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Executors have a few options when the estate has outstanding bills and no cash to cover probate fees. Find out what they are.
How does my husband request a loan to begin probate costs? Who and where would he turn to? No money is in the bank account, but the deceased does have a house and property, as well outstanding bills.
—Bonnie
I assume that your husband is named as executor of the estate of the deceased, Bonnie. An executor (or estate trustee) is typically named in a will, but it can apply to the court to be appointed if there is no will.
It is the responsibility of the executor to pay all debts (including funeral and testamentary expenses), inheritance (plus succession duties), taxes, as well as other related liabilities of the deceased in Canada and abroad. If the estate has more liabilities than assets, the estate could be considered insolvent.
Creditors are to be paid in a particular order, and the executor can be personally liable for not adhering to the correct sequence. That said, neither the executor nor the beneficiaries needs to personally pay off the debts of the deceased if the estate is insolvent.
I assume the estate in question, Bonnie, has more assets than liabilities, but there is just a bit of a cash crunch, particularly related to costs that need to be paid imminently.
If an estate includes real estate or cash or investments at a financial institution, typically the executor must apply for a grant of probate to prove they have legal authority to deal with these assets. In order to obtain probate, an executor must typically pay the probate fees or estate administration tax as part of the probate application.
Fortunately, an executor can request funds from a bank to pay expenses like probate fees before obtaining probate. The same advances can be made for other bills, like the outstanding debt you’ve mentioned.
However, since the estate your husband is handling has no cash and only real estate, Bonnie, it does make things a bit more difficult. He may be able to approach the beneficiaries of the estate to ask them to front the cash required to pay the bills and probate. These funds would be reconciled and paid back to them before determining their share of the estate.
Your husband could also pay the expenses himself and, likewise, could reimburse himself once cash becomes available.
Both the beneficiaries and your husband may feel comfortable doing this given the real estate will eventually be sold. But it does, of course, require up-front cash.
There are also lenders who provide inheritance loans or probate advances to those in your husband’s position, if the beneficiaries aren’t able to help, and he does not want to provide funds himself. These includes BridgePoint Financial, First Inheritance Financial and Lionsgate Financial Group.
Depending on the deceased’s province of residence, where the property is located, how saleable the real estate is and the complexity of the estate, it may take only a few months to wind up the estate. Or, it could take much longer. Eventually, the real estate’s sale proceeds from can be used to pay off any money advanced or borrowed to pay off the bills and pay the probate fees. But the first step to settling the estate and being able to sell the real estate is to apply for probate. Your husband will not be able to enter into an agreement of purchase and sale for the real estate otherwise.
In summary, Bonnie, your husband has a few options to pay for these costs. The various provincial Ministry of the Attorney General websites have information and forms required to carry out his executor duties. He can also seek out professional support.
Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.
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Thank you for writing about this common problem that doesn’t receive nearly enough publicity. When I was executor, the deceased’s bank didn’t warn me that they would only pay the vendors directly. I paid the funeral expenses, income taxes, probate fees, and legal fees out of my own funds. Then when I requested reimbursement from the bank, they refused. I had to wait a year for probate before I could reimburse myself. Even if I’d known the bank wouldn’t reimburse me, it would have been very inconvenient to take every bill to the bank to have them pay them, as there was also a co-executor who lived in a different city. The lenders mentioned above charge very high interest rates. Luckily, I was able to borrow from my own HELOC at a low interest rate. When people make their wills, they should make plans to pay these estate expenses. And executors need to be educated about this issue.
I have a (somewhat) related question (in Ontario): when the overwhelming majority of a deceased person’s assets are in direct investment accounts, will bank Estate departments allow an Executor to issue “Sell” orders to preserve the capital prior to a grant of probate? I’m in a situation as an Executor where I strongly feel that I have a duty to protect the heirs’ inheritances, and converting the stock into cash (which wouldn’t be touched) is the best way to do this. My fear is that the share prices are going to drop during these volatile times in the market, and the letters of probate are likely several months away.
Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
Strange how outdated & uneducate lawyers are, once they have that ticket time to stop thinking, thats the secretaries job.. Probate money can be gotten by a simple act called the EAT act that allows the executor to extract funds from investment accounts to cover probate. In my case my sick brother liquidated any cash & bank accounts. Then he created an action against me because I had no money for probate. Sad part is the court waisted lost of time & money trying to dethrone me as executor but supported the liquidating of my moms accounts because it’s easier than doing any discovery. I have no faith in our judicial systems, all inside traders.Oxford County has a corrupt court system. Change my mind!