Who would have thought that sound legal advice would echo the chorus of this 1976 Steve Miller Band hit. “Take the money and run” isn’t exactly the kind of advice one expects from their lawyer—unless that lawyer is Saul Goodman or Denny Crane. However, a recent case demonstrates the wisdom hidden behind those lyrics.
We recently assisted a Canadian client living in the United States who was a beneficiary of an estate administered in Ontario. She received a distribution cheque issued in Canadian dollars. Rather than depositing it immediately, she chose to hold onto it, hoping the exchange rate would improve—an understandable instinct, especially when the Canadian dollar is trading well below its U.S. counterpart.
Unfortunately, the delay proved costly. By the time she attempted to deposit the cheque, it had become stale-dated and was refused by her financial institution. Although we were ultimately able to recover the funds from the estate trustee, the situation could easily have ended differently. Had the funds been distributed to other beneficiaries, used to pay expenses, or otherwise depleted, recovering her bequest would have been difficult and even more costly—potentially exceeding the value of the bequest itself.
What Is a Stale-Dated Cheque?
A cheque is considered “stale-dated” when it is presented for payment after a certain period has passed—typically six months from the date of issue. In Canada, most financial institutions follow this six-month rule, although the specific policy may vary depending on the bank or cheque type. After that window closes, banks are not legally obligated to honour the cheque, and many will refuse to process it outright.
It’s important to note that a stale-dated cheque is not void in the legal sense. The obligations underpinning the transaction—be they contractual, equitable, or otherwise—remain intact. Disputes about reissuing cheques, however, often become time-consuming and costly. The drawer may raise defences such as detrimental reliance, waiver, or estoppel, any of which the recipient must overcome before recovering the funds.
Not Just an Estate Issue
This is not just an Estate Administration issue: it can also affect commercial transactions, cross-border contracts, and supplier payments. For example, an American company paid by cheque from a Canadian client may choose to hold the funds in the hope that the exchange rate will improve before depositing. If the cheque is left too long, the same risks apply: the payment may be refused due to stale-dating, and reissuance may not be straightforward—especially if the issuing business is dissolved, insolvent, or undergoing restructuring.
Lessons for Cross-Border Clients
For clients receiving cheques across borders, the example cited highlights two major risks:
- The Timing Risk: Waiting for the “right” exchange rate is speculative and can backfire: the market may worsen, as opposed to improve, and the value of a distribution cheque may ultimately become worthless if it goes stale and the funds become unavailable.
- The Availability Risk: Estate accounts are typically closed as soon as distributions are made. Once that happens, recovering stale funds may be difficult or impossible, especially if the estate trustee has fulfilled their duties and distributed the remaining assets. This may also be the case where a company issuing a cheque becomes bankrupt, dissolves, or otherwise undergoes some restructuring.
Practical Solutions
To avoid these pitfalls, clients and businesses alike should consider three practical strategies:
- Deposit First, Convert Later: Consider depositing the cheque immediately into an account in the currency of the original cheque. Many financial institutions offer foreign currency accounts. Depositing the cheque immediately into a foreign currency account preserves the value of the funds while giving the recipient flexibility to convert when conditions are more favourable.
- Don’t Wait: If holding foreign currency is not feasible, the safest course is to accept the current exchange rate and deposit the funds promptly. The marginal loss in conversion may be far less than the total loss of value if the cheque becomes stale and unrecoverable.
- Request a Bank Draft or Certified Cheque: In some cases, requesting a bank draft or certified cheque instead of a standard personal or estate cheque may be a prudent option. Because these instruments are backed by guaranteed funds, financial institutions may treat them with more leniency if presented after six months—though this is still subject to each bank’s discretion.
Final Thoughts
Currency speculation should never be allowed to compromise legal rights. Whether in estate distributions or commercial payments, the simple act of delaying a deposit can unravel otherwise straightforward transactions. Trying to game the “system” can turn an inheritance or a receivable—especially in a foreign currency—into a costly recovery mission.