Sometimes a beneficiary can feel powerless during the process of an estate administration. A beneficiary may not know anything beyond that he or she is a beneficiary. Sometimes even confirmation of a gift is difficult to obtain. The relationship between an estate trustee and a beneficiary does not have to be a challenging one. The estate trustee is, first and foremost, a trustee and a fiduciary. The estate trustee owes the beneficiary certain duties and obligations and, conversely, a beneficiary is entitled to certain information.
One way for a beneficiary to obtain the information to which he or she is entitled, is through a “passing of accounts”. An estate trustee must be able to provide a beneficiary with the accounts of an estate. Rule 74.17 of the Rules of Civil Procedure mandate that estate trustees shall keep accurate records of the assets and transactions in the estate. If an estate trustee chooses, or is compelled, to commence a court application to pass accounts, then the Rules provide which details must be included and the form the accounts must take, as follows.
(a) on a first passing of accounts, a statement of the assets at the date of death, cross-referenced to entries in the accounts that show the disposition or partial disposition of the assets;
(b) on any subsequent passing of accounts, a statement of the assets on the date the accounts for the period were opened, cross-referenced to entries in the accounts that show the disposition or partial disposition of the assets, and a statement of the investments, if any, on the date the accounts for the period were opened;
(c) an account of all money received, but excluding investment transactions recorded under clause (e);
(d) an account of all money disbursed, including payments for trustee’s compensation and payments made under a court order, but excluding investment transactions recorded under clause (e);
(e) where the estate trustee has made investments, an account setting out,
(i) all money paid out to purchase investments,
(ii) all money received by way of repayments or realization on the investments in whole or in part, and
(iii) the balance of all the investments in the estate at the closing date of the accounts;
(f) a statement of all the assets in the estate that are unrealized at the closing date of the accounts;
(g) a statement of all money and investments in the estate at the closing date of the accounts;
(h) a statement of all the liabilities of the estate, contingent or otherwise, at the closing date of the accounts;
(i) a statement of the compensation claimed by the estate trustee and, where the statement of compensation includes a management fee based on the value of the assets of the estate, a statement setting out the method of determining the value of the assets; and
(j) such other statements and information as the court requires. O. Reg. 484/94, s. 12.
(2) The accounts required by clauses (1) (c), (d) and (e) shall show the balance forward for each account. O. Reg. 484/94, s. 12.
(3) Where a will or trust deals separately with capital and income, the accounts shall be divided to show separately receipts and disbursements in respect of capital and income. O. Reg. 484/94, s. 12.
It is clear from a reading of r. 74.17 that a lot of information is contained with an estate accounting. For some beneficiaries this may be the first information they receive about estate assets and distributions. Essentially, the first peak at the management of the estate by the estate trustee. Each beneficiary has the ability to review the accounts and file a “notice of objection” should there be questions or additional information/clarification that is required. The estate trustee can then provide responses to the objections. If the accounting cannot be reasonably explained to the satisfaction of a beneficiary, then a court hearing will be required. This is primarily because an estate trustee will want either (i) a release from the beneficiary in which the beneficiary approves of the accounts and management of the estate; or (ii) a court order approving the accounts and management by the estate trustee.
Before the “formal” passing of accounts (i.e. the court application) is commenced, it is often preferable to request and assess an informal accounting. Sometimes an informal accounting provides enough information and detail and is more efficient than a court application. An informal accounting is also less costly which should equate to more money in the residue of the estate (and therefore more for the residuary beneficiaries to receive). At de VRIES LITIGATION LLP we can help beneficiaries through the process of an accounting, informal or otherwise, by an estate trustee.