*This article is an opinion piece and not to be considered legal advice*
Tips for an Estate Trustee – Part Two
In Part One We Covered What is an Estate Trustee? To read Part One first – click here.
Step Six – Financials – Paying Debts First & Claims
Before giving out funds to the beneficiaries (friends, family or charities) you must make sure you’ve settled all of the estate’s debts and obligations. Your Estate Lawyer will best recommend how to execute these processes, but it usually begins with opening a bank account for the deposit of sales, cashing of investments, and paying out the taxes and debts. This must be kept well organized and separate from your personal accounts, and be easy to understand by anyone who may inquire in to the management of the Estate’s financials. You’ll start by making a list of everyone the Estate will owe money to (rent, mortgage payments, property taxes, loans, lines of credit, credit cards, subscriptions, etc. If someone makes a claim that they are owed, get evidence in writing, retain a copy, if it appears legitimate, pay them out from the estate’s account, and always get receipts to document it’s been paid. Ensure income taxes are paid and up to date and file a final return for the current year.
Beneficiaries can be difficult to locate, especially if a will is old, or you are not in the deceased’s own family. Confirming the identity of people you don’t know well can be awkward or a challenge. If a beneficiary is a minor, you may have additional steps to follow, such as arranging to have the money held until their 18th birthday. Outside of beneficiary claims laid out in a will, someone may make a claim for an equalization payment according to the Family Law Act, or a claim for dependent support (apart from any inheritance), these will have to be dealt with before moving on to distributing assets.
Step Seven – Financials – Selling and Distributing Assets
Some assets can’t just be distributed to the designated beneficiary; some (TFSA, RRSP, RRIF) have to be sold within a window of time after death, before further taxes are garnered. Seek legal advice on capital gains taxes that may need to be paid on assets such as real estate or corporation shares. After you’ve had assets professionally appraised, and spoken to Real Estate Agents about selling properties, you will look to sell these assets at market value.
Selling a Property (Land, House or Cottage) is often the biggest challenge
A deceased person’s home may be in a state of disrepair, need deep cleaning, or be straight out of a scene from TLC’s show Hoarders. This is where engaging a Real Estate Professional experienced in Estate Sales is valuable early on in the process. There may be an appetite among some family members to fix up the home, repaint it, or pay for professional cleaning or staging to get the property looking it’s best for the sale, whereas others may disagree and not want to see any of the Estate’s money invested in a property that will be sold. This is best discussed on an individual basis with a LOCAL Real Estate Professional who should be able to provide you with advice on weather its worth the money to do repairs. They’ll also advise you on weather you should do a pre-list home inspection, or seek to have things like a wood burning fireplace WETT certified, or have the water tested before selling. It is best practice to discuss the spending of any substantial funds from the estate with family/beneficiaries before making decisions on investing in repairs, painting or staging.
|You may not be in a position to know much about the property itself, and that’s ok. Realtors know how to handle the sale of properties in these situations. The Parkhill Team of Realtors will help you every step of the way. We’ll provide you with a free, no-obligation consultation. We’ll give advice on weather the estate should / should not invest further money for the sale, discuss how to prepare the home, and what to price it. We can recommend cleaners, painters, movers, stagers, junk removals, auctioneers, appraisers, and more. We’ll oversee the prep, listing, showings, negotiations, and sale. We can consult with family members through these difficult times. We are the one-stop family team who understands what support you need. Call us today if you need help with a property for sale in Peterborough County, or Kawartha Lakes. Contact us at firstname.lastname@example.org We can be there in as little as 24 hours. We do not charge additional fees or higher commission premiums for estate sales versus other residential sales.|
Q: My friend/relative has asked to buy the property, can I sell it to them?
The Probate process can act as a safety net to protect the estate from a Trustee corruptly selling a $500,000.00 house to their friend/relative for $1 and directly or indirectly benefitting from such arrangement. Any beneficiary of the estate will want to see the property sold for fair market value, but if a relative wishes to purchase the property, this can cause disagreements over how much. A parent may wish to see their child be able to purchase his or her grandparent’s home, not only to enter the real estate market, but to keep a property ‘in the family’. We see this often in the cottage market. Fair market value maybe determined by obtaining more than one Opinion of Value from LOCAL Realtors, and /or an Appraisal, and that figure used to determine how much the relative should pay. If you do decide to sell to a friend or relative, you should seek out written permission from all beneficiaries to the Agreement of Purchase and Sale, including all clauses and conditions (such as closing dates, what chattels are included, etc) as well as agreement on price. Any existing mortgage on the property will have to be paid and discharged upon a sale. It should be disclosed to all parties involved if you have any relationship with the Buyer, or will directly or indirectly benefit from the sale.
Tip – If a family member wishes to buy the property, consider how they are planning to pay for the property, are they already qualified if taking out a new mortgage, are they receiving cash ‘gifts’ from relatives to be able to afford it, what happens when they wish to sell it, or does anyone else wish to purchase it now (family or otherwise), and will they be paying fair market value? Who is likely to pay the most for this property? Do you need a right of first refusal? Is shared ownership a possibility?
Q: How much will selling the property cost the estate?
You will discuss the overall costs of selling the property with the Estate Lawyer or Financial Advisor for a full scope of what the sale of the property will cost and if capital gains will have to be paid. It is common to pay Real Estate Commissions for both the Listing Agent assisting you, as well as for the Buying Agent co-operating with the Listing Agent on the sale. Expect to pay about 5% in Peterborough and the Kawartha’s for total commission (split between the Listing Brokerage and Buying Brokerage) but commission varies by Brokerage and by Agent throughout the Province, so inquire with someone you believe offers the services you are looking for. This is paid when the property closes from the profits of the sale along with any other fees and disbursements. Ask your lawyer for a full breakdown of costs to expect. Fees vary for appraisals, movers, junk removal, or auction services, etc.
Step Eight – Distributing the Estate to Beneficiaries
If you have a clearance certificate to ensure there are no other claims to the estate, it may be time to start distributing the estate. Apply to CRA for a clearance certificate and expect up to or around 6 months or even longer. This will reflect that all taxes owed by the estate are paid. Do not distribute anything before this step as taxes could be re-calculated – and if the funds are gone, you’ll be on the hook to pay what’s owed or try to collect it back from the beneficiaries. Never rush to distribute anything to a beneficiary, and always get documentation (a receipt) in writing. There may be pressure from family to get a portion (or the full amount) right away, but you have a duty to handle the responsibilities of a Trustee prudently. Don’t give bequests out immediately, wait to learn what the estate owes first.
Bequests – pay out first the specific gifts of property left to someone in a will, such as family heirlooms
Legacies – a gift of a specific amount of money, providing the estate has the funds to clear ALL legacy gifts of funds.
Q. What if the estate does not have enough money left (after debts are paid) to give out what it promised in the will?
If there is not the full amount available to pay exactly what the will stipulated was to be distributed in specific legacy gift amounts or bequests, all sums owed get reduced by the same percent to equal what funds remain. This could use up all funds in the estate without residue.
Tip – What to do with items not gifted in the will. (check with your lawyer before distributing assets)
- take inventory of all items you can find in the home and make a physical list or spreadsheet of these items
- identify in your list and mark on each item with post-it notes, what items are specifically bequeathed in the will and to whom
- discover if anyone is contesting the bequeathed items as identified in the will (items can “go missing” with family coming and going
- speak to family about your plan to manage all remaining items
- determine if any assets ought to be sold instead of gifted, as per the thoughts of the beneficiaries
- approach family and friends that you have items available to gift should they wish to make a claim for any and how you plan to manage the process
- allow family to be invited to view the items gathered in the home, or view the list online and consider what items they are interested in
- allow family to submit to you privately a list of items in priority order of what they’re interested in having
- use that information to compile a fair and organized distribution plan for items and determine how they will be obtained and/or delivered at the recipients expense
- set a deadline for retrieving items that are not claimed and ask people to respect the deadlines to retrieve the items
- consider not throwing away items that could be used by someone else, or donated to a local organization (ex. gently used mobility devices like walkers are in high demand by seniors)
- arrange for donation pick-up/delivery for any leftover un-retrieved or undesired items
Step Nine – Pay Yourself
Obtain in writing an agreement with the beneficiaries of the residue, what you will be paid as Trustee. They will have to agree with your summation of fees as Trustee, or else you may have to take it before a judge for approval. Give the beneficiaries of residuals a statement breaking down the assets in the estate, the expenses and debts paid or owing, the bequests and legacies, and the fee you’ll take, finally reflecting what residue will remain in the estate to be divided among the beneficiaries of the residue.
Tip – Document your actual payment in writing. Use your own bank account for accepting your fee, not the Estate’s bank account. You using the estate’s account for personal charges (personal debit transactions or small purchase withdrawals) is not the method to collect your fee.
Step Ten – Residue and Closing Accounts
After you have paid debts, bequests and legacies, what funds remain are called the residue, and often the will does stipulate how this remainder is distributed through naming beneficiaries of residue. Sometimes the naming of these beneficiaries is less formal (aka: any remaining funds to be split equal among all my grandchildren, without actually naming them in case new ones are born after the will was drafted). Ontario law sets out how distribution is handled if the will is unclear, similar to the process for someone without a will (“intestacy”). Sometimes residue is gifted to a charity with no specific amount. Like previous disbursements, always obtain a written receipt.
After the funds are distributed, bank and investment accounts used for administering the estate should be closed.
“Recently, as an Estate Trustee, I interviewed three real estate agents and chose Jessica Hill to assist me in the marketing and selling of an estate residential property. Jessica’s use of social media marketing, her staging of the property, and her skill and professionalism in bringing forward a number of acceptable offers truly impressed me.” – H Girvin Devitt, Estate Lawyer, Peterborough, ON (Google Review)
The Parkhill Team has been helping local families, Estate Lawyers, and Trust Companies in the Peterborough and the Kawartha’s sell Estate Properties since 2017. Our Team creates a customized plan with every client that suits your unique lifestyle or needs. We provide expert guidance and support, so you feel confident and worry-free, with minimal disruption to your life. Our online reviews reflect our teams care, skill and values. Thank you again for considering The Parkhill Team for the sale of your home. We look forward to speaking with you. Email us today at email@example.com to discuss how we can help.
I hope this information I have gathered is helpful, however please do not consider the information here to be legal or financial advice. Always consult with a professional lawyer or accountant with the experience and expertise to guide you. This information was gathered from the Government of Ontario site and stepstojustice.ca in 2022.