Beneficiaries are paid last. Every debt of the estate is settled before anyone receives an inheritance, and an estate trustee who reverses that order pays the difference personally.
The order of payment of estate debts in Ontario
1. Secured creditors. A mortgage lender or anyone holding security is paid from the asset securing the debt. The mortgage follows the house; it does not compete with other claims.
2. Reasonable funeral and testamentary expenses. Burial or cremation, probate costs, the estate trustee’s legal and accounting fees, and the cost of administering the estate. “Reasonable” is judged against the size of the estate – a $30,000 funeral out of a $90,000 estate invites a challenge.
3. Crown claims with statutory priority. Certain CRA amounts, notably unremitted source deductions and HST, rank ahead of ordinary creditors.
4. Ordinary unsecured creditors. Income tax on the final return, credit cards, personal loans, unpaid bills. If there is not enough to pay all of them, they share proportionally – nobody gets paid in full ahead of the others simply for asking first.
5. Beneficiaries. Whatever remains, distributed under the will or the intestacy rules.
Estate trustee, not Public Trustee
These are different roles and confusing them causes real problems.
The estate trustee – also called the executor, administrator or liquidator – is the person named in the will, or appointed by the court. This is who administers a normal estate.
The Office of the Public Guardian and Trustee is a government office that steps in only in narrow circumstances, such as where there is no one else willing or able to act, or where a beneficiary lacks capacity. It does not administer ordinary estates.
Being named does not oblige you to serve. You can renounce – but only before you start dealing with estate assets. Once you have begun to act, you cannot simply walk away.
The trap: personal liability
An estate trustee who distributes to beneficiaries while a debt is outstanding becomes personally responsible for that debt. Not the estate – the trustee, out of their own pocket. This is the single most common way executors get into trouble, and it usually happens with the best intentions: a grieving family pushes for their share, and the trustee pays out before the CRA has finished.
Two protections:
Advertise for creditors. A formal notice to creditors gives unknown claimants a window to come forward and shields the trustee from claims that arrive afterwards.
Get a CRA clearance certificate. This confirms all taxes owed by the deceased and the estate have been paid. Distributing without one leaves the trustee exposed to the entire tax bill. It takes months. Wait for it.
Do all beneficiaries have to be paid at the same time?
No. There is no rule requiring simultaneous payment, and there are good reasons for staggering it.
Specific gifts – “my car to my nephew” – can usually be handed over early, since they do not depend on what is left. Residual beneficiaries, who share what remains, can only be paid once every debt is known.
Most trustees make an interim distribution of part of the residue, holding back a reserve for taxes and unresolved claims, then a final distribution once the clearance certificate arrives. Beneficiaries who receive different amounts at different times often assume something has gone wrong; usually it has not.
Where an estate cannot pay everything, gifts are reduced in a set order – residue first, then general gifts, then specific gifts last.
What the estate trustee has to do
Locate the will, arrange the funeral, secure and value the assets, notify beneficiaries, apply for probate where needed, file the deceased’s final tax return and any estate returns, advertise for creditors, pay the debts in the order above, obtain the clearance certificate, then distribute and account to the beneficiaries.
Beneficiaries are entitled to an accounting. Keep records of every transaction from day one.
Frequently asked questions
Who gets paid first from an estate in Ontario? Secured creditors from their security, then reasonable funeral and testamentary expenses, then Crown claims with statutory priority, then ordinary unsecured creditors, and beneficiaries last.
Can debts be paid before probate? Some can. Banks will usually release funds directly for a funeral bill, and an executor can pay urgent expenses and be reimbursed. Large distributions should wait – paying out before the debts are known is how executors become personally liable.
How do you pay estate debts? From the estate account, in the order of priority above, after advertising for creditors so unknown claims surface. Keep records of every payment; beneficiaries are entitled to an accounting.
Can beneficiaries be paid at different times? Yes, and it is normal. Specific gifts can often be handed over early. Residual beneficiaries wait until the debts are settled, usually receiving an interim distribution first and the balance after the clearance certificate.
Do you really need a CRA clearance certificate? If you intend to distribute the estate, effectively yes. Without one, the estate trustee is personally liable for any tax the deceased or the estate still owes. It takes months, and waiting is the whole point.
Who needs to obtain a clearance certificate? The estate trustee, after filing the final return and any estate returns. It confirms all amounts owing have been paid or secured.
What happens if the estate cannot pay everything? Do not distribute anything. Unsecured creditors share proportionally, and a trustee who pays one creditor or beneficiary in full may have to make up the shortfall personally.
Is the estate trustee the same as the Public Guardian and Trustee? No. The estate trustee is the person named in the will or appointed by the court. The Office of the Public Guardian and Trustee is a government office that steps in only where there is no one else able or willing to act.
Talk to an estate lawyer before you distribute
LD Law LLP assists estate trustees through probate and administration, including the Certificate of Appointment of Estate Trustee with or without a will, notices to creditors, and clearance certificates.
1551 Bloor Street West, Toronto · 416-747-9900
General information about Ontario law as of August 2026. Not legal advice.