In Foisey v. Green, 2017 ONSC 7140, the estate trustee of the estate was required to pass her accounts as estate trustee, even though the beneficiary signed a full and final release.
There, the deceased died intestate, and was survived by two sisters. One sister, Joyce, was appointed as estate trustee. She distributed what she said was half of the estate to her sister, Darlene, who signed a release as against the estate and the estate trustee.
Darlene was later found incapable of managing her property, and the Public Guardian and Trustee was appointed as her statutory guardian. They looked into the estate, and had concerns about whether Darlene received her full entitlement from the estate. The estate was said to have a gross value of $830,000, but Darlene only received $291,000. The PGT sought an accounting from Joyce. Joyce resisted, relying on the release signed by Darlene.
The court held that Joyce had to pass her accounts, notwithstanding the release. The court referred to the presumption of capacity in the Substitute Decisions Act, and the fact that a person is entitled to rely on the presumption of capacity unless the person has reasonable grounds to believe that the other person is incapable. However, the court noted s. 2(4) of the SDA, which provides that where a contract was entered into within one year of the creation of a guardianship, “the onus of proof that the other person who entered into the contract …did not have reasonable grounds to believe the person incapable is on that other person.”
In the Foisey case, the court found that there were “red flags” that precluded the court from finding that Joyce satisfied the court that she did not have reasonable grounds to believe that Darlene was incapable. These included:
- Darlene was living in an assisted living facility; and
- Darlene was participating in a trusteeship program.
To Joyce’s credit, however, her lawyer met with Darlene, in the presence of Darlene’s apparent lawyer, a childhood friend, and the administrator of the facility of the lodge where Darlene resided. Apparently no one objected to Darlene signing the release, or advised that Darlene did not have capacity.
In ordering the passing of accounts, the judge noted Joyce’s evidence that after the signing of the release, she did not keep any of the estate accounting.
One takeaway is to take steps to ensure that beneficiaries are capable of signing a release if there is anything to suggest that capacity may be in issue. A second takeaway, as noted by the judge, is to always keep records. “Although unfortunate, this case underscores the importance of keeping adequate records notwithstanding the execution of an estate release.”
As a postscript, an appeal to the Court of Appeal was dismissed, as the Court of Appeal determined that because the order directing the passing of accounts was interlocutory, the appeal would lie to the Divisional Court, with leave.
For another discussion of releases being set aside where there was inadequate disclosure, see our blogs, here and here.
Have a great weekend.