A Personal Representative’s Duty to Account
When a person passes away, their will typically names someone responsible for carrying out the will’s instructions. In the completion of this responsibility, a personal representative – sometimes called a trustee, executor, or administrator – has a “duty to account”. This means that they must create an inventory and valuation of the deceased’s assets and debts. Invoices, receipts, and other relevant documents make up the inventory of all capital and expense and income transactions.
The personal representative must account to each person who has an interest in the estate. This entails giving information that a party “reasonably requires”. For example, someone who has been gifted cash only needs to know if the estate contains sufficient assets to fund this gift. The personal representative must maintain accurate books and be ready to account at any given moment, even if the beneficiaries are happy to get their share of the estate and never invoke their right to a formal “passing of accounts”.
What Is a Passing of Accounts?
The approval of the estate’s accounts is one of the final steps in the estate administration process. When the personal representative is ready to make the final distribution of the estate, he or she must send the accounting to each beneficiary within two years of the date of their appointment. The accounts must show what made up the original estate, all monies received, and all monies remaining on hand. For estates that take longer than two years to administer, the personal representative may also have to provide interim accounts to the beneficiaries every two years.
Beneficiaries who receive the accounting may either approve the accounts or find some fault in the numbers that are presented. For example, a beneficiary may not be happy with the amount of remuneration that the personal representative is claiming or with expenses claimed from the estate. If all beneficiaries are not prepared to approve the accounts, the personal representative must go to court for the passing of accounts in order to complete the administration of the estate. A passing of accounts is a formal process by which a registrar of the court reviews the accounts kept by the personal representative and decides whether the personal representative’s claimed expenses and remuneration should be approved, reduced or disallowed.
Passing of Accounts when a Beneficiary is a Minor or Mentally Incompetent
The personal representative must also proceed with a formal passing of accounts if any of the beneficiaries are under a legal disability. This includes beneficiaries that are minors, not yet born, unascertained, or mentally incompetent. The reason for this is that these classes of persons cannot legally consent to the approval of the accounts prepared by the personal representative and therefore a court order is required to pass the accounts.
Payment for the Personal Representative
The amount of remuneration that a personal representative is entitled to be frequently the subject of dispute. Unless the parties involved have agreed to an alternate compensation arrangement or the will itself provides for a specific level of remuneration, the personal representative may claim a reasonable allowance that does not exceed 5% of the total value of the capital and income. This allowance serves as a payment for the personal representative’s work and time spent carrying out their administrative and accounting duties in settling the affairs of the estate.
When the court assesses whether the personal representative’s proposed remuneration is fair, it will look at the size of the estate, the skill demonstrated by the personal representative, the time involved in the estate administration, and the relative success of the final result.
A Personal Representative Can Request a Passing of Accounts
Most accounts are approved by all the beneficiaries and never make it to court. However, if there are delays in having the accounts approved, a personal representative may submit the accounts to the court to be passed without the approval of the beneficiaries. Once the court passes the accounts, the personal representative is absolved of any liability with respect to the contents of the accounts and is also free to take their remuneration from the estate.
A Beneficiary Can Also Request a Passing of Accounts
A beneficiary dissatisfied with the accounts presented by the personal representative can also seek to have them passed by the court. In addition, if the personal representative has been slow to present their accounts to the beneficiaries, an application can be made to require the representative to present their accounts to the court for passing. Such an application can be made once 2 years have passed since the grant of administration of the estate.
If you are a beneficiary who does not consent to the accounts prepared by a personal representative or if you are a personal representative trying to carry out your duty to account, you should consult an experienced lawyer for assistance. To contact one of our estate litigation lawyers, call McLarty Wolf at 604-688-9542 or send us an email through our online contact form.