Author: Suzana Popovic-Montag

31 Mar

EALM: Moving Estate Litigation Matters Forward During COVID-19

Suzana Popovic-Montag Estate Litigation Tags: , , , , 0 Comments

The COVID-19 pandemic has resulted in temporary changes to the way that lawyers are able to practice law. For the time being, many of us and our staff are working remotely, avoiding in-person meetings whenever possible, and access to assistance through the courts is limited.

Processes such as examinations for discovery and mediations may not necessarily be postponed with the availability of online platforms through which they can be hosted, such as Zoom. However, an issue remains in how best to address procedural issues for which we would normally seek directions from the court.

For the time being, court dates are available only to provide assistance in respect of truly urgent matters. While some clients may consider the appointment of an estate trustee during litigation or timetabling issues to be urgent, it is unlikely that a judge will share this viewpoint absent compelling circumstances. While the scope of matters that can be heard by teleconference may expand after April 6, 2020, the ability of the courts to keep up with demand can be expected to be limited. Furthermore, once the courts resume operations, one can only expect schedules to fill up quickly as lawyers and clients try to make up for lost time. 

Lawyers and our clients have a common interest in moving matters forward during this period of instability. To assist in this regard, I am spearheading an initiative that I have called Estates Arbitration Litigation Management (“EALM“). 

What I see as being the key features of EALM can be summarized as follows:

  • parties will enter into an EALM agreement that sets out the matters to be arbitrated, primarily being procedural and interim relief;
  • senior members of the Bar will assist the parties as arbitrators in determining those issues agreed upon at a reduced hourly rate;
  • if the decision of the arbitrator requires a court order to be effective (for example, the appointment of an estate trustee during litigation), the parties agree to file a consent motion in writing to obtain the necessary order; and
  • the parties may return to court to address substantive issues once normal operations are restored or may elect to proceed to arbitration or mediation.

These measures have already been successfully employed by the Family Law Bar and we are grateful to Aaron Franks, Judith Nicoll, Martha McCarthy, and Gary Joseph for sharing their experiences in that regard. A link to a precedent draft agreement specific to EALM, as well as an information sheet that lawyers will be able to share with clients, will be added to the resources section of our website within the next couple of days, which will be the result of continued consultations with senior members of the Estates Bar.

Despite the unique challenges posed by COVID-19, it is important that we employ new measures to continue to move matters forward for the benefit of our clients and colleagues throughout the Estates Bar, and I am hopeful that EALM will become a timely and cost-effective tool in limiting the disruption to our practices in the coming weeks. If you have any comments regarding EALM, or are interested in introducing this into your own practice, please contact me at spopovic@hullandhull.com.

Thank you for reading and be safe.

Suzana Popovic-Montag.

18 Mar

Wills and Estates Law in George Eliot’s Middlemarch

Suzana Popovic-Montag Estate & Trust, General Interest, Wills Tags: , , , , , , 0 Comments

The Victorians consigned themselves to more subtlety in their works of entertainment than we at present do. To all appearances, theirs was decidedly not an age capable of enjoying rap music and HBO comedies. The spiciest themes in their art, therefore, would include marriage intrigues, duels, financial scandals – or, as we see in George Eliot’s Middlemarch – controversial wills and eccentric testators.

The wills and estates subplot in Middlemarch is comprised of all the ingredients that you may see in a modern legal drama: a rich and erratic miser (Mr. Featherstone) manipulating his relatives with implied promises of future bequests; the idle protégée (Fred Vincy) who accumulates debts with the idea that the testator will bail him out; concern over the testator’s attachment to his young caregiver (Mary Garth); a train of impoverished relatives ill-concealing their greedy expectations; and much discussion on why “blood” was deserving and why “strangers” were not.

It is remarkable how little has changed in a century or so with respect to wills and estates. Then, as now, a Mr. Featherstone who promises a bequest, receives consideration, and then goes back on his word, may be found to have broken a binding contract – as occurred in Legeas v. Trusts & Guarantee Co. Likewise, a ruling of unjust enrichment (Moore v. Sweet) or specific performance (Folsetter v. Yorkshire & Canadian Trust Co.) could be made against him/his estate.

Still relevant today are the challenges of undue influence and incapacity. In the story, the scheming relatives are alarmed at Mr. Featherstone’s connection to Ms. Garth. She, all too aware of an undue influence allegation, refuses her patron’s money and ignores him when he orders her, while on his deathbed, to destroy his wills. In return, he throws his cane at her, which is perhaps evidence of incapacity.

Much as we may laugh at the relatives in Middlemarch who repeatedly visit Mr. Featherstone to remind him of his obligations to his “own flesh and blood”, our own law continues to ascribe significance to bloodlines. The Succession Law Reform Act defines “child” based upon conception, and the statute’s intestacy provisions speak of “issue” and the “nearest degree” of kindred. As many an adopted child and step-child knows, with respect to estates law, blood still matters.

There are some marked differences between Eliot’s England and modern Canada. Whereas Fred Vincy was loaned money in part because the creditors knew he was favoured by Mr. Featherstone, we now have businesses openly and explicitly offering advances to those who “have an inheritance coming”. Although we still use the Banks v. Goodfellow test for evaluating capacity, there have been some innovations, such as capacity assessments done after death and more nuanced, neuroscientific understandings of capacity. Lastly, if Mr. Featherstone had died in Ontario in 2020, he could not take as much comfort in tantalizing relatives and then crushing their hopes, for we have dependency support laws whereby testators must provide “adequate provision” for their “dependents”. Perhaps the creation of such laws was influenced, in part, by the ghoulish conduct of such Victorian literary characters.

Thank you for reading. Enjoy the rest of your day!

Suzana Popovic-Montag and Devin McMurtry.

04 Mar

Predator Attorneys and Their Elderly Victims

Suzana Popovic-Montag Estate Planning Tags: , , , , , 0 Comments

In a recent story entitled, “What can happen when seniors appoint the wrong power of attorney”, CBC News sheds light on a problem that may be on the rise in Canada: attorneys for property preying on elderly incapable people.

The story focuses upon Christine Fisher, a widow and World War Two veteran, and Theresa Gardiner, who became Ms. Fisher’s attorney and then defrauded her of at least $78,000 over the course of three months. The attorney was charged, but after agreeing to pay $20,000 in restitution, the charges were dropped, the police citing an insufficient chance of conviction. The difficulty in convicting predator attorneys, in fact, is all too common, for the key witnesses in such cases often suffer from dementia and other impairments, and therefore struggle to recall or recite the requisite facts in their testimony.

Placing one’s trust in a family member may be safer, but it is not bullet-proof, as evidenced by the case of Royale Klimitz, whose eldest son, David Klimitz, used the power of attorney to drain his mother’s retirement savings from $557,000 to a mere $83. When Ms. Klimitz died shortly after, her other two children alleged it was of a broken heart. Before she died, however, she provided the Crown with two video-taped victim impact statements which contributed to her son’s conviction.

Not all predator attorneys are necessarily evil and insidious. As we have blogged in the past, some predator attorneys are otherwise good people who fall into temptation. This often occurs because being an attorney allows for opportunity to do wrong with little chance of detection; predator attorneys also often rationalize that in doing the work, they are entitled to more desserts; and financial need can be a burden too heavy for some people’s moralities to withstand.

So then, what can elderly people, in arranging their affairs, do to protect themselves? Sections 32, 33, and 35 of the Substitute Decisions Act impose obligations on attorneys to consult with the incapable person’s family members, keep detailed records of the incapable person’s finances, and review the incapable person’s will to ensure that testamentary assets are preserved.

Most importantly, just like picking spouses, business partners, or sports teams, the happiest results flow from the selection of trustworthy people. Similarly, it is best to avoid those with selfish and dishonest tendencies, or who would sway like aspens rather than stand like oaks under economic pressure. So when your sibling cheats on board game night, or your friend constantly “forgets” to bring wine or a dessert to dinner parties, or your child’s favourite conversational topic becomes “my inheritance” – it may be wise to steer well clear and choose another attorney!

Thank you for reading. Have a wonderful day,

Suzana Popovic-Montag and Devin McMurtry

19 Feb

Unconventional Will Provisions

Suzana Popovic-Montag Estate Planning, Wills Tags: , , , , , , , 0 Comments

While the majority of people use their wills to provide for their friends and family after they have passed away, some take their wills as an opportunity to creatively leave their mark in their passing.

In today’s blog, we will look at three cases of bizarre will provisions and their outcomes.

A Rose Everyday

Comedian, Jack Benny was married to his wife, Mary Livingstone, for nearly 50 years. While Jack was known to the public for his television persona of being stingy and terrible at playing the violin, Jack was quite the romantic to Mary. When Jack died in 1974, he left a provision in his will that one red rose was to be delivered to Mary every day for the rest of her life.

In a magazine article written by Mary in memory of Jack, it seems as if Jack’s wishes were carried out. Mary stated that “every day since Jack has gone, the florist has delivered one long-stemmed red rose to my home.”

A Millionaire Dog

Real estate investor and hotel owner, Leona Helmsley, died in 2007. Leona was dubbed the “Queen of Mean”. Leona’s will stated that a $12 million trust was to be established for her Maltese dog named “Trouble”. Leona excluded two of her grandchildren from her will but included $10 million for two of her other grandchildren on the condition that they regularly visit their father’s gravesite.

Trouble’s inheritance was reduced to $2 million by the court, with the remaining balance going to Ms. Helmsley’s charitable foundation. While the loss of income may have been upsetting to Trouble, it may also have come as a relief as there were reports that the dog was forced to go into hiding after a reported threat to kidnap her.

Sam Weir

Sam Weir, who was a retired lawyer, stipulated in his will that $3,500 was to be held in trust for the Law Society of Upper Canada. He directed that each year, the income from the trust was to be paid to the student who graduated from the Bar Admissions Course with the lowest marks. His reasoning behind this was that he knew many lawyers who became successful by “keeping their lack of knowledge in the dark.”

Sam strongly recommended that the recipient of the funds spend it on a “night on the town.” If the Law Society accepted the gift, Sam provided that it would receive an additional $10,000 to be spent on a series of lectures named the “Weir lectures”.

The Law Society declined the gift on the basis that it was not charitable.

Final Thoughts

Although adding an unconventional provision in your will might be tempting, doing so is risky as the provision could be declared invalid for a number of reasons such as uncertainty, impossibility of performance, public policy and more. If you do find yourself wanting to add a unique provision in your will such as the testators above, it is best to discuss it with a lawyer. Even retired lawyer, Sam Weir, could have benefited from such a discussion.

Thanks for reading!

Suzana Popovic-Montag and Celine Dookie

To read about some more unconventional wills, check out these blogs:

Fun With Wills – Charles Vance Millar

Want to be creative with your will? Get a lawyer

05 Feb

Making the Taxation of Trusts Fair for Disabled Canadians

Suzana Popovic-Montag Estate & Trust, Estate Planning Tags: , , , 0 Comments

Changes made in 2016 to the Income Tax Act resulted in unfair treatment to disabled Canadians by restricting which types of trusts were eligible for a “principal residence exemption” (PRE). Now the Department of Finance has issued a letter of comfort, attempting to rectify these unfair changes.

What is the PRE?

In short, the PRE allows Canadians, when selling their principal residence, to avoid being taxed on their realized capital gains. Without this exemption, someone selling their principal residence would be taxed on 50% of their capital gains, which could be very significant when taking into account the value of the property.

Injustice with the Current Rules

The changes introduced in the Income Tax Act in 2016 meant only three categories of trusts could claim the exemption. The first was life interest trusts, the second was qualified disability trusts, and the third was inter vivos or testamentary trusts established for a minor child with one or more parents being deceased.

This definition significantly restricted the type of trusts that were eligible to claim the PRE. Because the second category, qualified disability trusts, are testamentary trusts  (resulting from death), this meant that disabled taxpayers who were the beneficiaries of inter vivos trusts (not resulting from death) could not claim the exception and would have capital gains on their principal residence taxed at the highest rate.

In practice, this would result in an unexpected and significant amount of income tax being due 21 years after the creation of the trust, because after 21 years the trust will have been deemed to have disposed of its capital property. If a disabled beneficiary did not have enough funds available in the trust to pay the capital gains tax, there could be severe consequences.

Proposed Improvements

In response to this problem, the Department of Finance has issued a comfort letter stating that it will make recommendations to the Minister of Finance to fix the issue. This would involve amending the Income Tax Act to permit certain inter vivos trusts to claim the PRE. This would also be subject to certain conditions. Firstly, the beneficiary needs to be a resident in Canada who is disabled (able to claim the disability tax credit). Secondly, the beneficiary must be a child, spouse, common-law partner, or former spouse or partner of the trust’s settlor. Thirdly and finally, no one other than the qualifying disabled beneficiary can receive the income or capital of the trust. If these three conditions are satisfied, the disabled beneficiary would be able to claim the tax exemption for their principal residence.

Fixing the injustice

This proposal was made recently and has not yet been implemented. Any laws that put disabled Canadians at a disadvantage, even inadvertently, ought to be changed and the injustice should be corrected. Implementation of these recommendations would be welcome and cannot arrive soon enough.

Thanks for reading,

Suzana Popovic-Montag & Sean Hess

22 Jan

Ongoing Questions with Expert Evidence

Suzana Popovic-Montag Estate & Trust, Litigation, Wills Tags: , , , , , 0 Comments

In wills, trusts, and estates litigation, much hinges upon expert evidence. In a will challenge that is based upon alleged testamentary incapacity, both the objector and propounder of the will would be prudent to enlist a capacity assessor. A party suspicious of undue influence may wish to consult a physician, a police officer, or some other party who could be privy to abuse. In a contested passing of accounts, an expert investor can speak to the soundness of a trustee’s investments.

Though in theory expert evidence should clarify the points of contention, in practice it can sometimes render matters murkier and more uncertain. For instance, what happens if two equally distinguished handwriting experts draw opposite conclusions? What if a coroner’s findings contradict the preponderance of other evidence?

Another concern is experts’ impartiality, as evidenced by Wilton v. Koestlmaier, wherein one party unsuccessfully charged an expert witness with advocating for the other side. Courts have long been apprehensive that some experts may (perhaps unwittingly) be kinder with the parties with whom they interact and from whom they collect their bills. In 1873, Sir George Jessel, M.R., wrote:

“There is a natural bias to do something serviceable for those who employ you and adequately remunerate you. It is very natural, and it is so effectual, that we constantly see persons, instead of considering themselves witnesses, rather consider themselves as the paid agents of the person who employs them.”

One possible fix for this source of apprehension is to have both parties deal with the same expert. At the very least, litigators should not employ the same expert to too great an extent, which might appear as a “red flag”.

Courts have also looked into the timing for delivery of expert reports. The Rules of Civil Procedure prescribe that expert reports are served no less than 90 days before the pre-trial conference (or 60 days for responding parties’ reports). Oftentimes, however, parties should exchange their reports well before these deadlines, for once parties receive these reports, they have a much better idea of the relative strength of their positions, which may steer them towards settlement. In Ismail v. Ismail, Grace J. spoke to this:

“How can the parties’ lawyers advise their clients concerning settlement without knowing their case and the one they must meet?  How can the parties make informed decisions?”

Too many experts can increase costs exponentially (especially if the experts are famous or from faraway places), but too few experts could lead to a scantiness of evidence. As a nice medium, the Australians have come up with the practice of “hot tubbing” experts—which, despite its fun name, does not involve splashing, shouting, or the unusual combination of horn-rimmed spectacles with bathing suits. Rather, “hot tubbing” refers to having a panel of experts questioned together, which can allow for an identification of the points of agreement and disagreement and more lively discussion.

Thank you for reading. Enjoy your day!

Suzana Popovic-Montag and Devin McMurtry

08 Jan

Kent v. Kent: Matrimonial Homes and Resulting Trusts

Suzana Popovic-Montag Estate & Trust, Wills Tags: , , , , , 0 Comments

We often hear of the importance of forging and maintaining good relations with the in-laws. Hence, wishing to keep everyone united, and the spouse happy, we avert our gaze when the one in-law overindulges at the Christmas party, we bite our tongue when another in-law refers to us as “hey, you in the yellow”, and we put on a stiff smile when yet another in-law visits us on our birthday to ask for a loan. In one recent Ontario case, however, we see the grim consequences of having too good a relationship with one’s in-laws.

The cautionary case of Kent v. Kent arose from a legal dispute between the deceased’s son-in-law and her grandchildren. Perhaps unaware of her son-in-law’s inclinations towards insatiability and ingratitude, the deceased left equal shares of her home to the three eventual litigants. By and by, the son-in-law sought a declaration that he was entitled to a much larger share. He argued that since his mother-in-law had registered his late wife as a joint tenant (the transfer was gratuitous), and he and his late wife had moved in a decade after, the house “became their matrimonial home”. He relied upon subsection 26(1) of the Family Law Act:

If a spouse dies owning an interest in a matrimonial home as a joint tenant with a third person and not with the other spouse, the joint tenancy shall be deemed to have been severed immediately before the time of death.

The grandchildren countered with the presumption of resulting trust. According to this legal principle, despite legal ownership, property should be returned, or result, to the person who actually paid for the property (the beneficial owner). The presumption can be rebutted if the transferee can show that the transferor intended to gift the property (Pecore v. Pecore).

The Court ruled in favour of the grandchildren, finding that because the transfer was made from a parent to a child, with no consideration, the presumption of resulting trust applied. The son-in-law, who could not muster any evidence in his favour, did not rebut the presumption. The Court also ascribed significance to the Will itself:

The provisions of the will and transfer made by Marian in July 2015 suggest that she believed that she was the sole owner of the property, and in a position to dispose of it as she did.

This ruling might provide some comfort to those who have invited their married, adult children to live in their homes. It is a bitter fact, though, that the son-in-law’s conduct can bring no good to the reputation of in-laws, and that if his example is followed, we might see more in-laws receiving bequests of “thirty pieces of silver” or trusts comprised of stockings full of coal.

Thanks for reading!

Suzana Popovic-Montag and Devin McMurtry

11 Dec

Muirhead Estate, Re: A Widowhood Clause from 1919

Suzana Popovic-Montag Estate & Trust, Estate Planning, General Interest, Wills Tags: , , 0 Comments

As we head towards the holiday season, it is a good time to think about the past. The weather is drab and the days are short, too, so we have ample opportunity to curl up in cozy chairs – rum and eggnog in hand, perhaps – to read old books, watch history documentaries, or otherwise reminisce of that which came before us. In line with this, in today’s blog we examine a case from 1919, Muirhead Estate, Re, which includes a decision that is both intriguing and continuously relevant for estate planning.

The deceased had left a widowhood clause in his will, by which he sought to discourage his widow from marrying another. Remarry, however, she did, in the event of which the executors of the Muirhead Estate applied to the court for directions as to the construction of the following clause:

“If my wife shall remarry the share hereby bequeathed to her shall revert to my estate and be divided among my said children.”  

The court had to determine if the clause violated public policy, for even in 1919, conditional gifts “in general restraint of marriage” had long been against public policy. It found that there was a distinction between a restraint of marriage and a restraint of remarriage. The former was clearly grounds for voiding a clause, but the latter was legally valid. In particular, restraining the “second marriage of a woman” was an established exception to the public policy rule. As for the second marriages of men, the court found that these may have still fallen under the umbrella of public policy, but it did not explain or elaborate why.

One hundred years hence, we see from cases such as Goodwin and Brown Estate that the decision in Muirhead Estate, Re, is still good law – though the distinction of second marriages of men and women is in all likelihood obsolete. According to the public policy rule, you cannot, through conditions in your will, prevent a beneficiary from marrying; nor can you promote marital breakdown through such conditions. If, however, you think that your widow looks best in perpetual black finery, or you have a distaste for suitors characteristic of Odysseus, the law likely allows for you to include a widowhood clause in your last will.

 

Happy planning – and thank you for reading!

Suzana Popovic-Montag and Devin McMurtry

27 Nov

Adjournments in Estates Litigation

Suzana Popovic-Montag Estate Litigation, Litigation Tags: , , , , 0 Comments

Estate litigation involves risk and reward, heartbreak and vindication. Costs and other consequences often flow from the strength of litigants’ positions. Delay, however, is shared equally. In a protracted legal battle, the symptoms of delay – stress, distraction, gloomy foreboding – linger around like a shadow or a bad cold. Wary of these tribulations, the courts are increasingly focused upon smoothing and straightening, and thereby shortening, the road to decisions.

In today’s blog we explore how this shift has affected the granting of adjournments in estate litigation.

Judicial economy is not always served by the refusal of an adjournment. For example, if two proceedings are interrelated, the preliminary matter should be heard first. If an appeal is scheduled before an associated lower court motion, the appeal should be adjourned until the other has been settled, lest the courts “waste limited judicial resources and increase expense for all of the parties” (Mancinelli v. Royal Bank of Canada, [2017] O.N.S.C. 1526 at para. 5).

Reasons for granting adjournments include the ill health of a party, the emergence of new issues, and “to permit the appellants to file fresh evidence” (Morin v. Canada, [2001] F.C.T. 1420 at para. 11). Courts are also more inclined to adjourn when the other party is not prejudiced by such a request. If there is an urgent need for resolution of the dispute – in the estates context, for instance, when an estate has been tied up for years, to the detriment of the beneficiaries – an adjournment could be denied. Other factors which may lead to the denial of a request for an adjournment consist of “a lack of compliance with prior court orders, previous adjournments … the desirability of having the matter decided and a finding that the applicant is seeking to manipulate the system by orchestrating delay” (The Law Society of Upper Canada v. Igbinosun, [2009] O.N.C.A. 484 at para. 37).

Long waits and swollen court bookings have influenced today’s judicial decision-making. Judges are more inclined, progressively, to punish vexatious litigants, encourage parties to settle, and employ other strategies that are conducive to easing the strain on the courts. Much as the courts have emphasized the need to expedite decisions, however, the adjournment is still a mainstay in the judicial tool belt:

Perhaps to the chagrin of those opposing adjournments and indulgences, courts should tend to be generous rather than overly strict in granting indulgences, particularly where the request would promote a decision on the merits. (Ariston Realty Corp. v. Elcarim Inc., [2007] CanLII 13360 (O.N.S.C.) at para. 38).

In other words, fast adjudication should not compromise fair adjudication.

 

Enjoy the rest of your day, and thanks for reading.

Suzana Popovic-Montag and Devin McMurtry

13 Nov

Important Principles from the ONCA Regarding Capacity

Suzana Popovic-Montag Beneficiary Designations, Capacity, Estate Litigation, Estate Planning, Executors and Trustees, Trustees, Wills Tags: , 0 Comments

Lewis v. Lewis is a recent Ontario Court of Appeal decision in which the Appellants challenged the dismissal of their Application from the Superior Court of Justice. At issue was whether the Appellants’ mother, Marie Lewis, had the requisite capacity to execute new powers of attorney for property and personal care. The Appellants sought to invalidate the new powers of attorney and bring back into effect prior powers of attorney which Mrs. Lewis executed in 1995.

The Appellants raised several issues on appeal. In essence, they took issue with the application judge’s assessment of the evidence and exercise of his case management discretion.

In dismissing the appeal, the Ontario Court of Appeal emphasized the following principles regarding capacity:

  • Since capacity is presumed, those objecting to the document(s) have the onus to rebut that presumption, with clear evidence, on a balance of probabilities.
  • Similarly, those raising the issue of suspicious circumstances and undue influence bear the onus of establishing it, on a balance of probabilities.
  • The fact that someone had various chronic medical conditions throughout their life does not automatically mean that they lacked capacity. It is open to the application judge to consider the evidence. In doing so, the application judge may reject any evidence that they find to be unreliable.
  • Without evidence to the contrary, it is reasonable for an application judge to take “solace” from the fact that the individual executed their new powers of attorney before their solicitor of many years.
  • It is reasonable for an application judge to refer to the statements of section 3 counsel, appointed by the Office of the Public Guardian and Trustee, concerning an individual’s expressed wishes.

Good things to keep in mind when dealing with capacity issues.

Thanks for reading … Have a great day!

Suzana Popovic-Montag and Celine Dookie

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