Unexpected estate assets may cause the family to change direction with the estate

Just when you think you've dealt with an estate, or you figure that there really isn't anything to do on an estate, things change. This isn't unusual, but it can throw you off when you suddenly have to re-evaluate your plans. In the following question from a reader, funds from an unexpected source have changed what this family thought had to be done on the estate:

"My husband's brother recently died intestate and he was basically penniless. One brother applied for and received the CPP Death Benefit and it will be applied to his funeral costs. However, the deceased did have an employee death benefit that he assigned to his estate. We estimate his death benefit may be close to 100K. Do we have to apply to be an executor of his estate to access these funds in order to pay his funeral expenses? He also owed CRA and was paying them back in installments. Is the employee death benefit considered a part of his estate, where creditors can make claims against it? Would the executor be liable for all his other debts?"

There are several questions bound up in this one case, so let's take them one at a time.

Would someone have to apply to the court to be an administrator of the estate? Yes. Right now, there is nobody to receive the money. The employee death benefit can't be paid to anyone because nobody has the legal right to receive it. Nobody has the right to open or administer an estate bank account. If the death benefit sits for too long with nobody legally claiming it, the employer may choose to pay the money into court, where it will stay until someone makes a court application to get it out. I don't believe a court would allow payment out if there is not an administrator.

What should happen is that someone will apply to the court, be granted Letters of Administration, then use those Letters to receive the employee death benefit, put it into an estate bank account, and use it to pay the bills and taxes. There is a list of who is allowed to be the one to apply to the court. You asked if "we" have to apply, but as an in-law, you are not on the list. Those at the top of the list have top priority and those lower or equal on the list can't apply unless those higher up renounce the job and say they don't want to do it. The list is found in your provincial Rules of Court.

The role of administrator will allow someone to deal with the employer death benefit, but it also comes with a lot of responsibilities, such as notifying beneficiaries, getting tax returns done, and making sure all assets of the estate are found.

Would the estate funds be available to creditors? Yes. Estate assets are available to the creditors of an estate. Creditors have priority over beneficiaries, even if it means that the family gets nothing. CRA and the funeral have top priority, but if there are other bills such as credit cards, lines of credit, or even unpaid household bills, they should all be paid from the estate. If someone in the family pays the rest of the funeral bill (after CPP is applied) then that person can be reimbursed from the 100K, and the reimbursement is considered a bill payment.

Is the executor liable for the deceased's debts? No, not him personally. But if you are asking if he must use the estate money to pay the debts, then yes, he does have to. If he doesn't pay the bills and taxes, and he pays the money to the family (or himself) instead, the creditors can then come after him personally. This is because he is legally bound to use the estate funds for payment of debts and taxes first, as I said, and if he breaches that obligation, his own money is on the line.