Insolvent Estates in Canada: Executor Risks, Estate Bankruptcy & Personal Liability | John Sandrelli

Are you acting as an executor and worried the estate may have more debt than assets? As an executor, can you be personally liable for unpaid debts? In episode 64 of Your Estate Matters, Heritage Trust President Nicole Garton is joined by John Sandrelli, the National Leader of Dentons Canada’s Restructuring, Insolvency and Bankruptcy group, to explore one of the most misunderstood areas of estate administration: insolvent estates. With consumer debt reaching a record $2.6 trillion, John explains why this issue is becoming increasingly relevant. He outlines the warning signs executors should watch for, the serious personal liability risks they face, and the choice between administering an estate under BC's WESA or the federal Bankruptcy and Insolvency Act. Questions Answered in This Episode: • What is an insolvent estate? • How common are insolvent estates in Canada? • What warning signs should executors look for? • Can an executor be personally liable for estate debts? • How do CRA tax debts affect an estate? • What happens to RRSPs, RRIFs and life insurance proceeds? • What is the difference between administering an estate under BC provincial law (WESA) versus the Federal Bankruptcy and Insolvency Act? • What happens when family law claims intersect with an insolvent estate? • Can a bankrupt beneficiary lose their inheritance? In this conversation, Nicole and John discuss the practical steps executors should take when they suspect an estate may be insolvent, how creditor priorities work, when bankruptcy may be appropriate, and the common mistakes that can lead to personal liability. ⏱️TIMESTAMPS 00:00 Introduction 00:34 What Is an Insolvent Estate? 01:16 How Common Are Insolvent Estates in Canada? 01:56 Warning Signs an Estate May Be Insolvent 03:36 First Steps for Executors When Insolvency Is Suspected 04:51 Can Executors Be Personally Liable? 06:19 The At-Risk Distribution Trap, Deemed Disposition Tax Trap & CRA Liabilities 09:10 The Priority Order Trap: Why Paying the Most Aggressive Creditor Can Be a Mistake 10:11 Executor Choice: Provincial Estate Administration (WESA) or Federal Bankruptcy and Insolvency Act? 11:44 When Should an Estate Enter Bankruptcy? 12:37 Can Creditors Force an Estate Into Bankruptcy? 14:20 Creditor Priority Rules Under BC Estate Law 15:34 Key Differences Between Provincial Estate Administration (WESA) or Federal Bankruptcy and Insolvency Act? 17:13 What assets might be exempt from Creditors? RRSPs, RRIFs with designated beneficiaries? 19:36 Life Insurance and Insolvent Estates 20:18 Joint Tenancy. What Happens to the House? Survivorship and Creditor Claims 21:29 What Assets are Exempt Under the BC Court Order Enforcement Act? 22:18 Gifts, Transfers and Transactions Before Death – How Often Are They Reversed? 24:04 Family Law Issues and Insolvent Estates 24:52 Child Support and Spousal Support Claims 25:39 Wills Variation Act Claims Against Insolvent Estates 26:27 Bankruptcy Proposal – A Third Option for Insolvent Estates. 28:16 What Happens if the Executor Goes Bankrupt While Administrating the Estate? 28:46 What if a Beneficiary is Bankrupt? Can a Parent Protect an Inheritance from a Child's Creditors? 29:24 The First Thing Executors Should Do if they are Concerned the Estate Can Not Pay its Debts 30:01 Who Should Executors Call for Help? Insolvency Lawyer? Trustee? 30:30 The Most Common Mistakes an Executor of an Insolvent Estate Can Make. 30:46 At What Point Should an Executor Step Aside? 31:40 Final Advice for Executors 📌ABOUT OUR GUEST John Sandrelli is the National Leader of Dentons Canada’s Restructuring, Insolvency and Bankruptcy group and is widely recognized as one of Canada’s leading insolvency and restructuring lawyers. Based in Vancouver, John has been involved in many of British Columbia’s most significant restructuring and insolvency matters, advising companies, financial institutions, trustees, receivers, lenders, investors, and other stakeholders across a wide range of industries, including real estate, agriculture, transportation, and logistics. CONNECT WITH JOHN Website: https://www.dentons.com/en/john-sandr... LinkedIn:   / johnsandrelli   🔔 WATCH Your Estate Matters podcasts here:    • Your Estate Matters Podcast. Practical ins...   📌 About Heritage Trust Heritage Trust is a leading independent trust company in British Columbia, regulated by the BCFSA. We specialize in estate administration, trust services, and complex estate planning, including disability and Henson trusts. We help British Columbians and Canadians navigate estate planning and estate administration with clarity and confidence. Receive a complimentary Estate Planning Checklist for Canadians here: https://www.estateclub.ca/checklist #EstateAdministration #ExecutorDuties #InsolventEstate #EstateBankruptcy #EstatePlanningCanada #ExecutorLiability #ProbateCanada #CanadianEstatePlanning #HeritageTrust #YourEstateMatters