Certificates of Appointment
Although the Estate Trustee derives his or her authority to deal with an estate from the will itself, sometimes third parties may require evidence of that authority, and that the will appointing the Estate Trustee is actually the last valid will of the deceased. In order to provide this kind of evidence, the Estate Trustee may apply for probate, now called a Certificate of Appointment in Ontario.
The Certificate of Appointment of an Estate Trustee is issued when a will is successfully admitted to probate. Evidence must be presented with respect to the fact, date, and place of the death. In producing the Certificate of Appointment, the court finds that the Estate Trustee has been appointed under the last will of the testator and, most importantly, confirms the validity and the terms of the will.
The Certificate of Appointment can be required to prove the above finding to any individuals who enter into financial transactions with the Estate Trustee.
Probate will not be required in respect of every estate. Whether a Certificate of Appointment is required will depend on:
- the type of assets held,
- the value of assets, and
- the manner in which the assets are owned.
Probate will not be required to give effect to transfers of ownership to a joint owner or pursuant to a beneficiary designation for a life insurance policy or RRSP. With land and other investments, probate is more likely to be required.
The process of applying for a Certificate of Appointment of Estate Trustee is outlined at Rules 74.04 and 74.05 of the Rules of Civil Procedure. A probate application will include:
- the original will;
- an affidavit of execution sworn by one of the witnesses to the will; and
- an application outlining information relating to the deceased, the Estate Trustee, and the value of the estate.
The application must be sworn before a lawyer or notary, and will often be prepared by a solicitor, if one is retained by the Estate Trustee. When the probate application is filed with the court, estate administration taxes will be payable.
If there is not a will, if the will fails to appoint an Estate Trustee, or if the named Estate Trustee has predeceased or is unwilling or unable to act, pursuant to Section 29 of the Estates Act, RSO 1990, c E.21, the individuals who are entitled to bring an application for a Certificate of Appointment include the deceased’s surviving spouse, whether married or a common-law spouse, and the next of kin. An Estate Trustee appointed in this way is also called an “administrator.”
If a will is being admitted to probate, there is nothing that can be done by the Estate Trustee or his or her lawyer to prevent the will from becoming a matter of public record.
Estate Administration Tax
Pursuant to the Estate Administration Tax Act, 1998, S.O. 1998, c.34, Sch. (the "EATA"), estate administration taxes (formerly "probate fees") become payable in respect of an estate immediately upon the issuance of a Certificate of Appointment of Estate Trustee in respect of the estate.
If no Certificate of Appointment is sought, no estate administration tax ever needs to be paid in respect of an estate. For this reason, many estate planning strategies are designed to enable the estate trustee to administer the whole estate without a Certificate of Appointment. If successful, estate administration tax can be avoided altogether.
Another feature of the estate administration tax regime is that upon an application for a Certificate of Appointment of Estate Trustee, tax is only payable upon assets of the estate that are governed by the will in respect of which a Certificate is being sought. For this reason, in Ontario, the practice of preparing multiple concurrent wills for the same testator has arisen.
Certain types of assets can be administered without a Certificate of Appointment. Therefore, one "primary" will is prepared to govern those assets. Another "secondary" will is prepared to govern all other assets. An application for a Certificate of Appointment is then filed only with respect to the primary will. Efforts will have been made at the planning stage to ensure that as much of the value of the estate as possible passes through the secondary will, so as to minimize the value of the estate administration tax payable on the issuance of the Certificate of Appointment in respect of the first will.
Joint assets that pass by right of survivorship, as well as life insurance proceeds and the proceeds of registered plans that pass to designated beneficiaries, do not flow through the estate and are generally not subject to estate administration tax. Where the asset is truly intended to flow to the designated beneficiary, no estate administration tax will be payable. However, where the asset is held jointly with another purely for the sake of convenience and the intention was that it form part of the deceased's estate, the equitable interest in that asset will result back to the estate and it should be included in the value of the estate for estate administration tax purposes.
Great care should be taken in the preparation of multiple wills, or indeed, in any complex estate planning. As complexity increases, so too does the likelihood of an error or unintended consequence. One common error in multiple wills is to include standard revocation clauses in each, the result of which is that one will inadvertently revokes the other. Another common mistake is the "doubling up" of specific bequests, which are included in both wills.
Estate administration tax is calculated on the basis of the value of the estate covered by the will. If the estate is valued at less than $1,000, no estate administration tax is payable. If the estate is between $1,000 and $50,000, the amount of the tax is $5 for each $1,000, or part thereof. If the value of the estate is over $50,000, the amount of the tax is $5 for each $1,000 up to $50,000, and $15 for each $1,000 or part thereof after $50,000.
For example, if an estate is valued at $1,000,000, estate administration tax is calculated as follows:
- On the first $50,000, the tax is $5 per $1,000: $50,000 X ($5/$1,000) = $250
- On the remaining $950,000, the tax is $15 per $1000: $950,000 X ($15/$1,000) = $14,250
- The total estate administration tax payable is $250 + $14,250 = $14,500
The value of the estate used in the calculation of the estate administration tax includes the value of all of the assets of the estate that are covered by the will. Real property located in Ontario is included, but the value of real property located out of the province is excluded. Debts generally cannot be deducted, however the actual value of any encumbrances on real property that is included in the property of the deceased person (i.e. in Ontario) may be deducted.
Estate Information Return
In 2011, amendments were made to Ontario's EATA to provide for expanded reporting requirements and enforcement powers. A new regulation under the EATA came into force on January 1, 2015, detailing these requirements, which apply to all applications for Certificates of Appointment filed on or after that date.
Under the new regulation, an Estate Trustee must file an Estate Information Return with the Ministry of Finance within 90 days of the issuance of a Certificate of Appointment. The Return requires details about the deceased, the Estate Trustees, and particulars of any assets and debts.
The estate representative is required to certify that information given in the Return and in any supporting documents is true, correct and complete. Failure to file a Return or filing a false or misleading Return can result in penalties including a fine of at least $1,000, imprisonment for up to two years, or both.
If an error or omission on the Return is discovered within four years of the day the tax became payable, the Estate Trustee has an obligation to notify the Ministry within 30 days and to pay any additional tax owing. At the end of four years, the Estate Trustee is released from this duty.
However, if any new property is subsequently discovered that formed part of the estate at the date of death, this is treated differently than an error or omission and the obligation to pay the additional tax and file a revised Estate Information Return continues beyond the four year limit.
The Ministry has the power to assess and reassess the estate administration tax payable by an estate under the EATA. An Estate Trustee is obligated under the EATA to keep records and accounts containing sufficient information to enable the accurate determination of the tax payable. Detailed records with documents sufficient to support the value given for all items of significance will enable an Estate Trustee to defend his or her valuations of estate assets if required to do so.
The Executor’s Year
The executor’s year, which begins at the death of the testator, refers to the common-law rule under which an Estate Trustee must administer the estate and transfer assets without accrued interest to be paid to the beneficiaries. If all property is not realized during the one-year period, the Estate Trustee must provide a valid explanation for the delayed administration. Where there is no will or the Estate Trustees appointed pursuant to the will are unable or unwilling to act, the executor’s year will begin running at the date that the Certificate of Appointment is issued.
The Court in Currie v Currie Estate, 2005 PESCTD 64, 759 APR 178, summarized the duty of an Estate Trustee with respect to the realization of assets during the executor’s year (at para 45):
The executor must not unreasonably delay in getting the assets and settling the affairs of the estate and he will be personally responsible for any loss occasioned by undue delay. There is no hard and fast rule as to what constitutes undue or unreasonable delay, but it is the practice to speak of the executor’s or administrator’s year and the courts attach importance to the question whether the alleged failure to convert or realize assets which resulted in the loss to the estate occurred within or beyond a year. Therefore, all investments which are not proper to retain should be realized within a year of the testator’s death or, in the case of an administration, within a year of the date of the grant.
General Principles of Interpretation
Certain terms assume clear, specific meanings within the context of use within testamentary instruments. However, other language may give rise to terms of distribution that are ambiguous. Any person appearing to have a financial interest in an estate may apply to the court for directions under Rule 75.06 of the Rules of Civil Procedure for guidance with respect to the interpretation of a will and its provisions.
In general, a will is read as a whole. Every word, whether technical or not, can be presumed to have a meaning. Whenever possible, a will is read to lead to a testacy, rather than an intestacy.
Where there is ambiguity with respect to certain words in a will, the court will generally apply the armchair rule. The court will put itself in the position of the testator and determine just what the words mean, in light of the surrounding circumstances at the time of the making of the will. This analysis permits reference to extrinsic evidence. Where words in a will could be interpreted in two different ways, the court may admit evidence such as notes made by the deceased as evidence of his or her intentions that are ambiguously expressed within the document. Absent ambiguity or a clear mistake within the will, however, extrinsic evidence will not normally be admitted.
The Ontario Court of Appeal in Rondel v Robinson Estate, 2011 ONCA 493, confirmed that unless it can be shown that there is a mistake in a will that needs to be rectified leading to ambiguity, a court should not consider extrinsic evidence in its interpretation of a will.