and financial circumstances of the deceased.