What rights do beneficiaries of a Will have?

Leanne Kaufman:

Being the beneficiary of a loved one’s Will is clearly a huge honor, but did you know that as a beneficiary, you also have rights? The role of the executor in the settlement of an estate comes with a lot of responsibility, including significant duties to the beneficiaries. What must the executor disclose to those beneficiaries, for example. And what exactly can you expect as a beneficiary when it comes to the reporting and the legalities of the role of the executor?

Hello, I’m Leanne Kaufman and welcome to RBC Wealth Management Canada’s Matters Beyond Wealth. With me today is my friend, Tom Grozinger, principal trust specialist here at RBC Royal Trust.

Tom, thanks for being here with me today to talk about the estate settlement process as it relates to the rights of beneficiaries, and why this matters beyond wealth.

Tom Grozinger:

Thank you, Leanne. It’s a pleasure to be here today, and hello to all of your listeners.

Leanne Kaufman:

So, Tom, let’s begin our discussion today on the beneficiaries’ rights. Can you start by first describing to us—I used the phrase in my intro—”estate settlement.” What do we mean when we say estate settlement?

Tom Grozinger:

Sure. Well, to understand what we mean by that term, let’s first look at two other terms. One is “testate” and the other one is “intestate.”

When an individual dies, they’ve made a Will describing what is to happen to their estate, which we refer to as dying testate. In this case, the Will typically appoints an individual or a trust company like RBC Royal Trust to act as the personal representative, often referred to as the executor. They’re going to be responsible for administering the estate and carrying out the instructions in the Will. Including of course, ultimately paying out or transferring the residue of the estate to the beneficiaries named in the Will, or if there are trusts created, then to the trustees.

But if an individual dies without a Will, then the government has essentially written their Will for them as a result of applicable succession legislation. So, in this case, we say the individual died intestate, and it’s going to be up to the court to appoint the personal representative to administer the estate with the ultimate goal, again, of paying or transferring the estate residue to the deceased’s heirs.

But in either case of a person dying with a Will, or testate, or without a Will, or intestate, the individual or trust company acting as the personal representative will be settling the estate.

That involves a fair number of activities or steps such as, for example:

• Dealing with the deceased’s body.
• Communicating with beneficiaries.
• Collecting and safeguarding the assets of the deceased, and this may also involve
  • obtaining necessary insurance on those assets;
  • advertising for creditors;
  • identifying debts, and then of course;
  • paying those debts;
  • completing and filing tax returns and paying any taxes due; and again
  • ultimately paying or transferring the residue of the estate to the beneficiaries.

So, this whole process is considered the estate settlement. It’s only when the personal representative sent to all the remaining estate property or assets as belonging to the residuary beneficiaries—or the intestate heirs if there’s no Will—that we can say that the estate is finally settled.

Leanne Kaufman:

So, you’ve described, Tom, that high level series of events that the executor has to do—or the personal representative, whatever we want to call them. In order to get those assets into the hands of the beneficiaries. But what happens if the beneficiaries don’t feel like they’re being well versed on the progress? If they want some information about where the executor or the personal representative is—can the beneficiary, do they have rights to get that information?

Tom Grozinger:

Actually, they do and they can. Until the estate settlement is completed, beneficiaries actually have a right to compel the personal representatives to essentially do their jobs. Like in other words, beneficiaries have the right to require the personal representatives to administer to the estate in a proper manner. If necessary, they can seek the assistance of the courts in this regard, which can include disclosure of certain information relating to the estate settlement.

Leanne Kaufman:

So how will the beneficiaries know whether the executor or personal representative is getting all the tasks done, that they’re doing the job that’s expected of them?

Tom Grozinger:

Well, that’s where another key right of a beneficiary comes into play, and that’s effectively the right to hold a personal representative to account for the estate administration.

Now, this is done by requiring the personal representative to maintain relevant information concerning the estate settlement process, and then to provide that information when reasonably requested. Interestingly enough, there’s a corresponding duty on an executor to keep accurate records and frankly to provide full and also accurate information concerning the estate when reasonably requested. Similar rules, by the way, apply for any ongoing trusts that are created under the Will.

So, it’s really all about transparency, making sure that those who need to know what is happening with the estate settlement can get that information. I should add by the way, that often in the context of ongoing trusts, those trusts that may be created under a Will, issues can sometimes arise whether a particular beneficiary of the trust is entitled to the information because that beneficiary might only have a remote chance of actually receiving a share in the trust property.

According to the jurisprudence, “there is some uncertainty in the law regarding what and how much information a trustee is allowed to disclose and to whom.” We just don’t have the time today unfortunately to examine the nuances of the law in this regard. But I can say that it appears that the modern approach is for the courts to regard this right to seek disclosure of trust documents as one aspect of the so-called court’s inherent jurisdiction to supervise and if necessary, to intervene in the administration of the trusts.

So generally, I think it’s fair to say that beneficiaries who are likely to receive a share in the trust should be provided with information about the trust when reasonably requested to do so. But other beneficiaries with only a remote chance of receiving anything may find themselves having to go to court, to see if they can require the trustee to provide that requested information.

Leanne Kaufman:

So, the rules around beneficiaries rights may vary depending on the nature of what kind of a beneficiary they are. And it may be different between an estate and what you’ve described as the ongoing trust that may have been created under those Wills. So, it is a little bit complex.

Let’s go back to estates for a minute and leave the ongoing trusts aside. I think one of the questions beneficiaries probably would want to know is how long is all of this going to take. So, what’s typical for an estate in Canada to get to the actual conclusion where the beneficiaries can receive the inheritance that they will ultimately be getting?

Tom Grozinger:

Well, that’s actually a great question, and the answer really depends on a number of factors including the complexity of the estate. For example, does the estate have active businesses? Did the deceased own properties say in some foreign country or jurisdiction? Or is there or will there be litigation involved in the estate?

But let’s assume that the Will doesn’t provide for ongoing trust. Instead, it’s just an outright distribution to the beneficiaries that are named, and there aren’t any other sort of complicating factors.

Firstly, you have to bear in mind that there is a waiting time for probate of the Will if the Will actually is going to be probated. In some areas of Ontario, the wait time can be up to two to three months after submitting the application, but it can be less than other provinces.

Also, prior to wrapping up in a state administration, it’s generally prudent for personal representatives to obtain what’s known as a final tax clearance certificate from the Canada Revenue Agency. This can take around, say six to nine months from the time the request is made.

So, I would say it’s probably fair to say that it typically takes at least 18 to 24 months to fully administer an estate, but it could be longer if those complexities that I referred to earlier are present in that particular estate administration.

By the way, I should add that when it comes to applying for probate, the probate process will also require that notice of the application be sent to the beneficiaries. In fact, in some provinces, the legislation also requires that this notice be sent to certain individuals who may have claims against the estate. So in this way, even applying for probate actually provides the beneficiaries with some information about the estate settlement.

Leanne Kaufman:

So, what if the executor or the personal administrator, if the beneficiary feels that they’re not doing it properly or they’re not doing it quickly enough? Or what if maybe the executor isn’t communicating with the beneficiaries, they’re not getting any transparency around the process or there’s a disagreement, what’s available to beneficiaries then?

Tom Grozinger:

Okay, another great question. So where beneficiaries have a concern with the executor and how he or she is progressing with the estate settlement, the beneficiaries may first want to seek legal advice. That’s because not every disagreement is going to result in the executor somehow being sanctioned or being removed from the role of executor. But it is important to recognize that courts do retain an inherent jurisdiction to remove executors, and the beneficiaries can apply to the court for such a removal if they believe it’s justified.

In that regard, we know from jurisprudence that courts won’t remove a trustee or executor lightly. In other words, to remove an executor, the court really has to be satisfied that it’s in the best interest of the beneficiaries to do so. And this might be the case where the courts determined that it would be detrimental for the administration of the estate, for the executor to remain in the office.

There’s actually this—I guess I’d call it this laundry list of factors that the courts have described as potentially warranting the removal of an executor. They include things like

• positive misconduct amounting to an abuse of trust;
• putting the estate or trust property in danger;
• the executor trustee showing lack of honesty or reasonable fidelity;
• where an executor say lacks proper capacity or the ability to carry out the duties of the office;
• not maintaining an even hand between beneficiaries on a consistent basis; and importantly
• where the executor is in a conflict of interest and potentially favoring his or her own interests over the beneficiaries would be another potential factor for the removal.

But the courts also tell us, however, is that just some sort of friction between the executor and one or more beneficiaries isn’t generally enough to justify being removed, or a suspicion that the executor is going to favor one beneficiary over another. Also, let’s say there’s an isolated mistake or a technical breach of trust that was made in good faith, that also may not justify removal by the courts.

Leanne Kaufman:

So, what recourse other than removal by the courts would the beneficiaries have? So let’s say they don’t want to remove them, they just want them to do their job, the way that they think it should be done, and they’re in a disagreement. What sort of recourse do they have then?

Tom Grozinger:

Okay, well, I guess I can say human nature being what it is, there may be circumstances where beneficiaries and executors disagree about one or more matters pertaining to the estate settlement, that whole process we talked about at the beginning. But this could occur right at the beginning of an estate administration where an executor appointed in a Will is for some reason not actually starting the work of settling the estate—frustrating of course for the beneficiaries. In such a case, the beneficiaries could apply to the court for an order requiring the named executor to either accept or refuse the appointment.

There actually may also be situations where potential beneficiaries believe that a document in the possession of someone is actually the deceased’s Will, and for some reason that individual is not providing it. So, in that case, an application could again be made to court to require that the person produce the document. Of course, when it comes to obtaining information about the administration of an estate or trust, as we discussed earlier, it may be necessary to go to court for assistance.

In the common law provinces, there’s this process that’s referred to as a court passing of a trustee or executor’s accounts. This is where the executor or trustee presents his or her accounts to the court for review and hopefully approval.

Leanne Kaufman:

So, the accounts that you’re talking about, can you describe to us what those are because that’s presumably something a beneficiary should be able to review, and what would they show?

Tom Grozinger:

Sure. Well, they do include a number of items, but they can include things like

• a statement of assets at the date of death;
• entries showing dispositions or partial dispositions of the estate assets;
• accounts of all of the money received and dispersed—including, by the way, payments of compensation for the executor or trustee;
• statement of liabilities to the estate; and a
• statement of investments if there are going to be any.

The court passing accounts is really just one way that beneficiaries of the estate can ensure that an executor or trustee is faithfully and properly administering the estate or trust.

I should add that such court passings are not always, however, the result of beneficiaries requiring them. Sometimes the executor or the trustee wants to voluntarily apply to court to pass the accounts where, for example, they are not able to get releases from all the beneficiaries to the estate administration. So, this could be the case where the beneficiaries are not capable, or some might be minors, or where a beneficiary is being unreasonable in his or her demands or expectations of an executor.

I should also note, of course that passing of accounts in court are generally going to result in extra costs and delay in the estate settlement process. But in the interest of transparency in this whole estate settlement process, it’s important to note that executors and trustees can also simply provide informal accounts to beneficiaries from time to time without having to go to court. And this of course will help the beneficiaries feel that they’re being included in the estate settlement process right from the start. It helps executors deal with any concerns before they become a bigger problem leading to litigation. Something of course executors and trustees want to avoid if possible.

Leanne Kaufman:

Yeah, for sure. I mean, I think the passing of accounts thing and the whole court is the exception obviously, not the norm. And an extreme measure that anybody would probably take just to make sure that the beneficiaries’ rights are being protected.

Well, Tom, look, there’s a lot of complexity here, I mean, I think you’ve tried to break it down for us and let beneficiaries have a high-level understanding of what their rights are. But if you wanted people just to remember one thing from the conversation you and I’ve had today, what would that one thing be?

Tom Grozinger:

Well, I would say one word, it’s transparency. The job of a personal representative is challenging with its many duties and potential personal liabilities. Of course, everyone will be grieving the death of a loved one in their own way. To reduce suspicion and frustration, personal representatives should communicate information about their progress with the estate settlement in a timely manner. But if beneficiaries have a concern, well, they should know that as we discussed here today, they too have rights.

Leanne Kaufman:

Yeah, that’s great information I think that people probably might not otherwise have known.

So thanks so much, Tom, for joining me today to talk about really the importance of knowing your rights as a beneficiary and why this matters beyond wealth.

Tom Grozinger:

Thank you very much, Leanne.

Leanne Kaufman:

You can find out more about Tom Grozinger on the RBC Wealth Management Canada website or on LinkedIn.

If you enjoyed this episode and you’d like to help support the podcast, please share it with others, post about it on social media, or leave a rating and a review.

Until next time, I’m Leanne Kaufman. Thank you for joining us.

Outro speaker:

Whether you are planning for your own estate, the needs of your family or business, or you are an executor for a loved one’s estate, we can help guide you, simplify the complex, and support your life’s vision. Partner with RBC Royal Trust and ensure your legacy will thrive for generations to come. Leave a legacy, not a burden™. Visit rbc.com/royaltrust.

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