Toronto Estate Law Blog : Toronto Estate Lawyer : Hull & Hull Law Firm : Trust Mediation and Succession Planning : Serving Ontario, Ottawa, Mississauga, Hamilton

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Estate Trustees have the authority to settle claims against the estate.  Claims may be asserted by a creditor, often in response to an Advertisement for Creditors. 

An Advertisement for Creditors typically runs for three consecutive weeks in a daily newspaper in the area where the deceased lived and worked at the time of death.  The date by which all claims must be submitted to the estate solicitor is usually one month after the first date that the advertisement is published whereafter, once the time period for filing claims has expired, the newspaper will provide an Affidavit of Proof of Publication. 

While there is no statutory requirement to advertise for creditors, there are several reasons why it is prudent practice:

• to confirm that there are no outstanding creditors (especially if the deceased carried on an active business) and thereby eliminate liability with respect to such a claim if it arises after the estate has been distributed;
• if the estate trustee wants to pass his accounts it is usually required on the first passing of accounts; or
• on an intestacy, if the estate trustee wants to distribute the estate prior to the expiration of one year after the death of the intestate.
   

David Morgan Smith - Click here for more information on David Smith. 

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It is a trite principle of estate administration that "debts must be paid before beneficiaries."  Assuming this maxim is followed, the estate trustee will not assume any personal responsibility for the debts of the deceased. On the other hand, if the estate trustee distributes the estate without due consideration to creditors' entitlements, the estate trustee may be left personally exposed unless the beneficiaries return their entitlement to the estate trustee to fund any unpaid debts.

To be fully relieved from personal liability, the estate trustee must make reasonable efforts to locate and satisfy the creditors of the deceased.  Advertising for creditors is therefore an essential step in protecting the estate trustee from liability and ensuring that the creditors of the deceased have had the opportunity to be paid. But the importance of the advertisement ought not to be overstated.  If an estate trustee can be proven to have had independent knowledge of a creditor who does not claim (for whatever reason) in response to the advertisement, and if the estate trustee distributes in the face of this knowledge, he or she could conceivably be personally responsible to such a creditor.

The bottom line is that the estate trustee, understandably focused on his or her fiduciary duty to the beneficiaries, stands in the shoes of the deceased and must give more than a passing regard to the creditors of the estate.

David M. Smith

David M. Smith - Click here for more information on David Smith.

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