Author: David M Smith

09 Aug

A Special Needs Child Requires Special Planning

David M Smith Estate & Trust, Estate Litigation, Estate Planning, Health / Medical, Uncategorized Tags: , , 0 Comments

Oakland Rose is no ordinary child. He is special in more ways than one.

Oakland was diagnosed with Autism at the age of 2 years old and had no verbal communication until the age of 5.

Oakland is currently 20 years old. Although his verbal communication has drastically improved, he is not able to engage in abstract thinking. Oakland’s responses are often rehearsed and premeditated. He is not able to take public transportation alone. Although Oakland will graduate from a specialized high school program, he will never attend university. Oakland has the capacity of a young child.

Oakland will be dependent on his parents for the rest of his life.

Approximately 1 in 66 Canadian children were diagnosed with Autism Spectrum Disorder in 2018. Autism is just one of many developmental disorders that children are diagnosed with each year.

Families with children with special needs are in a unique position when it comes to estate planning. Planning for one’s death and ensuring that your loved ones are supported is an overwhelming task for the average person. For parents with special needs children, the task becomes even more burdensome.

According to one author, a child with special needs includes any child who, at birth or as a result of an illness or injury, is physically, mentally or emotionally disabled. While some people with special needs have successful careers, many will be dependent on their parents for the rest of their lives. Not only will the person be physically and emotionally dependent on their parent, but they will also be financially dependent. As a result, parents of a special needs child face exceptional estate planning challenges.

The higher functioning a special needs person is, the more likely he/she will require assistance from a parent’s estate. This is because government funding typically only provides for basic necessities.

Estate planners must determine whether their clients have children or other immediate family members with special needs. They must also ascertain that individual’s level of functioning. Specialized planning will be required for these families.

A parent of a special needs child might wish to consider:

i) Providing financial compensation for future caregivers in their will
ii) Setting up a special needs trust to ensure their child is not disqualified from government benefits – this trust will supplement but not replace the government benefits
iii) Creating a life care plan for their child which includes educational, living and career planning
iv) Writing a letter of intent summarizing the child’s habits, likes and dislikes
v) Naming a guardian if your child is under the age of 18

It is important to remember that children with disabilities have evolving needs. Thus, parents should create an estate plan that allows for flexibility. The plan should be reassessed and updated regularly to ensure it is in line with the child’s current needs.

Although creating a will and considering your own mortality is a daunting experience, it is far better than the alternative of leaving your child without adequate support!

Thanks for reading!
David Morgan Smith and Tori Joseph

15 Jul

Where There’s a Will to Contract, There’s a Contract to Will

David M Smith Beneficiary Designations, Estate & Trust, Estate Litigation, Estate Planning, Mutual Wills, Support After Death, Trustees, Uncategorized, Wills 0 Comments

In researching common errors in will drafting, we recently stumbled (as one often does through research) on the following question:

In the case of mutual wills, what happens in the event of remarriage?

Mutual wills operate as a contract. Simply put, the terms of the contract are that absent any revocation during the joint lives of the parties, the survivor will not revoke thereafter. The conundrum then becomes: If a will by its very nature is revocable, and wills are automatically revoked by marriage, what then happens to the agreement in the event of a second or third marriage?

The question at hand is best described with an example:

Jane has two children from a prior marriage, as does John. John and Jane get married and draft wills. The wills of Jane and John are identical except for some names and dates and include an agreement that says in part, that if John dies, all assets will be transferred to Jane absolutely, and when Jane dies all assets shall be divided equally among their four children. When John dies, his assets vest in Jane, and her will is now locked such that changing it would frustrate the terms of her agreement with her now deceased husband. But what if then Jane meets and marries Oscar? If all prior wills are null. . . Now what?

The courts have wrestled with the concept of mutual wills since the death of Lord Horatio Walpole in 1797. In his will of 1756, a nephew of the English author and statesman, George Earl of Walpole, demonstrated intent to enter in to a “compact” with his late uncle for the disposition of his and his uncle’s estates to the benefit of their respective families. The question that arose then, as it still does today, is upon what terms the two parties were transacting, and how should they be bound? Or, to quote a commentary from the turn, “How far in law and equity was each at liberty to repent, and to recall his share of the testamentary exchanges between them?”

204 years later, the question continued to be addressed in a seminal decision of the Ontario Superior Court of Justice. In 2001’s Edell v. Sitzer, Cullity J, was tasked with unpacking a bitter family dispute where an alleged agreement not to depart from equal division of assets was at stake. The question before the court then (in part) was, do the facts give rise to a constructive trust? Justice Cullity set out the test for mutual wills thusly:

  1. The mutual wills were made pursuant to a definitive agreement or contact not only to make such wills, but that the survivor shall not revoke.
  2. Such an agreement is found with certainty and preciseness.
  3. The survivor has taken advantage of the provisions in the mutual will.

If the test is satisfied, the court can impose a constructive trust. Rooted in the law of equity, an implied or constructive trust aims to remedy any unjust enrichment by one party of a contract (a surviving spouse, for example) over another.

But what consistently seems to trouble the conscience of the court, is the idea of “contracting-away” one’s testamentary freedom. There is no restriction for a will made in defiance of such an agreement, but in equity, the court is almost bound to treat mutual wills as a single testamentary instrument. This was the problem in the 2016 ONSC case of Rammage v. Estate of Roussel: Alf and Ruth Roussel had made mutual wills 13 years prior to Alf’s death in February of 2009, agreeing in part to divide their estate equally among their four children (both Ruth and Alf went into the marriage with 2 children each). One year after Alf’s death, Ruth made a new will, disinherited Alf’s children, and left everything to her own two kids. Upon the death of Ruth, the litigation began.

The court in Rammage determined that the wills of the deceased testators amounted to mutual wills, imposed a constructive trust, and divided the assets according to the terms of the first wills of Ruth and Alf.  If the court is satisfied that the wills are mutual, any property disposed of in a subsequent testamentary document is subject to a constructive trust in favour of the named legatees, and the subsequent will fails.

Returning to the question of remarriage, one could expect the need for administration and ultimately judicial intervention, should all the beneficiaries not consent to the changes in subsequent wills. Like many decisions that seem like “a good one at the time,” mutual wills should be considered very carefully and with the advice of independent counsel. A decision to enter into a contract that prohibits one from ever changing their last will and testament must be considered from all sides. To quote the late Horatio Walpole, the 4th Earl of Orford: “The wisest prophets make sure of the event first.

Thanks for reading!

David M. Smith & Daniel Enright (Summer Law Student)

29 Nov

Resealing of Foreign Orders Appointing Guardians

David M Smith Estate & Trust, Estate Planning, Trustees, Uncategorized, Wills Tags: , , , , 0 Comments

This blog was written in collaboration with, and with thanks to Yasmin Vinograd of Merovitz Potechin LLP .

In some cases, an incapable person residing outside of Canada has assets in Canada. Can a guardian appointed outside of Canada have access to the incapable’s Canadian assets? By extension, would a Guardianship Order made outside of Canada be recognized in Ontario?

In Ontario, this scenario is dealt with in the Substitute Decisions Act, 1992 (“SDA”). Section 86 of the SDA provides a mechanism by which orders made by a court outside of Ontario to appoint a guardian of property or of the person may be recognized or “resealed” in Ontario. Subsections of s. 86 specify that:

s.86(1): a foreign order is “an order made by a court outside Ontario that appoints, for a person who is sixteen years of age or older, a person having duties comparable to those of a guardian of property or guardian of the person.”

s.86(2): “Any person may apply to the court for an order resealing a foreign order that was made in a province or territory of Canada or in a prescribed jurisdiction.”

s.86(3): an applicant seeking to have the court reseal the foreign order is required to file a copy of the foreign order, along with a certificate signed by registrar, clerk or other officer of the foreign court stating that the order is unrevoked and is of full effect.

The effect of these provisions is that a guardianship order made by a foreign court will be recognized and enforceable in Ontario.

Sounds easy enough, doesn’t it? Unfortunately, it is not.

I had previously blogged about the possibility of resealing guardianship orders made in other provinces and territories. The issue arises when trying to reseal a guardianship order made outside of Canada. The problem is that Ontario has yet to prescribe any other country as a “prescribed jurisdiction” for the purpose of section 86(2). This begs the question: can the court reseal a foreign guardianship in the absence of the list of prescribed jurisdictions?

When faced with this exact issue in Cariello v Perrella, 2013 ONSC 7605, the court refused to apply section 86 to reseal a guardianship order made in Italy. Justice Mesbur stated:

It seems to me that unless and until Ontario creates a list of “prescribed jurisdictions” there is simply no legislative basis on which I can apply s. 86. This is not a case where the statute inadvertently fails to deal with an issue. Here, the province has simply failed to take the regulatory steps necessary to create a list of prescribed jurisdictions to which s.86 would apply. I have no idea of the province’s intentions in that regard. I fail to see how I can simply assume Ontario would designate Italy as a prescribed jurisdiction when it finally creates a list of prescribed jurisdictions under the SDA. I have no basis to conclude that Ontario has any intention of having s.86 apply to any jurisdiction other than another Canadian province or territory. Section 86 cannot apply.

In light of the Cariello decision, it appears that section 86 and the mechanism it provides cannot be used to reseal an order made by a jurisdiction outside of Canada. What, then, is a guardian to do if the incapable has assets in Canada that need to be accessed?

There are two ways in which this could be addressed.

The first is to bring an application to have the guardianship order recognized as a non-monetary order, pursuant to the Supreme Court of Canada’s decisions of Morguard Investments v De Savoye, [1990] 3 SCR 1077 (SCC), Beals v Saldanha, 2003 SCC 72, and Pro Swing Inc v ELTA Golf Inc, 2006 SCC 52. As of now, there is no decision that applied the SCC’s test of real and substantial connection in the context of a guardianship order. It remains to be seen whether an Ontario court would be open to recognizing a guardianship order on that basis and what the Public Guardian and Trustee’s position will be on such an application.

The second option is to commence a new guardianship application in Ontario. The evidence of incapacity in the foreign jurisdiction may be useful in such an application, but it would probably need to be updated to reflect the current status of the incapable and to demonstrate his or her incapacity. The “new” guardianship application will need to conform to Ontario’s requirements under the SDA, including the filing of a Management and/or Guardianship Plan(s), service on required persons, and naming of specific respondents in the notice of application.

Thanks for reading!
David M. Smith & Yasmin M. Vinograd

05 Dec

Fraudulent Conveyance and The Estate Planning Defence

David M Smith Estate & Trust, Estate Planning, Executors and Trustees, General Interest, In the News, Litigation, Public Policy Tags: , , , , 0 Comments

We have previously blogged on Fraudulent Conveyance.  This cause of action can, on occasion, be met with a defence that the conveyance of property was in furtherance of an estate plan and, therefore, without fraudulent intent.  As with most cases, the specific facts of the case will determine whether the defence can succeed.

In Bank of Montreal v. Real Marleau, the Saskatchewan Court of Queen’s Bench was prepared to entertain the notion that the defendant’s assertion might actually be true, but nonetheless, determined that the conveyance ought to be aside.

The estate planning defence was considered and again rejected in Re Whetstone, 1984 CarswellOnt 157.  In this case, the estate planning defence relied on evidence from the family’s solicitor.  The court noted, at paragraph 28,

“In the circumstances, it is not material that the family’s solicitor recommended the conveyance based on general principles and not on actual knowledge of the company’s financial position; the intent we are concerned with is not that of the family’s solicitor, but of [the defendant].”

Lastly, in an unreported decision of the Ontario Superior Court of Justice, RBC v. Nicolau, the defence was considered but not accepted:

“In this case, Mr. Nicolau testified that the transfer was for estate planning purposes.  He submits that there was therefore no fraudulent intent.

RBC referred the Court to jurisprudence in which the estate planning defence was raised.  I agree with the submissions of RBC that this defence must fail.  While the transfer may have also satisfied Mr. Nicolau’s estate planning goals, this explanation is not, in my view, sufficient to displace the inference of fraudulent intent given the timing of this estate planning and the presence of the badges of fraud.  Accordingly, I find that the April 16, 2012 conveyance of 1 Lister Drive to Gabriel Nicolau was fraudulent, and the provisions of the Act are therefore applicable.”

Thanks for reading,

David Morgan Smith

28 Nov

Supreme Court Advocacy

David M Smith Continuing Legal Education, Estate & Trust, Estate Planning, General Interest, Litigation, Wills Tags: , , , , , 0 Comments

I was able to attend a recent CPD program by the Advocate’s Society titled “Supreme Court of Canada Advocacy.”

A powerful keynote address was presented by the Honourable Madam Justice Suzanne Côté of the Supreme Court of Canada. Justice Côté’s remarks included an inside look at what lies behind the Supreme Court of Canada’s “big mahogany doors,” as she so eloquently phrased it. The Honourable Marshall Rothstein, Q.C., then spoke about the unwritten rules to getting leave to appeal.

Debate was had over the need for a script. Most panelists supported coming prepared with a script but cautioned against being married to it. When it comes to answering questions, advocates should see this as an opportunity to get off their script and engage in a dialogue with the bench. As Justice Côté points out, an oral argument is not supposed to be a monolog.

After discussion on the power of oral advocacy, the discussion shifted to the importance of the written argument. Although the factum is a critical component of any appeal, parties are under no obligation to reach the maximum page length. It was suggested that some of the most successful arguments can be made in 25 pages or less.

In addition to the factum, the Condensed Book can be a vital tool for advocates appearing before the Supreme Court. Under the Supreme Court rules, the Condensed Book may contain a two page outline of the oral argument. Preparing the this two page outlines forces advocates to truly narrow down their key points.

The panelists also spoke about the important role interveners can have in a case. Within the confines of a 10 page factum, and 5 minutes of oral argument, an intervenor can illustrate why a matter is of public interest, and provide supplemental answers to questions posed to the parties by the Justices. Interveners can play a critical role, and should not be overlooked.

Finally, the panel highlighted the power of a moot. Practice moots are one of the most valuable tools an advocate can use to prepare their case. The Supreme Court Advocacy Institute offers moot sessions where participants have the opportunity to moot their case before a panel of experienced litigators and retired justices.

Thanks for reading,

David Morgan Smith

24 Oct

Why Influence is not always Undue

David M Smith Uncategorized Tags: 0 Comments

In the world of estate litigation, there is a tendency to view influence askance:  to see all influence as being motivated by self-interest and as inevitably carrying the seeds of coercion or “undue influence.”

Of course, this can’t be the case.  A society that cares for the vulnerable and the elderly will require that strangers or distant relatives step in on occasion to help someone in need, particularly where there is no immediate family member to assist.  A balance must be struck in the law as it relates to undue influence between protecting the elderly and vulnerable while, at the same time, respecting the dignity of an individual to exercise his or her own decision-making even in the face of influence or persuasion.

The law of undue influence has evolved differently as it relates to inter vivos gifts, on the one hand, and Wills, on the other.  A full discussion of the reasons for this goes way beyond the scope of a blog but one observation that can be made is the acceptance that the law has shown for an individual to assert testamentary freedom, even if that means benefitting someone who exercises power over them.

Commentators such as John Poyser have observed the various rationales behind the fact that the presumption of undue influence is inapplicable in the case of Wills.  While the law in this area has evolved, one of the policies underlying the law recognizes what we observed above:  society requires the young to help the old.  While there must be boundaries put on any conduct that would amount to an abuse of this social reality, there must at the same time be a recognition that well-meaning people should not be dissuaded from providing assistance if to do so would automatically trigger a legal presumption that their actions amounted to coercion.

Thanks for reading,

David Morgan Smith

 

 

 

 

 

 

17 Oct

Holding the House in Trust

David M Smith Hull on Estates, Trustees Tags: 0 Comments

As a follow up to my last blog which considered Andrade v. Andrade, 2016 ONCA 368, today we further consider the specific issues that can arise in the litigation of competing interests in real estate and the importance of a declaration of trust.

The scenario is common: one party holds legal title to real estate and another asserts that he or she is beneficially entitled to the property having provided the funds to purchase the property or pay down the mortgage.

While evidence may be led to establish the existence of a resulting or constructive trust in favour of the applicant or plaintiff, it is tempting to simply argue that an express trust existed:  the legal owner held the property from inception in trust for the person who alleges that he or she is the beneficial owner.  Successfully advancing such an argument relieves the disappointed party from having to tender vast amounts of bank records and cancelled cheques to establish, say, a purchase money resulting trust.

The simplicity of the argument, however, requires clear evidence that satisfies the basic requirements of an express trust, and meets the requirements of the Statute of Frauds.  The successful applicant or plaintiff will have to establish that the legal owner assumed the obligations of trustee by:

  • certainty of intention to create the trust;
  • certainty of the identification of the subject property of the trust; and
  • certainty as to the persons intended to be beneficiaries of the trust

Proving the three certainties requires documentation evidencing a property interest in trust.  The gold standard would be a trust declaration attached to a reporting letter from the purchaser’s solicitor.  In the absence of such evidence, the three certainties cannot be proved and the provisions of the Statute of Frauds are violated.  Recent cases considering this issue include Sundarampillai v. Ponnambalam, 2015 ONSC 5466, and Roberts v. Hyland, 2017 ONSC 2164.

In the absence of an express trust, equitable remedies may still be available but, as noted, the case becomes more complex from an evidentiary point of view.

Thanks for reading,

David Morgan Smith

Find this blog interesting? Please consider these other related posts:

Resulting Trusts and What it Means to Pay for the House

 

03 Oct

Resulting Trusts and What It Means to Pay for the House

David M Smith Uncategorized Tags: 0 Comments

There are many cases that consider whether a resulting trust is created in respect of real estate. The question that arises is whether the person with legal title to real estate is in fact the true owner or whether, because of contributions made by another, the property should “result” or be returned to the person who actually contributed the proceeds required to purchase the property.

In Andrade vs. Andrade, the Ontario Court of Appeal considered a lower court decision in which the Trial Judge had found that a woman named Luisa who lived in a house had not paid for the house and could therefore not establish an entitlement based on resulting trust.

What is most interesting about the decision of the Court of Appeal is that, in reversing the lower court decision, it peeled the onion on what actually constitutes a financial contribution by someone who purports to be beneficially entitled to real estate:

  •  Luisa paid down the mortgage with money given to her by her children who resided with her.  But it was her money: “once the working children gave their paycheques to Luisa…[it] was no longer their money because they made a gift of it to their mother, knowing she would use it to support the family.”
  • Likewise, the rental income was Luisa’s money: “Luisa was the only person…who advertised for and negotiated with prospective tenants and collected their rent.”
  • And, lastly, Luisa had other sources of money: “Luis received old age security benefits commencing in 1990… and in 2003 she received a settlement of $21,000.”

The takeaway from the case would appear to be that the determination of whether someone paid for a house requires a thorough analysis of the source of the moneys rather than simply looking for cancelled cheques directly written by the purported beneficiary.

Thanks for reading,

David Morgan Smith

Find this blog interesting? Please consider these other related posts:

Resulting Trusts – Protect Yourself

The Purchase Money Resulting Trust

Resulting Trust Reverberations

 

28 Sep

The Equitable Doctrine of Tracing

David M Smith Estate & Trust Tags: 0 Comments

Where an estate trustee acts in breach of trust, the first concern of the beneficiary is to recover the estate assets.  But what if the trust property has left the hands of the trustee?  In such a situation the beneficiary is left to trace the trust property and seek to recover it from the person or entity then in possession.

The equitable doctrine of tracing operates on the occurrence of two events:

  • the acquisition of legal title “in breach of some trust, express or constructive, or of some other fiduciary obligation”  and
  • the assumption of possession by a volunteer “provided that as a result of what has gone before some equitable proprietary interest has been created and attaches to the property in the hands of the volunteer”

These principles were considered and applied in Re Diplock, [1948] Ch.465 (C.A.), the leading modern authority on the doctrine.

In this case, an executor distributed an estate to charitable residuary beneficiaries pursuant to a Will (presumably not probated) which was subsequently challenged and found to be invalid.  The next of kin sought to recover from the executors and the charitable beneficiaries.  Applying the doctrine of equitable tracing, the executors were found to have distributed in breach of a fiduciary duty to the next of kin.  The charitable beneficiaries, although innocent volunteers, could not take good equitable title to the estate property.

The next of kin were thus entitled to recover, first from the estate trustee and then from the charitable beneficiaries.

Thanks for reading,

David M. Smith

 

19 Sep

A Collaborative Motion for Summary Judgment

David M Smith Litigation, Uncategorized, Wills Tags: , , 0 Comments

In yesterday’s blog, my colleague Umair observed that moving for summary judgment may carry significant risks.  This is particularly so where only the moving party seeks to use the process and, where credibility is in dispute, the Court will often be compelled to find that a genuine issue for trial exists.

The situation is quite different, however, when the parties agree to use the summary judgment process to adjudicate a dispute.  Where the parties have agreed to have all or part of a claim determined by summary judgment and the Court is satisfied that it is appropriate to grant same, judgment will issue one way or the other.

A collaborative approach to summary judgment may be an advisable manner of adjudication, particularly having regard to the principles of proportionality with regard to the assets in dispute.  As a general rule, if counsel agree that the matter can be adjudicated based on an agreed Statement of Fact and transcripts of examinations for discovery, Judgment may be made.  The key determination is whether the viva voce evidence of witnesses and the “machinery” of cross-examination before the trier of fact is required for the fair and just adjudication of the case.  Note that the Judge may direct the matter to trial even if counsel submit the case on consent for summary judgment (this would be a rare occurence indeed).

An example of a collaborative motion for summary judgment is the decision in Rammage v. Estate of Roussel (2016 ONSC 1857).  In this case,   Alfred Roussel (“Alfred”) and Ruth Roussel (“Ruth”) were married in 1997. Each had two children from previous relationships.  In 1998, Alfred and Ruth executed wills by which they gave their respective estates to each other and provided for an equal division amongst their four children on the death of the surviving spouse (the “1998 Wills”). Alfred died 2009 leaving his estate to Ruth. Ruth decided to prepare a new will in 2010 leaving the entirety of her estate to her two children. Ruth later died in 2013.

Alfred’s children took issue with the fact that Ruth’s estate passed entirely to her beneficiaries and not them and litigation ensued.

As there was no direct written or oral confirmation that the 1998 Wills were mutual, Alfred’s children had to rely on extrinsic evidence to support the existence of a binding legal contract. Justice Reid considered the context and the agreed evidence.  In finding that the deceased made a mutual will, the Court considered: (i) the 1998 Wills were made in context of 13 years of cohabitation including a commitment of marriage, (ii) Alfred had been the breadwinner for many years, (iii) Alfred and Ruth had acted throughout their marriage as if they had a family consisting of four children, (iv) the obituary was indicative of a unified family and (v) Alfred and Ruth had told the four children they would be left everything once both had passed.

Thanks for reading,

David Morgan Smith

Find this blog interesting? Please consider these other related posts:

Summary Judgment Granted

Summary Judgment in Estates Litigation

Late-Stage Summary Judgment Motions Questioned

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