This process involves obtaining the court’s approval of the executor’s accounts. In Ontario, only in certain instances are executors required to have their accounts approved by the court. Generally, there is no fundamental duty to pass accounts.
Accounts that are examined by the court are:
1) Approved or “passed” in the form as presented;
2) Amended by court order and passed in amended form; or
3) Not passed because the court is not satisfied with the accounts or some aspect of the administration of the estate reflected in the accounts.
The passing of accounts refers to the presentation of formal accounts by a person in a fiduciary position, to the beneficiaries and the court. Someone in a fiduciary position may be an estate trustee, a trustee for a trust, an attorney acting pursuant to a power of attorney, or a guardian for an incapable person or minor.
The executor of an estate is responsible for keeping an accurate account of the estate administration which consists of detailed and complete ledgers of all assets, income, and disbursements. Specifically, relevant information such as any legal and professional fees incurred by the executor and paid from the estate, and all executor compensation, are to be included.
The beneficiary of an estate may ask for the court to require the executor to pass accounts if they so happen to refuse. In such an event, a court order must be obtained to compel the executor to pass the accounts. Then the executor provides the accounts, so the beneficiaries have an opportunity to challenge the accounts prior to appearing before a judge for ‘passing’.
There are situations when it is necessary to have accounts approved by the Court, such as when:
- There are minors or mentally incapable beneficiaries
- There are unascertained or contingent beneficiaries
- A beneficiary challenges the actions of the executor or refuses to consent to the amount of the executor’s compensation
- A beneficiary challenges the handling of the estate accounts by the executor
In order to pass accounts in Ontario there are specific legal documents that need to be filed with the Superior Court of Justice, they are:
- estate accounts in proper Court format
- an Affidavit sworn by the estate trustee verifying the estate accounts
- copy of the Certificate of Appointment of Estate Trustee
- a Notice of Application to Pass Accounts
The courts have said the general rule is that the estate must bear the costs of settling disputes as a cost of administration, this was discussed in Munro v Thomas. The Ontario Superior Court said:
It is beyond dispute that an executor has an obligation to fully and fairly report to the beneficiaries information as to estate assets. An estate trustee must act in an open and transparent manner. A beneficiary of an estate is entitled to compel an executor to produce an estate accounting.
This fiduciary duty is set out under the Rules of Civil Procedure where Rule 74.17 specifically sets out the assets required to be accounted for by the Executor in a proper accounting of the estate including: a statement of assets at the date of death; an account of all money received; and an account of all money disbursed, including payments for trustee compensation and payments under court order. There is no requirement under the Rules for the Executor to account for assets falling outside of the estate that were passed inter vivos, for tax planning, estate planning, or other purposes.
There are several factors that contribute to the cost, they include:
- The size and complexity of the estate
- The quality of the executor’s records
- How long the estate has been on-going
The passing of accounts may sometimes become costly, and for an executor, the cost is handled by the estate unless the court finds it reasonable to impose costs directly on the executor. This is rare and only seen when an executor’s conduct is poor or suspicious.
While most estate accounts are simple, some estate’s require extensive consideration due to complex details and unique family circumstances. At Bickhram Litigation, we are equipped to guide you through preparing your accounts, passing them before a judge, communicating with an executor, and challenging any passing of accounts from an executor. Our team of experts know that the passing of accounts is generally a process where people hire legal experts for clarity and accuracy, so we ensure that you are supported every step of the way.
Rick Bickhram with the assistance of Omar Husain