Author: Stuart Clark

09 Jan

Knives Out

Stuart Clark General Interest Tags: , , , , , , , , , , 0 Comments

This past weekend I had the great pleasure of seeing the movie Knives Out by Rian Johnson. For those of you who have not yet seen it I would highly recommend it, especially for those interested in estate law. Although I will try my best to avoid any significant spoilers for those who have not yet seen it, if you don’t want to know anything about the movie before seeing it you should stop reading this blog now.

The plot of Knives Out offers some interesting considerations for those interested in estate law, as it centers around the possible murder of the patriarch of an affluent family, with the alleged motive for many of those accused being that he was going to cut them off and write them out of his Will. While I was watching the movie I couldn’t help but analyze the cases of some of those accused, and whether there were estate law related options that would have been available to them that would not require them to commit murder (I promise that I am fun at parties and that this job has not ruined me).

Knives Out gets into a surprising amount of detail regarding certain estate law concepts, discussing such concepts as “undue influence” in relation to those who would have benefited from the new Will, as well as the “slayer rule” which would result in any individual who was involved in the murder not being entitled to receive a benefit from the estate for public policy reasons. The movie also gets into the concept of “testamentary capacity“, and whether the deceased would have had the capacity to draft the new Will which would have cut the various individuals off.

While watching the movie the one thing that kept running through my mind was that most of the accused family members would appear to have fairly strong arguments that they were dependants of the deceased even if they were cut out of his Will. The movie makes it fairly clear that the deceased was financially supporting a majority of his family members, with his threats to cut them off financially forming the foundation of the motivation for why they may or may not have killed him.

If the deceased had indeed cut these family members out of his Will, and this matter took place in Ontario, there would appear to be a fairly strong argument that those family members that were cut out of the Will were dependants of the deceased under Part V of the Succession Law Reform Act, insofar as the deceased was providing support to them immediately prior to his death and he did not make adequate provision for them in his Will. If these family members were found to be dependants of the deceased, the court could make an order providing for their support from the deceased’s estate regardless of whether they were left anything in his Will. Although I will concede that a long and drawn out court case where various family members assert they are dependants of the deceased is probably a less interesting film than an Agatha Christie style murder-mystery, if Knives Out were real life it is unlikely that many of the family members would ultimately receive nothing from his estate (assuming, of course, they were not involved in his death).

Thank you for reading.

Stuart Clark

P.S. Rian Johnson’s The Last Jedi was better than The Rise of Skywalker. I will die on that hill. Knives Out also features a great scene where Frank Oz (a.k.a. Yoda) plays the family estate lawyer.

07 Jan

Overturning a trustee’s discretionary decision – What is “bad faith”?

Stuart Clark Estate & Trust Tags: , , , , , , , , , , , , , 0 Comments

Yesterday I blogged about the limited circumstances in which the court will interfere with a trustee’s discretionary decisions while administering a trust. Simply put, as confirmed by the Ontario Court of Appeal in Fox v. Fox Estate in citing to the old English decision of Gisborne v. Gisborne, although generally speaking the court will not interfere with a trustee’s decisions while administering a trust, they may do so under limited circumstances and intervene if the trustee’s decision was made with what is known as “mala fides” which roughly translates as “bad faith”.

While Gisborne v. Gisborne makes it clear that the court will not interfere with a trustee’s discretion unless there is “mala fides“, it does not provide much guidance regarding what would constitute “mala fides” or “bad faith” on the part of the trustee. In Fox v. Fox Estate, in recognizing that there is little guidance with respect to what constitutes “bad faith”, the Court of Appeal cites to the article “Judicial Control of Trustees’ Discretions” by Professor Maurice Cullity (as he then was) in trying to provide some guidance for what will constitute “bad faith”. In summarizing his position with respect to what will constitute “mala fides” on the part of a trustee in exercising their discretionary authority, Prof. Cullity provides the following summary:

Yet, it seems clear that the mala fides which will justify the intervention of the court must extend a considerable distance beyond the requirement of personal honesty. If the doctrine of fraud on a power permits the courts to intervene to strike down attempts to exercise a power which is vested in a person who is not a trustee, the jurisdiction over trustees must be at least as extensive. In very broad terms, that doctrine invalidates any attempt to exercise a power which is intended to achieve a purpose other than that for which the power was conferred. It is unquestionable that fraud in this sense is within the concept of mala fides.” [emphasis added]

Prof. Cullity’s definition of “mala fides“, whereby he advises that the court’s utilization of such a doctrine is intended to invalidate “any attempt to exercise a power which is intended to achieve a purpose other than that for which the power was conferred“, could offer some guidance on the kind of circumstances in which the court will interfere with a trustee’s discretion. It would appear that the fundamental question to be considered by the court in determining whether a decision was made in “bad faith” is in effect whether the decision is in keeping with the original intention of the trust. If the answer is “yes”, the court will not interfere with the discretionary decision by the trustee. If the answer is “no”, the circumstances may be such that the court will interfere with the decision on the grounds that it was made in “bad faith”.

Thank you for reading.

Stuart Clark

06 Jan

Discretionary Trusts – Can a trustee’s discretion be challenged?

Stuart Clark Estate & Trust Tags: , , , , , , , , , , , 0 Comments

The use of a “discretionary trust” that grants the trustee with the absolute discretion to determine when and if a distribution is made to a beneficiary, and in what amount, is a fairly common estate planning tool. If you are a beneficiary of a trust which provides the trustee with such broad discretion you may question whether there is anything that you can do prior to the final distribution to question the discretionary decisions that have been made by a trustee, and whether there are circumstances in which the court will intervene to overturn a trustee’s discretionary decision. The short answer is that while the court is generally reluctant to interfere with a trustee’s discretionary decisions, there are certain limited circumstances in which they will intervene and overturn a trustee’s decision.

The leading decision in Ontario concerning when the court will interfere with a trustee’s discretion is Fox v. Fox Estate. In considering when the court may interfere with a trustee’s discretion, the Court of Appeal provides the following commentary:

The entire question of the degree of control which the courts can and should exercise over a trustee who holds an absolute discretion is filled with difficulty. The leading case, or at least the case to which reference is almost always made, is Gisborne v. Gisborne (1877), 2 App. Cas. 300 (H.L.). It stands for the proposition that so long as there is no ‘mala fides’ on the part of a trustee the exercise of an absolute discretion is to be without any check or control by the courts.” [emphasis added]

Fox v. Fox Estate cites to the English authority of Gisborne v. Gisborne for the proposition that, so long as there is no “mala fides” on the part of the trustees in exercising their discretion, the court will not interfere with a trustee’s discretion. In Gisborne v. Gisborne, Lord Cairns provides the following commentary with respect to when the court may interfere with any discretionary decision undertaken by a trustee:

My Lords, larger words than those, it appears to me, it would be impossible to introduce into a will. The trustees are not merely to have discretion, but they are to have “uncontrollable”, that is, uncontrolled, “authority”. Their discretion and authority, always supposing that there is not mala fides with regard to its exercise, is to be without any check or control from any superior tribunal.” [emphasis added]

Simply put, the court will generally not interfere with a trustee’s discretionary decisions unless they were exercised with “mala fides“. “Mala fides” roughly translates as “bad faith”, such that the principle from Gisborne v. Gisborne can be summarized as providing that so long as there is no “bad faith” on the part of the trustee in making a discretionary decision the court will not interfere with such a decision.

Thank you for reading.

Stuart Clark

10 Oct

Procedural differences between Applications and Actions

Stuart Clark Estate Litigation Tags: , , , , , , , , , 0 Comments

Consider yourself warned. Notwithstanding the relatively mundane title referenced above, the within blog contains a (somewhat mild all things considered) rant about something that troubles me to my very core (more of a mild annoyance really). Individuals who confuse and conflate the procedural steps and processes of Applications and Actions. Turn back now ye of mild stomachs.

There are two basic ways that civil matters proceed before the court in Ontario, either by Application or by Action. The Action is the more common of the two, and is the stereotypical image that most people probably have when thinking of something being heard before the court. Evidence is put before the court in an Action by witnesses sitting in the witness box, with the lawyers cross-examining and putting questions to the witnesses much like they do in your favourite legal television show. Applications, on the other hand, proceed only on a written record, with any evidence that is put before the court being contained in affidavits that were sworn by the various parties before the hearing date. To the extent that there are any cross-examinations on these affidavits they will generally have taken place before the hearing, with the Judge only being provided with copies of the transcripts and not witnessing the cross-examinations first hand as they would with an Action.

The estates litigation world exists in this somewhat unique corner of the civil litigation world, as many of the statutes under which our claims are advanced provide that the claims are to be commenced by way of Application and not Action. Although this in theory should result in these proceedings advancing on affidavit evidence alone, as parties often believe that there may be a strategic advantage to having the matter heard by way of Action (i.e. a sympathetic witness appearing in person before a Judge rather than simply in writing) parties will often seek to convert their proceedings from an Application to an Action at an early stage. I imagine that this is probably where most of the confusion stems from when individuals conflate the procedural steps of Applications and Actions, with the Order Giving Directions often being issued at a time the matter is still an Application yet providing directions for how an Action is to proceed.

The procedural process and obligations imposed upon parties participating in an Application are very different than those participating in an Action. There are no “Affidavit of Documents” or “Discoveries” in an Application, with the only evidence and documentation that is generally produced being that contained in the affidavits (subject to any undertakings or further directions from the court). Conversely, once a matter has been converted into an Action from an Application the affidavits that may have historically been filed are in a way irrelevant, as the Judge should in theory no longer have them available at the ultimate hearing of the matter with any evidence now being produced “viva voce” (i.e. in person). Once a matter has been converted into an Action from an Application the process that is to be followed is that of an Action, with the parties no longer being expected to serve and file any responding affidavits, but rather the more typical pleadings and documentation required for an Action such as a Statement of Defence or an Affidavit of Documents.

So please. I beg of you. Do not ask me when my client will be producing their Affidavit of Documents in an Application to Pass Accounts or when my client will be producing their responding affidavit after a matter has been converted into an Action.

Thank you for reading.

Stuart Clark

08 Oct

Notice of Contestation of Claim – Can you use it for all potential claims?

Stuart Clark Executors and Trustees Tags: , , , , , , , , , , , , 0 Comments

Yesterday I blogged about the Notice of Contestation of Claim, which is a process that in essence provides the Estate Trustee with the ability to require individuals with a potential claim against the estate to commence such a claim within 30 days of being served with the Notice of Contestation of Claim failing which they are deemed to have abandoned the claim such that they can no longer pursue it before the court.

The power given to an Estate Trustee by the Notice of Contestation of Claim coupled with the relatively short timeframe by which the claimant must respond could appear attractive to an Estate Trustee, potentially enticing the Estate Trustee to use such a process to flush out all potential claims at the early stages of the administration of the estate. This is turn raises questions about the kinds of claims that the Notice of Contestation of Claim can be used for, and whether it can be used for all potential claims against an estate or whether the claims against which it can be used are more limited. Could you, for example, serve a possible dependant with a Notice of Contestation of Claim, and in doing so require the alleged dependant to bring their claim for support forward within 30 days failing which they are deemed to have abandoned their claim?

The issue of whether a Notice of Contestation of Claim can be used against a potential dependant of the estate was dealt with by the Ontario Court of Appeal in Omiciuolo v. Pasco, 2008 ONCA 241, wherein the court confirmed that the Notice of Contestation of Claim could not be used in relation to a potential claim for support by a dependant under Part V of the Succession Law Reform Act. In coming to such a decision the Court of Appeal notes that historically the “claim or demand” referenced in sections 44 and 45 of the Estates Act had been interpreted to mean a “claim or demand against the estate by a ‘creditor’ for payment of money on demand“, and that it could not be used for claims such as declaratory relief or a claim for judicial sale or foreclosure.

From the Court of Appeal’s rationale in Omiciuolo v. Pasco it would appear that the “claims” against which a Notice of Contestation of Claim can be used are likely limited to claims of potential creditors of the estate (i.e. claims that the deceased owed an individual money), and that it cannot be used against other more nuanced or equitable claims such as a potential claim from a dependant for support or declaratory relief.

Thank you for reading.

Stuart Clark

07 Oct

Just sue me already – Notice of Contestation of Claim

Stuart Clark Executors and Trustees Tags: , , , , , , , , , , , , , , 0 Comments

What’s an Estate Trustee to do when faced with a situation in which an individual has threatened to bring a claim against the estate but has not yet actually taken any formal steps to advance the claim. As Estate Trustee you have certain obligations to the beneficiaries of the estate, including seeing to the administration in a timely manner. An Estate Trustee also has obligations to the creditors of the estate however, and needs to ensure to that all debts of the estate are paid prior to distributing the estate to the beneficiaries. If they fail to do so, the Estate Trustee could face potential personal liability to the creditors of the estate.

An active claim being commenced against the estate can significantly delay the amount of time it takes for an estate to be administered, as the Estate Trustee cannot see to the final administration of the estate while the claim remains active as they must ensure that there are requisite funds in the estate to satisfy any damages award should the estate ultimately not be successful in the claim. The same is also true for a claim that has been threatened against the estate, as the Estate Trustee may be apprehensive to distribute the estate in the face of a claim possibly being commenced for the same reason. When faced with a such a threatened claim the Estate Trustee could be put in a difficult dilemma, for on the one hand they wish to administer the estate in a timely fashion to the beneficiaries and there is no active claim that has been commenced that would otherwise stop them from doing so, yet because of the threatened claim they may be reluctant to do so for fear of their own potential liability should the claim later be commenced after the funds have been distributed. When faced with such a situation the “Notice of Contestation of Claim” could become the Estate Trustee’s new best friend.

At its most basic the Notice of Contestation of Claim provides a mechanism by which a Estate Trustee can require the potential claimant to formally advance their claim against the estate failing which they are deemed to have abandoned the claim. The “Notice of Contestation of Claim” process is governed by sections 44 and 45 of the Estates Act. If a potential claimant is served with a Notice of Contestation of Claim they are provided with 30 days to issue a “claim” pursuant to the Notice of Contestation of Claim, failing which they are deemed to have abandoned the claim. The 30 day deadline may be extended up to a maximum of three months by the court if the claimant should seek such an extension.

The process by which a Notice of Contestation of Claim is issued is governed by rule 75.08 of the Rules of Civil Procedure, providing the form (Form 75.13) that the Notice of Contestation of Claim must be in, as well as the steps that the claimant must follow to bring their claim before the court upon being served with the Notice of Contestation of Claim should they intend to pursue the matter.

Through the Notice of Contestation of Claim an Estate Trustee can force a potential claimant to make a decision regarding whether they intend to bring a claim against the estate. If the potential claimant does not take the appropriate steps following being served with the Notice of Contestation of Claim their potential claim is deemed to be abandoned and can no longer be pursued before the court, with the Estate Trustee being theoretically free to proceed with the administration of the estate.

Thank you for reading.

Stuart Clark

03 Sep

Motions to approve a settlement – Are they brought in writing or in person?

Stuart Clark Estate Litigation Tags: , , , , , , , , , , , 0 Comments

I have previously blogged about the need to have any settlement which affects the interests of a party under a “legal disability”, whether on account of them being a minor or otherwise, to be approved by the court in accordance with rule 7.08 of the Rules of Civil Procedure before the settlement is binding upon the party under a disability. Although rule 7.08 is clear what materials need to be included in any Motion to approve a settlement, with affidavits being required both from the incapable person’s litigation guardian as well as the litigation guardian’s lawyer outlining why they believe the settlement should be approved, what is less clear is the actual procedure by which such a Motion is brought before the court.

There has been some debate recently about whether in Toronto a Motion to approve a settlement should be brought in writing or if they should be brought before a Judge in person. The apparent confusion appears to be caused by what appear to be competing instructions that are contained in the practice direction for the Toronto Region as well as the practice direction for the Estates List, with one appearing to tell you to bring the Motion in writing and the other appearing to tell you to do the opposite.

The general practice direction for the Toronto Region provides the following regarding an approval Motion under rule 7.08:

A motion under Rule 7.08 must be brought in accordance with the Best Practice’s Guidelines and Checklist for rule 7.08 matters.”

The Best Practice’s Guidelines and Checklist in turn provides:

Rule 7.08 requires the approval of a judge for any proposed settlement on behalf of a party under a disability. This is done by way of a motion made in writing or if no action has been commenced, then the approval of a judge is obtained by way of an application. In Toronto, Rule 7 motions and applications are to be filed as in-writing motions through the civil intake office, in the motions department.” [emphasis added]

The checklist appears clear that if you are bringing a motion to approve a settlement in Toronto that it is to be done in writing. As a result, if your matter is subject to the general Toronto practice direction, it would appear fairly clear that your approval Motion must be brought in writing.

Although the general Toronto practice direction appears clear that approval Motions are to be brought in writing, many, if not most, estates matters in Toronto are adjudicated on the specialized Estates List. The general Toronto practice direction notes that it does not apply to matters on the Estates List unless it is specifically mentioned, stating:

This Practice Direction does not apply to motions or applications heard on the Commercial and Bankruptcy Lists, Estates List, or under the Class Proceedings Act, 1992, unless specifically mentioned.” [emphasis added]

There appears to be no reference in the general Toronto practice direction that the “in writing” rule for approval Motions is to apply to matters on the Estates List. As a result, it would appear that such a rule does not apply to matters on the Estates List, and that we are to revert to any direction provided in the Estates List practice direction regarding approval Motions.

The Estates List practice direction provides the following regarding how approval motions are to be brought before the court:

Where the settlement of a proceeding on the Estates List requires court approval, the motion for approval of the settlement and the application for the appointment of a guardian of property should be brought before a judge on the Estates List.” [emphasis added]

There is no reference in the Estates List practice direction to the approval motion having to be brought in writing, with the practice direction simply stating that it has to be brought “before a judge”. Although a technical reading of such a direction may suggest that a matter could be brought “before a judge” in writing, in the absence of any specific bar to bringing the approval Motion before a Judge in person, and as Judges often have questions about a settlement before granting their approval, it would appear that absent any additional direction from the court that approval motions on the Estates List can (and probably should) still be brought before a Judge in person.

The result of all of this appears to suggest that if you are seeking the approval of a settlement in Toronto and your matter is on the general civil list that you have to bring the approval motion in writing. If you matter is on the Estates List however it would appear likely that you can continue to bring your approval Motions in person before a Judge. Matters in jurisdictions outside of Toronto should consult with your local practice direction for any direction regarding how they may want you to bring any approval Motions.

Thank you for reading.

Stuart Clark

11 Jul

Trustee Act – Limitation Periods and Discoverability

Stuart Clark Estate Litigation Tags: , , , , , , , , , , , , , , , , 0 Comments

When most people reference a “limitation period” in Ontario, chances are that they are referencing the limitation period imposed by the Limitations Act, 2002, which generally provides an individual with two years from the date on which a claim is “discovered” to commence a claim before it is statute barred. Although an individual is presumed under the Limitations Act to have “discovered” the claim on the date that the loss or injury occurred, if it can be shown that the individual did not “discover” the claim until some later date the limitation period will not begin to run until that later date, potentially extending the limitation period for the claim to be brought for many years beyond the second anniversary of the actual loss or damage.

Although the limitation period imposed by the Limitations Act must be considered for situations in which an individual intends to commence a claim against someone who has died, individuals in such situations must also consider the much stricter limitation period imposed by section 38 of the Trustee Act.

Section 38 of the Trustee Act imposes a hard two year limitation period from the date of death for any individual to commence a claim against a deceased individual in tort. Unlike the limitation period imposed by the Limitations Act, the limitation period imposed by section 38 of the Trustee Act is not subject to the “discoverability” principle, but is rather a hard limitation period that expires two years from death regardless of whether the individual has actually yet to “discover” the claim. If an individual starts a claim against a deceased individual in tort more than two years after the deceased’s individual’s death it is statute barred by section 38 of the Trustee Act regardless of when the claim was “discovered”.

The non-applicability of the “discoverability” principle to the two year  limitation period imposed by section 38 of the Trustee Act is confirmed by the Ontario Court of Appeal in Waschkowski v. Hopkinson Estate, (2000) 47 O.R. (3d) 370, wherein the court states:

As indicated earlier in these reasons, based on the language of the limitation provision, the discoverability principle does not apply to s. 38(3) of the Trustee Act. The effect of s. 38(3) is, in my view, that the state of actual or attributed knowledge of an injured person in a tort claim is not germane when a death has occurred. The only applicable limitation period is the two-year period found in s. 38(3) of the Trustee Act.” [emphasis added]

Although the Court of Appeal in Waschkowski v. Hopkinson Estate appears firm in their position that the court should not take when the claim was “discovered” into consideration when applying the limitation period from section 38 of the Trustee Act, it should be noted that in the recent decision of Estate of John Edward Graham v. Southlake Regional Health Centre, 2019 ONSC 392 (“Graham Estate“), the court allowed a claim to brought after the second anniversary of the deceased’s death citing “special circumstances”. Although the Graham Estate decision is from the lower court while the Waschkowski v. Hopkinson Estate decision is from the Court of Appeal, such that it is at least questionable whether it has established a new line of thinking or was correctly decided, the Graham Estate decision may suggest that the application of the limitation period from section 38 of the Trustee Act is not as harsh as it was once considered. More can be read about the Graham Estate decision in Garrett Horrocks’ previous blog found here.

Thank you for reading.

Stuart Clark

09 Jul

ODSP – How long do you have to put an inheritance into a trust before it counts against your asset limit?

Stuart Clark Estate Planning Tags: , , , , , , , , , , , 0 Comments

Yesterday I blogged about the potential for an individual who receives benefits from the Ontario Disability Support Program (“ODSP”) to place up to $100,000.00 from an inheritance they receive into a trust for their benefit without such funds counting against the maximum asset limit they are allowed to have to continue to qualify for ODSP. Although the use of such a trust can work as an effective tool to help insulate an ODSP recipient from the risk that an inheritance they receive could disqualify them from ODSP, as there is a deadline by which such a trust can be established it is important that ODSP recipient acts quickly to create the trust.

As noted in my blog yesterday, the ability for an ODSP recipient to establish a trust so that any inheritance would not count against their asset limit is governed by the Ontario Disability Support Program Act (the “Act“) as well as O.Reg. 222/98 (the “Regulation”). Although neither the Act nor the Regulation establish a deadline by which such a trust needs to be established, the Government of Ontario has released Policy Directive 4.7 which states that ODSP recipients may be given up to six months from receiving their inheritance to establish the trust. From the perspective of the Government of Ontario, if the ODSP recipient does not put the funds into the trust within six months of receiving the inheritance, the funds will begin to count against their maximum asset limit. As a result, if after the six month deadline the trust has not been created and the inherited funds push the ODSP recipient over the maximum asset limit they will lose their benefits.

Although the Government of Ontario appears firm in their position that an ODSP recipient has a maximum of six months to place any inheritance into a trust before the funds will count against their asset limit, it should be noted that as neither the Act nor the Regulation provide for any deadline by which the trust must be established that some people have argued that the six month deadline proposed by the Ministry should not be considered law and can be extended. Such an argument was raised before the Ontario Social Benefits Tribunal in 1711-09594 (Re), 2018 ONSBT 5888, wherein the Tribunal ultimately agreed to extend the deadline for a trust to be established to ten months after an ODSP recipient’s benefits had initially been terminated for going over the asset limit for not creating the trust within six months. In coming to such a decision the Tribunal states:

(8) Section 28(1) does not specify a time period within which an inheritance must be converted into a trust in order for it to qualify as an exempt asset.

(9) The Tribunal finds that in the absence of specific guidance in the legislation, it is to be inferred that an ODSP recipient should be given a “reasonable” amount of time to establish a trust and thereby exempt inheritance funds from his or her asset calculation. What is “reasonable” will in turn be determined by the circumstances present in each individual case. Such an interpretation allows effect to be given to section 28(1)19 and is in keeping with the purposes of the Act.” [emphasis added]

Although decisions such as 1711-09594 (Re) show that the six month deadline to establish the trust can be extended by the Tribunal to allow an ODSP recipient a “reasonable” amount of time to establish the trust before the inherited funds will count against the asset limit, as the Government of Ontario continues to reference the six month deadline in Policy Directive 4.7 for the trust to be established it is likely wise to continue to consider the deadline for the trust to be established to be six months.

Thank you for reading.

Stuart Clark

08 Jul

ODSP – Can you put inherited funds into a trust after receiving the funds and still qualify?

Stuart Clark Estate Planning Tags: , , , , , , , , , , , , , , 0 Comments

The use of planning tools such as a “Henson Trust” is an often discussed topic in the estate law world for what can be done to allow an individual who receives benefits from the Ontario Disability Support Property (“ODSP”) to receive an inheritance from an estate without losing their benefits. Although the Henson Trust can be an effective tool to allow an individual to receive an inheritance from an estate while not losing their benefits, as a central tenant of the Henson Trust is that the inherited funds do not “vest” in the beneficiary until the trustee makes a distribution in their favour (thereby allowing funds in the trust not to count against the asset limit provided for by ODSP before they are distributed), a beneficiary and/or Estate Trustee cannot create a Henson Trust after the testator has died as the inherited funds have typically already “vested” in the beneficiary and therefore would count against the asset limits for ODSP. As a result, if a beneficiary who receives an interest in an estate is also an ODSP recipient (and the Will did not use a tool such as a Henson Trust to ensure the inherited funds do not count against the ODSP qualification criteria), there is the risk that the beneficiary could lose their ODSP benefits as a result of the inherited funds putting them offside the ODSP qualification criteria.

Although advance planning is always preferable when dealing with a situation in which a potential beneficiary receives ODSP, sometimes for whatever reason a testator does not take steps prior to their death to ensure that their estate plan includes tools such as a Henson Trust that would allow the beneficiary to receive the inheritance as well as continue to receive their benefits from ODSP. Should this occur, although the options available after the testator’s death are more limited to the beneficiary, there remain certain remedial steps that could be taken by the beneficiary to help to insulate them against the risk that their newly inherited funds would disqualify them from ODSP.

The general parameters for who is entitled to ODSP and how it is to be administered is governed by the Ontario Disability Support Program Act (the “Act“), section 5(1) of which provides that the government through regulation is to establish a maximum “asset limit” for an individual who receives ODSP. The regulation that establishes the asset limit is O.Reg. 222/98 (the “Regulation”), section 27(1) of which sets $40,000.00 as the current maximum “asset limit” for an individual who receives ODSP (although such an asset limit is potentially higher if the individual has a spouse or dependants).

As a result of section 5(1) of the Act in collaboration with section 27(1) of the Regulation, if an ODSP recipient’s total assets exceed the $40,000.00 maximum asset limit after receiving their inheritance they would likely lose their ODSP benefits. To this respect, if the potential inheritance the beneficiary/ODSP recipient is to receive is significant, there is the very real risk that if no steps are taken to help to insulate the inheritance from counting against the asset limit the beneficiary would lose their ODSP benefits.

Although section 27(1) of the Regulation provides that the ODSP recipient’s assets may not exceed the maximum threshold, section 28(1) of the Regulation lists certain assets and/or interests which are deemed not to be included in the calculation of an ODSP recipient’s assets. These “non-counting” assets potentially include a trust that is established by a beneficiary with funds that they inherit from an estate. Specifically, item 19 of section 28(1) of the Regulation provides that the following would not count against the asset limit:

Subject to subsection (3), the person’s beneficial interest in assets held in one or more trusts and available to be used for maintenance if the capital of the trusts is derived from an inheritance or from the proceeds of a life insurance policy.

Section 28(3) of the Regulation then further provides:

The total amount allowed under paragraphs 19 and 20 of subsection (1) shall not exceed $100,000.

As a result of section 28(1)19 of the Regulation in conjunction with section 28(3), if an ODSP recipient receives an inheritance or the proceeds of a life insurance policy they are allowed to put up to $100,000.00 of such funds into a trust to be held for their benefit without such funds counting against their asset limit for ODSP. As a result, if the inheritance that the ODSP recipient is to receive is $100,000.00 or less (or close to $100,000.00 such that any excess over $100,000.00 would not put them offside the asset limit), the potential option of putting the inheritance into a trust for the benefit of the ODSP recipient may be available to help insulate the inherited funds from counting against the asset limit.

If a beneficiary/ODSP recipient would like to explore the possibility of establishing such a trust after death they should speak with a lawyer to ensure that the trust is drafted in compliance with ODSP requirements.

Thank you for reading.

Stuart Clark

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