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Monday, January 8, 2018

The executor doesn't keep the estate assets so why should he keep the debts?

I frequently receive questions here on my blog as well as in person about the exposure of the executor when there are debts in an estate. Something that I see often is an estate where there is no will and nobody in the family will step up to become the administrator because they are afraid of personal liability for the deceased's debts. It's time to get some better information out to people since there seems to be a general misunderstanding about what the executor or administrator is getting into.

An executor is not personally liable for the debts of the deceased or of the estate. That's a pretty hard-and-fast rule.

Recently a reader told me that the car leased by the deceased person had to be returned and this created a bad credit situation. The reader asked me whether the bad credit would now be transferred to the executor. The answer is that no, the bad credit will not affect the executor. Why would it? The lease was not in the executor's name. The payments for the lease were not coming from the executor. All the executor did was step in to return the car after the deceased passed away.

I hear similar questions where the deceased had a credit card balance. Executors and administrators fear that if they are the ones who send the death certificate to the credit card company and tell them that there isn't going to be enough money to pay them off, that the credit card folks will somehow transfer the debt to them.

It doesn't work that way. A creditor can't just decide that someone else is liable for a bill that they are simply not liable for. That includes executors.

An executor's responsibility is to use the estate assets to pay off the estate debts. Sometimes there isn't enough money to go around and the executor has to either rank the creditors in order of priority or pay them all off in part. But the executor is certainly not expected to pony up his or own money to top up someone else's debt.

Look at it this way. The executor doesn't get to keep the assets of the estate, so why should he or she have to keep the debts? The executor only has to pay the debts personally if he or she pays the estate money out to him/herself or to beneficiaries without paying debts first.


  1. Hello Lynne,

    I came to know about you through this website and decided to seek your advice on some very important points. But before that I am explaining my actual situation and giving you all the info you may need to suggest me properly.

    I live in GTA, Ontario. My husband is 70 yrs old and I am 47 yrs. I am his second wife. My husband’s first wife passed away some years back due to cancer. He has two adult daughters who are well established in life with their professions. Both my husband and his daughters are Canadian citizen BUT I AM STILL NOT. I AM ON PERMANENT RESIDENT STATUS AS HE MARRIED ME OUTSIDE CANADA AND BROUGHT ME IN AS PR IN 2015.

    My husband is not a wealthy man and he does not have vast property or assets at all. He has a survival job with minimum salary and has a condo in both of our names which is worth approximately 350,000 CAD but that is not paid off and mortgage payment is still there every month.

    He explained to me that once he passes away condo will automatically come to me as I am his legally married spouse and present condo is in joint name. So I will have the right to decide anything about the condo after he passes away. Even though when I was not convinced and felt insecure my husband made a WILL in 2016 giving me the right of being sole executor to decide about his property and assets. His daughters are left out from the will. Reason he said to me that he does not have enough property to give his daughters and he spent almost all of his early age vast income and savings to educate them and make them established in their lives. He has to keep something for his own survival and as I will be looking after him at his old age till his death I should get whatever he has now after he passes away on humanitarian ground as a survivor spouse of the deceased. BUT NOTHING IS MENTIONED IN THE WILL WHY HIS DAUGHTERS ARE LEFT OUT. THERE IS NO BENEFICIARY NAME ALSO MENTIONED ANYWHERE IN THE WILL. As I don’t have any family or friend in Canada who will give me advice or stand for my help if anything happens to my husband suddenly I still feel insecure. When I went through the estate law in this website and read about several cases it made me feel more insecure. I found somewhere that adult children can always contest a will if they want. I am fearing because of the relationship between father and daughters they will obviously contest the will as they never accepted their father’s second marriage.

    Now my questions are:
    1) According to Ontario Family Law/ Estate Law can my husband’s daughters contest the will after he passes away????
    2) If they can contest is there any possibility of winning the case????
    3) If they win the case how much can they claim????
    4) If my husband makes the condo document fully in my name not in joint name can there be still a claim from his daughters side????
    5) Can the executor be beneficiary at the same time??? As there is nothing mentioned in the will about beneficiary I thought I can be automatic beneficiary. Don’t know whether it is a mistake done by lawyer and should be immediately corrected.

    One vital information about the will is it was done by professional lawyer and lawyer and his assistant signed as witnesses.

    I didn’t have any wish to come between my husband and his daughters but unfortunately I am already in. I never liked in my life to be in family feud/dispute regarding money and property. But now for my own survival ground I have to think how I can avoid any family dispute with my husband’s daughters regarding little property my husband will be leaving at his death. If you can please point out anything important ( adding any clause in the will or mentioning clearly something) which can save me fighting against my husband’s daughters and resist the will from going to court to be contested. I really don’t know anything about Canadian Family/Property Law. So please help me. If you give me your email then I can further discuss some more points which I don’t want to discuss in public forum like this as it is too personal.

    With best wishes

  2. As usual a very good explanation.

    One item might require a little clarification or might even be another blog entry. You stated, "the executor has to either rank the creditors in order of priority or pay them all off in part."
    This might be misunderstood by some executors, that they can choose which creditors get the money.
    As you are aware, the priority expenses are first (funeral and testamentary). Then, if there are insufficient funds to pay all other unsecured creditors, including CRA, they are subject to their proportional amount.

    Again, thanks for an informative and well-written blog!

    1. Very good point, and thanks for your clarification. I did kind of skim over the point in my post.


  3. What does an executor need to do to clear an estate when the estate is insolvent but there is still a CRA balance owing? The deceased did not have a sigificant estate, there was a joint tenancy property (that still had a mortgage) with some equity in the house, but no other real assets. Spouse could not afford to remain in the house, so had to sell and downsize to a more affordable house. Only other assets that the deceased had were clothes & small personal items. The was about $10-15K in a joint bank account, but this money & the Canada death benefit was used towards funeral costs and covered the remaining payments of a secured debt (final 6 months of a car lease payment, which is now paid off & clearance letter from car company provided). The estate money wasn't even enough to cover the funeral & secure debt, but spouse paid for difference out of her CPP, OAS, pension.

    The will states the spouse as beneficiary, even though there are no tangible assets. There has been nothing distributed to an other family members/friends, as there is nothing to distribute.

    But, there is CPP tax owing. I know CRA won't give a clearance letter since there is a balance owing, but is there something the executor needs to send the CRA to show that the estate is insolvent? Can the executor do this themselves, or do they need to have a lawyer or accountant do it?


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