Making Estate Distributions (QC)

Show Table of Contents Allocating estate proceeds to heirs

An estate distribution is the delivery of cash or an asset to a given heir. After resolving debts and paying any taxes due, the executor should distribute the remaining estate to the heirs in accordance with the instructions in the will (or as dictated by the court).

General Plan

Before making any distributions from a QC estate, it's best to come up with an overall estate settlement plan: how you plan to resolve debts, which assets you plan to sell, which assets you plan to distribute directly, which heirs will get what, etc.

Your goal is to resolve all debts and to allocate 100% of the remaining value of the estate, with each heir scheduled to receive the proper items and the correct overall share of the estate. It's usually easiest to try to do things in this order:

  1. Record Automatic Transfers — Define distributions for assets over which you have no control (i.e., RRSPs, life insurance policies, etc.)
  2. Account for QC Family Entitlements — Define distributions for any Family Entitlements that will be utilized
  3. Allocate Bequests — Define distributions for any specific bequests made in the will
  4. Prepare for Debt Resolution — Ensure you will have enough cash to resolve the debts, planning to sell assets if necessary
  5. Determine Executor Compensation — Decide the amount of executor fee you will take, as prescribed by QC law
  6. Mark Assets for Sale or Distribution — Plan remainder of asset disposition
  7. Allocate Distributions — Define distributions so that each heir will get the proper share of the final estate

If the estate will not have enough free cash to resolve all debts, even after liquidating all available assets in step 5, you may need to revisit some of the earlier steps in an attempt to satisfy estate creditors, since debts generally have precedence over other estate claims.

Priority chart of estate allocation

The steps outlined above work well for an estate that can ultimately pay its bills, but if not, you will need to keep in mind that an estate must give preference to its obligations in a defined priority order (see diagram). Certain transfers (such as to RRSP beneficiaries) happen automatically outside the control of the estate, and the estate itself must then ensure it has enough funds to pay all taxes, then estate administration costs (including executor fees), then any family entitlements, then any general debts, and with anything left over, fulfill any bequests, and finally distribute the residuary estate. If the estate runs out of money handling one priority, then subsequent priorities are left with nothing.

Priority chart of estate allocation

Note that provincial law determines which debts have priority over other debts, and some debts (such as funeral expenses) often have priority over family entitlements, but these specifics really only matter if the estate cannot pay all its bills (see Insolvent Estates for more details).

EstateExec makes the overall planning process easier by allowing you to mark whether you plan to sell or distribute each asset (see Reference: Asset Planning), and to define proposed distributions to each heir before actually making them (see Reference: Manage Distributions). You can then see at a glance which assets and heirs need more attention, and the Overview tab will show you overall estate progress.

Automatic Transfers

Certain items change ownership or pay out "automatically" upon death: life insurance policies, property held in joint tenancy or community property with the right of survivorship, funds in an RRSP or LIRA for which a beneficiary was named, stocks held in a transfer-on-death account, and so forth (note that in Quebec, only life insurance contracts can transfer this way). An executor does not take possession of such items, or control them, but frequently ends up facilitating their transfer (contacting the organizations, providing copies of the death certificate, etc.). While such items are not subject to QC probate, they can impact the estate settlement process (in terms of taxes owed, calculating certain family entitlements, etc.).

Tip: EstateExec understands that such assets are not usually subject to QC probate, and will automatically handle them accordingly (you can manually override this if desired; see EstateExec Reference: Identify Assets Subject to Probate). In any case, you should create Distributions for each such item with the "Reason" identified as "Beneficiary".

Family Entitlements

Quebec allows a surviving spouse and dependants to claim certain entitlements; only once these potential entitlements are dealt with can the normal succession process proceed:

Family Home

A surviving spouse or other dependant has the right to continue living in the family home for 6 months after the death.

Family Patrimony

Before settling the rest of the succession, a liquidator must first allocate half the net value of the family patrimony to any surviving spouse.

Patrimonial assets include all the property used by your family, regardless of whether it is owned by you or your spouse, such as:

  • Residences used by your family (e.g., condominium, house, cottage)
  • Furniture and other items used by the family in those residences (e.g., bed, TV, stove, table)
  • Motor vehicles used for family transportation

Patrimonial assets exclude:

  • Personal property that only you or your spouse use, such as jewelry
  • Gifts or bequests (and any subsequent increases in value) to one of the spouses either before or during the marriage or civil union
  • A business or farm, except the residential portion
  • Cash and bank accounts
  • Savings bonds, treasury bonds, shares and other investments (except RRSPs)
  • Amounts accrued by in a profit-sharing plan, supplementary pension plan for high-income earners, or a non-registered annuity plan

See Civil Code of Québec, CQLR c CCQ-1991, s 414-430.

Marital Regime and Acquests

After partitioning the value of any family patrimony, the liquidator must next settle the liquidation of any matrimonial or civil union regime.

If there is a marital or civil union contract, partition the assets accordingly.

If there is not such a contract, then the partnership of acquests regime applies, which basically says that a surviving spouse is entitled to half the acquests made during the marriage or civil union. The acquests of each spouse include all property not declared to be private property by law, and, in particular, the proceeds of that spouse’s work during the regime, and the fruits and income due or collected from all that spouse’s private property or acquests during the regime.

The following types of property are considered private, and not acquests:

  • Property owned or possessed by a spouse when the regime comes into effect
  • Gifts or bequests (and any subsequent increases in value) received by a spouse during the regime, if the testator or donor has so provided
  • Property acquired by a spouse to replace private property and any insurance indemnity relating thereto
  • Rights or benefits of a spouse as a subrogated holder or as a specified beneficiary under a contract or plan of retirement, other annuity or insurance of persons
  • A spouse’s clothing and personal papers, wedding ring, and decorations
  • Instruments required for a spouse’s occupation

See Civil Code of Québec, CQLR c CCQ-1991, s 448-491.

Family Support

A surviving spouse or other dependent may claim a financial contribution from the succession as support, the amount of which cannot exceed the difference between 1/2 of the share he or she could have claimed had the entire succession, including the value of any gifts during the preceding 3 years, devolved according to law, and what he receives from the succession. Any such claim must be made within 6 months after the death. See Civil Code of Québec, CQLR c CCQ-1991, s 684-695.

Specific Bequests

Wills sometimes specify that certain assets or dollar amounts are to be distributed to certain heirs. Such bequests should be generally be handled before dealing with the residuary estate, in which percentages of the remaining estate are allocated to the appropriate heirs. You can mark these bequests via the Distribution dialog (see Manage Distributions).

However, not all bequests can be honored: sometimes the asset is no longer part of the estate; sometimes the bequest conflicts with local law (e.g., community property); sometimes the asset must be sold (as a last resort) in order to pay estate debts.

The process of reducing bequests is called abatement, and any required reductions are typically made proportionately to the recipients. For example, if the estate is worth $50K and there are several bequests that total $100K, all bequests would be reduced by 50%. Similarly, if the will bequeaths three pianos to a particular heir, and there are only two pianos in the estate, then the heir would receive just two pianos. And if there were no pianos in the estate, then that bequest would remain unfulfilled (known as ademption). Even if the estate has plenty of money left over, the executor cannot "make up" for an abatement or ademption; in this example, the executor cannot buy the heir a piano using other estate funds, or just provide extra cash in lieu of the piano.

Heir Percentages of the Estate

Wills usually specify a percentage that each heir should receive of the residuary estate (the residuary estate is the amount remaining after all debts and obligations have been satisfied, and any specific bequests handled). For example, if a QC estate is worth $200K after resolving all debts, and the will says that Johnny gets $20K (i.e., a bequest), and that Sally gets 40% of the residuary estate, then Sally would get $72K (i.e., 40% of the $180K residuary estate).

If there is no will, then QC law will dictate the heirs and associated residuary percentages.

Residuary percentages do not need to be realized as single lump sum cash payments, but may be composed of multiple distributions, in various combinations of cash and property.

Tip: You can enter these target percentages on the EstateExec Heirs tab, and as you define distributions, see how you are doing in reaching these targets in the Heir Target Allocation chart on the Overview tab (for additional tips, see EstateExec Reference: Manage Distributions).

Heir Debts

In some cases, a decedent dies with an heir (or multiple heirs) owing the decedent money. As an executor, you do not have legal authority to simply forgive (i.e., cancel) such debts: it would be unfair to the other heirs. The heir to whom the money was lent can either repay the estate the amount owed, or you can distribute the loan as an "asset" to some other heir, or you can deem that such repayment has been made as a portion of the inheritance otherwise owed that heir. For example, if an heir owes the estate $10K, and is entitled to $50K in distributions from the estate, you can distribute that $10K loan "asset" to the heir, and plus $40K in other distributions.

Charitable Donations

A charitable donation is really just an estate distribution to a particular type of heir (a charity). The executor does not have the right to give away items of value to charities unless specifically authorized by the will or the court (or in Quebec, the heirs).

Distribution Completion and Receipts

Actually making distributions to heirs is usually one of the last things the executor does in settling the estate. Although it is best practice to make all the distributions at the end of the process, it is usually permissible to make some distributions earlier if desired (see Early Distributions).

It is good practice to require all heirs to sign a receipt for any distributions (the receipt can cover multiple items). When making final distributions to an heir, it is also good practice to have that person sign a document (perhaps prepared by a lawyer), stating that he or she approves of your actions as executor and confirms that he or she has received everything due.

In Quebec, before making distributions to the heirs you must produce a Final Account of the succession (consider using View | Reports | Accounting menu).

If the heirs agree with your Account, you can then proceed with the distributions, creating a Declaration of Transmission for the distributions to each heir (many people use a notary for this). For distributions of real property, you must use a notary, and you must also publish the Declaration of Transmission (of Real Property) in the Quebec Land Registry (Registre Foncier). For vehicles, you can use this Vehicle Transfer Form.

If the intended recipient of a distribution worth >$40K is a Quebec minor, you must submit a Declaration of the remittance of property in favour of a minor to the Curateur public du Québec at least 15 days before the intended distribution (see Gouvernement du Québec: Inheritance by Minors).

Additional Information

See also EstateExec Reference: Manage Distributions for specifics about using EstateExec to organize, plan, and document distributions that satisfy the directives of the will (and/or the court).

In case you're interested, details about making distributions in other provinces can be found here:

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