The liquidation process is fraught with challenges and complexities, and a liquidator bears a heavy responsibility in administering an estate with diligence. Failure to do so may engage the heirs’ liability for the debts of the deceased, and the liquidator’s personal responsibility for negligence.
The following is a succinct rundown of a liquidator’s responsibilities regarding the settlement of an estate:
1. Respect of the will and final wishes of the deceased
The liquidator must respect the will and final wishes of the deceased in order to properly administer the estate and allocate what is owed to the appropriate heirs.
2. Insure his/her performance if necessary
A liquidator must either take out an insurance or furnish another security guaranteeing the performance of his obligations in the following cases:
a) If stipulated in the deceased’s will;
b) By demand of the majority of the heirs; or
c) By an order from the court upon the application of any interested person establishing the need for such a measure.
3. Contact and inform all relevant heirs and stakeholders
The heirs are either named in the will or, in its absence, determinable according to the legal devolution of successions found in article 653 of the Civil Code of Québec(hereinafter “CCQ”). In the absence of any heirs, the estate will fall to the state.
All heirs and creditors have the right to receive a copy of the last will. At the very least, an heir may simply receive a copy of the passage in the will indicating his status as an heir. For all other individuals who have a vested interest wishing to gain access to the will, they may directly inquire with the drafting notary.
4. Perform the formalities required by law
The liquidator must fulfill all formalities required by law such as the registration of notices and the respect of prescribed delays in addition to administering the estate soundly and diligently.
5. Close bank accounts and inform service providers and governmental bodies to cease all activities in the deceased’s accounts
The liquidator must close the deceased’s bank accounts and set up an account on behalf of the succession.
It is also important to notify other relevant entities of the deceased’s passing in order to cease all activities in the deceased’s accounts, for example:
a) Service providers (i.e. telephone, internet, electricity, credit cards, etc.); and
b) Governmental bodies i.e. (the Régie des rentes du Québec), the (Régie de l’assurance maladie du Québec), etc.
6. Determining the content of the succession and making an inventory
In normal circumstances, a liquidator must, within six months, perform the inventory of the deceased’s assets including all properties, monies and debts. The inventory will allow the heirs to ascertain the value of the succession, which will enable them to either accept it or refuse it. The inventory must include a faithful and exact enumeration of all the assets of the succession.
Pursuant to article 1326 CCQ, an inventory must contain the following:
a) A description of the immovables and movables with an indication of their value;
b) A description of the currency in cash and other securities;
c) A list of valuable documents;
d) A statement of liabilities as of the date of the deceased’s passing; and
e) A recapitulation of assets and liabilities.
The inventory is made either by notarial act en minute, or by a private drafting before two witnesses.
A copy of the inventory must be furnished to the beneficiaries of the succession and every other person known to have an interest.
The liquidator must then publish a notice of inventory at the RDPRM and in a newspaper circulated in the locality of the deceased’s last address. This notice allows other stakeholders affected by the succession (such as a bank or private lenders) to be informed of the death, to consult the inventory, and be given the chance to contest it if necessary.
Pursuant to article 799 CCQ, the liquidator may be exempt from making an inventory should all the heirs and successors provide their consent. However, should they give their consent, the succession will be presumed accepted by the heirs, therefore making them liable for the debts of the succession beyond the value of the property allocated to them.
For more information on the content of the inventory, please consult the estate liquidation form available on our website.
7. Recover money owing to the deceased or to the succession
Anything owed to the deceased at the time of his passing must be recovered by the liquidator and deposited in the estate’s account since the collected assets benefit the entirety of the succession.
Most notably, the claims can be narrowed down to: held-over work-related earnings, private pension plan benefits, life insurance claims and private loans.
8. Pay the debts of the deceased and the succession’s cost
The liquidator must realize the property of the succession to the extent necessary to pay the debts (such as income taxes, loans, rent, credit card, etc/), legacies by particular title and expenses resulting from the death. To that effect, the liquidator may alienate movable property that is perishable, likely to depreciate rapidly, or expensive to maintain. The remaining property of the estate may also be alienated upon obtaining the heirs’ consent, or through a court order in the event of a dispute.
Other expenses such as funeral costs, fees for obtaining the death certificate, and other costs inherent to the succession are also paid out of the deceased assets.
The liquidator must also prepare the deceased’s tax statements and pay his/her taxes within the period prescribed by law and obtain a certificate from Revenu Québec and the Canada Revenue Agency confirming that the deceased has paid all of his taxes.
The liquidator must also consider the claims of the creditors of support, or claims made by the children, the spouse or the civil union partner of the deceased such as support payments, partition of value of the property accumulated during the marriage or the civil union, and compensation for work performed during marriage or civil union for the benefit of the deceased.
It is also important that the liquidator conserve all proofs of payment made.
I) When the succession is manifestly solvent
The liquidator pays the known creditors and legatees by particular title on a first-come-first-served basis. Note that the compensatory allowance to the surviving spouse or any other debt resulting from the liquidation of the patrimonial rights of the married or civil union spouses is treated in the same manner as any other debt of the estate.
Consequently, there is no hierarchy regarding payment when the succession is manifestly solvent.
However, an exception does exist concerning ordinary public utility bills and outstanding debts which must be paid when they become due.
Also, advances may be paid to the creditors of support and to the heirs and legatees by particular title of sums of money, but said advances are deducted from their shares.
For more information regarding partial distribution of an estate, please see the attached judgement.
II) When the succession is manifestly insufficient
The situation is vastly different when the estate’s debts outweigh its assets. In this scenario, the liquidator must:
a) Draw up a full statement of the estate, which must be notified to all interested persons;
b) Obtain a court homologation of a payment proposal containing a provision for a reserve for the payment of any future judgment; and
c) Alienate property bequeathed as legacies by particular title or reduce such legacies if the other property in the estate is insufficient to pay all the debts.
The liquidator may not pay the debts of the succession or the legacies by particular title until the expiry of 60 days from the registration of the notice of closure of the inventory or from the exemption from making an inventory.
Article 812 CCQ outlines the order in which the parties must be paid in accordance with the payment proposal:
1. The preferred or hypothecary creditors according to their rank;
2. Other creditors, except for their claims with regard to their support;
- If the liquidator is unable to repay them fully, he pays them proportionally to their claims;
3. Should any property remain after paying the creditors outlined above, the liquidator pays the creditors of support proportionally to their respective claims if he is unable to repay them fully; and
4. The legatees by particular title.
- Reminder: Property bequeathed by particular title may be alienated or reduced to pay the parties ranked above the legatees by particular title.
Heirs who wish to renounce a succession must do so in a notarized document.
9. Rendering an account
a) Annual account
If the liquidation takes longer than one year, the liquidator must render and annual account of management to the heirs, creditors, and legatees by particular title who have not been paid.
This account must be sufficiently detailed to allow the verification of its accuracy.
b) Final accounting
Upon termination of the liquidator’s administration, the liquidator must render a final account to the beneficiaries of the succession. This account must also be sufficiently detailed to allow the verification of its accuracy. Once the account is accepted by the beneficiaries, it is effectively closed.
A plan to divide the property is normally attached to the final account. This plan may be drafted with the help of a professional in order to minimize the tax consequences inherent to the transfer of certain assets.
The object of this account is to determine the net assets or the deficit of the succession.
As such, pursuant to article 820 CCQ, the final account must indicate:
a) The unpaid debts and legacies;
b) The debts guaranteed by security or assumed by heirs or legatees by particular title;
c) The debts whose payment is settled otherwise and a specification of the mode of payment for each; and
d) The reserves needed for the satisfaction of future judgments.
Once the final account has been accepted by the heirs, the liquidator is discharged of his administration and delivers the property to the heirs.
Lastly, the closure of the account must be published in the RDPRM.
10. Filing the deceased’s income tax returns
The liquidator is not only responsible for filing the deceased’s provincial and federal income tax returns for years prior to his/her death, but also for the year of his/her death.
The deadline for filing these income tax returns and for paying income taxes varies depending on the deceased’s date of death and whether the deceased was carrying on a business.
For more information, please visit the Revenu Québec and Canada Revenue Agency websites.
11. Clearance certificates
Prior to the distribution of the deceased’s property, the liquidator must obtain the following two certificates:
a) A certificate issued by Revenu Québec authorizing said distribution; and
- A notice of distribution of property in the case of an estate must be filed in order to obtain this certificate.
b) A clearance certificate issued by the Canada Revenue Agency.
- The liquidator must complete form TX19.
It seems appropriate to mention that any distribution made before obtaining these certificates may result in the liquidator’s personal liability.
In certain exceptional circumstances, a partial distribution of monies from the estate may be distributed to the heirs prior to the remittal of the clearance certificate. For more information, please see the attached judgement.
If the liquidator must distribute an amount of more than $ 25,000 to a minor, he must complete the form entitled “tutorship of the property of a minor” and submit it to the public curator.
With respect to the transfer of ownership of a vehicle or a building, the liquidator must ensure that the following additional steps are taken to ensure that the transfer is done in due form:
a) The vehicle of the deceased
The liquidator must complete the “Declaration by the Liquidator of the Succesion” from the Société de l’assurance automobile du Québec.
b) The property rights of the deceased in a building
The liquidator must sign a “Transfer Declaration” prepared by a notary.
In addition, the liquidator must return all that he has received in the performance of his duties, even if what he received was not due to the beneficiary or the trust patrimony; he is also accountable for any profit or personal advantage he has realized by using, without being authorized, the information he held as a result of his administration.
The liquidator is also entitled to deduct, from the sums he must remit, what the heirs owe him as a result of his administration.
Do I absolutely have to follow all these steps?
The above steps can be avoided if the heirs decide, by mutual agreement, to liquidate the estate without following these rules. However, it should be noted that the latter are required to pay the debts of the estate on their own assets while exempting the liquidator from any liability.
 Ibid art. 790.
 Ibid art. 1327.
 Ibid art. 1330.
 Ibidart. 795.
 Ibid at art. 808 para 1.
 Ibid at para 2.
 Ibid art. 807.
 Ibid art. 811.
 Ibid art. 813.
 Ibid art. 810 para 1.
 Ibidat art. 811.
 Ibid art. 806.
 Ibid art. 1352 para 1.
 Ibid art. 822 para 2.
 Ibid at art. 1366 para 1.
 Ibid at art. 1369 para 1.
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The above noted text should not be construed as providing legal advice or a statement of your claim. The process highlighted above are merely parameters and barometers and do not constitute any warranties and guaranties with regards to your file at hand. We strongly recommend that you seek legal advice with a licensed attorney from the Barreau du Quebec or a notary at the Chambre des Notaires. Each case must be seen and analysed on its merits as the legal process may be complex and cumbersome.