By Jeffrey Bichard, Associate, Legacy Tax + Trust Lawyers
“What’s next” can seem a daunting question when a person dies without a will. This article gives a brief overview on how estates without wills are administered and distributed, and some of the factors that might influence a person deciding whether to administer them.
Applying to Administer an Estate where there is no Will
In a will, the will-maker appoints an executor who will have the authority to administer the estate. The executor’s authority begins from the date of the will-maker’s death.
When a person dies without a will, there is no one with automatic authority to administer the estate. The disposition of the body will be controlled, in order of priority, by the deceased’s spouse, children, grandchildren, guardian (if the deceased was a minor), parent, sibling, nieces and nephews. If none of these persons are available, legislation gives further authority to more remote next of kin or certain government authorities. The funeral home will assist in applying for a death certificate. It may also provide forms to apply for the Canada Pension Plan death benefit, which the deceased’s spouse, next of kin or person who paid for the funeral expenses may apply for. (Footnote 1)
In order to manage the deceased’s financial affairs, a person must apply for a court order to be appointed as the administrator of the estate. The applicant will file certain forms and sworn statements with the court. Among the sworn statements is a listing of the values of certain of the estate assets as at the date of death. Probate fees of 1.4% will be payable on the total value of the assets listed greater than $50,000 and 0.6% on the value between $25,000 and $50,000. These fees may have been avoidable in some cases with proper estate planning. In some cases, an authorization from the court may be needed to get the values of the assets.
In the vast majority of cases, the court will issue the order without the applicant or his or her counsel appearing before the court. However, the process will usually take several months, even where the information required to complete the application materials is readily available.
The Act sets out who has priority to apply to be the administrator. In descending order, these are: (a) the spouse of the deceased or a person nominated by the spouse, (b) a child of the deceased having the consent of the majority of the deceased’s children, or a person nominated by that child, (c) a child of the deceased not having the consent of the majority of the deceased’s children, (d) a person who will receive a distribution from the estate, who has the consent of the majority of the other persons who will receive a distribution from the estate, (e) a person who will receive a distribution from the estate, who does not have the consent of the majority of the persons who will receive a distribution from the estate, and (f) any other person appointed by the court.
Distribution of Estates where there is no Will
Legislation dictates the distribution of an estate where there is no will. The assets of the estate are first used to pay the deceased’s debts, liabilities and taxes. The Wills, Estates and Succession Act, R.S.B.C. 2009, c. 13 (the “Act”) then sets out how the remainder of the estate is distributed. Essentially, the Act gives the estate to the nearest surviving relatives.
If the deceased has a surviving spouse and no descendants (i.e. children, grandchildren, etc.), the estate is distributed to the spouse. Where the deceased has surviving spouse and descendants in common with that spouse, the first $300,000 is given to the spouse, and the remainder is given one half to the spouse and the other half to be divided among the surviving descendants in the generation nearest to the deceased (e.g. the children). If the deceased had descendants from another relationship, then the first $150,000 is given to the spouse and the remainder of the estate is given one half to the spouse and one half among the surviving descendants in the generation nearest to the deceased.
If the deceased has no surviving spouse, then the estate is distributed to the nearest surviving descendants.
If the deceased has no surviving descendants, then the estate is distributed to persons with the nearest common ancestor of the deceased, to the fifth degree of separation from the deceased. (Footnote 2) If there is no person within five degrees of separation of the deceased, then the government receives the estate.
The result is that the deceased’s estate may end up with persons or in proportions that the deceased would not have wished had he or she made a will. For example, the estate may end up benefitting adult children as well as well as a spouse, which the deceased may not have intended. The Act includes rules that assist in preserving the spouse’s interest in the family home, such as allowing the spouse to receive it as part of his or her interest in the estate and being able to purchase the difference in value, but it may not be possible to ensure that the spouse receives the home in all instances.
Moreover, if a person under 19 (which is the age of majority in BC) receives an inheritance, then it must be paid to the Public Guardian and Trustee who will manage it as trustee until the person attains the age of 19 years, unless a trustee is appointed by the court. Fees will apply. As well, if there is no guardian appointed by will and the minor has no surviving guardians then a court application to appoint a guardian must be brought. People usually prefer to appoint a trustee to manage funds on the minor’s behalf and to appoint guardians under a will.
Deciding to Apply
In many cases, a person will apply to administer an estate where there is no will. However, it is not always necessary or desirable to apply.
In some cases, the assets can be transferred and the debts dealt with without a court appointed administrator. For example, assets that the deceased held in joint tenancy pass automatically to the surviving joint tenant(s). Usually, the transfer can be done by producing a death certificate. The assistance of a lawyer or notary will be needed for transfers of land. Similarly, assets with a beneficiary designation, such as RRSPs, RRIFs, TFSAs and life insurance policies, will transfer to the beneficiary on production of a death certificate. For small estates, assets in the deceased’s name alone can sometimes be transferred without an administrator. Financial institutions may be willing to give access to the deceased’s accounts to the next of kin in exchange for an indemnity. ICBC may allow a vehicle to be transferred without a court appointed administrator where the total value of the estate is under $25,000.
Certain of the debts can also sometimes be dealt with without an administrator. For example, the next of kin, or a person related to the deceased having the consent of the next of kin, may apply for authority to manage the deceased’s tax filings. However, advice should be taken before doing so. It is possible that the person administering the tax filings or otherwise dealing with the deceased’s debts will be exposed to liability for those debts to the extent that they hold assets of the estate.
In other cases, it may not be advisable to deal with the estate. This is particularly so where the estate is insolvent and the applicant is not also a creditor, since the applicant will not have a financial interest in the estate. Among other duties, the administrator must pay any taxes and creditors in order of priority, and then distribute what remains in accordance with the Act. The administrator will be personally liable to the extent he or she does not do so. The assistance of a trustee in bankruptcy, or simply not taking any steps, may be the preferred option in these cases.
Persons who seek to administer intestate estates should seek professional guidance. Estate administration is a complex and difficult undertaking. There is high exposure to liability, and there are unique challenges and considerations in administering an estate where there is no will. Tailored advice can address many of these challenges, but is often not as advantageous as having planning in place before death.
If they are not provided by the funeral home, these forms can be found on the Services Canada website.
I.e. To the deceased’s parents, and if none are surviving, then to the first generation in which there are surviving descendants of the deceased’s parents, down to the fifth degree. (In descending order, the deceased’s siblings, nephews and nieces, children of nephews and nieces, and children of the children of nephews and nieces.) If there is no surviving descendent from the parents’ line down to the fifth degree, then the deceased’s grandparents will share in the estate, and if they are not surviving, their descendants, down to the fifth degree, and so on.