The Estate Administration Act was proclaimed in force June 1st, 2015. It replaces the Administration of Estates Act. As such, the new Act applies to the administration of all estates, applications and grants. For many seniors, whose Wills stipulate that they will act as their spouse’s executors, this is an important new law. There will be advantages and disadvantages with this transition rule. Importantly, it is possible to apply to the court to have the Act not apply; to rely on the prior Act; or to modify the application of the Act.
The definition of a personal representative has changed
An executor named in a Will who does not apply for a grant of probate must still provide notices to beneficiaries, family members, a spouse, adult interdependent partner, former spouses and adult interdependent partners, and and the Public Trustee where applicable.A personal representative includes an executor, administrator and judicial trustee, as well as a personal representative named in a Will, whether or not a grant is issued. This latter point is of particular importance! The new Act creates a process to administer an estate without a grant of probate of the Will. For many older adults, whose assets such as their home may be jointly owned, probate may not be necessary. However, there are many reasons why a grant of probate may still be required. What is important to note is, whether a Will is probated or not, an executor has the same responsibilities in administering the estate.
Duties of a personal representative
These duties underscore the fiduciary role of a personal representative in plain language and require a personal representative to distribute the estate as soon as possible. In addition, a professional personal representative is required to exercise a greater degree of skill than a layperson personal representative.
The requirement that a professional personal representative is required to exercise a greater degree of skill than a layperson personal representative is a codification of the duty developed in the case law for a professional personal representative. The duties of any personal representative are:
- to act honestly and in good faith;
- in accordance with the testator’s wishes and the Will, if a valid Will exists; and
- with the care, skill and diligence a reasonably prudent person would exercise in similar circumstances.
Core tasks of a personal representative
It is helpful to older adults that the Act clearly identifies that the core tasks of a personal representative are to:
- identify the assets and liabilities of a deceased;
- administer and manage the estate;
- satisfy the debts and obligations of the estate; and
- distribute and account for the administration of the estate as soon as reasonably practicable.
A Schedule in the Act provides helpful examples that an older adult can check to gain an understanding of what is involved in administering an estate.
A personal representative includes an executor, administrator and judicial trustee, as well as a personal representative named in a Will, whether or not a grant is issued. This latter point is of particular importance! Many of the provisions in the Schedule in the Act are familiar, as they also appear in Schedule 1, Table on Legal and Personal Representative Compensation in the Alberta Surrogate Rules. However, some of the provisions in the Schedule under the Act are new, such as identifying the nature and value of online accounts, creating and maintaining records, and regularly communicating with beneficiaries.
An executor named in a Will who does not apply for a grant of probate must still provide notices to beneficiaries, family members, a spouse, adult interdependent partner, former spouses and adult interdependent partners, and the Public Trustee where applicable.
This notice requirement is functionally equivalent to what one does now when applying for a grant of probate or administration. The more informal manner the Act provides for now means the executor of a Will does not have to serve anyone, but give the required notice in a manner that is likely to bring it to the attention of the intended recipient. There are suggested forms in the Alberta Surrogate Rules.
An application may be brought to the Court if a personal representative fails to perform a duty or core task or provide notice
But when a Will has many gifts of various kinds of assets and not enough cash to pay the debts, there may be a problem.The Act does not say who can bring the application, but presumably it is a beneficiary or the Public Trustee. This is in addition to other applications already allowed for elsewhere in the Act, the Alberta Surrogate Rules or the Trustee Act.
A new provision provides that a personal representative stands in the shoes of the deceased and has all the same powers as the deceased, but only to administer the estate subject to the Will and the Act
A personal representative has the authority to:
- take possession and control of the deceased’s property;
- do anything in relation to the property that the deceased could have done if he or she were alive and of full legal capacity; and
- do all things concerning the deceased’s property that are necessary to give effect to any authority or powers vested in a personal representative.
This part of the Act replaces all kinds of provisions in the former Administration of Estates Act as well as other Acts.
New rules when assets gifted in a Will have to be used to pay the deceased’s debts
Statutory marshalling rules replace the common law marshalling rules when the property in an estate is insufficient to pay all of the deceased’s debts and make the specific gifts to the beneficiaries in the deceased’s Will.
This is not the same as when an estate is bankrupt. Here, there are enough assets to pay the debts; the issue is the order in which the assets have to be realized upon to pay the debts.
If there are just residuary gifts in the Will (assets less debts), then it is not an issue. But when a Will has many gifts of various kinds of assets and not enough cash to pay the debts, there may be a problem. Historically, this was an extremely complicated area of the law that was not very well understood. It is unlikely anyone would make an attempt to apply the old rules unless a beneficiary is affected differently, depending on which rules are applied.
This in turn raises the issue of whether a personal representative has to tell a beneficiary of the difference in applying these rules, since as noted above, it is possible to make an application to the court to apply the old rules.
All provisions relating to the trusteeship of a minor’s estate have been moved to the Minors’ Property Act.
Prior to the proclamation of the Estate Administration Act, some of the law dealing with minors’ property was in the old Administration of Estates Act. It made sense to put the law in one place – the Minors’ Property Act. This is a special area of the law that requires careful consideration should a minor have an interest in a deceased’s estate. But what is worth reiterating is that parents are not automatically the trustees of their minor children’s property.
Anyone and perhaps especially an older adult who is appointed as an executor in a Will or who is considering applying to be appointed as the administrator of a deceased person’s estate where there is no Will, should familiarize themselves with the legislation. The new simplified, plain language content should make a daunting task a bit easier. And always, seek professional advice as required.