What Are Passing of Accounts? Role of an Estate Trustee
An Estate Trustee has a legal obligation to keep a complete and accurate set of accounts of the assets under his or her administration. Informal accounts are the most common where the estate trustee sends a letter to each beneficiary outlining the assets to which that beneficiary is entitled.
The letter will also include details about the steps the estate trustee took in distributing the assets, the money received from interest and dividends, money received on sale, money disbursed, reasons why the money was disbursed, calculation of balance, and a calculation of the share of each beneficiary. Informal accounts are legal and unproblematic to the trustee as long as no one objects to the accounts.
Passing of Accounts is the formal process that the estate trustee must undergo to obtain the court’s approval of the accounts. A beneficiary can obtain a court order to force the passing of accounts. For example, if he is suspicious of how the estate trustee has distributed the assets. In other circumstances, an estate trustee can apply to the court voluntarily for a passing of accounts, for example, if he or she feels that someone will object to the accounts.
An Estate Trustee is required to pass accounts in circumstances where:
- A beneficiary challenges the actions of the estate trustee
- A beneficiary challenges the estate trustee’s handling of the estate accounts
- At least one of the beneficiaries is a minor
- At least one of the beneficiaries is mentally incapable
- There are contingent beneficiaries (individuals who will receive assets in the event that the primary beneficiary is unable to receive them)
- Some of the beneficiaries are unknown
FILING THE DOCUMENTS
The estate trustee must file the following documents with the Superior Court of Justice:
- Accounts in proper form
- An Affidavit of the Estate Trustee Verifying Estate Accounts
- Present a copy of the certificate of appointment of estate trustee
- If there has been a prior passing of accounts, a copy of the last order made on the passing of accounts
- A Notice of Application to Pass Accounts
- A filing fee of $322.00 payable to the Minister of Finance and imposed by the Superior Court of Justice and Court of Appeal
The accounts must be in proper form and there are several requirements that an estate trustee must meet. If this is the first passing of accounts, the estate trustee must provide a statement of the assets at the date of death. If this is a later passing of accounts, the estate trustee must provide a statement of the assets on the date the accounts for the period were opened, and a statement of investments, if any. The estate trustee must also present an account of all the money received and all money disbursed, including the trustee’s own compensation and any court order payments.
Investments come with their own proper form requirements. If the estate trustee has made any investments, they must provide an account of:
- All of the estate’s investments at the closing date of the accounts
- All unrealized assets in the estate at the closing date of the accounts
- The estate’s debts and liabilities at the closing date of the accounts
- The compensation claimed by the estate trustee, and, if applicable, a management fee based on the value of the estate’s assets and how that value will be determined
- Money used to purchase investments
- Money received from repayments or realization on the investments
- A statement indicating all the money and investments in the estate at the closing date of the accounts
SERVING THE DOCUMENTS TO BENEFICIARIES
The Estate Trustee must serve the documents to all the beneficiaries who have an interest in the estate. It is appropriate for the estate trustee to mail the following documents to the recipients:
- A notice of the application to pass accounts
- Draft notice of objection to accounts
- A draft judgment must be served on each person who has a contingent or vested interest at least 60 days prior to appointment for persons in Ontario; 75 days for parties outside of the province
If one of the beneficiaries is a minor, the Office of the Children’s Lawyer and the Office of the Public Guardian and Trustee must be served the documents along with a copy of the will, certificate of appointment, and other documents. The same documents must be served if one of the beneficiaries is a charity or mentally incapable.
There is value in accounting to beneficiaries. Formal passing of accounts allows each beneficiary to know how much they will receive and feel satisfied that the Estate Trustee acted honestly and in their best interests. Passing of accounts allows the estate trustee to discharge their duty once the beneficiaries are satisfied that they have received what was properly due to them. The Estate Trustee is not entitled to receive any compensation until the beneficiaries have consented, which they will not do until after they have been provided with an accounting of actions.
If there is a formal court order passing the accounts, it provides the Estate Trustee with the benefit of judicial release for all actions taken by them during the period of accounts. For an estate trustee, this gives them peace of mind and protection against objections by beneficiaries which informal accounts do not provide.
Nothing in this article should be considered or relied on as legal advice or opinion. This article only provides general information and should you require assistance, please contact us to book a free initial consultation 905-366-0202 or through our website here.