Sometimes heirs are frustrated by the amount of time that it can take to settle an estate in Canada. Sometimes the delays are legitimate and unavoidable.
At other times, executors are dragging their feet, especially if they currently have use of certain properties or assets that they’d like to continue using. Learn what is and is not a legitimate delay, and how to handle a delay that you think might be unreasonable.
How long can an estate remain open in Canada?
Believe it or not there is no deadline on how long an estate can remain open. Every estate is different and comes with a wide variety of requirements. There are some tax requirements which executors must abide by.
However, there is a rule known as the “executor’s year rule.” In general, an estate should be wrapped up within a year of the descendant’s death. However, if the executor can show they are keeping the process moving in good faith then the courts will generally allow them to proceed.
How long does an executor have to notify beneficiaries?
The executor should notify beneficiaries within three months after the Will has been filed in probate court. Usually it takes less time than that: we’ve seen it happen in one to two months in many cases.
There is no set schedule for how often an executor has to notify beneficiaries on the progress of the estate. It’s a good idea to ask the executor what his plans are at the start of the process, and you do have the right to call for updates.
Is there a time limit to settle a will?
There is no strict time limit to settle a will, but judges expect to see reasonable action taken on the will, and the courts expect most estates to settle within one year. There are good legal reasons why this may not be possible.
For example, on heir is 16 years old. The will stipulates that they may not inherit a property till they turn 21. In this case there’s no good way to make that estate close any faster than 5 years. The heir has to wait until they reach the age as stipulated, and the executor can’t do much about that.
How long does an executor have to distribute funds?
It usually takes six to twelve months to distribute funds after probate. Sometimes beneficiaries themselves can slow this process down. For example, the executor may have to obtain signed documents from each beneficiary. One beneficiary may drag their feet, slowing down the entire process.
Can the executor take everything? Can the executor do whatever they want, or cheat beneficiaries?
Is the executor living in the house you are supposed to inherit? It’s been known to happen. If the one year period has passed you can bring a legal challenge against the executor however. The courts can either force the executor to get moving on resolving the estate or remove the executor, replacing that person with someone else.
Can an executor refuse to pay beneficiaries, or release inherited property to them?
The executor has a fiduciary responsibility to the heirs. They cannot take everything unless they themselves are the sole beneficiary of the will. They are supposed to execute the decedent’s wishes. They cannot refuse to pay beneficiaries unless there is a provision in the will that blocks the payment.
If you believe your executor is acting in bad faith, you can take your beneficiary to court.
Does an executor have to give an accounting to beneficiaries?
Yes. The executor must maintain a detailed record of debts and expenses paid, and can be held accountable for malfeasance if they misuse or misappropriate estate funds.
How does one take possession of inherited property in Canada?
The executor will take care of getting the title transferred to you, and should provide you with a date, time, and place to pick up your keys and sign any necessary paperwork.
What are your options when you inherit property in Canada?
You can move into the property, rent it out, use it as a vacation home, or sell it. There will be a lot to consider, from the condition of the existing mortgage to the condition of the property itself.
Each move you make will have financial implications for you and your family. You should consult with your real estate attorney and your accountant before making any decisions.
What happens when you inherit a house with siblings in Canada?
Inheriting a home with siblings can be fraught. The situation can grow emotional and every sibling might want something different. Questions may arise such as who gets to live in the house, if anyone, whether or not the home should be sold so the proceeds can be split, and more. Siblings might also choose to rent out the house and split the rental profits equally.
Often one sibling will offer to buy out the other. This can be done even if the sibling doesn’t have a large cash payment to offer: a promissory note can allow the sibling to pay their share over time.
If you and your siblings absolutely cannot agree on what to do you can sue for partition.
This action asks the court to force the sale of the home. The process is expensive, and can cut into your profits. It can also damage your relationship with your siblings. In general it’s usually better to come to a mutually agreeable arrangement if you can. Consider who needs the property the most, who is most able to meet financial obligations on the property, and get your attorney to draw up a fair agreement.
What kinds of taxes will you have to pay when you inherit property in Canada?
Fortunately, you won’t have to pay estate taxes, but you will have to take over any expenses associated with the property. If you sell the property at a profit you’ll have capital gains taxes. If you keep the property you’ll be responsible for property taxes. If you rent it out, you’ll need to pay taxes on rental income. If you decide to live in the property you’d pay homeowner’s property taxes just as if you’d bought the home.
Selling an inherited house comes with capital gains taxes but selling a purchased house does not. Capital gains is the difference between the fair market value of the property and the price when you received the property. It amounts to 50% of this difference (not 50% of the value of the property). Thus if the property is worth $200,000 and you sell it for $240,000 then you’ll own $20,000 in capital gains taxes, which might be offset by other tax breaks and rebates.
Meet with your attorney and a tax advisor to determine how best to manage your tax liability and your overall obligations in light of your unique financial situation.
Having trouble getting your estate settled in a timely fashion?
Call (780) 474-7777 to make an appointment with our experienced estate planning attorneys today.