Author: Ian Hull

17 Feb

“Small Estate” in Ontario Now $150,000

Ian Hull Estate Planning, In the News Tags: , , 0 Comments

Last Friday, February 12, 2021, the Attorney General for Ontario announced changes to the Estates Act that raise the limit of a “small estate” to $150,000.

“Right now, the process to apply to manage an estate in Ontario is the same, whether the estate is worth $10,000 or $10,000,000. The process can be time-consuming and costly, deterring people from claiming smaller estates – and that isn’t right,” said a press release.

The new regulation, introduced in the Smarter and Stronger Justice Act, does not come into effect until April 1, 2021, but will make it easier to file a probate application for small estates and removes the requirement for a security bond in many small estate probate applications.

Among the changes to simplify the probate process for small estates are allowing for the completion and filing of a new simpler application form; removing requirements for certain supporting documents to be filed (for example, a commissioned affidavit of service); and more guidance for applicants on the process to file a probate application for a small estate.

Estate administration tax is still applicable to the portion of the small estate that is larger than $50,000, but these changes to procedure represent a positive step for grieving families who might otherwise leave a small estate unclaimed.

It’s worth noting that banks and other financial institutions often can’t take instructions from an estate trustee unless probate has been granted. By raising the limit for small estates, and simplifying the probate procedure, many estates will be settled sooner and with fewer burdens or costly hurdles for grieving families.

Thanks for reading

Ian Hull and Daniel Enright

03 Feb

A Third Look at PGT v Cherneyko, 2021

Ian Hull Capacity, Elder Law, Guardianship, Litigation, Power of Attorney Tags: , , , , , , 0 Comments

Earlier this year, our colleague Doreen So, blogged in two parts (here and here) on the matter of PGT v Cherneyko. It is a blog that discusses a litany of failures by an attorney for property. While Doreen covered the facts in full, they are worth repeating here in part:

“Jean Cherneyko is a 90-year-old woman.  Jean did not have any children of her own.  Her closest known relative was a niece in the US.  By the time of the PGT application, Jean was in a long-term care home.  Prior to that, Jean lived alone in the same home that she had lived in since 1969.  Jean had a friend named Tina who she had known for about five years.  On August 15, 2019, Jean and Tina went to a lawyer’s office.  Jean named Tina as her attorney for property and personal care.  Jean also made a new Will which named Tina as the estate trustee and sole beneficiary of her estate.  A week or so later on August 27th, Jean and Tina went to Jean’s bank where $250,000.00 was transferred to Tina […]”

The PGT applied to take over as guardian for property and, among other things, to set aside the gift to Tina. The court agreed and ordered the $250,000 returned to Jean on the basis of resulting trust.

In a novel approach to the law of gifts, the court in Cherneyko relied on Pecore to establish that the gift ought to be returned, saying: “The leading Canadian case on the law of gifts, the Supreme Court of Canada in Pecore v Pecore, 2007 SCC 17 (CanLII) at paras. 24-26 established that where a gratuitous transfer of property is found, there is a presumption of a resulting trust. The onus falls to the recipient to rebut the presumption.” In the court’s view, Tina failed to rebut the presumption.

But this represents a new application of the Supreme Court’s analysis and it’s worth revisiting Pecore.

In 2007, Justice Rothstein, writing for a unanimous court (Justice Abella concurring) looked closely at gratuitous gifts of joint bank accounts, between parents and children, and whether the presumption of resulting trust and advancement applied in modern times:

“The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers.  When a transfer is challenged, the presumption allocates the legal burden of proof.  Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended: see Waters’ Law of Trusts, at p. 375, and E. E. Gillese and M. Milczynski, The Law of Trusts (2nd ed. 2005), at p. 110.  This is so because equity presumes bargains, not gifts.”

The decision in Cherneyko represents a significant expansion of the principles of Pecore by applying them to inter vivos gifts between unrelated adults. Traditionally, if the courts determine that a transferor lacked the requisite capacity, the gift is void as the transferor lacked the capacity to form the proper intention to gift. Ball v. Mannin, an almost 200-year-old UK case established the original test for granting a gift and held that a person had capacity if the person was “capable of understanding what he did by executing the deed in question, when its general purport was fully explained to him.” The Supreme Court has previously outlined a separate test in Geffen v Goodman Estate in 1991, examining the nature of the relationship itself, and applying a presumption of undue influence where there is the presence of a dominant relationship. While the failed gift in Cherneyko was ultimately returned under a resulting trust, it will be fascinating to see if other courts also continue this expansion of Pecore.  We’ll keep you posted.

Thanks for reading!

Ian Hull and Daniel Enright

 

20 Jan

The Reverse Mortgage: A Caution

Ian Hull Estate Planning Tags: , , , 0 Comments

It’s often referred to as the largest transfer of wealth in human history. “Baby boomers,”  the post-war generation born between 1944 and 1964, are expected to transfer what Forbes has called “jaw-dropping amounts” to younger generations. Over the next 20 years, the United States alone will see a transfer of $30 trillion dollars. A 2020 Bloomberg opinion article points out that the top 1% of US households will receive 35% of all inheritances. In Canada, however, half of all Canadians expect to receive an inheritance, and 63% expect to leave one.

So how do these numbers breakdown?

  • Canadians who are married, own property, and have an income of $80,000 or more are most likely to leave an inheritance.
  • Only 69% of those planning to leave a legacy use a financial professional for their testamentary strategy.
  • The average inheritance in Canada, according to a 2014 BMO survey, is just under $100,000.

It’s not all good news. The Office of the Superintendent of Financial Institutions (“OSFI”) is an independent agency of the Government of Canada that supervises and regulates federally regulated banks, insurers, trust and loan companies. In July of 2020, the OSFI released data showing that Canadian seniors are achieving record debt levels through reverse mortgages: $4.5 billion. An increase of $4 billion in 10 years. Reverse mortgage interest can be high. The December 2020, 5-year interest rate on a traditional mortgage was 1.69%, while the 5-year reverse mortgage rate was closer to 5%. Reverse mortgage rates compound and balloon and it’s easy to see how the collected debt could skyrocket. This is particularly so older Canadians are able to stay in their homes for longer.

So while so many younger Canadians are expecting an inheritance, and indeed that expectation is forming part of their long-term financial plans, caution and careful planning should be encouraged if that inheritance is already saddled with debt. While this blog[1] has encouraged estate discussions between family members in the past, it’s important to make your heirs aware of any responsibilities and options for settling your reverse mortgage debt when the time comes.

Thanks for reading!

Ian Hull and Daniel Enright.

[1] Ian Hull also discusses the subject of the family conference in his book, Advising Families on Succession Planning – The High Price of Not Talking

 

06 Jan

Estate Planning: Starting 2021 on the Right Foot

Ian Hull Estate Planning Tags: , , , , 0 Comments

Ah, January. A new year, a new start. This year, more than any other, people are putting 2020 behind them with ‘extreme prejudice’, and planning for a much different and much better year ahead.

Some will be giving up sugar, others will take up running, or tackling that Spanish language textbook that’s been sitting in the corner since the first season of Narcos. Some of us will even get our estate affairs in order.

With that in mind, we present a few considerations for 2021 when making sure our affairs are all set.

A Power of Attorney: Nobody expects to lose the ability to make financial decisions. But it does happen, and as we age, the risks increase. Giving someone you trust the power to make decisions for you in the event you’re no longer able to do so, can save a lot of time down the road, and a lot of money in legal expenses.

A Will: Without one, your assets will be divided according to provincial law. If you have children, and no Will, your kids may be placed in the care of a guardian who is maybe not your first choice. It is your “last word” and the single most important document in your estate files. Our colleague, Kira Domratchev, blogged about the importance of a Will in November of 2020.

Banking Information: According to the Bank of Canada at the end of 2019, there were approximately 2.1 million unclaimed balances, worth $888 million, sitting in unclaimed bank accounts across the country. Have a list of your banks and accounts, including safety deposit boxes, and ensure that your family knows where it is.

Insurance Policies: Many insurance plans provide benefits for funeral plans or list a chosen beneficiary who is entitled to the policy. Make sure that your insurance plan is up to date, and keep copies close to your Will. This also applies to any RRSPs or pension plans that may include a benefit to someone in the event that something were to happen.

Proof of Ownership: Whether it’s the family cottage, that 1965 Mustang GT 390 Fastback, or your condo in Kitsilano: Without proof of ownership, your family may not know what you have or where it is.

Passwords: As we have blogged in the past, your online presence needs proper safeguards, but also creates important considerations for your executor or trustee who will need access to your online information and/or assets. Whether you use an online password manager, such as these, or keep an old-fashioned paper list, make sure it can be found by your family if needed.

Finally, these documents are important and need to be kept safe. Thankfully, in January of 2020, the New York Times undertook an investigation to determine the best fireproof documents safe. You can read about the results here.

We wish you all the very best in 2021, and thanks for reading!

Ian Hull and Daniel Enright

23 Dec

Murder, Insurance Money and the Slayer Rule

Ian Hull General Interest Tags: , , 0 Comments

 In the 1944 film-noir classic Double Indemnity, Fred MacMurray plays Walter Neff, a successful salesman at Pacific All Risk Insurance. He has an affair with Phyllis Dietrichson, the wife of a client, played by Barbara Stanwyck, and the two concoct a classic caper: To kill her husband, make it look like an accident, and collect the insurance money.

The title takes its name from a clause in some life insurance policies that would double a benefit in the case of accidental death, like falling off a train, the fate that allegedly befell Mr. Dietrichson and energizes a very suspicious Edward G. Robinson to find out the truth.

While Billy Wilder’s classic film trips up the protagonists’ best-laid plans at several turns, the aim of the insurance company is to uncover a fraud (it would be up to the courts to determine the killer). At law, such a concept is caught by what’s known as the Slayer Rule.

Cleaver et al. v Mutual Reserve Fund Life Association established a general rule of public policy that forbids a criminal from profiting from his or her own wrongdoing. The facts were these: A husband had taken out an insurance policy for the benefit of his wife. The policy was to pay out in the event of his death to the wife, should she be alive, otherwise to his estate. The husband died leaving a Will, the wife was convicted and imprisoned for poisoning him, and Cleaver was appointed administrator of her assets. The insurance benefit was denied to the wife on public policy grounds, and was instead paid out to the estate. In Latin, it’s known as ex turpi causa (“from a dishonourable cause an action does not arise”) and it has been Canadian law since Cleaver was decided in 1892.

One of the most important developments over the last century has been the critical element of moral culpability under section 16 of the Criminal Code of Canada as it relates to the Slayer Rule and insurance entitlements. In the 2012 decision Dhingra v. Dhingra Estate, the Ontario Court of Appeal reversed a lower court’s decision that applied the Rule to a person found not criminally responsible (NCR), holding,

 “It seems to me that if a person found not criminally responsible on account of mental disorder is not “morally responsible” for his or her act, there is no rationale for applying the rule of public policy. That rule is founded in the theory that people should not profit from their crimes or, more broadly, by their own wrongs. […] It was an error for the application judge to describe the appellant as having “committed second degree murder.”

So, while an NCR designation may permit the courts to clear a path for the release of the insurance benefit, the following scenarios are still treated as black letter law when a killer strikes, is in their right mind, and:

1) Where insurance proceeds are in question;

2) Where the slayer is a beneficiary under a will;

3) Where the slayer is an heir of his intestate victim;

4) Where the slayer and the deceased were joint tenants.

Thanks for reading!

Ian Hull and Daniel Enright

09 Dec

Let’s Talk About Grief

Ian Hull General Interest, In the News Tags: , , , , 0 Comments

“To weep is to make less the depth of grief.”
(Henry VI, Part III Act II, Scene I)

The numbers are breathtaking: over 12,000 Canadians have died of covid-19. Between covid and non-covid deaths, over 1.2 million Canadians are in some stage of grief. With the holidays just over the horizon, and the numbers showing no signs of ebbing, this time of year, already fraught for so many, is going to pose new and difficult challenges for so many of us. And according to Naheed Dosani, a palliative care physician and health justice activist, we’re not talking about grief enough.

In a recent interview with CBC News, Mr. Dosani shared his experience with “grief circles,” a gathering of colleagues where tears laughter and memories are shared in honour of the people for whom they have cared. Grief circles have moved online, but the number of participants are increasing, partly, he says, “because there’s more grief than ever before.” Shelly Cory, executive director of Canadian Virtual Hospice, sees this as “the hidden crisis of the whole pandemic.” Cory is a co-founder of the Canadian Grief Alliance, a coalition of leaders in bereavement and grief:

“Canadians have been robbed of goodbyes with dying friends and family or people they care about and forced to grieve in isolation without funeral rites. They and those working on the front lines of health care are at heightened risk for prolonged, complicated grief marked by depression, and the risk of suicide. Existing grief services are fragmented, under-funded and insufficient. Left unaddressed, significant long-term social, health and economic impacts will result.”

While Ms. Cory and Mr. Dosani are urging the federal government to implement a National Grief Strategy, the stark numbers reveal a tragic truth: we’re not talking to each other enough about grief. While lockdowns and safety measures may be preventing us from being present with a loved one at the end, grief and grieving is itself in a kind of quarantine. Unable to hug her mother and father-in-law after the death of her husband, Heather Ramey recently told Maclean’s magazine, “I want something more for my children other than this.”

Complicated grief, more than just prolonged sadness, can have devastating effects including PTSD, depression and suicidal thoughts. Pandemic related isolation and loneliness, and in particular around the holidays, can make matters more pronounced, or even worse.

It’s hard, it’s sad, but grief is still a process like any other. While grief is unique to each of us, the Centre of Addiction and Mental Health (“CAMH”) reminds us of a few suggestions to get started:
• Get clarity by naming the struggle and identify five things that have been hard, then tackle
them one at a time.
• One day at a time. If we only focus on smaller issues in a given day, we break things up
into smaller, more manageable pieces.
• Self-care, self-care, self-care. While grief can often lead us to take care of others, check in
with yourself every day. Take some time for yourself and be compassionate with yourself.
• Talk to someone. As the saying goes, “a burden shared, is a burden halved.”

It’s this final point that remains so challenging during a lockdown.

While there are several online resources and articles from local hospitals to the Harvard Business Review, it’s critical to remember to reach out and show your support, or ask for support, during a difficult time. Be it a front-line health worker like Mr. Dosani, or a colleague from years ago, or a friend you haven’t heard from in a few days: We need to talk each other more.

Ian Hull and Daniel Enright

25 Nov

Finders and Keepers and the Hidden Half-Million Dollars

Ian Hull General Interest Tags: , , , 0 Comments

In 1972, Bill and Mary Moroz purchased a humble single-story bungalow, in Edmonton, on the banks of the North Saskatchewan River. They were the first and only occupants of the home and lived there the rest of their lives. William died in 2009 and in September of 2016, so did Mary.

Their nephew, William Smolak, was appointed personal representative of the Estate of Mary Moroz and set about preparing the house for sale. The house needed much work to clean and empty, but it was finally sold to Roger and Simone Gagne, and Christopher Short, who took possession on October 16, 2017.

Two days later, the new homeowners found $100,000 in a tin in a basement shoe cubby roughly 18” high.

Seven days after that, another $500,000 was found in more tins under the drawers in the basement kitchen. The Gagnes and Mr. Short did not contact the realtor or Mr. Smolak to tell them they had made this rare find. When Mr. Gagne attempted to deposit the $100,000, the bank notified the police, and the money was seized.

Mr. Smolak claimed the money belonged to the Estate of Mary Moroz, and he applied to the Court of Queen’s Bench of Alberta for summary judgment. The court’s decision in Moroz Estate v Gagne, 2020 was handed down this past November 4.

The Alberta Court of Appeal in Weir-Jones Technical Services Inc. set out the key considerations for an application for summary judgment, based on the test set out by the Supreme Court of Canada. In order to achieve an outcome that is “just, appropriate, and reasonable,” the court laid out four key considerations:

1) Having regard to the record and issues, is it possible to resolve the dispute on a summary basis?

2) Has the moving party met its burden to show that there is no merit or no defence and that there is no genuine issue requiring trial?

3) If the moving party has met its burden, has the resisting party put its best foot forward to demonstrate that there is a genuine issue?

4) Has the presiding judge been left with sufficient confidence to exercise their discretion and summarily resolve the dispute?

The court next turned to the law on finders:

“Orthodoxy has it that the finder of a chattel acquires a title that is good against the entire world except for the true owner […]. A recovered item may have been abandoned by a previous owner. It is self-evident that a finder of ownerless property can face no superior claim. It is not only the true owner who may assert a prior right, but anyone with a valid and subsisting entitlement, including, theoretically, some previous finder. Therefore, a more accurate general proposition is that a finder acquires a title that is good against the world, except for those with a continuing antecedent claim. This is a general statement about the relative rights of owners.” (Bruce Ziff, Principles of Property Law, 7th ed (Toronto: Thomas Reuters, 2018) at 176 [Ziff])

For Mr. Smolak, everything turned on an intent to abandon, a question of fact that relies on, among other things, the passage of time, the nature of the property, and the conduct of the owner. The burden of proving intention to abandon rests with the defendant.

Unfortunately for Mr. Smolak, he had given conflicting statements about his knowledge that gave rise to uncertainty in the court. While cleaning out the house, he had found receipts for gold wafers, and Mary’s daughter had told him about the possibility of hidden money and her parents’ distaste for banks. But Mr. Smolak also said he had no knowledge of any assets hidden in the house, and claimed he would have no intention of abandoning estate assets.

Ultimately, the court dismissed the application for summary judgment, citing its uncertainty and the need to determine Mr. Smolak’s state of mind after putting so much time and effort into cleaning and sorting the personal property and selling the house.

Unable to make a fair and just determination, the court welcomed further affidavits or a possible summary trial. In the meantime, however, it was unable to decide “keepers.”

We will keep you posted. . .

Thanks for reading!

Ian Hull and Daniel Enright

11 Nov

New Rules for Trust Administrators: The End of the Secret Trust?

Ian Hull Estate & Trust Tags: , , , , , , , , 0 Comments

As 2020 begins to wind down and mercifully come to an end, we are reminded of new rules coming into force for administrators of trusts beginning January 1, 2021.

As part of its 2018 federal budget, the Government of Canada introduced new tax return filing and information reporting requirements for trusts. Currently, a trust must file a T3 return if it has tax payable on its assets, or income or capital is distributed to beneficiaries.

Going forward, the Canada Revenue Agency (CRA) will begin to collect detailed information on the identity of all trustees, beneficiaries and settlors, as well as any person who has the ability to apply control over trustee decisions about appointment of income or capital. This information includes the name, address, date of birth, jurisdiction of residence, and taxpayer identification number (“TIN”).[1] This information must now be filed with a T3 return.

For some trusts, a T3 return may never have been required before, for others, these new reporting requirements could prove very onerous. Trustees and administrators are encouraged to plan ahead and seek the advice of a tax professional as non-compliance carries significant penalties of around $2,500.00 on top of any existing penalties.

When it comes to estate planning, the new rules will affect most express trusts, and settlors preparing their testamentary documents should also seek the advice of a planning professional. Especially as it is yet unknown how the new rules may affect the use of secret and semi-secret trusts.

Oosterhoff on Trusts (9th ed.) reminds us that with a secret trust, “the Will neither discloses the existence of the trustee, nor the beneficiary,” and under a “semi-secret trust, the Will discloses the existence of the trustee, but not the beneficiary” (p.830).

We are expecting the CRA to issue clarification and guidance in the coming months as the new rules yield a host of as yet unanswered questions, namely: By seeking out personal details from beneficiaries, does a trustee then risk breaching the terms of a trust that was settled on terms meant to stay private? Is there a risk of increased non-reporting through the use of secret trusts? And what happens if the required information is not available, or withheld?

As our managing partner, Suzana Popovic-Montag told the Law Times  in February of this year, “There has been a historical lack of transparency in the administration of trusts and estates, and governments are now taking an interest in the use of these tools in the transfer of assets for taxation purposes.” Beyond the questions raised above, Suzana goes on to say that we should “‘expect concern surrounding privacy issues’ any time there are new or enhanced disclosure obligations.”

The federal government is looking to crack down on aggressive tax avoidance, and beginning January 1, 2021, a new era of disclosure will begin. While the full picture is not yet completely clear, we will keep you posted.

Thanks for reading!

Ian Hull and Daniel Enright

 

[1] The TIN includes a social insurance number for individuals, a business number for corporations and partnerships, or an 8 digit trust account number issued by CRA to trusts.

28 Oct

Presidential Powers of Attorney: A Capital Idea

Ian Hull In the News, Wills Tags: , , , , , , 0 Comments

Whenever the President transmits to the President pro tempore of the Senate and the Speaker of the House of Representatives his written declaration that he is unable to discharge the powers and duties of his office, and until he transmits to them a written declaration to the contrary, such powers and duties shall be discharged by the Vice President as Acting President.

USCS Const. Amend. 25, S. 3

In December of 1963, as America mourned the assignation of John F. Kennedy, Birch Bayh , the young United States Senator from Terre Haute, Indiana, introduced an amendment to the Constitution aimed at curing its dangerously vague language on vice-presidential succession and presidential disability. One of the many contingencies it aimed to address was, what happens if the President is unable to discharge the powers and duties of his office?

With the recent hospitalization of the current President after his diagnosis of Covid-19, much of the water cooler buzz, the nightly news, and social media was atwitter with questions surrounding the 25th and whether it would be evoked.

Such declarations are rare, but not uncommon. Presidents Reagan and George H.W. Bush each transferred power using 25 during pre-planned surgeries. But while we do not know, as of yet, if the White House counsel drafted language affording the transfer of power to the Vice-President (albeit temporarily) were the President’s health to take a turn, it did get us thinking that such a document could be akin to the most important Power of Attorney in the world.

In Ontario, the subject of a living will often comes up in similar circumstances. But the term “living will” is not used in any formal way. We have written about living wills here in the past. A more common term is advance directive: a document that clearly outlines your treatment and personal care wishes.

But whether you call it a living will or advance directive, they are not the same as a Power of Attorney (POA): a legal document in which you name a specific person to make decisions on your behalf. While an advance directive can form part of your POA for personal care, so your attorney is aware of your wishes, it does not carry the same weight with the court.

The Ministry of the Attorney General for Ontario outlines the various types of Powers of Attorney in this handy guide and our colleague Jim Jacuta, discussed some differences in this post from 2019.

Finally, while we may not know whether the president executed a document under the 25th Amendment or if one was even drafted, it is a good reminder that even if our own illness or temporary absence does not pose a national security risk, outlining our wishes about care is always a capital idea.

Thanks for reading.

Ian Hull and Daniel Enright

08 Oct

Heightened Death Awareness in the Midst of Covid-19

Ian Hull Estate Planning Tags: , , 0 Comments

The importance of regularly updating your will cannot be understated. A prudent individual should review their will upon significant life changes. An article on Forbes suggests that one’s estate plan should be reassessed at least every five years. A change in finances, the law or personal circumstances, such as marriage, divorce or a change in relationships, should prompt a review even sooner.

Covid-19 sparked a change in many people’s daily lives and personal attitudes. While death is not something pleasant to consider, Covid-19 has made many people more conscious of their own vulnerability and mortality. There is a psychological theory that describes this notion – Terror Management Theory. This phenomenon examines how people respond when death is made salient to them. In their book, The Worm at the Core, Sheldon Solomon and his colleagues explain how the Terror Management Theory begins with the notion that human beings have an innate need to survive, like other living organisms. However, while other organisms lack the intellectual ability to understand their impermanence, human beings do not.  Perhaps as a result of heightened death awareness spurred by Covid-19, estate planners were flooded by clients rushing to update (or create) their estate plans at the beginning of the pandemic.

As students in the GTA return to school, we are again seeing a steady and concerning increase in Covid-19 cases. Ontario Education Minister, Stephen Lecce, expressed concerns of a possible second wave of the virus in conjunction with flu season. It is important for individuals to again reconsider whether their personal circumstances have changed in a significant way and to review their estate plans to ensure they are sufficient and up to date. It is crucial that Canadians do not succumb to “pandemic fatigue.”

Thanks for reading!

Ian Hull & Tori Joseph

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