Accounting to beneficiaries

Whether you’re an executor or administrator, under the law you’re called the personal representative. One of your duties is to be ready at all times to account to the beneficiaries and to any others who have an interest in the estate, such as unpaid creditors.

This duty to account involves:

• Accounting to beneficiaries regularly. This doesn’t mean you have to keep a set of complete accounts at all times. But you should always keep track of what’s coming in and going out of the estate. 

You can do this by taking notes in a daily journal. And of course, keep and organize all receipts and other relevant records. This will allow you to produce full accounts for beneficiaries, as needed. 

A set of accounts is generally prepared when the personal representative proposes an interim or final distribution. However, it’s a good idea to give brief updates to the beneficiaries throughout the administration, especially if a major step has occurred (such as selling a home).

• Responding to reasonable requests for information. Be prompt, and give complete and accurate answers. How much information you owe to someone will depend on who they are in relation to the estate. Some onerous requests may not justify the expense of satisfying them.

The duty to account is a serious responsibility. If you don’t do your job properly, you could find yourself out-of-pocket for a mistake, discrepancy, or undocumented transaction.

“I’m acting as executor of my Mom’s estate. Her cousin Eddie is to receive a $5,000 gift under the will. Eddie keeps pressing me to give him every little detail about what’s going on with the estate. I am simply going to show Eddie that his specific gift will be paid from Mom’s assets. If I do this, I will satisfy my duty to account to him.”

– Jay, Port Moody, BC

In this context, informal accounts refers to any set of accounts you prepare for beneficiaries that’s not put before the court. 

There’s no set way that you must present your informal accounts to beneficiaries. (Informal accounts don’t need to be prepared with court form P40.) But your accounts should give a clear and full picture of the financial position and progress of the estate. A typical accounting will show:

• the opening balance of assets and debts

• an account of all the money and property you’ve received and paid out, including expenses you’re claiming

• an account of the assets still in hand, including where they are held and how much they are worth

• a reconciliation of the estate bank account balance (that is, comparing transactions to supporting documents and resolving discrepancies) 

• any fee you’re planning to claim for your work

Depending on the stage of administration, you should also include the past and proposed distribution of the estate.

Remember, you’re preparing the accounts for the benefit of others. Beneficiaries should easily be able to understand them. Be clear and specific when describing each transaction. In a cover letter, you could:

• summarize the steps you took to do the accounting

• briefly explain how the administration of an estate works

• identify some of the challenges you faced in the administration of the estate

You can avoid going to court if all of the beneficiaries approve and consent to your accounts in writing. If everything’s in order, this is usually the best option for everybody. Going to court drains estate funds and delays the distribution of the estate. 

Asking beneficiaries to approve the accounts

If you want to ask a beneficiary to approve your accounts, you’ll need to send them an accounting (see the above section on preparing informal accounts). Typically, this is done when you’re ready to distribute the estate, although it may be done at other times. 

You’ll also have to get a consent and release form signed by each beneficiary. In it, ask them to:

• Acknowledge that they received a copy of the final estate accounts. 

• Approve the accounts, including any fee you’re planning to charge for your work.

• Waive the formal passing of accounts. (You’re asking them to approve the accounts instead of you having to get court approval.) 

• Release you from any legal claims around your handling of the estate.

Here’s a template consent and release form. You can use it as a starting point to draft your own. You might also want to write a cover letter. Highlight any other facts you think the beneficiary should know before signing.

When you can’t get consent

Sometimes a beneficiary cannot or will not give you the consent you’re seeking. If this happens, you’ll need to get your accounts approved by the court.

You cannot get a release and consent from a minor beneficiary or their guardian. Your accounts will have to be approved by the court.

Every personal representative has a duty to account. This might involve asking the court to approve your accounts, but as explained above, it doesn’t have to. 

The formal process of asking the court to approve your accounts is called passing accounts. This step is required when a beneficiary cannot or will not approve your accounts. Here are some common situations where this arises:

• A beneficiary doesn’t agree with how you’ve handled the estate and you haven’t been able to resolve the issue informally. 

• There’s a beneficiary whom you haven’t been able to locate.

• Some of the beneficiaries are minors. A guardian can’t approve accounts on behalf of a minor child, and neither can the Public Guardian and Trustee. You may be able to have a summary passing by the court, without having to be referred to the registrar, if all of the adult beneficiaries agree to the accounts and the court is satisfied.

If you are passing accounts before the court, you must do so within two years of receiving the grant of probate or grant of administration.

Below, under pass the accounts, we walk you through the steps involved.

With someone else calling the shots, a beneficiary can feel that their money is out of their hands. As personal representative, establishing a relationship built on trust and transparency will make your job easier. Beneficiaries are happiest when they know what’s going on. And they’ll be less likely to question your decisions.

Here are some things you can do to help avoid disputes and time in court down the road:

• Communicate early and often. Most disputes are a result of poor communication. Aim for full transparency. Explain your actions in the context of the rules of estate administration. As well, inform beneficiaries when very important decisions have been made. 

• From the start, set expectations for how disputes will be resolved. These can range from simple arrangements to formal mechanisms.

• Make sure the accounts are complete and easy to understand. Clearly describe what each deposit and withdrawal is about. For example, a beneficiary is likely to question a large expense that’s just noted as a “cost.” 

• Consolidate all estate funds into one bank account. This will make it easier to track deposits and withdrawals. Be sure not to mix your own personal money with the estate money.

• Keep proper records. Keep receipts for all expenses and carefully file bank statements. If you’re planning to charge a fee for your work, take detailed notes. Describe each task, time spent, any unusual problems, and the results achieved. 

• If there’s a will, follow its instructions. Beneficiaries will question decisions that can’t reasonably be referenced back to the will. For example, a random disbursement or an unexplained preference for one beneficiary will likely raise concerns. 

• Keep your costs reasonable. You have an obligation to protect the estate assets. This includes managing the estate money carefully. Expenses shouldn’t be disproportionate to the size and complexity of the estate. 

“When I received the estate accounting from my brother, there were so many red flags. He chartered a helicopter to visit Mom’s investment property in Whistler. This just seemed ridiculous to me! And he paid his accountant friend $25K. It doesn’t make sense. Mom’s estate is simple — just the property and some cash at the bank. There’s no way I’m approving these accounts!”

– Cecelia, Vancouver, BC

The formal process of asking the court to approve the accounts is called passing accounts. (As explained above, you can avoid going to court if all of the beneficiaries approve and consent to your accounts in writing.)

If you have to pass your accounts, consider talking to a lawyer. Getting legal advice will be important if the estate is large or complex or if there are highly contentious issues at play. A lawyer can guide you through the court process. They can also help to define the issues in dispute. This will better allow you to address the beneficiaries’ concerns. 

Either you or a beneficiary can initiate the process to pass accounts. If you’re taking this on, start by filing a notice of application in form 32 with the probate registry within the existing probate file. You should seek that the accounts be passed before the registrar and that the registrar review the accounts and determine the executor fee. If there are other beneficiaries, ask the registrar to make directions about service on them.

As a personal representative, your application must be supported by two documents:

• affidavit in support of application to pass accounts in probate form P38, and

• statement of account affidavit in probate form P40.

You must give notice of the application to all of the people who may be affected by the orders you’re seeking. Include copies of the completed forms when you send the notice. Note that these forms will need to be sworn or affirmed.

You must present your formal accounts in probate form P40. The form refers to two dates:

• The commencement date is usually the date of death. If the estate has previously filed accounts with the court, it’s the last day covered by the most recent accounts.

• The effective date is the last day covered by the statement of accounts.

The form prompts you to describe:

• assets and liabilities at the commencement date and the effective date

• income and capital transactions

• all distributions made and anticipated to be made out of the estate

• details of any payment you (or any other personal representative) plan to claim

You must include any other details or information the court may require or that you consider relevant.

The venue and procedure for passing accounts will differ depending on the issues at hand. For example, the accounts can be approved on a summary basis. This means you can submit written evidence instead of attending court. This is typically how accounts will be passed if there’s a minor beneficiary (and everyone else consents).

If further inquiry is needed, the court may refer the matter to a registrar. Here's information on the process. If this happens, you’ll have to present your accounts before the registrar. You’ll be called as a witness. You may be cross-examined by the beneficiary (or their lawyer). Other witnesses may be called. In complex or highly contentious matters, the court may make the final order.

If your accounts are in order and all disputes have been resolved, the court will issue an order approving your accounts. The order confirms that you’ve properly performed your duties as personal representative.

Passing your accounts brings you a step closer to being able to distribute the remainder of the estate. Before you do, you’ll want to be sure to pay off all debts, expenses and taxes. All claims against the estate should also have been resolved.

Your accounts don’t have to be perfect. But they must be complete and accurate to the standard of a person with ordinary diligence. The court can decline to approve your accounts if they’re found to be lacking. It can also make any order or give any direction it considers appropriate.

If your accounts contain unexplained discrepancies or have other shortcomings, you could be ordered to re-write them. You may be ordered to pass them at a later date, or the court may simply not allow some of your claimed expenses to be paid from the estate money. 

A personal representative can also be made to pay damages or compensation to the beneficiaries (for example, when the personal representative has wrongly taken estate money for themselves). If there’s been deliberate misconduct or more serious errors, the court could replace the personal representative, although this is typically a different application.

Normally, the personal representative’s costs to pass the accounts will be covered by estate funds. Ultimately though, it’s at the court’s discretion. If your actions have been grossly incompetent, negligent or dishonest, the court could deny your costs.