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Disclaimer: This article on estate administration bonds is intended for the purpose of providing information only. It is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
We have noted in other articles an estate trustee’s responsibilities. In this article, we will talk about one requirement that you may face when you probate an estate in Ontario.
(If you are appointed as an estate trustee, you may be interested in this article about your responsibilities. If you are preparing your estate documentation, you may enjoy this article about how to select an estate trustee.)
What is an administration bond?
An administration bond is a type of surety bond required in Ontario when someone becomes an estate trustee for a deceased person’s estate. Its purpose is to protect the beneficiaries and ensure that the estate trustee fulfills their duties properly. Generally, the bond is at least double the value of the assets of the deceased.
When is an administration bond required?
Ordering an administration bond is at the discretion of the courts, but a judge will typically require an administration bond in these scenarios:
- There is no will;
- There is a will, but an estate trustee was not named and one needs to be appointed; or
- A foreign estate trustee is appointed.
When referring to a “foreign estate trustee”, the courts will not only apply that definition to someone who lives outside of Canada. It can also be applied to estate trustees that live outside of the province. (Read below for how this can affect your decisions when selecting an estate trustee.)
The Estates Act sets out some situations where an administration bond is not required, including:
- In cases where the Government of Ontario or any Ministry, Provincial Commission, or Board established under legislative Acts submits an application to act as an estate trustee;
- There is no will, but the surviving spouse is applying to be an estate trustee and the value of the estate is less than the preferential share and an affidavit sets out the estate’s debts; or
- It is a small estate (meaning a total value of less than $150,000) and none of the beneficiaries are minors or incapable (as defined by the Substitute Decisions Act, 1992).
Waiving the requirement for an administration bond
Most people do not have easy access to the amount required by an administration bond, so you will want to apply for an order waiving the requirement for an administration bond.
Previously, this was a simple matter that could be handled over the counter with the court registrar. However, as of July 2022, the procedure has changed. A full motion is now required, and it is more likely to require a hearing before a judge. This is a more involved (and more costly) procedure than before.
If you are looking for an order to dispense with the bond requirement, you must convince the court that the protection that a bond provides to any creditors and beneficiaries is not required.
In some cases, an application to waive an administration bond is unsuccessful, meaning the court will still require it. What are your options in that case?
You can turn to insurance companies that offer bond insurance policies. From the court’s point of view, these insurance policies serve as the equivalent of a bond, eliminating the need to come up with the full cash amount.
It is typically a straightforward application that resembles a credit check, where the insurance company assesses the applicant’s financial standing. There is a one-time premium that you must pay. However, this is considered a proper estate expense. Therefore, the estate trustee can be reimbursed once they receive a certificate of appointment.
Choosing your executor
Knowing that an administrative bond is more likely when your estate trustee lives outside of Ontario can impact who you appoint. It may make sense to select someone who lives locally rather than someone who is geographically distant or transient. For example, this might include a young adult child with an inclination for a nomadic lifestyle.
Navigating estate law with Beeksma Law
At Beeksma Law, we know that estate law can be complex, especially when it comes to requirements like administration bonds. Our team of experienced estate lawyers is here to guide you through the probate process in Ontario with confidence and ease.
Whether you’re stepping into the role of an estate trustee or diligently preparing your estate documentation, we’ve got you covered. We offer comprehensive services tailored to your specific needs. This includes ensuring you understand the ins and outs of administration bonds and how they impact you and the beneficiaries. With our expertise, we’ll find the best solution to protect your interests and streamline the estate administration process.
Reach out to Beeksma Law today. Let us be your trusted partner in managing your estate matters – we’re ready to assist you every step of the way!