A passing of accounts is the “presentation of formal accounts to the beneficiaries and the court, which are either approved in the form as presented, or amended by a court order and passed in a revised form, or not passed due to the fact that for some reason the court is not satisfied with the accounts or some aspect of the administration of the estate reflected in the accounts.” The procedure for a passing of accounts is addressed by Rules 74.16, 74.17 and 74.18 of the Ontario Rules of Civil Procedure (Rules). The overarching theme in the Rules with respect to a passing of accounts is that “any party with a financial interest in the assets should have an opportunity to review the accounts in a readable form and be in a position to determine all outstanding issues well in advance of the date of the court audit itself.” Although there is no requirement by law that personal representatives pass their accounts, it is the duty of the personal representative to keep proper books and be ready to account if requested to do so. In other words, the personal representative should be able to account at any given time.
While there is no obligation on the trustee to pass accounts, the trustee may voluntarily decide to have the accounts passed by the court. One of the benefits in doing so is the fact that the trustee “is relieved of any further accounting for the period except for items as a result of fraud or mistake.” Leaving aside a successful passing of accounts, a Trustee should be mindful of the necessity to request a clearance certificate. This is beneficial for the Trustee because any distribution made without a clearance certificate can put the trustee at risk of being personally liable to the CRA.
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Civil Procedure Updates, Wills, Trusts, & Estate Planning Updates
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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