Estate definition: the total of an individual's assets less all debts, except for: jointly owned assets, pensions or life insurance policies that have a specific beneficiary, and gifts and legacies left to others in the individual's will.
The estate includes all of the deceased individual's real estate, personal property, securities, and other assets. The property belonging to an estate is first used to pay any taxes or debts owing. Once this is done, it can be distributed according to the terms of the will.
Not all property will be part of the estate in every case. Homes, land, or bank accounts owned by people who are joint tenants usually transfer to the remaining joint tenants when an owner dies. There may also be life insurance policies, RRSPs, or pension plans that the deceased person directed to go to specific beneficiaries. These do not become part of the estate.
What is Considered Part of the Estate?
The assets and liabilities that form part of the estate include:
- Real property (real estate)
- Stocks and bonds
- Life insurance
- Pensions and other benefits
- RRSPs, RRIFs, and annuities
- Bank accounts and investments
- Motor vehicles, mobile home, boats, and aircraft
- Mobile homes
- Personal possessions
- Assets in foreign jurisdictions
- All debts due to, and owed by, the deceased
Each type of asset has different requirements for proof of ownership and transferring ownership.
Personal representatives are responsible for settling any debts and liabilities of an estate before distributing the estate, otherwise they may be personally liable for those debts.
(Note: the term “personal representative” is the current legal term used to refer to an executor/executrix, administrator/administratix, and judicial trustee.)
Debts typically fall into three main categories:
- Debts incurred by the deceased while alive
- Loans, credit cards, and utilities
- Continuing debts: certain spousal or child maintenance agreements, mortgages, and leases
- Contingent liabilities, such as an existing lawsuit
- Enforceable pledges made by the deceased to make gifts or donations
- Debts related to the death, most commonly funeral expenses
- Debts incurred by the personal administrator: reasonable fees and expenses
The personal representative must undertake a thorough investigation of all of the deceased's records, and contact all known creditors to determine outstanding balances. While it is not mandatory, the personal representative may also choose to advertise for creditors and claimants. Unless the estate is very simple and the personal representative is very knowledgeable about the deceased's affairs, it would be prudent to advertise to avoid being held liable for those debts.
Property Outside of Alberta
If the deceased person owned property outside of Alberta, it is still part of the estate. You may have to apply for probate in the place where the property is located. An estate lawyer will be able to advise you on what to do.
Canada does not have estate or inheritance taxes (i.e., that are collected by the Canada Revenue Agency). However, estate or probate fees may be payable upon the death of a Canadian resident. These fees are collected provincially.