A recent Ontario Superior Court decision in Hotner v. Norman, 2025 ONSC 735 provides lessons for anyone informally managing and making transfers to themselves from the assets of an individual with diminished capacity. The case showcases the complex intersection of family caregiving, cognitive decline, and informal financial management.
Background
This matter centred on Annie, who died in 2021 at the age of 96, and her daughter Elaine. After Annie’s husband passed away in 2016, Elaine took control of her mother’s finances after being added as a joint account holder, eventually spending over $1.1 million of her mother’s assets. Elaine claimed these funds were a gift in exchange for providing care and keeping her mother out of a nursing home. However, the evidence showed Annie had documented cognitive decline starting in 2015 and notably scored just 5/30 on a Montreal Cognitive Assessment (MOCA) test in November 2016 – right before major financial decisions were made. Unsurprisingly, Elaine’s two siblings, who were the sole beneficiaries of Annie’s estate, took significant issue with her actions after Annie’s death. Importantly, the other siblings, including Elaine, were not named in Annie’s will, which was executed in 1987.
Court’s Analysis of Fiduciary Duty and Treatment of Gifts
The court’s analysis of fiduciary duty is particularly instructive. Applying the Supreme Court’s three-part test from Frame v. Smith, Justice Smith found that Elaine owed a fiduciary duty to her mother. The decision emphasizes that when an elderly person gives control of substantial assets to a family member, fiduciary obligations likely arise – regardless of formal appointment. The court also found Elaine was a “trustee de son tort,” essentially treating her as a trustee despite a lack of formal appointment.
The treatment of gift claims in this case provides valuable guidance. The court reinforced that mere assertions of gifts are insufficient under Section 13 of the Evidence Act, particularly when dealing with cognitively impaired donors. Despite testimony from multiple family members supporting Elaine’s gift claim, the court found this evidence inadequate without clear documentation or proof the witnesses understood the full context of Annie’s cognitive state and Elaine’s financial actions. As well, Elaine’s accounting was insufficient to justify various expenses made, including a full renovation from top to bottom of Annie’s home.
Warning Signs and Red Flags
Some key red flags from this case highlights include:
- Rapid depletion of assets (here, from $1.1 million to $38,960 in just a few years);
- Large undocumented “gifts” to caregivers, including significantly increasing monthly payments;
- Significant home renovations using the elderly person’s funds; and
- Lack of funds reserved for future care needs.
In Summary
The court ultimately ordered Elaine to repay all funds, subject to reasonable compensation for care services. The decision serves as a reminder that those managing an elderly person’s finances, whether formally appointed or not, will be held to high fiduciary standards. Proper estate planning in these kinds of cases may play a crucial role in protecting both elderly clients and family members by implementing proper safeguards and documentation from the outset.
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