Debts & Liabilities of the Estate

An executor must distribute the estate according to the Will. If there is no Will, The Intestate Succession Act, 2019 sets out how to distribute the estate. Before doing this, any liabilities or debts of the estate must be dealt with. The person handling the estate can be held personally liable for wrongly transferring assets out of the estate. It is important to understand what needs to be done before any distribution takes place.

A dependant spouse or child can apply for a share of an estate for their support. The court can review the Will and, if necessary, redistribute the estate to properly provide for dependants. As well, a spouse can apply to have family property divided before their spouse’s estate is dealt with. If the court divides family property, the estate will only include the deceased person's share of the property. These claims could result in fewer assets being available for distribution.

There is a six-month waiting period after Letters Probate or Administration are issued before the estate can be distributed. This allows dependants and spouses to apply for relief. An executor or administrator may be personally liable if they ignore this waiting period. Dependants and spouses may, however, provide written consent for an earlier distribution.

Where children under the age of 18 years have an interest or claim in an estate, the Public Guardian and Trustee becomes involved. The Public Guardian and Trustee ensures that a child's property interests are protected. This also applies to adults who lack capacity. Because of this, it may be necessary to obtain consent from the Public Guardian and Trustee before dealing with an estate. For example, if a child is left a house, the Public Guardian and Trustee must consent before the person handling the estate can sell it.

In Saskatchewan, children under 18 do not have the legal capacity to manage their own financial affairs. They do not receive their share of the estate outright until reaching at least the age of 18. A Will may authorize an executor to manage the child's share of the estate until they turn 18 or older. It may direct that the executor pay any expenses required to properly care for and maintain the child. When the Public Guardian and Trustee requires it, an accounting of the estate must be provided to them once a year.

When there are no minors or dependent adults interested in the estate, the application to deal with the estate must state this. Upon request and payment of a fee, the court can then issue a certificate that no one under the age of 18 is interested in the estate.

One of the duties of an executor or administrator is to pay any taxes of the deceased. This may include outstanding taxes from employment income or capital gains taxes. A person is deemed to have sold all the property in their estate on the date they die. Any increase in value of the property since it was acquired will usually results in capital gains. The estate must then pay income tax on half of the total capital gains. In the case of an RRSP, the whole amount is counted as income to the estate since no tax was previously paid on it. The only exception is if the deceased's spouse or a dependant is named as the beneficiary of the RRSP.

You can request a clearance certificate for an estate once you have:

• filed all necessary tax returns for the deceased person
• received the notices of assessment for those returns
• paid any outstanding amounts owed to the CRA

This clearance indicates that the deceased person has no outstanding tax liabilities with the CRA. Without this type of clearance, the person handling the estate can be held personally liable for any outstanding tax amounts.

All debts of an estate must be paid before distributing the estate to the beneficiaries. As an executor or administrator, you may not be aware of all the debts owed by the deceased or the estate. To protect yourself from unknown claims, you can advertise for creditors before you distribute the estate. This way you can pay any legal debts while there is still money in the estate to pay the debts and will not be responsible for debts you did not know about.

An advertisement for creditors needs to be placed in the newspaper nearest where the deceased lived. This must be done once a week for two consecutive weeks. An advertisement is also valid if it is posted on the NoticeConnect website for 30 days. The advertisement must be in the Notice to Creditors form. It must also include a date by which a creditor has to notify the estate of a claim. If you do not receive any notices from creditors and the date has passed, you can distribute the estate. This is still subject to the time limit for claims by spouses or dependants. A creditor cannot hold you personally liable for debts of the deceased if you have advertised in this way.

If a beneficiary is in bankruptcy, their share of the estate must go their trustee in bankruptcy. It is important for the person handling the estate to take steps to avoid improper pay-outs. You can search for information on bankruptcies through the Government of Canada’s database.

Sometimes there are not enough assets in an estate to pay all the debts of the estate. In these instances, the law sets out the priority for payment of debts. Reasonable funeral and administration expenses of the estate are paid before any other debts. The executor or administrator is not personally liable for debts of the estate when administered properly.