Hello again dear readers, It has been a long time since my last blog post, as the office got very busy with the real estate rush and then, well, vacation was in order.
With regards to real estate, I noticed that a lot of people took advantage of the extremely low interest rates being offered by the Banks. I also saw a bit of a surge in the sale of properties held in undivided co-ownership (hence, the previous blog post on undivided co-ownership). I am curious to see how the real estate market will develop in the coming years.
For today’s blog post, however, I wanted to veer away from the real estate topics and focus on something that has touched most people’s lives at one point or another – Estate Liquidation. In essence, when a person passes away, the heirs become owners of the deceased person’s assets immediately. When we speak of Estate Liquidation, we refer to the operations that must be completed by the Liquidator (a.k.a. Executor) of the estate so that all debts are payed and the heirs cannot be held personally liable for any of the Deceased’s debts. Here are some key operations to take into consideration when dealing with the liquidation of the estate.
1. Who is the Liquidator (aka Executor) to the Estate: This answer is two-fold, depending on whether or not the Deceased did or did not have a Last Will and Testament. In the event the Deceased passed away having left a Last Will and Testament, he/she would have designated the person(s) in charge of liquidating his/her estate, and will have also defined his/her powers with regards to the assets (i.e. whether or not the Liquidator could sell the assets of the estate, and under which circumstances). In the event the Liquidator is not named in the Will or if the Deceased died without a Will, the law states that the legal heirs (usually the children and spouse of the Deceased) exercise the charge of Liquidator to the estate or they can nominate someone, as long as the decision is unanimous. In the latter case, the Liquidator’s powers with regards to the assets of the estate are defined in Quebec Law (the Civil Code of Quebec). This also becomes difficult in the event the children of the deceased, also legal heirs to the estate, are minors – they cannot exercise their civil rights, so it would be their “tutor” (their surviving parent) who would exercise their civil rights. The problem here lies in the fact that, in essence, it would be a conflict of interest for the surviving parent to nominate someone or to exercise the charge of Liquidator alone (and as a representative for her children). In most cases, the court would need to be petitioned to nominate a Liquidator to the estate, which can be a costly procedure – another reason for which most people should consult their notary in order to draw up their Wills, but I digress.
2. What if the Estate is insufficient to pay off all of the Deceased’s debts?: Once you have taken stock of all of the deceased’s person’s assets and debts (in order to do this, you will need to do some detective work and gather all bills, policies, account statements, etc. in order to get a really clear picture of what the estate is comprised of), you will then be in a position to know whether or not there are enough assets in the estate to pay off the debts. In other cases, you will know right away whether or not the estate is sufficient to pay off all debts. In these situations, it would be in your best interest to renounce to the estate. In order to renounce to an estate, you must consult with a Notary, as a Deed of Renunciation is only acceptable when it is done in notarial form, according to Quebec Law. By renouncing to the estate, you can no longer be liable for the Deceased’s person’s estate, whether you were designated by a Will or by law. Furthermore, by law, a renunciation must be completed six (6) months after the date of death (with a 60 day grace period from the date the inventory is completed) in order for it to be valid. This is extremely important as you will be deemed to have accepted a succession if no renunciation has been made during this period. Finally, it is extremely important not to pose any acts that might be considered a “deemed acceptance” (i.e. transferring ownership of the deceased’s car) – before doing any such acts, you should consult with your notary in order to be certain of the consequences of your actions. For more information on this subject, please consult the following web page:http://www.revenuquebec.ca/en/bnr/snr/renoncer.aspx
3. What is the point of an inventory and do we really have to do one? An inventory is a list of all of the Deceased’s assets and liabilities. Once the inventory has been completed, a notice of Inventory is published at the Register for personal and movable real rights (RDPRM) as well as in a local newspaper (local to the Deceased’s person last known residence). The point here is not to make the actual inventory public. The reason for publishing the notices is to provide creditors with information (address where the inventory is being held) in order to consult the inventory. Quebec law does give successors the option of discharging the Liquidator from his obligation to establish an Inventory, in the event it is known that the succession’s assets far outweigh its debts. Many people decide to proceed in this manner, to save time and costs to the estate, but the danger in this is that, in the event there are any unknown creditors of the estate that make a claim in the coming years, these said creditors will have the right to go after the heirs’ personal assets, above and beyond whatever you may or may not have received from the succession. So, just to recap and for purposes of clarity: with an inventory, your personal assets are safe, but without an inventory, your personal assets may be subject to seizure by estate creditors.
4. Taxes – do we need to file and are there any estate taxes we need to pay? In Canada, income taxes need to be filed for a deceased person for the year of his/her death. Usually, the liquidator takes care of filing the taxes and he/she/they will usually consult an accountant. That having been said, estates are not taxed in Canada, regardless of whether or not the deceased person left a will. What is extremely important is that the Liquidator of the estate, before doing the final distribution of what is left in the estate to the heirs, obtains certificates of clearance from both the provincial and federal governments. These certificates ensure that there are no taxes owing to both governments and should be the final (or one of the final) steps in the liquidation process. This is not a difficult process – the relevant forms need to be filled in and sent out to Revenue Quebec and Revenue Canada. For more information, please consult the following pages: http://www.revenuquebec.ca/en/citoyen/situation/deces/declar_defunt.aspx http://www.revenuquebec.ca/en/citoyen/situation/deces/certificat.aspx http://www.cra-arc.gc.ca/tx/ndvdls/lf-vnts/dth/clrnc-eng.html
There are many more facets involved in the liquidation of estates, but alas, I cannot go over them all in one blog post. My main goal here was really to give a few guidelines and focus on, what I believe to be, the most important aspects that can have an effect on the heirs to an estate.
Have a great week everyone!
Anna Kamateros, notaire, Notary
B.S.W., LL.B., D.D.N.
Disclaimer:This post does not constitute legal advice, nor does it establish a notary-client relationship. If you require any legal advice, please feel free to contact the Mtre. Anna Kamateros, Notary, directly.