Author: Joshua Eisen

02 Oct

Pre-taking Compensation as an Estate Trustee

Joshua Eisen Executors and Trustees Tags: , , , , , , 0 Comments

An estate trustee’s right to compensation is a creature of statute in Ontario.  Prior to the enactment of a statutory right to compensation, an executor or administrator could draw compensation from an estate only when authorized to do so by the will, by agreement with all of the beneficiaries, or by court order.  In Ontario, compensation for estate trustees is governed by the Trustee Act, which permits “fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice”.

One question that arises frequently is the question of whether an estate trustee can pay his or her compensation out of the estate before it is approved by a court.  Some older texts had indicated that pre-taking compensation without passing accounts was once a common practice for estate trustees.  However, the Ontario Surrogate Court indicated its disapproval of the practice in the 1982 case of Re Knoch, [1982] O.J. No. 2516, 12 E.T.R. 162, 1982 CarswellOnt 622 (Surr. Ct.).  Justice Dymond took the view that pre-taking of compensation is a breach of a trustee’s fiduciary duty to the beneficiaries because it places the trustee in a fundamental conflict of interest between his or her obligations to the beneficiaries and his or her own interests, and because a fiduciary is not supposed to personally profit from his or her position.  It also deprives the beneficiaries of the interest that would have been earned on the compensation, had it not been pre-taken.

There have been some cases where the Courts have been more forgiving.  In Re William George King Trust, the prohibition in Re Knoch against pre-taking was described as a “general rule”, but that in cases where the administration of the trust is ongoing, the trustees are paying themselves for services already rendered, and the amount taken is fair, pre-taking might not only permissible but should be encouraged in order to avoid the expense of a passing of accounts.  Courts have since disapproved of this statement, however.

Whether an estate trustee pre-takes or not, compensation is reviewable on a passing of accounts.  A trustee who takes compensation without a court order, authorization in the will, or agreement from the beneficiaries risks being ordered to repay interest to the estate, or to have his or her compensation reduced for having acted improperly.  The estate trustee may have to reimburse the estate for excess compensation taken if it is found that the fair and reasonable amount is less than what was pre-taken.

Although no discussion of this appears in the case law, it is interesting to speculate as to whether the decisions in these two cases were influenced by interest rates.  At the time of the decision in Re Knoch in 1982, interest rates were very high.  In 1994, when the King Trust case was decided, they were much more modest and the consequences of pre-taking were quantitatively smaller.  This is purely speculation on my part, however.

In any event, subsequent cases have returned to the position in Re Knoch and it now seems that the weight of authority is against unauthorized pre-taking.  If the will doesn’t allow for it, and the consent of all of the beneficiaries cannot be obtained, pre-taking of compensation will generally be improper and is to be discouraged.

01 Oct

Death on Mars

Joshua Eisen In the News, Wills Tags: , , , , , 0 Comments

NASA revealed exciting news earlier this week when they announced the discovery of liquid water flowing on the surface of Mars.  The presence of water is an encouraging find.  It boosts the prospects of discovering life on our nearest neighbour, and it raises questions about whether the planet could someday host human visitors.

The goal of sending people to the Martian surface now seems more attainable than ever.  Talk of sending astronauts to Mars is likely to accelerate over the coming months.  With people travelling to and someday settling on the red planet, a whole host of legal issues are likely to arise about how people will live on Mars, and some day, how we will deal with death in space.

The problem of applying testamentary law in space is a novel one.  Perhaps the closest historical analog is the example of the explorers who set sail centuries ago in search of strange, new places across the seas.  One of the legal developments that arose was the exception for privileged wills.  Sailors at sea were allowed to make wills without them being subject to the same formal requirements that governed other wills.

Today, section 5 of Ontario’s Succession Law Reform Act addresses the formal validity of wills made by “a sailor when at sea or in the course of a voyage”.  The section provides for a relaxation of the usual requirements for a will to be formally valid, including the requirement for two witnesses in the case of an attested will and the requirement that the will be wholly in the handwriting of the testator in the case of a holograph will.  It provides that a sailor at sea can make a will by a writing, signed by the testator or by some other person in his or her presence and by his or her direction, without any other formalities.  The section also applies to members of the Canadian Forces on active service and members of any other naval, land or air force while on active service.

There are no cases testing whether this provision or analogous provisions in other jurisdictions (on Earth) would apply to relax the formal requirements for a will where it is made during a space flight or while residing on Mars.  It’s possible that astronauts in flight could be considered to be analogous to sailors at sea.  It’s also possible that NASA astronauts would be members of a military force on active service, and accordingly gain access to the use of privileged wills.

It seems that it will be still be some time before we will need to consider the problems associated with living on Mars, and hopefully much longer before issues associated with death on Mars need to be sorted out.  Perhaps need will spur new and unforeseen innovations in our legal system, just as naval exploration once did.

Mars is probably a forced heirship planet, anyway.

29 Sep

When the Will Provides for Compensation (Sort of…)

Joshua Eisen Executors and Trustees Tags: , 2 Comments

Under section 61 of the Ontario Trustee Act, an estate trustee is normally entitled to compensation in an amount that is “fair and reasonable”.  There is a sound body of case law regarding the proper quantum of compensation, but it generally applies only where the will is silent as to compensation.  Usually, it’s clear whether a will addresses compensation or not, but sometimes it can be a little bit tricky if the will also includes a gift to the estate trustee.

At law, where the will also leaves a legacy to an estate trustee, there is a presumption that the legacy is intended to be in lieu of compensation.  However, this generally arises only when the gift is made to the estate trustee in his or her capacity as estate trustee.  Additionally, this presumption will give way to even a slight indication that it was not intended to be in lieu of compensation.

For example, in the B.C. case of Canada Permanent Trust Co. v. Guinn, the will appointed a trust company and Ms. Guinn to be the executors.  The will also left a bequest of $40,000 to Ms. Guinn.  The trust company took the position that she was entitled to her $40,000 and nothing further in terms of compensation.  Looking first to the will, the Court determined from the wording of the clause appointing the executors that Ms. Guinn’s role was meant to be nominal and that the primary responsibility for administering the estate was intended to fall to the trust company.  Paired with that, the bequest to Ms. Guinn was thought to be disproportionately large for her limited role and was also disproportionate in that the legacy to her was double that left to any blood relative of the deceased.  These facts were sufficient to convince the Court that the legacy to Ms. Guinn was not to be in lieu of compensation.

Interestingly, the Court noted that extrinsic evidence of the surrounding circumstances would be admissible for the purpose of determining this question.

This issue does not arise very often, but when it does, it touches upon some interesting questions about the interpretation of wills and the origins of an estate trustee’s entitlement to compensation.  Before the enactment of statutory provisions entitling an executor or administrator to remuneration, he or she would not have been entitled to any compensation at all unless the will or trust provided for it or unless the beneficiaries agreed to it.  While compensation has been the norm in Ontario for a very long time, there are other jurisdictions that still adhere to the traditional rule that compensation can only be claimed where allowed under the will or by the beneficiaries.

21 Aug

Back from the Dead

Joshua Eisen In the News Tags: , 0 Comments

A recent article in the Chronicle Herald tells the story of a couple in Halifax who received a letter from the Canada Revenue Agency regarding Old Age Security benefits.  The letter was addressed to the Estate of Anna Zahorski, and indicated that her benefits would be coming to an end since she had passed away.  This was surprising and unfortunate news, especially for Anna Zahorski.  Who wouldn’t be alarmed to receive notice of their own death from the CRA?

The article goes on to detail the struggle faced by the Zahorskis in trying to remedy this administrative error.  One of the steps taken was to attend with Anna at a Service Canada location to prove that she was in fact alive.

In Ontario, legislation allows a court to declare a person to be dead when they have disappeared in circumstances of peril, or when they have been missing for at least seven years.  The Declarations of Death Act, 2002 provides that an interested person can apply, on notice to any other interested persons, for an order declaring that an individual has died.

Ontario’s Act makes provision for a scenario where a person who was previously declared to be dead under the Act is discovered to be alive.  If that happens, Ontario’s Act provides that the person’s personal representative should immediately stop taking steps in the administration of that person’s estate.  If part of the estate has already been distributed, that distribution is final.  The court does have power to order that property be returned to the person if it would be just to do so.  Any property belonging to the person that has not been distributed yet is deemed to have been held in trust for them and may be returned as the Court may direct.  Nova Scotia’s legislation is a little bit different in some respects.

In any event, it is hoped that resorting to the “found alive” provisions will not be necessary for the Zahorskis, if these provisions are even applicable.  While the circumstance faced by the Zahorskis must be very frustrating for them, the article hints that they may appreciate the humour in it as well.

17 Jul

Changes are Coming to Passings of Accounts in 2016

Joshua Eisen Passing of Accounts, Uncategorized Tags: , , , 0 Comments

As discussed in yesterday’s post, a new regulation has been filed that provides for changes to the Rules of Civil Procedure, affecting, among other things, the practice on Applications for Certificates of Appointment of Estate Trustee and mandatory mediation of estates matters.  The changes will also affect Applications to Pass Accounts when most of the operative provisions in the new regulation come into effect on January 1, 2016.

One of the amendments clarifies the rules for service where there is a person under disability with an interest in the estate, who is represented by an attorney for property or guardian of property.  The Rules will clarify that an attorney or guardian will need to be served with the application materials.

Another change relates to timing of objections.  A Notice of Objection to Accounts will need to be served and filed with proof of service at least 35 days before the hearing date specified in the notice of application.  The current requirement is 30 days before the hearing date.

A new form has been introduced that can be filed in response to an Application to Pass Accounts – a Request for Further Notice in Passing of Accounts (Form 74.45.1).  This Request entitles the person who files it, unless the Court orders otherwise, to receive notice of any further steps, to receive copies of any further documents, and to file materials relating to costs.  In the event of a hearing, it also entitles the person filing it to be heard, to examine witnesses, and to cross-examine on affidavits, but only with respect to a request for increased costs.

The procedure for seeking costs on an Application to Pass Accounts has changed as well.  This procedure was revised only a few years ago and the new revisions clarify and streamline the procedure further.  Filing requirements and timing are set to change as of January 2016, so care will have to be taken to ensure that the correct procedures are being followed.

New subrules to be introduced under Rule 74.18 will set out the Court’s authority to order a trial and to provide directions with respect to its conduct at the hearing of an Application to Pass Accounts.  The Court can also order a mediation under the new Rule 75.2, even in places where mandatory mediation under Rule 75.1 does not apply.

As January approaches, it’s important to be mindful of these changes in the Rules.

16 Jul

Changing the Rules

Joshua Eisen Estate & Trust, Wills Tags: , 0 Comments

A new regulation, O. Reg. 193/15, was filed on July 9, 2015 under the Courts of Justice Act.  The new regulation affects the Rules of Civil Procedure and the existing estates rules in particular (74, 75, and 75.1).  The regulation also introduces a new Rule 75.2 Court-Ordered Estates Mediation.  There are some changes that come into effect sooner, but most of the important changes that affect estates matters come into effect on January 1, 2016.

One of the major changes pertains to the rules for mediation in estates matters.  At present, mediation in estates matters is mandatory in Toronto, Ottawa, and Essex County, unless waived by a judge, under the terms of Rule 75.1.  In other parts of the province, mediation is not required, but remains a useful and often successful process in resolving estate disputes.  The new regulation sets out that the Court has power to direct the parties to attend mediation in an Order Giving Directions under Rule 75.06 or on a contested Application to Pass Accounts under Rule 74.18, even where mediation is not mandatory under Rule 75.1.  Court-ordered mediation in estates matters will be governed by a brand new Rule 75.2.

Also being introduced is Rule 74.14.1.  This Rule allows a person to make a written request to the registrar for authentication of a Certificate of Appointment that has been issued.  The registrar will issue a “certificate of grant” for use within Canada and an “exemplification certificate” signed by a judge if the authentication is intended to be used outside of Canada.

Rule 74.14.2 is brand new as well.  This rule addresses difficulties associated with confirming the authority of an estate trustee where there has been a change due to the death of an estate trustee named in the will (whether the sole surviving executor or not) or due to removal of an estate trustee by the Court.  It can also be used when there has been no change of estate trustees.  By making a written request to the registrar and upon filing the necessary documents, a court status certificate can be obtained which confirms the authority of the estate trustees.

The regulation makes a series of other changes to the Rules of Civil Procedure as well, including procedural changes on Applications to Pass Accounts and a number of new forms when applying for a Certificate of Appointment.  Some of the new forms are already in effect.  The bulk of the changes will be effective in the new year.

14 Jul

Guardianships and Tests for Capacity

Joshua Eisen Guardianship Tags: , 0 Comments

Last week, news sources reported that a judge of the Los Angeles County Superior Court appointed a conservator over the affairs of former Eagles bassist, Randy Meisner.  The conservator was appointed to help make decisions about Mr. Meisner’s medical care, but not about his property.  The conservatorship is temporary for now, pending a further hearing this fall which may determine whether or not it should be made permanent.

In Ontario, our closest equivalent to a conservatorship is a guardianship.  There are two types of guardianships – one for personal care and another for property.  A person may apply to the Court to be appointed as someone’s guardian for property, for personal care, or both.  There is an alternative procedure, whereby the Public Guardian and Trustee will become a person’s statutory guardian upon receipt of a certificate of incapacity issued by a capacity assessor.

The tests for each kind of capacity are set out in Ontario’s Substitute Decisions Act, 1992.  A person is incapable with respect to making decisions about the management of property if that person is unable to understand information that is relevant to making a decision in the management of his or her property, or if the person is unable to appreciate the reasonably foreseeable consequences of a decision (or lack thereof).

On the personal care side, a guardian may be appointed if the person is incapable of understanding information relevant to making a decision concerning his or her health care, nutrition, shelter, clothing, hygiene or safety, or is if the person is unable to appreciate the reasonably foreseeable consequences of a decision with respect to any of these.

The California ruling dealt with personal care decisions but did not appoint a conservator for property.  Property decisions are sometimes thought of as being more cognitively demanding.  However, Mr. Meisner’s story is a good reminder that each kind of capacity is its own creature.  One cannot assume that a person who may be found incapable with respect to one function will necessarily be found incapable with respect to another.

Ontario’s Act creates another set of standards for the capacity to grant powers of attorney for property and yet another for granting powers of attorney for personal care.  A person may be incapable of managing property or personal care, but may still be capable of appointing another person to make those decisions on his or her behalf.  Creating a power of attorney while capable of doing so empowers the person to decide who will be responsible for making decisions and to provide the attorney with instruction or guidance in the event that difficult decisions need to be made.  Having powers of attorney in place can sometimes eliminate the need for guardianship proceedings, which can be a difficult and costly process.

28 Nov

The Powers of Attorney Registry that Wasn’t

Joshua Eisen Power of Attorney 0 Comments

In 2011, a bill was put forward for first reading in the Ontario legislature called Bill 21, Protection of Vulnerable and Elderly People from Abuse Act (Powers of Attorney), 2011.  Bill 21 never made it past this stage, but it would have made amendments to Ontario’s Substitute Decisions Act, 1992, the legislation that governs continuing powers of attorney for property and powers of attorney for personal care.  The purpose of Bill 21 was to build protections into the regime governing powers of attorney in order to prevent their abuse.

At present, a power of attorney requires two witnesses to be valid (although the court can declare it to be effective if it’s in the best interests of the grantor or his or her dependants to do so).  One of the changes that Bill 21 would have made is to require that at least one of the witnesses would have to be a non-relative of the grantor.

Bill 21 would also have created new annual accounting obligations for attorneys for property.  The attorney would have been required to account to the Public Guardian and Trustee annually on the grantor’s assets and liabilities, any compensation taken by the attorney, and other prescribed information.

Perhaps the most striking feature of Bill 21 was that it would have created a registry for powers of attorney in Ontario.  The Public Guardian and Trustee would have been charged with establishing and maintaining this registry.  Information kept would include the name and address of the grantor and the attorney, any restrictions on the attorney’s authority, the date on which the power of attorney took effect, and the names of any person or group to whom the release of this information had been authorized by the grantor.

The information in the registry would have been kept confidential.  Only the grantor’s spouse, adult children, parents, adult siblings, or those whom the grantor names would have access.

Though it contains many interesting ideas, Bill 21 never made it through and did not become law in Ontario.  It is unclear how effective it would have been at combatting abuse through powers of attorney.

Powers of attorney can give the attorney a great deal of power over the grantor’s property or person.  Careful thought should be put into who you may wish to name as attorney, and what restrictions, if any, should be placed on the authority of the attorney.  Make sure that the attorney is somebody that you trust.

Josh Eisen

27 Nov

Estate Administration Taxation Regulation Consultation

Joshua Eisen Estate & Trust 0 Comments

Consultation is drawing to a close on the new draft regulations under the Estate Administration Tax Act.  Amendments to the Act came into force in 2011, promising new regulations to follow.  The long-awaited regulations were posted in draft form for consultation on November 7, 2014.

Section 4.1 of the Act provides that on an application for a certificate of appointment of estate trustee, the estate representative must provide information about the deceased person to the Minister of Revenue.  The nature of that information was set to be prescribed by the Minister of Finance.  These regulations spell out what information needs to be disclosed and when, as well as clarifying obligations to keep this information current.

If the regulations are enacted in their current form, the following information will need to be presented on a return:

  • The deceased’s name, address, date of birth, date of death, and marital status;
  • If there is a last will, the date of the last will;
  • A complete list of the assets used to determine the value of the estate, including:
    • The value of each;
    • The address, any encumbrances, assessment roll number, and property identifier number of any real property;
    • For cash investments, a description including the type, number of units, contact information of the adviser or institution, and account number;
    • For other assets, the type of asset and other identifiers (such as the VIN on a vehicle);
    • If the deceased was known by any other names, any assets held under the other names;
    • If the deceased held any assets as tenant-in-common, the percentage owned by the deceased;
    • The amount of tax owing or paid under the Act;
    • The name and contact information of all estate representatives;
    • The applicable court address;
    • The type of application (eg. certificate of appointment of estate trustee with a will, certificate of appointment of succeeding estate trustee, etc.);
    • The court file number;
    • The date on which the certificate was issued;
    • If the tax or deposit was based on an estimated value, the date of the representative’s undertaking to file a sworn statement and pay any additional tax, and a copy of that undertaking;
    • If the representative applied for an order to have the certificate issued before paying a deposit, a copy of the order, details about the security furnished, and copies of any materials submitted to the court in support of the request for the order; and
    • Any other information necessary to determine the amount of tax owed.

Moira Visoiu has previously blogged about this subject here.

Some concerns have been raised about the length of the time periods given under the regulations and other matters.  Others are content with the draft regulations as presented.  If you are interested, take a few moments to review the draft regulations and let the Ministry know what you think, whatever your opinion may be.

Consultation closes this Friday, November 28, and the regulations are set to come into force on January 1, 2015.  This may be your last chance to speak your mind about these draft regulations before they take effect.  The Ministry of Finance is accepting comments by email, so it is not too late to make sure your voice is heard.

Josh Eisen

25 Nov

Estate Trustee Phone Home

Joshua Eisen Uncategorized 0 Comments

Sometimes it seems like the bills never stop coming in.  In some cases, they can keep coming long after the account holder’s death.

In a recent news story, a UK cellular service provider continued to bill a deceased account holder even after his death.  The son of the account holder attended in person the day after the death, says the article, but the phone company required a death certificate.  The son returned with the death certificate, but the bills did not stop arriving.

Eventually, the widow of the account holder went to the retail location to have the account canceled, with all of the proof of death that she could bring – including the ashes of her late husband.  Despite this extraordinary step, the bills continued.

The article tells the story of another customer at an American cellular company.  She called to cancel her service and was told that it was in her late husband’s name.  When she told them that he had died, she was told that, as the account holder, only her husband could cancel the account.

In Ontario, it is the estate trustee of a deceased person who is given the authority to deal with creditors like the phone companies on his or her behalf.  The estate trustee is responsible for paying off and closing out accounts with phone companies and other utilities.

In the ordinary course, this should be a simple process.  If the phone company refuses to close the account over the phone, proof of death may need to be shown to them at a retail location.  Typically, a copy of the death certificate should be sufficient proof of death.  A will or lawyer’s letter should provide evidence of the estate trustee’s authority to close the account.

As with any large organization, mistakes can happen.  The death of an account holder is something most employees at a telecom company have little experience with.  However, mistakes of this sort, particularly when a loved one has recently passed away, can be frustrating and hurtful.

By planning in advance, you can reduce the chances of this sort of problem arising on death.  One thing that you can do is to prepare a list of accounts and passwords for the person who will become your estate trustee.  Having a list of account information available will make it easier for the estate trustee to do his or her job.  In some cases, he or she may be able to simply sign in online and cancel phone, television, or other services.  Hopefully, this will save your loved ones some frustration.

Josh Eisen


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