Author: Stuart Clark
One would be forgiven if at first instance they did not see any connection between Justin Trudeau’s recent selection of his cabinet and trust law. While most of the attention has been placed on the background of the new appointees, and of their immediate tasks at hand, there is a (however small) connection to the trust world, as many of the newly appointed Ministers and their staff are rushing to place their assets into blind trusts.
At its most simple, a blind trust can be thought of an individual relinquishing control over their assets, and providing them to a trustee to manage them on their behalf. The trustee has complete discretion over how to invest the individual’s assets, with the beneficiary being provided with no information regarding how the investments are being held, and the beneficiary having no say in how the funds are managed. As the beneficiary has no idea what their funds are invested in, the theory is that they would not be inclined to enact government policy which would favour their own investments, and that they would be able to avoid a conflict of interest.
In accordance with the federal Conflict of Interest Act, a “reporting public office holder”, which is defined as including a Minister of the Crown, a “ministerial adviser”, as well as a member of the “ministerial staff” who works on average 15 hours or more a week, must within 120 days of their appointment either sell all “controlled assets” in an arm’s length transaction, or place such assets into a blind trust. Any assets which are placed into a blind trust have annual reporting requirements, with the trustee having to file an annual report to the Conflict of Interest and Ethics Commissioner regarding the ongoing management of the blind trust.
In the context of the recent federal election, the most attention was placed on the recently elected Toronto Centre MP, Bill Morneau, who was appointed as Minister of Finance. As Mr. Morneau himself reportedly has a stock portfolio in excess of $30 million, and with his appointment as Minister of Finance would have a significant influence and impact upon the financial sector, some attention was paid to the transition of his investment portfolio likely into a blind trust. Justin Trudeau himself previously moved his own investments into a blind trust following his appointment as leader of the Liberal Party in 2013.
A close relative dies. Although you are not named as the Estate Trustee in the will, you cooperate and assist the Estate Trustee to begin the process of seeing to the administration of the estate. Suddenly, you find new evidence which you believe questions whether the deceased had the requisite capacity to execute the Will, and you contemplate bringing a will challenge. But is it too late? Have your actions to date made it such that you are no longer able to challenge the validity of the will? As a result of the doctrine of estoppel by convention, the answer is maybe.
At its most simple, the doctrine of estoppel by convention can be thought of as the court concluding that as a result of an individual’s prior representations or conduct, that it would be unequitable and unjust to now allow them to advance a claim. In the context of a will challenge, the doctrine of estoppel by convention will most often be raised when, prior to an individual having commenced a will challenge, they assisted and/or were involved in the administration of the estate. The argument which is advanced is that as a result of their involvement in having seen to the administration of the estate up to a certain point, that it would be unjust and unequitable to now allow them to challenge the validity of the will.
In Leibel v. Leibel, Madam Justice Greer found that as a result of the conduct of the Deceased individual’s son following his mother’s death (including assisting to sell his mother’s house, and assisting in dividing up certain household and personal effects), that he was now estopped from challenging the validity of his mother’s will. In Leibel, Madam Justice Green employed the test adopted by the Supreme Court of Canada in Ryan v. Moore to determine whether to apply the doctrine of estoppel by convention, being:
- The parties’ dealings must have been based on a shared assumption of fact or law: estoppel requires manifest representation by statement or conduct creating a mutual assumption. Nevertheless, estoppel can arise out of silence (impliedly).
- A party must have conducted itself, i.e. acted, in reliance on such shared assumption, its actions resulting in a change of its legal position.
- It must also be unjust or unfair to allow one of the parties to resile or depart from the common assumption. The party seeking to establish estoppel therefore has to prove that detriment will be suffered if the other party is allowed to resile from the assumption since there has been a change from the presumed position.
In the event that all three elements of the test are found to apply, the court may apply the doctrine of estoppel by convention, and dismiss the will challenge.
Where there is money, litigation may follow. We have previously blogged about how in terrorem clauses, or even marriage contracts, are not infallible in their ability to discourage litigation from being commenced after death. While the use of these or other techniques may be successful in discouraging estate litigation from taking place, so long as there are funds available in the estate against which a claim may be made, an individual may be inclined to commence a claim against the estate. Perhaps knowing this to be the case, an Austrian grandmother recently took matters into her own hands, destroying approximately €1 million in bank notes shortly before her death in an apparent attempt to disinherit her heirs.
Yahoo News recently reported on an 85 year old Austrian woman who, shortly before her death, cut approximately €1 million in bank notes (approximately $1.4 million Canadian), along with her bank booklets, into small pieces, placing the pieces in tatters around the bed in her retirement home. It is believed that the reasoning behind the destruction of the funds was that the woman wished to disinherit her heirs.
While unconventional, the rationale behind such an approach seems fairly straight forward, as if there are no funds against which a disappointed beneficiary may make a claim, surely it would follow that the intention on the part of the deceased to disinherit her next-of-kin would be fulfilled.
While one has to admire her determination, it seems the beneficiaries themselves may have the last laugh in this instance, as Austria’s Central Bank, OeNB, has indicated that they may be willing to replace the destroyed funds, stating:
“If the heirs can only find shreds of money and the origin of the money is assured, then of course it can all be replaced… If we didn’t pay out the money then we would be punishing the wrong people.”
Maybe next time she will have to burn it.
I’ve always been a fan of the “beer bet”. Whenever an interesting point of trivia should come up, and there should be two differing points of view, more often than not the matter will be settled through a “beer bet”, where the loser must buy the victor a beer the next time that they are out. While I have had some good winning streaks of “beer bets” (at one point one co-worker lost about 13 in a row), I have to give credit where credit is due, as I have never reached the sort of levels which the National Post reported on earlier this week.
In a beer bet to end all beer bets, the National Post advised of a 24,576 bottle “beer debt” that had recently been cleared by the Edmonton Eskimos’ recent victory over the Calgary Stampeders. In a math lesson which teaches you how fast “double or nothing” can get out of hand, after a repeated string of Edmonton losses to Calgary dating back to June 15, 2012, and a corresponding “double or nothing” bet that was placed on each game, one brother owed the other 24,576 bottles of beer.
While at first blush this story may have nothing to do with estate litigation, when I sent the story around to some of my co-workers who are also fans of a good “beer bet”, something near the bottom of the article caught one of their attention, as one brother referenced the fact that this bet would go on. The comment back was something to the effect of “imagine trying to collect that debt from an estate”. Well imagine no further.
Being ever one to believe that a beer bet is an unbreakable oath and debt, if you should find yourself in the unfortunate situation of having someone die before re-paying a beer bet, you may be required to turn to their estate to collect on the debt. In such situations, the first question that you must ask yourself is whether you want to demand payment of your beer bet in the form of the beer itself, or if you were willing to take a cash payment in lieu of beer. If it’s the latter, at an average price per beer of $2.50 (no true beer bet can be settled by buck a bottle beer), at 24,576 bottles this would work out to $61,440.00.
If you should find yourself needing to collect on a beer bet from an estate, make sure to keep in mind section 38(3) of the Trustee Act, which provides that no action may be brought against the estate after two years from the death of the deceased. It would be a shame to rack up a 24,576 bottle beer debt, only to have the claim thrown out as a result of the expiry of any limitation period.
Have a great weekend.
Applications for support under Part V of the Succession Law Reform Act (the “SLRA“) can often be a highly emotional affair. While you would hope that an Estate Trustee would not do anything to jeopardize assets against which a claim has been made while the Application remains ongoing, often when the Estate Trustee in question is a beneficiary of the estate, or has taken a strong adversarial position against the Applicant, the Applicant may begin to have concerns that the Estate Trustee may do something to jeopardize estate assets while the Application remains ongoing. Should such concerns arise, the provisions of the SLRA may be able to provide some safeguards to the Applicant.
In accordance with section 67(1) of the SLRA, once an Application for dependants support has been served upon the Estate Trustee, the Estate Trustee may not make any distribution from the estate unless the court orders otherwise, or all parties consent. Specifically, section 67(1) provides:
“Where an application is made and notice thereof is served on the personal representative of the deceased, he or she shall not, after service of the notice upon him or her, unless all persons entitled to apply consent or the court otherwise orders, proceed with the distribution of the estate until the court has disposed of the application.”
While section 67(1) should ensure that the estate will not be distributed to the beneficiaries until the Application has been resolved, it does not necessarily mean that the Estate Trustee may not sell a specific asset in the estate while the Application is ongoing. In the event that as part of their Application, the Applicant has sought the transfer of a specific asset into their name (whether under section 63(2)(c) of the SLRA or otherwise), more action may be required by the Applicant to safeguard such an asset while the Application is ongoing. Should such a situation arise, an Order suspending the administration of the estate in accordance with section 59 of the SLRA may be required. Section 59 provides:
“On an application by or on behalf of the dependants or any of them, the court may make an order suspending in whole or in part the administration of the deceased’s estate, for such time and to such an extent as the court may decide.”
Unlike section 67(1), section 59 is not automatic, such that in the event that it appears that the suspension of the estate will be necessary as it relates to a certain asset, and the Estate Trustee will not voluntarily agree to such an Order, it is likely that the Applicant will be required to bring a Motion for an Order suspending the administration of the estate in accordance with section 59 of the SLRA.
Thank you for reading.
The passing of accounts process can provide beneficiaries with an insight into how an estate and/or trust has been administered, with the revelations not always being good. In response to being served with an Application to pass accounts, allegations will often be brought forward by the beneficiaries that, as a result of the actions or inactions of the trustee, the beneficiaries have suffered damages, and they will be looking to the trustee to compensate them for such damages. If such damages go beyond a mere reduction of a trustee’s compensation, the question which often emerges is whether the passing of accounts is the correct forum for the beneficiaries to seek such damages against the trustee, or if a separate proceeding is required.
Section 49(3) of the Estates Act provides the court with the authority to adjudicate issues of negligence and/or breach of trust as part of the passing of accounts process, providing:
“The judge, on passing any accounts under this section, has power to inquire into any complaint or claim by any person interested in the taking of the accounts of misconduct, neglect, or default on the part of the executor, administrator or trustee occasioning financial loss to the estate or trust fund, and the judge, on proof of such claim, may order the executor, administrator or trustee, to pay such sum by way of damages or otherwise as the judge considers proper and just to the estate or trust fund, but any order made under this subsection is subject to appeal.”
While section 49(3) of the Estates Act does provide the court with the authority to hear such issues as part of the passing of accounts process, section 49(4) of the Estates Act provides the Judge with the discretion to have such issues heard by way of separate trial of an issue, providing:
“The judge may order the trial of an issue of any complaint or claim under subsection (3), and in such case the judge shall make all necessary directions as to pleadings, production of documents, discovery and otherwise in connection with the issue.”
In determining whether such allegations should be directed to a separate trial of an issue, or heard as part of the passing of accounts process, the Ontario Court of Appeal in Simone v. Chiefetz provides the following commentary:
“While there is statutory authority for awarding damages for “misconduct, neglect or default” by a trustee on the passing of accounts (Estates Act, s. 49(3)), it is rare for the court to permit the parties to litigate a substantial claim for damages for breach of a trustee’s duties through the medium of an audit. As Professor Waters states: “… the courts prefer to see beneficiaries bring breach of trust actions for reinstatement of loss to the trust, rather than that a breach allegation be fought out through the medium of a remuneration hearing.“ [emphasis added]
Simply put, the Court of Appeal states that while section 49(3) of the Estates Act provides the court with the authority to hear such claims as part of the Application to pass accounts, that in the event that the claim being brought forward is a substantial claim, that the court prefers that such issues be directed to a separate trial of an issue in accordance with section 49(4) of the Estates Act.
Thank you for reading.
While placing an advertisement in the classifieds section of a newspaper is a common enough occurrence in the administration of an estate, it is rare that a family attempts to get two birds with one stone, and advertises to prospective buyers for the deceased’s possessions in the obituary itself. The Toronto Star recently reported on a light hearted and humorous obituary which was recently featured in their newspaper which had gone viral on social media. In an entertaining nod to a life well lived, a family wrote an obituary for their late 94 year old mother which in part contained the following:
“She left behind a hell of a lot of stuff to her daughter and sons who have no idea what to do with it. So if you’re looking for 2 extremely large TV’s from the 90s, a large ceramic stork (we think) umbrella/cane stand, a toaster over (slightly used) or even a 2001 Oldsmobile with a spoiler (she loved putting the pedal to the metal), with only 71,000 kilometers and 1,000 tools that we aren’t sure what they’re used for. You should wait the appropriate amount of time and get in touch. Tomorrow would be fine. This is not an ad for a pawn shop, but an obituary for a great Woman, Mother, Grandmother and Great-Grandmother born on May 12, 1921 in Toronto…”
No stone was (literally) left unturned by the obituary, where the family goes on to provide the following description of their late mother:
“Her extensive vocabulary was more than highly proficient at knowing more curse words than most people learned in a lifetime. She liked four letter words as much as she loved her rock garden and trust us she LOVED to weed that garden with us as her helpers, when child labour was legal or so we were told. These words of encouragement, wisdom, and sometimes comfort, kept us in line, taught us the ‘school of hard knocks’ and gave us something to pass down to our children.”
While some may call the obituary unorthodox, it is clear that she was well loved and will be missed by her family. At the end of the day that is all any of us can really ask for, as, in the words of her family, “(s)he leaves behind a very dysfunctional family that she was very proud of.”
Have a great weekend.
The use of a Family Trust is a common estate planning tool, whereby an asset, whether it be cash, a family cottage, or otherwise, is placed into a trust to be held for the benefit of the family. More often than not, when such a Family Trust is established, both spouses are named as trustees of the trust, and the beneficiaries are often the two spouses together with any children that they may have. The trust is often discretionary, whereby the trustees may distribute some or all of the trust assets to any one of the beneficiaries to the exclusion of the others.
While the administration of the trust often goes smoothly while everything is going well in the relationship, the question emerges of what should take place should the spouses later separate and commence divorce proceedings. Although we do not tend to see arbitration used as often within the estates and trusts context, the same cannot be said for family law proceedings, where, anecdotally at least, it appears that parties are much more willing to enter into binding arbitration in order to settle their dispute rather than adjudicate the matter before the courts. When the two spouses (who are also the trustees) separate, and as part of the divorce proceedings agree to enter into binding arbitration, the question often emerges of whether the internal administration of the trust can be caught up in the arbitration process?
Inevitably, as part of such an arbitration, one of the spouses will often take the position that as both trustees have signed the arbitration agreement, that the arbitrator has now assumed the powers of the trustees, and may utilize the discretion afforded to the trustees to determine how the trust assets should be distributed as part of the divorce process. Without commenting on whether a trust may be bound to the arbitration process in the event that the trustees have only signed the arbitration agreement in their personal capacities, and not their capacities as trustees, the courts have been clear that unless the terms of the trust specifically contemplate otherwise, that trustees may not delegate the fundamental decision making powers entrusted to them as trustees to any person (whether it be arbitrator or otherwise). As put by Professor Waters in Waters’ Law of Trusts in Canada:
“The courts, however, continue to adhere to the principle that a delegate may not delegate his duties when the nature of the task is one which he is required to perform personally. This prevents the trustee from appointing an agent to perform the task of this kind, whether or not he has an express, implied, or statutory power to appoint agents. Indeed, any act of an agent purportedly carrying out such a task would have no legal effect; it would bind neither the trust nor any third party.“ [emphasis added] (4th ed., pg. 913)
Using this rationale, unless the deed of trust specifically contemplates that the trustees may delegate their decision making to an arbitrator, the trustees may arguably not delegate their fundamental decision making powers to an arbitrator, for to do so would be an improper delegation of their authority. As made clear by Prof. Waters, any decision made by the arbitrator concerning the internal management of the trust would arguably not be binding upon the trust or any third party, as they could arguably not have assumed such powers in the first place.
This past week Harper Lee published Go Set a Watchman, her first book since To Kill a Mockingbird was first released in 1960. While the book has been released to much fanfare, becoming the most pre-ordered book in the publisher’s history, an equally as interesting story (at least to an estates lawyer) has emerged regarding questions surrounding Ms. Lee’s capacity, and whether it was truly ever Ms. Lee’s intention to have the book released.
As recently outlined in an article in Bloomberg, Go Set a Watchman is a sort of “lost manuscript” of Ms. Lee’s, having itself been written in the mid-1950s before To Kill a Mockingbird was ever written. It was apparently rediscovered by Lee’s lawyer while recently looking through a safety deposit box. Ms. Lee herself is presently 89 years old and resides in a nursing home, having previously suffered a stroke in 2007. Much of her daily life is now apparently managed by her Power of Attorney.
Ms. Lee famously rarely ever spoke publically following the release of To Kill a Mockingbird, having become an almost sort of social recluse, never publishing any further works or giving interviews. To this effect, when news broke that Go Set a Watchman would be published, and that Ms. Lee’s Power of Attorney had supposedly played a prominent role in seeing to its publication, questions immediately emerged regarding whether it was ever truly Ms. Lee’s intention to release Go Set a Watchman. While those around Ms. Lee are quick to point out that in their opinion Ms. Lee is capable, and has consented to the release of Go Set a Watchman, as outlined in the Bloomberg article the questions still remain.
Without commenting on the specifics of Ms. Lee’s scenario, the supposed fact pattern itself, whereby a famous novelist for decades refuses to give interviews or publish any further works, only to allegedly later have their unpublished works released by their Power of Attorney, offers an interesting hypothetical. In Ontario, presuming that there are no further restrictions in the Power of Attorney document itself, an Attorney for Property may do anything on behalf of the grantor except execute a new Will. To this effect, if such a famous novelist had executed a standard Power of Attorney for Property, and their Attorney for Property later discovered unpublished works, it would be fully within the rights of the Attorney for Property to release such works on behalf of the grantor.
From a practical standpoint, should such a novelist wish to execute a Power of Attorney for Property, and should they not want their unpublished works to be released, it would likely be as simple as including a carve out in the Power of Attorney which would simply provide that the Attorney for Property did not have the authority to consent to the release or in any way deal with the unpublished works. Without such a provision being included however, the Attorney for Property would arguably have the authority to consent to the release of the unpublished works on behalf of the grantor.
Thank you for reading.
The administration of estates can be an inherently public affair. Those individuals who may have gone to great lengths to keep their affairs private during their lifetime can suddenly find their intimate personal details published for all to see, with a copy of their Will becoming public record in an open court file if probate is required, as well as an estimate of the total value of their estate for the purposes of calculating any estate administration tax which may be owed. If an Application to pass accounts is eventually required, not only will further details of the Deceased’s assets become public record in the accounts, but specific details of the transactions which the Estate Trustee undertook will be open for all to see.
To many individuals who went to great lengths during their lifetimes to keep such matters private, such a prospect may seem terrifying. As a possible solution to such concerns, a recent article in the Wall Street Journal proposed the use of trusts as a possible way for high net-worth individuals to keep secret just how rich they are.
While trusts created within a Will may be open to the same privacy concerns which are outlined above, inter vivos trusts by their very nature can be kept much more secretive. Such documents need not be disclosed for the purpose of applying for probate, and the value of any assets which are contained in such trusts need not be disclosed to the public for the purpose of calculating estate administration tax, as they by their very nature pass outside of the estate. In the event that the beneficiaries of such trusts remain content, and periodical releases are sought by the Trustees rather than formal Applications to pass accounts, the ongoing administration of such a trust can also be shielded from public view.
While the article acknowledges that in the event that the administration of a trust should become litigious that the privacy advantages may be undone, it suggests as a possible way to safeguard against such matters becoming public is to create a separate trust for each child in the event that there are multiple children who will be beneficiaries, thereby ensuring that in the event that one beneficiary should become litigious that only their portion would become open to the public. It also recommended encouraging mediation and arbitration to disappointed beneficiaries as a way to further safeguard the administration of the trust from public view.
Thank you for reading.