Surety Bonds and Probate in Ontario
Author: Andrew Cartwright
In Ontario and many jurisdictions in Canada and around the world, when a person passes away, the Will goes through a process called probate. The probate process is essentially the judicial way to “prove” a Will. Probate states that the Will is a valid public document that is the true last testament of the deceased person. It gives any asset holder or institution the proof they need to release the assets of the estate for distribution. The estate trustee can then distribute the assets according to the Will. The probate certificate, which acts as proof, essentially removes the liability associated with releasing these assets to the estate trustee. If another more recent version of the Will was to surface after probate was issued, the beneficiaries could not pursue the asset holders because these asset holders have done their due diligence in obtaining a probate certificate issued by a court of law.
In cases where there is a Will, the estate trustee is a resident of Canada and the beneficiaries of the estate consent to the appointment of the estate trustee, probate is a relatively easy although lengthy process. In some instances, the court may feel that additional protections for the beneficiaries of the estate are required. Examples of these situations include: No Will exists, the estate trustee does not live in Canada, there’s an ongoing business in the estate, or some of the beneficiaries are minors. The court may require a surety bond to protect the beneficiaries. This surety bond is known as an Administration Bond.
What is an Estate Administration Bond?
An estate administration bond is a type of surety bond which guarantees that the estate trustee will fulfill its duties in correctly distributing the assets of the estate. Some of these duties such as paying taxes to the Canada Revenue Agencies are set out in Estates Act and some such as the distribution of the assets are outlined in the Will. To bring this full circle, these duties are accepted and mandated by the court through the probate application process. This process involves an application for certificate of appointment of estate trustee which is made to the court when applying for probate. An estate administration bond is issued by an insurance company and there’s an application process that an estate trustee will undergo. For more information on administration bonds and the application process please read:
When do I Need an Estate Administration Bond?
The court will ultimately determine if and when an estate trustee will be required to post a bond. The administration bond will need to be posted prior to receiving the probate certificate. As outlined above, situations where a bond is required include:
- There is no Will (the deceased person passed away “intestate”, or without a Will).
- The estate trustee resides outside of Canada. This bond is known as a non-resident administration bond.
- There is an on-going business in the estate.
- One or some of the beneficiaries of the estate are minors.
- One or more of the beneficiaries of the estate are contesting the estate trustees appointment, or the Will itself.
To read more about when an estate administration bond is required, please visit:
How to Dispense with an Administration Bond?
In some instances, the court requirement to post a bond can be eliminated. In the Estates Act, this is known as “dispensing” of the bond. An application to dispense with the bond is to be made to court who will make the final decision. There are requirements for dispensing the bond and they vary based on the circumstances surrounding the initial court order. This application needs to be contemplated and prepared by your lawyer, however they will always involve obtaining beneficiaries consents to the appointment of estate trustee and to dispense of the bond. Ultimately if the court determines that the bond cannot be dispensed, the estate trustee will need to apply for the bond. Please read (Jamie link to admin bond post) to learn more about the bond application process.
As you can see probate is a vital process in settling an estate. Depending on the circumstances surrounding the estate, an administration bond may be required and can be dispensed with in some situations. When you aren’t able to dispense with the bond, it’s important you work with a surety bond broker that specializes in estate administration bonds.
With any questions please contact us at 1-888-241-5656 to start the conversation today.