My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. My posts are blunt, opinionated and even have a twist of humour/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, January 15, 2018

Estate Administration - The Importance of Advertising for Creditors

After writing the last two weeks about the Tax On Split Income Rules and the Ontario Minimum Wage Increase, I thought I would try a less controversial topic this week; that being the importance of advertising for creditors.

Over the years, I have written numerous times on the various issues associated with being named an executor, including this laundry list of requirements. Included on this list is the necessity to advertise for any creditors of the estate.

My guest blogger today is Patrick Hartford, who is the founder and managing director of NoticeConnect, which is a platform for publishing and accessing legal notices online to simplify the process of advertising for creditors. Patrick will discuss the importance of advertising for creditors and the risk to an executor if they do not do so.

Please note that while I agree it is important to advertise for creditors, the policy of this blog is to not endorse any specific company, so you will need to do your own research as to whether you engage NoticeConnect or not.

With the legal disclaimer out of the way, I thank Patrick for his blog post on this important, but often neglected estate issue.

Estate Administration - The Importance of Advertising for Creditors 

By Patrick Hartford

The majority of estate trustees in Ontario - both executors and administrators - are not advertising for creditors. This is a problem because trustees who do not publish a notice to creditors risk personal liability.

When someone dies, any outstanding debts of the deceased must be paid before the assets of the estate can be distributed to the beneficiaries. Whatever is leftover after the creditors have been paid can then be inherited by the deceased’s spouse, children, pets, etc.

It is the job of the estate trustee to identify and pay these outstanding debts.

Some debts are easy to identify, particularly if they involve a secured creditor like a mortgage lender. But there are often other debts that the trustee has no way of identifying. They could be old utilities or credit card bills, municipal taxes, or any other type of debt. The likelihood that outstanding debts exist increases if the deceased lived and worked in multiple cities or did business online.

It’s unrealistic to expect a trustee to play detective and track down every possible debt the deceased may have had. Instead, the law says that a trustee should ‘advertise for creditors’. In Ontario, this is governed by section 53 of the Trustee Act. Other provinces have similar legislation.

The trustee publishes a public advertisement, called a ‘notice to creditors’, stating that a deceased’s estate is being administered and any outstanding creditors have a set amount of time (typically 30 days) to come forward with their claims. When this time period expires, the estate will be distributed with regard only to claims that have been filed.

The law says that an estate trustee who advertises for creditors will be protected from liability if a previously unknown creditor comes out of the woodwork after the assets of the estate have been distributed. Conversely, if an estate trustee does not advertise for creditors, an outstanding creditor can sue the trustee personally for the full amount of the debt. There is no statutory limit or cap to this liability.

So why aren’t trustees publishing notices to creditors?

Sometimes because they are confident that the deceased had no outstanding debts that they are unaware of. This can be risky. Estates lawyers will tell you stories about clients who didn’t advertise for creditors, only to be caught by surprise later.

Another reason is the fact that advertising for creditors used to be prohibitively expensive. Notices to creditors used to be published in print newspapers, and publishing ads in multiple cities would easily cost thousands of dollars. While the estate covers this cost, few trustees wanted to spend this much money for print ads that few people would ever read. Fortunately, with the advent of services for publishing notices to creditors online and its acceptance in Superior Court (see this page for various articles and discussions on this case), the cost of advertising for creditors has been dramatically reduced and has restored its efficacy.

If you’re an estate trustee, it’s important to protect yourself from liability. Advertising for creditors will prevent you from having to pay the deceased’s old debts out of your own pocket.

Patrick Hartford, is the founder and managing director of a platform for publishing and accessing legal notices online. Over 200 law firms, banks, and legal service organizations in Ontario have trusted NoticeConnect for publishing estate notices to creditors their clients.

The above blog post is for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Readers are advised to seek specific legal advice regarding any specific legal or estate issue.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

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