Discussing estate planning and contemplating unforeseen circumstances often brings discomfort to everyone involved. Personally, when my husband and I started organizing our will, the gravity of ensuring the protection of my children and assets became evident. One big deal in estate planning is picking someone to handle your property if you can’t. Appointing a Power of Attorney for your property, a measure taken in the event of your incapacitation or unforeseen circumstances is not exactly the most fun chat to have, but boy, is it crucial.

In our role as real estate agents, we frequently encounter individuals entrusted with the responsibility of managing someone’s assets, such as a property. They often approach us seeking further insights into the probate process or specific sales scenarios and many of these questions are not possible for us to answer. Recognizing the need for accurate information, we sought guidance directly from a trusted source: Coach House Law, a reputable real estate law firm in Toronto. Through their expertise shared in this blog, we aim to gain valuable insights into the fundamentals of selling a home in Ontario with a Power of Attorney.

Guest Blogger: David Woodside, J.D. from Coach House Law

What to do if the buyer or seller of a home is unavailable or an incapacitated person?

A person who is buying or selling a property but is unable to sign the closing documents may need to use a Power of Attorney to close the transaction. Before they decide to use the Power of Attorney, they should obtain legal advice regarding the consequences of giving a Power of Attorney as it is a powerful document that gives the person they name as their attorney (the donee) powers to do things and act on their behalf.

A person who has been appointed as a Power of Attorney for Property for someone may be able to sell their property. The Power of Attorney may restrict the donee to the specific transaction of the sale of that one property so that the Power of Attorney can only be used for limited purposes. Many lawyers would recommend restricting the limits of what a Power of Attorney can do depending on the situation.

The real estate lawyer should be informed as soon as possible that a Power of Attorney will be used for the transaction and given the Power of Attorney document so they can confirm that the Power of Attorney can be used for the transaction. There are requirements respecting the signing of the Power of Attorney, if these requirements are not met the Power of Attorney may be invalid.

Keep in mind that the proceeds of the sale must be made payable to the registered owner and not the attorney. If the owner will be out of the country for the closing they will need to make prior arrangements for delivery of the closing funds.

TIP: The real estate lawyer will likely require the original Power of Attorney document for closing. A photocopy is typically not accepted.

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What is the difference between a Power of Attorney and an Estate Trustee?

A Power of Attorney is someone appointed to act on a person’s behalf while they are alive but are unavailable or incapacitated. Once that person is deceased, the Power of Attorney document is no longer valid as it is only valid to act on behalf of a living person. Once a person is deceased, a person can apply to become the estate trustee for probate to be appointed to administer a trust for the benefit of the beneficiaries of the trust.

What is probate?

Probate is a court procedure to formally approve that the deceased’s will is their valid last will. In addition, probate is the procedure to ask the court to either give a person the authority to act as the estate trustee of an estate or confirm the authority of a person named as the estate trustee in the deceased’s will. A person needs to apply for probate of an estate. They can apply to the Ontario Superior Court of Justice for a Certificate of Appointment of Estate Trustee.

Is probate required?

Probate is required when court approval of the distribution of the deceased estate assets by the estate trustee is needed. If the estate’s assets include real property which passes to another person by right of survivorship and the will is uncontested, probate may not be necessary. However, if the estate’s assets include real property which does not pass to another person by right of survivorship probate may be required. If the deceased’s real property must be sold, probate will almost certainly be required.

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When to apply for probate when trying to sell real property?

A Certificate of Appointment of Estate Trustee or a Small Estate Certificate should be obtained before anyone enters into an Agreement of Purchase and Sale for the deceased’s real property. If a person enters into an Agreement of Purchase and Sale before probate is granted, a sale may not close smoothly and it could expose the estate to litigation for failing to close the transaction. To avoid any issues or complications, it is best to not enter into an Agreement of Purchase and Sale until after probate has been granted. The sooner a person applies for probate the better.

How long does probate take?

The probate application can take days or weeks to be prepared and filed depending on the attentiveness and effort of the applicant. Once the application is filed, the court takes some time to process the application. Depending on where the court is in Ontario, this may take 15 days, under 8 weeks, or more than 8 months as the processing times vary for courts throughout the province. According to the Ministry of Attorney General Ontario, most estates take between 6 to 8 weeks to be issued a Certificate of Appointment of Estate Trustee. However, some cases can take months or years to finish if there are issues such as disputes among beneficiaries or disputes over the validity of the will.

TIP: While waiting for probate to be granted, the person applying to be estate trustee can be proactive and take this time to gather other documents the real estate lawyer will require before the closing date. The real estate lawyer will want to know the deceased’s property tax information, ideally by providing the most recent tax bill and informing the lawyer of whether the property taxes have been paid fully or if there are any property tax arrears to be paid. If the deceased’s real property is a condo, providing information on the monthly common expenses and whether they have been fully paid as well as if there are any special assessments against the unit and, if so, whether those have been paid. If the real property is in a rural location the lawyer will want to know about rental items such as propane tanks to be adjusted for on closing. Often the tanks have a sticker on them indicating the rental company. The lawyer may ask for utility bills such as heat and hydro or have the estate trustee cancel the account themselves and provide confirmation the accounts will be terminated on the closing date.

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How does an Estate Trustee sell real property after probate is granted?

Once probate is granted and a probate certificate is obtained, the estate trustee can enter into an Agreement of Purchase and Sale with a prospective buyer for the real property of the deceased.

The estate trustee is acting as a seller would. They may choose to obtain the services of a real estate agent and list the property on real estate boards. The length of time it may take an estate trustee to sell the property would depend on the real estate market and how quickly they find a buyer at this point.

What happens to the proceeds of the sale?

Once the real estate transaction has closed and the funds are with the vendor’s lawyer, all proceeds of the sale would be deposited into the estate account to be distributed as set out in the deceased’s will or, if there is no will, in accordance the applicable intestacy rules.

Is there an estate administration tax for a sale by an Estate Trustee?

If a person obtains a Certificate of Appointment of Estate Trustee they will have to pay an estate administration tax. This tax is calculated based on the total value of the property. However, this tax does not apply to all property.

TIP: It is important to check whether the real property registered under the Registry System or the Land Titles System because this may affect the payable estate administration tax.

Thank you David Woodside, J.D. from Coach House Law for this post, and providing such in-depth information! Coach House Law | 60 Atlantic Avenue, Suite 200, Toronto | 416.276.5337

Do you need to sell a home quickly? We can help with that! Call us today at 416-909-1602 or email us directly at hello@getnested.ca to get started.

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