A “Passing of Accounts” is a formal court process which audits the handling of an estate. The executor will provide detailed documentation outlining the estate assets and debts, in addition to estate receipts, bank statements, cheques, deposits, professional expenditures, asset distribution, reimbursement, and any other estate debits or credits.
Two ways a Passing of Accounts Occurs
The executor will either file a Notice of Application to Pass Accounts by (1) their own volition or (2) in response to a court order. A beneficiary who desires to initiate a passing of accounts must apply to the court for an order compelling the executor to pass their accounts.
Step #1 Application to Pass Accounts
The first step in the process is to file the Application to Pass Accounts. In support of this Application, the executor of will, will need to provide supporting documentation for the courts’ review, including:
- A Notice of Application to Pass Accounts
- Estate accounts and supporting financial documents
- An affidavit sworn by the executor(s)
- A copy of the Certificate of Appointment of Estate Trustee; and
- A draft order
NOTE: A filing fee for the Application to Pass Accounts is charged when the documents are submitted to the court ($322 in 2023).
NOTE: The executor must then serve the documents on each individual who has an interest in the estate 60-75 days before a proposed hearing date.
NOTE: The accounts are presented as receipts (all the assets received) and disbursements (all the assets going out such as expenses, taxes, distributions).
Step #2 Response to the Application
After the beneficiaries have been served the material, they are provided with the opportunity to challenge any item on the accounts. Some common reasons why a contested passing of accounts occur include the following:
- A beneficiary disagrees with the amount the executor is claiming as compensation
- A beneficiary questions estate expenses or income
- A beneficiary questions the sale or value of an estate assets
- A beneficiary asserts that the estate is not being distributed promptly or properly
If a beneficiary wishes to challenge anything related to the accounts, the court date will become a contested hearing. A “Contested Passing of Accounts” is where one or more of the beneficiaries dispute the executor’s handling of the estate.
NOTE: It is common for hearings to be adjourned (delayed to another date) for various reasons such as time needed to prepare for the hearing day, or solicitor availability.
A beneficiary who chooses to contest any of the accounts will be required to file at least 35 days before the scheduled hearing date a Notice of Objection to Accounts, which will put the executor and other beneficiaries on notice.
- It is possible to resolve disputes or concerns before the hearing. If this occurs, a beneficiary may withdraw their Notice of Objection by filing a Notice of Withdrawal of Objection at least 15 days before the hearing.
Step #3 Executor will Reply to Objections
The executor will combine the remaining Notices of Objection to Accounts and prepare a “Reply to Notices of Objection”. The executor must then file and serve these documents on all the individuals entitled to notice.
Step #4 Beneficiary can Reply to the Executor’s Reply to Objections
The beneficiaries can then submit a further reply to the executor’s Reply to Notices of Objection within 5 days before the hearing.
Step #5 The Court Hearing
During a contested hearing, the executor and all beneficiaries who have filed a response to the Notice of Application to Pass Accounts will be able to present their case in court. The court has the discretion on whether the matter is resolve or if the matter will continue. The following discretionary outcomes are possible:
- Approve the accounts in whole or in part
- Mark a court Order for a full Trial including;
- Issues to be determined
- Timing
- Witnesses
- Procedure
- Make a court order for Mediation (Mandatory in most jurisdictions)
- NOTE: This means that an entire new procedural process is implemented.
- Make a court order for an Assessment Officer to review/assess legal bills and costs
- NOTE: This means that an entire new procedural process is implemented.
Costs in a Passing of Accounts
The legal cost awarded to a beneficiary of a Passing of Accounts depends on the size of the estate and whether it is contested. The costs are paid by the estate.
For an uncontested passing of accounts that proceeds without a hearing the rules are under Tariff C https://www.ontario.ca/laws/regulation/900194/v14
TARIFF C SOLICITORS’ COSTS ALLOWED ON PASSING OF ACCOUNTS WITHOUT A HEARING
| (1) | ESTATE TRUSTEE | Amount of costs | ||
| Amount of receipts
Less than $100,000……………………………………………………………… |
$ 800 |
|||
| $100,000 or more, but less than $300,000…………………………………………………………………………………………………… | 1,750 | |||
| $300,000 or more, but less than $500,000…………………………………………………………………………………………………… | 2,000 | |||
| $500,000 or more, but less than $1,000,000………………………………………………………………………………………………… | 2,500 | |||
| $1,000,000 or more, but less than $1,500,000……………………………………………………………………………………………… | 3,000 | |||
| $1,500,000 or more, but less than $3,000,000………………………………………………………………………………………………. | 4,000 | |||
| $3,000,000 or more………………………………………………………………………………………………………………… | 5,000 | |||
| (2) | PERSON WITH FINANCIAL INTEREST IN ESTATE | |||
| If a person with a financial interest in an estate retains a solicitor to review the accounts, makes no objection to the accounts (or makes an objection and later withdraws it) and serves and files a request for costs, the person is entitled to one-half of the amount payable to the estate trustee. | ||||
| (3) | CHILDREN’S LAWYER OR PUBLIC GUARDIAN AND TRUSTEE | |||
| If the Children’s Lawyer or the Public Guardian and Trustee makes no objection to the accounts (or makes an objection and later withdraws it) and serves and files a request for costs, he or she is entitled to three-quarters of the amount payable to the estate trustee. | ||||
NOTE: A beneficiary can make a special request to the court asking for increased costs to Tariff C at least 5 days before the hearing.
NOTE: These are not realistic costs to the actual cost to a beneficiary and estate which are usually much higher.
Costs in a contested proceeding are the same as those that can be claimed in other proceedings and may be paid from the estate or possibly the executor personally. Whether a party will be awarded their costs is up to the court’s discretion. However, the guiding principle for costs awards in Ontario is that they are made to a successful party to indemnify them for certain expenses and services in relation to the proceeding and paid by the unsuccessful party.
NOTE: A costs award is not made until the conclusion of a proceeding. It may require a separate hearing.
Timing for a Passing of Accounts
It is nearly impossible to determine the length of time a contested passing of accounts can take. The size of the estate, the courts availability, and the additional procedures such as mediation or trial, all factor into this answer. It is possible that the matter is not resolved for more than 18-24 months.
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