Author: Natalia R. Angelini

26 Sep

Accountings and Incapable Persons – How Is Privacy Protected?

Natalia R. Angelini Uncategorized Tags: , , , , 0 Comments

It is trite law that an executor administering a deceased persons’ estate has an obligation to account to the beneficiaries. The law is a bit more complex when an attorney for property is applying to the court to account for his/her administration of an incapable person’s affairs.

Rule 74.18(3) of the Rules of Civil Procedure provides that service of the application material is required on persons who have “a contingent or vested interest in the estate”. Because a will speaks as if it was made immediately prior to the death of a testator, a beneficiary has no financial interest until the testator dies, the result being that in an accounting for the administration of the assets of an incapable person, only the incapable person him/herself has a contingent or vested interest in the assets.

Although it may seem inadequate that an attorney would be required to serve the grantor and no other family members, as an incapable person will arguably not have the wherewithal to level objections in respect of the administration, keep in mind that the welfare of the grantor is already being safeguarded by the Public Guardian and Trustee (who must also be served with the court material) and a litigation guardian who may be appointed within the context of the accounting application to protect the interests of the grantor.

Couple the above with the strict duty of confidentiality and privacy owed to an incapable person by the attorney, as set out in the Substitute Decisions Act, 1992 (Regulation 100/96), and we have a protective framework when dealing with disclosure of financial affairs of living persons.

This makes total sense to me. However, it may come as an unwelcome surprise to an adult child who, for instance, learns that she does not have an automatic right to receive disclosure of her incapable parents’ finances. Feeling unfairly shut out, she may consider seeking the court’s assistance.

Although she can apply to the court for leave to compel an accounting, the prevailing view of the court is that a person’s privacy is paramount such that leave should be granted sparingly. In a prior blog on the subject, my colleague Umair Abdul Qadir cited the Groh v Steele decision, where the Court makes an important pronouncement on this point, stressing that leave should not be granted absent the applicant establishing an interest (at least indirectly) in the affairs of the grantor, and some evidence that the attorney is not properly handling the administration.

Thanks for reading and have a great day,

Natalia R. Angelini

Some other blog posts on this and related subjects that may appeal to you are:

Attorneyship Accounting with a Capable Grantor

Abuse of a power of attorney: when good people do bad things

Passings of Accounts and Serving the Public Guardian and Trustee

25 Sep

Where should you store your testamentary documents?

Natalia R. Angelini Estate Planning, Uncategorized, Wills Tags: , , 0 Comments

Getting a will done is step one. Step two is ensuring it is safely stored. Although many people choose to leave their will with their lawyer, store it themselves or put it in a safety deposit box, there is another option that seems to be less popular but just as secure – deposit with the court.

The Process

Rule 74.02 of the Rules of Civil Procedure governs the process, and amongst the requirements are the following:

  • The depositor is restricted to limited number of individuals, including (i) the testator or a person authorized by the testator in writing, (ii) a lawyer who held the will or codicil at the time of retirement from practice, or, if deceased, the lawyer’s estate trustee, and (iii) a person authorized by the court;
  • The court office must follow specific procedures for processing and storage of the documents; and
  • During the testator’s lifetime, his/her will or codicil can only be copied, inspected or removed by the testator in person, by his/her guardian of property or by court order.

Rule 74.02 also provides for access to and release of the documents post-death.

Regarding post-death access, any person may copy or inspect a will or codicil of the testator on deposit, on filing a written request stating the testator’s date of birth and proof of death.

Regarding post-death release, this can only be to a named estate trustee or such other person as the court may direct, and is done after the filing of (i) a request for delivery, (ii) proof of death, and (iii) if no order directing delivery of the will or codicil has been made, an authorization signed by every estate trustee named in the will specifying the estate trustee (or the estate trustee’s lawyer) to whom the will or codicil is to be delivered (if an estate trustee is not available to sign, a written explanation will need to be given satisfactory to the registrar).

Is this for you?

If it isn’t convenient or viable for you to personally and safely store your testamentary documentation, if you don’t want it kept with your lawyer (or if there was no drafting lawyer), and if you don’t mind putting your executor to the task (and additional time and expense) to secure the document from the court post-death, this may be the option for you.

However, if you expect to periodically be making changes to your estate plan the deposit process may not be something that you would like to keep repeating. Further, if you wish to revoke your will on an urgent basis, it may be more difficult to do so. In the worst case scenario, this could result in a testator not having his/her testamentary wishes executed.

Thanks for reading and have a great day,

Natalia R. Angelini

10 Aug

When are Corporate Directors Personally Liable?

Natalia R. Angelini Litigation Tags: , , 0 Comments

Estate litigation often intersects with other areas of law, and frequently with corporate law where, for instance, a testator has an ownership interest in a corporation and/or is a director of a corporation. Accordingly, we pay attention to important cases in corporate law that may impact upon our practice. One such case is Wilson v. Alharayeri, a recent Supreme Court of Canada (SCC) decision, where the SCC considered when an oppression remedy may lie against a director personally.

The facts in brief are that Mr. Alharayeri (Mr. A) was the president and CEO of a corporation. He was also a director and a significant minority shareholder of the corporation, with half of the shares being convertible into common shares if the corporation met certain financial targets. Mr. A resigned for failing to disclose a conflict of interest. The appellant, Mr. Wilson, replaced Mr. A as president and CEO. A few months later, the board of directors issued a private placement of convertible secured notes to its existing common shareholders. Prior to doing so, the board accelerated the conversion of certain convertible preferred shares, but not those held by Mr. A given the conduct leading to his resignation. Wilson played a lead role in this decision. The result was that the value of Mr. A’s portfolio was diluted.

Mr. A brought an oppression claim against four of the directors, including Wilson. The Superior Court of Quebec found oppression, and Wilson and another board member were held personally liable for the board’s failure to convert Mr. A’s shares. They were Ordered to pay Mr. A compensation. The Quebec Court of Appeal affirmed the decision, and Wilson appealed to the SCC on the question of when personal liability for oppression may be imposed on corporate directors.

The SCC dismissed the appeal, and in doing so applied a two-pronged approach. First, the oppressive conduct must be attributable to the director. Second, a personal remedy must be “fit” in all of the circumstances – four general principles should guide the court, being:

(i) whether personal liability is fair in consideration of all circumstances;

(ii) any order should go no further than needed to remedy the oppression;

(iii) any order may serve only to vindicate the reasonable expectations of a security holder, creditor, director or officer as a corporate stakeholder; and

(iv) the general principles of corporate law.

It is noteworthy that the hallmarks of conduct attracting personal liability remain, being where a director derives a personal benefit and where a director acts in bad faith, but they are not necessary conditions of the two-pronged approach.

Thanks for reading and have a great day,

Natalia R. Angelini

You may also enjoy the following blogs:

https://hullandhull.com/2016/11/beneficiaries-corporate-documentation/

https://hullandhull.com/2014/11/control-of-private-corporations-in-the-event-of-incapacity/

https://hullandhull.com/2006/09/trusteedirector-conflicts-part-ii/

 

08 Aug

How Can We Add Clarity to Inter Vivos Gifting?

Natalia R. Angelini Estate Planning, Joint Accounts, Uncategorized Tags: , 0 Comments

I was surprised to learn of a recent statistic indicating that about half of all singles in Toronto under age 34 are living with their parents – I thought this was just the way we do things in my family! But seriously, if you are a parent longing to cut the ties that bind, or if you just want to help your adult child get a head-start in life, you have probably considered doing so by way of a gift or loan. To avoid any confusion or worse, litigation, it is important to document the transaction and record the intention.

If the intention is to loan, a loan agreement should be used. If, however, the intention is to gift, keep in mind that to have a valid gift there are three necessary elements: (i) intention to donate; (ii) acceptance by the donee; and (iii) sufficient act of delivery and transfer. The onus of proving that a gift is valid is on the recipient of the gift, who must show a clear and unmistakable intention by the donor to have voluntarily given the gift. In order to ensure legal clarity, using a deed of gift is ideal.

The benefit of using a deed of gift is that it can provide an answer to any challenges that others may have to the transfer in question, which we often see in situations of transfers of property (bank accounts, real property etc.) into the joint names of the parent and child. Otherwise, upon death, the gift is usually presumed to form part of the parent’s estate unless proven otherwise by the child.

Other potential benefits to using a deed of gift include increasing the chances of protecting the funds upon marital breakdown (e.g. if the deed of gift stipulates that the funds are for the child alone, and not the married couple, this may prevent the monies from forming part of the family assets). It can also assist an estate trustee to correctly apply a hotchpot clause (which often requires the executor to take inter vivos gifts into account when making an equal distribution amongst the beneficiaries) and distribute the assets as the testator intended.

Thanks for reading and have a great day,

Natalia R. Angelini

Other articles you might enjoy:

https://hullandhull.com/2017/02/can-delivery-gift-precede-intention/

https://hullandhull.com/2016/10/validity-inter-vivos-gift/

https://hullandhull.com/2015/10/mortis-causa-gifts/

You may also enjoy the July 7, 2017 interview of Nicole Ewing, a TD Wealth business succession advisor and tax and estate planner, which can be found on www.moneytalkgo.com.

19 May

Eight Drafting Tips for Primary and Secondary Wills

Natalia R. Angelini Beneficiary Designations, Estate & Trust, Estate Planning, Executors and Trustees, General Interest, Trustees, Uncategorized, Wills Tags: , , , , , 0 Comments

At the recent Six-Minute Estates Lawyer, several areas of interest were discussed.  One that served as a helpful reminder to me was the presentation on the estate administration tax-avoidance strategy of using primary and secondary wills.  Many tips are contained in the paper presented by Kathleen Robichaud.  Here are eight of them:

  1. Checklist – develop a thorough intake process and form, so you can ensure a detailed meeting with your client takes place that will give you the information needed to make recommendations best suited to your client’s needs;
  2. Revocation clause – ensure each will has one that takes the other will into account, so each will won’t revoke the other;
  3. Estate trustee – using the same estate trustee (and same alternate) for both wills may reduce the risk of drafting errors and usually simplifies the administration (although for a second will regarding outside Ontario assets, it is ideal to have the estate trustee and assets both in the same jurisdiction);
  4. Debts and Taxes – it is of particular importance to delineate how debts are to be paid in both wills, especially if you have difference beneficiaries and/or estate trustees in each of the wills;
  5. Know which assets require probate – sounds trite, but when in doubt only include assets in the secondary will that you are certain do not require probate (e.g. real property (subject to exceptions), bank accounts with large balances, RRSPs left to the estate, shares of publicly traded companies, an interest in a privately held partnership and investment accounts generally require probate);
  6. Define the assets carefully – otherwise you may have a partial intestacy that could defeat the testator’s wishes;
  7. Out of jurisdiction assets – when dealing with out of jurisdiction assets, consider that a second, third or even fourth will may be appropriate for varying reasons (e.g. because of difference succession rules or difference taxation rules); and
  8. Beneficiaries – listing the correct beneficiaries for the right assets, and matching the right set of beneficiaries with the corresponding will, can avoid drafting errors that may otherwise result in both wills having to be probated and/or rectification orders being needed.

Thanks for reading and enjoy the long weekend!

Natalia Angelini

Other Articles You Might Be Interested In

The Unsatisfactory State of Professional Negligence for Defective Will-Drafting

Drafting Trustee Compensation

Drafting to Prevent Attacks by Disappointed Beneficiaries

 

18 May

Complications from Simultaneous Deaths

Natalia R. Angelini Estate Planning, Executors and Trustees, General Interest, In the News, Joint Accounts, RRSPs/Insurance Policies, Support After Death, Trustees, Uncategorized, Wills Tags: , , , , , , 0 Comments

In Ontario, if two people die at the same time or in circumstances rendering it uncertain which of them survived the other, the property of each person shall be disposed of as if he or she had survived the other (see s. 55(1) of the SLRA).  In short, each person’s Will is administered as if the spouse predeceased. This outcome can be particularly problematic in various circumstances, a few of which I touch upon below.

Spouses with mirror wills.  Without a common disaster clause that would address circumstances where both spouses die simultaneously, there may be certain bequests that are triggered twice.  For instance, mirror wills may provide that (i) the residue of the testator’s estate is to be transferred to the spouse if he/she survives the other by 30 days, and (ii) if the spouse predeceases or fails to survive the other by 30 days, a specific bequest is gifted to Child #1, with the residue going to Child #2.  Since neither husband nor wife survived the other for30 days, Child #1 would get two specific bequests, one from each of the parents’ estates, reducing the entitlement of the residuary beneficiary, Child #2.

No alternate executor. Spouses often name the other as their executor.  If no alternate is named and they die simultaneously, the executor appointment would go on an intestacy (see s. 29 of the Estates Act), and the testator has lost the power to control who administers the estate.

Joint assets. Where joint tenants die at the same time, unless a contrary intention appears, the joint tenants are deemed to have held the property in question as tenants in common (see s. 55(2) of the SLRA).

Insurance proceeds. If the insured and the beneficiary die at the same time, the proceeds of a policy are to be paid as if the beneficiary predeceased the insured (see SLRA s. 55(4), and Insurance Act ss. 215 and 319). If there is no alternate beneficiary, and unless the insurance contract provides otherwise, the proceeds would be payable to the estate and subject to probate fees.

These examples serve to illustrate the value in having simultaneous deaths form part of your checklist when advising estate-planning clients.  For more on this topic, I encourage you to read this article and to watch/listen to my recent podcast with Rebecca Rauws.

Thanks for reading and have a great day,

Natalia R. Angelini

Other Articles You Might Be Interested In

Life and Death Under the Health Care Consent Act

Double Legacies – A Trap to Avoid

Polygamous Marriages and the SLRA

17 Mar

Relinquishing US status – how do you do it and what are the tax implications?

Natalia R. Angelini General Interest Tags: , , 0 Comments

Some American celebrities spoke of leaving the US depending on the outcome of the election.  I don’t know if anyone has actually followed through…yet.  Nonetheless, it got me thinking back to an interesting paper presented at the 2016 Six Minute Estates Lawyer by Britta L. McKenna.  The issues addressed in Ms. McKenna’s paper include what is involved in relinquishing US citizenship.  Here is how you do it:

  • Formally – A US citizen can formally renounce his/her citizenship at a US consulate, which process involves some initial communication and information exchange, followed by taking the oath of renunciation at the consulate. A final US tax return will need to be filed for the year of renunciation. The former citizen will be sent a Certificate of Loss of Nationality.
  • Informally – A US citizen can informally renounce his/her citizenship by engaging in an expatriating act with the intent of relinquishment. A bold example – committing an act of treason. A more benign example – taking an oath of office with a foreign government.

A person relinquishing their US citizenship will be subject to the US exit tax regime if any of the following is true (with limited exceptions): (1) his/her net worth at the time is US$2,000,000 or more; (2) his/her average US tax liability for the prior five years is US$161,000 or more; or (3) the individual cannot certify that all US tax filing obligations for the preceding five years have been complied with.  The tax consequences include a deemed sale of his/her assets for fair market value on the day before he/she ceases to be a US citizen, and all gains/losses are recognized.

Further, if one is subject to an exit tax regime, an inheritance tax is also imposed on certain gifts made by the expatriate (during life or death) after expatriation to a US citizen or resident.  The inheritance tax (assessed at the highest gift or estate tax rate at the time of receipt) is imposed on the recipient.

Finally, a former citizen who renounces, and who is determined to have renounced for the purpose of US tax avoidance, may be denied entry into the US pursuant to its immigration laws.  Ms. McKenna cites that enforcement was lacking, but that this may change. With the current political climate, I wonder if that change is already underway.

Thanks for reading and have a great weekend!

Natalia Angelini

You may also be interested in the following blog-posts:

The US Elections and Estate Tax 

US Inheritance Tax Deductions for Surviving Spouses

 

Tax Concerns for Snowbirds

16 Mar

What Can Reducing Probate Fees Cost You?

Natalia R. Angelini Estate Planning, General Interest, Joint Accounts Tags: , , 0 Comments

Although probate fees in Ontario are relatively modest (approx. 1.5% of the estate value), most wish to avoid or reduce them.

With respect to which assets you must pay probate fees on, section 1 of the Estate Administration Tax Act, 1998 defines the “value of the estate” as “the value of…all the property that belonged to the deceased person at the time of his or her death less the actual value of any encumbrance on real property that is included in the property of the deceased person”.  As joint-property vests in the co-owner of the property immediately before the time of death of their co-owner, the asset cannot be said to belong to the deceased person at the time of their death.  An exception, of course, is the rebuttable presumption of resulting trust expounded in Pecore v Pecore.

Although parents may wish to place assets in joint-ownership with an adult child to avoid probate fees, here are five ways that doing so can have negative consequences:

  1. No savings – If the resulting trust presumption that property transferred into joint tenancy by a parent to the parent and his/her adult child results to the deceased parent’s estate is not rebutted by showing a clear intention of a gift, the transfer may not work to save on probate fees.
  2. Loss of control – The property cannot be sold or mortgaged without the child’s consent.
  3. Negative tax consequences – the transfer of an asset with accrued gains to someone other than a spouse is a deemed disposition at fair market value. Further, if the property is the parent’s principal residence, half of the principal residence exemption may be lost for the years following the transfer during which the child is not living in the property.
  4. Spousal claims – The property may be exposed to claims against the child by his/her separated spouse.
  5. Creditor claims – financial troubles and/or declarations of bankruptcy can result in the child’s interest in the property being subject to creditor claims.

These and other potential pitfalls are reviewed in a recent piece in The Lawyers Weekly.

Thanks for reading,

Natalia Angelini

You may also be interested in the following blog-posts:

Joint Property and Intention Evidence

The High Cost of Probate

Does Jointly Owned Property Pass to the Surviving Spouse?

14 Mar

Interpretation of Wills – a recent case where direct evidence was not permitted

Natalia R. Angelini Litigation Tags: , , 0 Comments

In McCarthy Estate (Re), 2016 CanLII 87407 (NL SCTD) the executor of his mother’s estate was seeking directions on the meaning of a clause in the Will.  Clause 5(a) of the Will gifts the residue of the estate as follows:

“to my children, namely … a building lot to be sized and located in accordance with the development regulations … and to be chosen in consultation with my Executor from my land at Paradise Road…”

The executor offered to convey a residential building lot of the minimum size permitted in the town’s regulations to each of his named siblings.  Some of the siblings disagreed, asserting that “a building lot” should be given the widest and most liberal interpretation, and not interpreted as one of the minimum size permitted.  Alternatively, they argued that their mother intended that each child should receive a parcel the same or similar in size to parcels conveyed to certain other children during their mother’s lifetime.

The executor argued that the Will is not ambiguous.  Rather, it contains three directions, including that the executor is given the discretion to choose the size and location of each lot after consultation with the beneficiaries.

The Court reviewed the applicable legal principles, being that it must look to the language of the Will to ascertain whether the testator’s intention can be discerned from the natural and ordinary meaning of the words used.  Only if this is not p
ossible may the court consider indirect extrinsic evidence of surrounding circumstances at the time of making the Will. Further, where an “equivocation” occurs (eg. where the words of a Will apply equally well to two or more persons or things), direct and indirect evidence of the testator’s actual intention may also be admitted.

The Court concluded that the language of the Will was not equivocal, such that direct extrinsic intention evidence was not permitted.  In addition, it found that the intention was discernible from the language of the Will, such that it was not necessary for indirect extrinsic evidence of surrounding circumstances to be considered.  However, as the parties had provided such evidence, the Court reviewed it and was satisfied that the interpretation of Clause 5(a) and the surrounding circumstances also lead to the conclusion that a conveyance as proposed by the executor was in conformity with the mother’s intentions.

Thanks for reading,

Natalia R. Angelini

You may also be interested in the following blog-posts:

Opinion, Advice or Direction of the Court in Interpreting a Residue Clause

Interpretation of Wills – An Example of When Extrinsic Evidence Is Admissible

Considering the Admissibility of Extrinsic Evidence on Will Construction Applications

 

 

13 Jan

Court of Appeal Upholds Tolling of a Limitation Period due to Fraudulent Concealment

Natalia R. Angelini Ethical Issues, Executors and Trustees, RRSPs/Insurance Policies Tags: , , 0 Comments

The first instance decision in Roulston v McKenny was recently upheld on appeal.  In this case,  the deceased, Mr. Penner, and his ex-wife, Ms. McKenny, entered into a separation agreement requiring Mr. Penner to maintain $150,000.00 in life insurance, with Ms. McKenny as the designated beneficiary.  Mr. Penner failed to pay the premiums on the life insurance policy, which lapsed prior to his death.

Mr. Penner died in March 2013. Shortly thereafter, the estate trustee (the deceased’s sister, also a beneficiary of the estate) discovered that Mr. Penner’s life insurance policy had lapsed. However, her lawyer did not advise Ms. McKenny’s lawyer until September 2013.

Ms. McKenny commenced her claim against the estate in September 2015, before the two-year expiration after learning of the lapse, but after the expiration of the two-year limitation period from the date of death.  The estate trustee sought the court’s directions as to whether the claim was statute-barred.

The application judge held that Ms. McKenny’s claim was not statute-barred, applying the doctrine of fraudulent concealment to toll the limitation period. On appeal, the appellant submitted that the judge made the following errors:

  1. In finding that a special relationship existed between the estate trustee and Ms. McKenny.
  2. In finding that the conduct of the estate trustee was unconscionable, such as to attract the operation of the doctrine of fraudulent concealment.

The Court of Appeal for Ontario denied the appeal, reasoning that:

  1. The special relationship between the estate trustee and Ms. McKenny did exist, arising from a combination of: (i) duties owed at law by an estate trustee to creditors; and (ii) the estate trustee’s exclusive control over information – the insurer would only release information to her.
  2. By withholding material facts, the estate trustee concealed from Ms. McKenny that she was a legitimate creditor of the estate. It was unconscionable for the estate trustee to initially suggest that insurance was in place, then delay matters and then later take the position (that would benefit the estate trustee as a beneficiary) that the limitation period had expired.

Thanks for reading and have a great weekend!

Natalia Angelini

You may also be interested in the following blog-posts:

 

Fraudulent Concealment and Statutory Limitation Periods

 

Fraudulent Concealment

 

Limitation Periods and the Power of Fraudulent Concealment

 

 

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