Despite what some people might think, estate administration does not always happen instantly. When someone passes away, distributing the estate can take months. And, if passing of accounts is required, it can add additional time, money, and complexity to the estate administration process.
Passing of accounts is a court audit of the executor’s actions regarding the estate. This article will provide a brief overview of the general process.
The Executor’s Duty to Account
When creating an estate plan, one or more individuals are appointed as an executor who will carry out estate administration as set out in the will and accompanying documents. An executor has a fiduciary duty to act honestly and in good faith for the estate’s beneficiaries. As the executor is responsible for identifying the deceased’s assets, paying estate debts, and distributing the estate to the beneficiaries in accordance with the will, the executor also has a “duty to account” to the beneficiaries by proving that these steps have been followed in accordance with the will or trust.
Outside of the executor capacity, the duty to account can occur in situations including substitute decision-makers and trustees. Regardless of the title and situation, it is essential to understand the obligations required by each role to ensure it is fulfilled appropriately.
What is Passing of Accounts?
In Ontario, passing of accounts is the process of obtaining the court’s approval of the executor’s accounts. The executor will be required to show that they have fulfilled the obligations of the estate with respect to paying debts, accounting for expenses incurred, and distributing assets of the estate to beneficiaries, in addition to justifying an executor’s commission, if claimed.
By applying to pass the accounts before the court, this allows all parties the opportunity to review the executor’s actions before the estate is closed with the court.
Who Can Request Passing of Accounts?
There are three main reasons for initiating passing of accounts. An executor may voluntarily apply to the court for a passing of accounts, particularly in the event that there is a dispute between any of the involved parties.
A beneficiary may apply to the court for a passing of accounts if they are dissatisfied with the executor’s handling of the estate, for example, if they allege improper distribution of the estate’s assets.
Finally, passing of accounts may be required by law or statute. This may be applicable in instances where a beneficiary to the estate is a minor or there are questions of legal mental capacity.
What Does the Process Look Like?
Passing of accounts can be a complex and time-consuming matter, however, if an executor maintains detailed and organized records throughout the duration of the administration, the process may be much easier.
Regardless of how an application is brought before the court, it is expected that the executor will provide detailed documentation, in a satisfactory manner, outlining the estate assets and debts, in addition to estate receipts, bank statements, cheques, deposits, professional expenditures, asset distribution, reimbursement, and any other estate debits or credits.
Required Documents and Forms
The executor will be required to prepare and file several sets of documents with the court. The executor will either file the Notice of Application to Pass Accounts by their own volition or in response to a court order. In the latter scenario,, a beneficiary who desires to initiate a passing of accounts must apply to the court for an order compelling the executor to pass their accounts.
Application to Pass Accounts
The first step in the process is to file the Application to Pass Accounts. In support of this Application, the executor will need to provide supporting documentation for the courts’ review, including:
- A Notice of Application to Pass Accounts;
- Estate accounts and supporting financial documents;
- An affidavit sworn by the executor(s);
- A copy of the Certificate of Appointment of Estate Trustee; and
- A draft order.
A filing fee for the Application to Pass Accounts will be charged when the documents are submitted to the court. After the documents have been filed, the executor must then serve the documents on each individual who has an interest in the estate, in a manner which is satisfactory to the court.
In the Notice of Application to Pass Accounts, the executor will be required to identify a desired hearing date whereby the court will review the documentation before making a final determination on the accounts and issuing a subsequent order on the status of the accounts. If the executor was only required to serve the documents on individuals within Ontario, the Notice of Application will need to be served at least 60 days before the hearing date. If the executor is serving any individuals outside of Ontario, they will need to be served at least 75 days before the hearing date.
Responses to an Application to Pass Accounts
After the beneficiaries have been served, they are provided with the opportunity to challenge the executor’s accounts. This can include challenging specific expenses incurred by the estate (such as legal fees) or inquiring about missing income (for instance, if the executor has not accounted for rental income from a property owned by the estate). If a beneficiary wishes to challenge anything related to the accounts, this will become a contested hearing.
A beneficiary who chooses to contest any of the accounts will be required to file a Notice of Objection to Accounts, which will put the executor on notice, which must be filed at least 35 days before the scheduled hearing date.
It is possible to resolve disputes or concerns before the hearing. If this occurs, a beneficiary may withdraw their Notice of Objection by filing a Notice of Withdrawal of Objection at least 15 days before the hearing.
What Happens Next?
Part 2 of this guide will expand on what happens after the documents in support of the Application to Pass Accounts have been submitted to the court.
Contact Toronto Estate Lawyers at Derfel Estate Law For Assistance With Passing of Accounts
At Derfel Estate Law, our experienced team of estate lawyers understand how complex probate and estate matters can be. Our lawyers regularly provide clients with assistance in preparing the passing of accounts in probate matters. Our estate team provides support to clients in their role as executor and trustee by helping to prepare and file the required documents and representing parties at hearings before the court. Contact us by phone at 416-847-3580 or contact us online to schedule a consultation and find out how we can assist you.