An Estate Trustee should only distribute the assets of the estate once he or she is completely certain that there are sufficient funds to pay the estate’s outstanding debts and taxes. If the Estate Trustee distributes the assets prematurely and fails to account for the estate’s creditors, the Estate Trustee could face personal liability. Accordingly, to minimize this risk, the Estate Trustee should obtain indemnities from beneficiaries, and retain sufficient funds to cover any tax liabilities until the receiving the Tax Clearance certificate from the CRA.
When a deceased gifts specific personal belonging to specific recipients, this is sometimes referred to as a bequest. To deal with bequests, the deceased may have created an itemized memorandum list designating the intended recipients of said belongings. A memorandum of this sort is not legally binding on the Estate Trustee; however, it is advisable to obtain signed receipts from the recipients when distributing bequests.
Once the Estate Trustee has ensured that all bequests, legacies, expenses, fees, taxes, and debts have been paid or transferred, there may still be remaining assets of the estate, referred to as the residue of the estate. Final distribution of the residue of the estate may be made to beneficiaries after the clearance certificate has been obtained, and upon approval of the executor’s accounts. The Estate Trustee should obtain a final release from each residual beneficiary prior to making the final distribution. The release serves to protect the executor against any future complaints or claims by a beneficiary.
The executor must advise the bank, in writing, to close the estate account once the estate is settled and distributions have been made. The Estate Trustee should keep a copy of the written request to close the account to further protect him or herself from future claims.
It is important to note that the Estate Trustee is entitled to receive compensation for his or her services. The Estate Trustee is also entitled to reimbursement for any expenses incurred relating to his or her duties. The fee may be stipulated in the Will or agreed upon by the beneficiaries. In Ontario, there is a “court-recognized” tariff which serves as a guideline for Estate Trustee compensation; the tariff applies percentages to the various section of the accounts and typically sits at about two and a half percent of total capital receipts, disbursements as well as total revenue receipts and disbursements. The Estate Trustee is also typically entitled to an annual “care and management fee” of about two fifths of a percent of the average annual market value f the capital of the estate. GST/HST may also apply to an Estate Trustee’s fees in specific circumstances, which makes it advisable for an Estate Trustee to consult his or her tax advisors before claiming a fee.