When Money Claims Threaten an Estate, What Can a Trustee Do?

If a claimant has threatened or demanded payment by an estate without initiating any court proceedings, the estate trustee may feel like they are stuck in limbo, not wanting to make any distributions while there is a potential claim for money outstanding. If the trustee chooses to make a distribution in the face of a potential claim, the trustee could be held personally liable for any shortfall to the creditors of the estate.

Rule 75.08: A Powerful Tool

In these situations, a little-known tool can be of assistance, providing an opportunity for the estate trustee to have the matter dealt with expeditiously and in a summary fashion. Rule 75.08 of the Rules of Civil Procedure provides that an estate trustee can deliver a Notice of Contestation of a Claim (“Notice”) pursuant to section 44 or 45 of the Ontario Estates Act. Once the Notice has been delivered to the claimant (via personal service^[1]), the claimant must particularize their claim within 30 days (or three months if an extension is granted), failing which their claim is deemed to have been abandoned and forever barred. In other words, the estate trustee can effectively accelerate the limitation period for bringing claims against the estate, forcing the claimant to “move it or lose it!”^[2]

In Omiciuolo v. Pasco, 2008 ONCA 241, the Court of Appeal for Ontario clarified the types of claims where an estate trustee could rely on this rule. In summary, it can be used when there is a claim or demand by a creditor against an estate for payment of money or a debt alleged to be owing.

Where a person dies without a will (intestate), the rule can be used after the Certificate of Appointment of Estate Trustee Without a Will has been obtained. But if the person died with a will, then the estate trustee named in the will can give such notice before a Certificate of Appointment of Estate Trustee With a Will has been obtained.^[3]

Conclusion

Rule 75.08 is an excellent tool for estate trustees to be aware of and can help keep the estate administration moving forward expeditiously without unnecessary holdups by alleged creditors who have failed to otherwise advance their claim.

The Aird & Berlis Estates & Trusts Group provides comprehensive services to a variety of clients. Our expertise spans estate and trust planning, cross-border planning, estate and trust administration, trust, estate and capacity litigation, charity law and related areas of tax law. Please contact the author or a member of the group if you have questions or require assistance with estate claims.