If the deceased was acting as a trustee for someone else in Ontario, those trust assets do not belong to their personal estate and must not be distributed to their heirs. As the executor, you must safeguard these funds and legally transfer them to a new, successor trustee appointed by the trust document or the Superior Court of Justice.
Being an executor (officially called an Estate Trustee in Ontario) is a heavy responsibility. 📋 When you begin gathering the deceased’s assets, you might discover a bank account, an investment portfolio, or even a piece of real estate in Toronto or Ottawa held “In Trust For” someone else. This usually means the deceased was managing money for a grandchild, holding a family cottage in a bare trust, or acting as a formal trustee for a disabled relative.
It is absolutely critical to understand that trust assets are not part of the deceased’s personal estate. They are not subject to the deceased’s Will, and you do not pay Estate Administration Tax (probate fees) on them. If you accidentally mix these trust funds with the regular estate money or distribute them to the deceased’s beneficiaries, you can be held personally liable for the financial loss. Your primary job is to protect these assets until a new trustee takes over.
Step-by-Step Process for Executors in Ontario
Handling the transmission of fiduciary duty requires careful detective work and strict legal compliance. 🔍 Here is how you manage this delicate situation in Ontario.
Step 1: Identify and Isolate the Trust Assets
As soon as you discover an account labelled “ITF” (In Trust For) or find a formal trust deed, you must immediately inform the bank or financial institution. Freeze the account to prevent any automatic withdrawals. Under no circumstances should you transfer these funds into the general “Estate of [Name]” bank account. They must remain isolated.
Step 2: Locate the Original Trust Document
You need to know the rules governing this specific trust. 📁 Search the deceased’s home, safety deposit boxes, and contact their local Ontario law firm. If it is a formal trust, there will be a trust deed or a Will from a previously deceased person that created it. If it was just an informal bank account for a grandchild, gather all banking records.
Step 3: Identify the Successor Trustee
Read the trust document to see what happens when the current trustee dies. Most well-drafted trusts will name an alternate or successor trustee (e.g., “If John dies, Mary shall take over as Trustee”). If a successor is named, your job is simply to hand over the assets and records to that person.
Step 4: Apply to the Court if No Successor is Named
If the document is silent, or if the named successor is also deceased, you cannot automatically appoint yourself as the new trustee. ㊣ Under the Ontario Trustee Act, you may need to apply to the Superior Court of Justice to have a new trustee formally appointed. The court will ensure the new person is suitable to manage the beneficiary’s funds.
Step 5: Pass the Accounts
Before handing over the assets, you should review the deceased’s management of the trust. The new trustee or the beneficiaries will want to know that the deceased didn’t mismanage the funds. You may need to prepare a formal accounting (Passing of Accounts) to show the incoming trustee exactly what they are taking over.
Step 6: Transfer the Assets and Obtain a Release
Once the new trustee is confirmed, you will sign over the bank accounts or register a new deed for real estate. 📝 Crucially, you must have the new trustee (and adult beneficiaries, if possible) sign a full Release and Indemnity. This legal document protects you and the deceased’s estate from future lawsuits regarding the trust.
How Much Does it Cost in Ontario?
Managing the handover of trust assets incurs administrative and legal costs. These costs are generally paid out of the trust itself, not the deceased’s personal estate. 💰
- Lawyer Fees: Consulting an estate lawyer to review the trust and draft releases usually costs between $2,500 and $5,000 CAD.
- Court Application (if needed): If you must apply to the Superior Court of Justice to appoint a new trustee, expect legal fees of $5,000 to $10,000 CAD, plus the $243 CAD court filing fee.
- Accounting Fees: If the trust history is messy, hiring a CPA to prepare the accounts can cost $2,000 to $6,000 CAD.
| Asset Type | Part of the Deceased’s Estate? | Subject to Probate Fees (EAT)? |
|---|---|---|
| Personal Bank Account | Yes | Yes (1.5% over $50k) |
| Joint Account (Right of Survivorship) | Generally No (but “Yes” if held with an adult child under the presumption of resulting trust, unless rebutted) | No (unless the presumption of resulting trust is not successfully rebutted, then Yes) |
| “In Trust For” Account | Absolutely No | No |
How Long Does the Process Take?
If the trust document clearly names a successor trustee who is willing to act, the handover can be completed in just 2 to 4 months. ⌛ However, if the trust is undocumented, the deceased left messy financial records, or you must apply to the court to appoint a new trustee, the process can easily delay the administration of the main estate by 8 to 12 months.
Frequently Asked Questions (FAQ)
Do I automatically become the new trustee because I am the executor?
No. An executor’s authority is limited to the deceased’s personal property. While you have a duty to secure and protect the trust assets temporarily, you do not automatically assume the role of trustee for the beneficiaries unless the original trust document specifically names the deceased’s executor as the successor trustee.
What if the deceased stole money from the trust before they died?
If you discover that the deceased breached their fiduciary duty and misappropriated trust funds, you have a serious problem. The trust beneficiaries have a legal claim against the deceased’s estate to recover the stolen money. You must consult a lawyer immediately and halt any distributions to the estate’s heirs until the trust debt is settled.
Do trust assets need to go through the probate process?
No. Assets held strictly in trust for someone else do not pass through the deceased’s Will. Therefore, they are not listed on the application for a Certificate of Appointment of Estate Trustee (probate) and are exempt from Ontario’s Estate Administration Tax.
What if it’s an informal trust (like a savings account for a child)?
Informal “In Trust” accounts are common but legally tricky. If the child is now an adult (18 or older in Ontario), the bank may simply release the funds directly to them upon proof of the original account holder’s death. If they are still a minor, the money may need to be paid into court or managed by the child’s legal guardian.
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