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Passing of AccountsSettling all outstanding matters
Passing of Accounts
An unfortunate truth is that no one, other than estate lawyers, really explain to executors and other legal representatives what obligations they have and what steps they need to take when wrapping up an estate. The questions executors and other legal representatives should be asking themselves is how can I distribute this estate without being sued personally? The answer prepare and ,if necessary, pass your accounts.
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The passing of accounts is often the last step taken where all outstanding matters are settled. What happens is the legal representative, often through their lawyer, produces an accounting document. This document shows the assets and debts at the date of death, all of the monetary transactions that occurred since death, the proposed pay for the legal representative, and the proposed final distribution to the beneficiaries.
If the beneficiaries consent then everything is settled and the estate can be distributed. If the beneficiaries refuse to consent there can be negotiation or, if all else fails the court can make decisions on all of the outstanding issues.
Frequently Asked Questions
How much are Legal representatives paid?
The maximum allowable pay is 5% of the total of the estate, along with an annual fee of up to 0.4% of the average value of the assets. The factors that determine the actual amount are:
- The magnitude of the estate,
- The care and responsibility involved,
- The time occupied in the administration,
- The skill and ability displayed, and
- The success (or lack thereof) achieved in the administration.
Can I take executor’s compensation, before asking the beneficiaries?
No you cannot. If you do, the amount of your compensation may be reduced. If you have taken more then you are allowed you will have to pay the money back.
What if the beneficiaries do not agree with the accounts?
If the beneficiaries do not agree with the accounts the representative must arrange a court hearing where a registrar with the court will review the accounts. That process is called passing the accounts.
Why would a beneficiary refuse to agree with the accounts?
There can be a few reasons.
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- The beneficiary could argue that assets passed outside of the estate and should be pulled back into the estate. For example, the deceased may have, while their judgment was impaired, given large sums of money to a relative, neighbor or acquaintance. The accounting is the last chance for the beneficiary to raise the issue with the representative.
- The beneficiary could have issues with the representative’s expenses. For example, if the representative charges expenses back to the estate which the estate shouldn’t have to pay for.
- The beneficiary could also have issues with the representative’s pay. If the beneficiary believe’s the executor is being paid more than they should they could argue the pay be decreased, or eliminated.
When would I need to do this?
The representative has to pass accounts within 2 years of receiving an estate grant. Beneficiaries can ask for accounts earlier. If they do the representative must pass accounts within 1 year of receiving an estate grant. The executor would want to pass a final set of accounts before the final distribution.
Is the passing of accounts required?
Not necessarily. This step is taken to protect the executor from potential claims brought by the beneficiaries. If you are the executor and sole beneficiary of an estate you don’t need that protection because you are not likely to sue yourself. Likewise if the beneficiaries agree in writing that you do not need to produce the accounts you could rely on that consent.
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