The Biggest Estate Planning Mistakes Ontario Families Make (And How to Avoid Them)

The single most dangerous estate planning mistake Ontario families make is distributing estate assets before establishing true beneficial ownership, settling debts, obtaining federal tax clearance, and addressing statutory spousal and dependant claims. In Ontario, premature distribution exposes personal representatives to personal liability for outstanding liabilities and tax assessments up to the value of the distributed assets; retaining an experienced wills and estates lawyer in Ontario ensures that these strict preliminary stages are completed before funds are transferred.

When administering an estate, personal representatives (also known as estate trustees) routinely operate under misunderstandings regarding joint accounts, provincial probate taxes, and statutory limitation windows. These statutory obligations arise under Ontario provincial statutes and federal tax legislation, creating a strict administrative sequence that must be fulfilled before funds are distributed to beneficiaries.

Ontario Estate Administration & Risk Matrix

The following table outlines the statutory authorities and operational risks that define estate planning mistakes Ontario families face during asset distribution:

1. The Joint Account Fallacy: Resulting Trusts Under Pecore

One common estate planning mistake Ontario families make is assuming that placing an adult child’s name on a bank account or asset ensures automatic ownership through the right of survivorship. Holding legal title jointly does not resolve the question of beneficial ownership.

When an asset is transferred gratuitously (without valuable consideration), Canadian law applies the presumption of a resulting trust. In the leading Supreme Court of Canada decision, Pecore v Pecore, 2007 SCC 17 [Pecore], the Court established at paragraph 53:

“Of course, the presumption of a resulting trust means that it will fall to the surviving joint account holder to prove that the transferor intended to gift the right of survivorship to whatever assets are left in the account to the survivor. Otherwise, the assets will be treated as part of the transferor’s estate to be distributed according to the transferor’s will.”

Personal representatives must review banking instruments, determine the origin of the funds, and document the transferor’s true intention before excluding any joint asset from the general inventory of the estate.

2. Premature Asset Distribution and Creditor Exposure

Under Ontario law, estate property does not transfer to beneficiaries unencumbered. Pursuant to section 2(1) of the Estates Administration Act [EAA], real and personal property devolves to the personal representative as trustee, strictly subject to the payment of the deceased’s debts:

“All real and personal property that is vested in a person without a right in any other person to take by survivorship, on the person’s death, whether testate or intestate and despite any testamentary disposition, devolves to and becomes vested in his or her personal representative from time to time as trustee for the persons by law beneficially entitled thereto, and, subject to the payment of the person’s debts and so far as such property is not disposed of by deed, will, contract or other effectual disposition, it shall be administered, dealt with and distributed as if it were personal property not so disposed of.” (EAA, s 2(1).)

Where the deceased dies intestate (without a will), section 26 of the EAA establishes a specific timeline:

“Subject to section 53 of the Trustee Act, no distribution shall be made on an intestacy until after one year from the death of the intestate, and every person to whom in distribution a share is allotted shall, if any debt owing by the intestate is afterwards sued for and recovered or otherwise duly made to appear, refund and pay back to the personal representative the person’s rateable part of that debt and of the costs of suit and charges of the personal representative by reason of such debt out of the part or share so allotted to the person, thereby to enable the personal representative to pay and satisfy such debt, and shall give bond with sufficient sureties that the person will do so.” (EAA, s 26.)

This one-year statutory restriction applies specifically to intestate estates and remains subject to section 53 of the Trustee Act; it does not apply across all testate estates. Estate trustees must ascertain debts and maintain adequate reserves for contingent liabilities before distributing funds.

3. Conflating Estate Administration Tax with Federal Clearance

A frequent error among executors is confusing the provincial Estate Administration Tax (probate fees) with federal tax clearance. The provincial tax is governed by the Estate Administration Tax Act, 1998 [EATA], which states under section 2(1):

“A tax determined in accordance with this section is payable to the Crown in right of Ontario by the estate of a deceased person immediately upon the issuance of an estate certificate.” (EATA, s 2(1).)

Paying this provincial tax does not authorize distribution. Under federal law, subsections 159(2) and 159(3)(a) of the Income Tax Act [ITA] require a formal clearance certificate from the Minister:

“Every legal representative (other than a trustee in bankruptcy) of a taxpayer shall, before distributing to one or more persons any property in the possession or control of the legal representative acting in that capacity, obtain a certificate from the Minister, by applying for one in prescribed form, certifying that all amounts (a) for which the taxpayer is or can reasonably be expected to become liable under this Act at or before the time the distribution is made, and (b) for the payment of which the legal representative is or can reasonably be expected to become liable in that capacity have been paid or that security for the payment thereof has been accepted by the Minister.” (ITA, s 159(2).)

If the legal representative distributes property without this certificate, section 159(3)(a) dictates that “the legal representative is personally liable for the payment of those amounts to the extent of the value of the property distributed.” To navigate federal and provincial requirements without personal exposure, executors frequently retain the trust and estate practice at Pax Law Corporation.

4. Dependant Support Claims and Statutory Stay of Distribution

Under Part V of the Succession Law Reform Act [SLRA], individuals who qualify as dependants may apply for support from the estate. Section 61 outlines the statutory limitation period:

“(1) Subject to subsection (2), no application for an order under section 58 may be made after six months from the grant of letters probate of the will or of letters of administration. (2) The court, if it considers it proper, may allow an application to be made at any time as to any portion of the estate remaining undistributed at the date of the application.” (SLRA, s 61(1)–(2).)

This limitation period runs from the grant of probate or letters of administration, not from the date of death. Once a dependant brings an application and serves formal notice, distribution is stayed pursuant to section 67 of the SLRA:

“(1) Where an application is made and notice thereof is served on the personal representative of the deceased, he or she shall not, after service of the notice upon him or her, unless all persons entitled to apply consent or the court otherwise orders, proceed with the distribution of the estate until the court has disposed of the application. (2) Nothing in this Part prevents a personal representative from making reasonable advances for support to dependants who are beneficiaries. (3) Where a personal representative distributes any portion of the estate in violation of subsection (1), if any provision for support is ordered by the court to be made out of the estate, the personal representative is personally liable to pay the amount of the distribution to the extent that such provision or any part thereof ought, pursuant to the order or this Part, to be made out of the portion of the estate distributed.” (SLRA, s 67(1)–(3).)

Executors must identify potential support claims and observe the six-month post-grant period before finalizing disbursements.

5. Miscalculating Intestacy Shares and the Spousal Election

When an individual dies without a valid will in Ontario, the estate is not divided automatically into equal parts. Instead, Part II of the SLRA sets out a statutory framework. Under section 45(2), a surviving spouse is entitled to a “preferential share” out of the net property:

“Subject to subsection (3), where a person dies intestate in respect of property having a net value of more than the preferential share and is survived by a spouse and issue, the spouse is entitled to the preferential share absolutely.” (SLRA, s 45(2).)

The exact dollar figure of this preferential share is prescribed by regulation and must be verified against current in-force statutory instruments rather than historical figures. After the preferential share is accounted for, the residue is distributed depending on the number of surviving children under section 46:

“(1) Where a person dies intestate in respect of property and leaves a spouse and one child, the spouse is entitled to one-half of the residue of the property after payment under section 45, if any. (2) Where a person dies intestate in respect of property and leaves a spouse and more than one child, the spouse is entitled to one-third of the residue of the property after payment under section 45, if any.” (SLRA, s 46(1)–(2).)

In addition, personal representatives must recognize the election rights available under the Family Law Act [FLA]. Under section 6 of the FLA, a surviving spouse can elect between receiving their entitlements under the will or intestacy rules, or receiving an equalization of net family property under section 5:

“When a spouse dies leaving a will, the surviving spouse shall elect to take under the will or to receive the entitlement under section 5. When a spouse dies intestate, the surviving spouse shall elect to receive the entitlement under Part II of the Succession Law Reform Act or to receive the entitlement under section 5… The surviving spouse’s election shall be in the form prescribed by the regulations and shall be filed in the office of the Estate Registrar for Ontario within six months after the first spouse’s death. If the surviving spouse does not file the election within that time, he or she shall be deemed to have elected to take under the will or to receive the entitlement under the Succession Law Reform Act, or both, as the case may be, unless the court, on application, orders otherwise.” (FLA, s 6(1)–(2), (10)–(11).)

6. Inadequate Accounting and Estate Trustee Record-Keeping

An estate trustee is bound by fiduciary obligations to maintain accurate records of all assets, liabilities, receipts, and disbursements. In Roman Krentz Estate, 2011 ONSC 1653 [Roman Krentz], the Ontario Superior Court of Justice confirmed this duty at paragraph 133:

“However, the duty of the Trustees is to keep records current and available so that the beneficiaries can be properly informed of the status of things as the administration of the estate proceeds.”

While the court in Roman Krentz addressed accounting records in the context of fixing compensation and did not impose a singular universal reporting schedule, the principle is unambiguous: failure to keep organized accounts invites formal objections, delayed distributions, and disputes regarding trustee indemnification.

Pre-Distribution Checklist for Ontario Estate Trustees

• Review original wills, codicils, and title registrations carefully.
• Do not exclude joint accounts from the estate without evidence rebutting the presumption of resulting trust under Pecore.
• Ascertain all outstanding, contingent, and administration debts pursuant to the Estates Administration Act.
• Differentiate between provincial Estate Administration Tax and federal clearance certificates under section 159 of the Income Tax Act.
• Track the six-month limitation window for dependant support claims under the Succession Law Reform Act starting from the grant date.
• Review spousal election timelines under section 6 of the Family Law Act (six months from date of death).
• Maintain dedicated ledgers for receipts, costs, and distributions to fulfill the disclosure standards reaffirmed in Roman Krentz.

Frequently Asked Questions

What is the difference between an Estate Administration Tax payment and an ITA Section 159 certificate?

Estate Administration Tax is paid to the Crown in right of Ontario upon the issuance of an estate certificate under provincial law. An ITA section 159 clearance certificate is issued by the Canada Revenue Agency and confirms that all federal income taxes attributable to the deceased have been satisfied or secured.

Can a personal representative distribute funds if an SLRA dependant application is served?

No. Under section 67(1) of the Succession Law Reform Act, once an application is made and notice is served on the personal representative, distribution must cease until the court disposes of the matter, unless all entitled parties consent or the court permits an advance.