Identifying estate liabilities is vital part of the Estate Trustee’s role. The Estate Trustee is responsible for paying all debts and settling any legitimate claims prior to the final distribution of the estate assets. At the same time, the Estate Trustee should be mindful not to waste the assets and funds of the estate.
There are three general categories of liabilities, expenses or claim that can arise during the estate administration process. First, there are debts or liabilities that are due at the date of death; these include claims regarding contracts or liabilities to third parties. Second, there are the expenses and costs incurred through the administration of the estate. Third and finally, there are the claims that may be against an estate by the deceased’s surviving spouse or dependant(s).
An Estate Trustee can be found liable if the proper debts owed to a creditor are not paid. Accordingly, an Estate Trustee will often advertise for creditors of the deceased, which gives creditors an opportunity to bring forward any claims which have not yet been identified. In Ontario, advertising for creditors provides protection to the Estate Trustee against personal liability where a creditor brings forward a claim after the estate is distributed. Typically, the Estate Trustee will post a notice in the provincial Gazette, local papers, or more recently, through online services. Depending on the circumstance, it may be necessary to consider multiple jurisdictions.
Case law has provided some guidance on the acceptable form of the notice. For example, a prudent Estate Trustee will post a notice as soon as possible after the death of the deceased. The notice should indicate a minimum period within which claims can be brought forward.
A vital consideration of the Estate Trustee when approaching potential debts of the estate is to ensure that the debts in question are valid. The claimant should provide proof of their claim evidenced by documentation. It is then the responsibility of the Estate Trustee to verify that the debt is in fact owed. For example, where the claim involves a contract for services, the Estate Trustee should verify the terms of the contract and confirm that the services were completed; where the claim involves credit card debt, the Estate Trustee should verify the expenditures and, if there is a second cardholder, determine who was responsible for the charges incurred.