It appears that the Ontario government is taking action to make it easier and more affordable for executors of modest estates to access the courts.
Where the value of an estate is relatively small, the cost of obtaining a Certificate of Appointment (otherwise known as “probate”) can be perceived as too expensive. As a result, an executor (“estate trustee”) of a small estate often administers the estate without the protection of probate. In some cases, people choose not to administer a small estate at all and abandon the assets altogether.
Foregoing probate may lead to roadblocks when administering an estate. Third parties (like banks and persons buying the deceased’s real or personal property) will often require that the estate trustee obtain a Certificate. Probate reassures these third parties of the estate trustee’s authority and protects third parties from liability, as it verifies that the person they are dealing with is authorized to deal with the estate’s assets.
In the past, we have blogged about the Law Commission of Ontario’s efforts on this issue, including the release of a questionnaire to Ontarians who have administered what they consider small estates.
It now looks like the provincial government is looking to address the issue as well. Attorney General Doug Downey recently introduced the Bill 161, Smarter and Stronger Justice Act. If passed, the Act is intended to improve how court processes are administered to make life easier for Ontarians.
Notably, one of the proposed amendments includes allowing for a simplified procedure to make it less costly to administer estates of a modest value.
Right now, the probate process for all estates in Ontario is the same, no matter the size of the estate.
The Smarter and Stronger Justice Act would make amendments to Ontario’s Estates Act to exempt probate applicants from the requirement to post a bond for small estates in certain cases.
Other proposed changes to the Estates Act include safeguards to protect minors and vulnerable people who have an interest in an estate, and to increase efficiency by allowing local court registrars to perform the required estate court records searches, rather than a central court registrar.
It will be interesting to see if the proposed changes will be passed, and how they may encourage more people to apply for probate and administer an estate of lower value.
Thanks for reading!
The recent decision of Muth Estate, 2019 ABQB 922, a decision of the Court of Queen’s Bench of Alberta, is a cautionary tale (and a scary one, at that) for estate trustees when distributing an estate.
There, the estate trustee distributed the estate to herself and other beneficiaries of an estate, subject to a holdback. The holdback was insufficient to satisfy amounts owing to CRA. The estate trustee then brought an application for an order requiring that the beneficiaries indemnify her for the amounts owing to CRA.
The estate trustee moved for summary judgment. Summary judgment was denied. The court found that the respondent beneficiaries had no obligation to indemnify the estate trustee.
As background, the estate trustee retained an accountant to prepare estate tax returns. The accountant advised that a holdback of $25,000 was sufficient. The estate trustee therefore held back $25,000, and distributed the balance of the estate. Unfortunately, that accountant did not file the required returns. A second accountant then completed the returns. The tax owing and the second accountant’s invoice totalled $60,772.19. The estate trustee paid this amount, and sought indemnification from the beneficiaries for their share of this amount.
(Query: Whether the estate trustee would have a claim against the first accountant?)
Of note, when making the distributions, the estate trustee could have but did not ask the beneficiaries to provide an indemnity.
The court held that the Income Tax Act imposed personal liability on the estate trustee for unpaid taxes where a clearance certificate is not obtained.
The court went on to find that one of the duties of an estate trustee is to file tax returns and pay taxes owing. As the estate trustee breached her duties, she was not entitled to an indemnity. Relief may have been available if it was the beneficiaries who instigated or requested the breach. However, this was not the case.
The natural corollary of that principle [breach of trust at instigation of beneficiaries] is that if the beneficiaries did not instigate or request the breach, they cannot be obligated to indemnify the trustee. In a fiduciary relationship such as that between a trustee and a beneficiary, the logic of that corollary is that as between the two parties, one who had the obligation to perform the duty and failed and one who had neither the obligation nor the means to satisfy it, it is the former who should bear the consequences of the action or inaction.
Interestingly, the judge dismissed the estate trustee’s motion for summary judgment, but, notwithstanding the finding that the beneficiaries were under no obligation to indemnify the estate trustee, did not dismiss the proceeding. The beneficiaries did not ask for this relief. The matter was therefore allowed to proceed. However, the estate trustee was warned that “if she continues with the lawsuit, she may face a significant costs award if another judge comes to the same conclusion at the end of the suit.”
Thank you for reading.
Recently, Marketplace has released the results of an investigation into seniors’ homes using trespass orders to ban family members from visiting. The investigation reviewed over a dozen cases across Canada where family members believe they were banned from visiting their loved ones by retirement homes and long-term care homes as a method of silencing them from advocating on behalf of their loved ones.
In Ontario, one’s entry to a premises can be prohibited through the issuance of a notice under the Trespass to Property Act.
Marketplace spoke with counsel at the Advocacy Centre for the Elderly (“ACE”) in Toronto, who explained that with regard to retirement homes in Ontario, case law has established that residents who pay to live on the property have a right to receive visitors they choose, without interference.
With regard to long-term care, the Long-Term Care Homes Act (the “Act”) provides residents with statutory protection, setting out that “[e]very resident has the right to communicate in confidence, receive visitors of his or her choice and consult in private with any person without interference.” This particular protection can be located at section 3(14) of the Act, which forms part of the Residents’ Bill of Rights (the “Bill of Rights”). The Act also provides for a reporting and complaints procedure set out from sections 21 to 28.
The Bill of Rights statutorily mandates licensed care homes under the Act (“licensees”) to fulfill certain duties and obligations to their residents, including unhindered visitation and communication with family members and friends, the right to be protected from abuse, the right to exercise the rights of a citizen, and the right to be treated with courtesy, respect and in a manner that fully recognizes the residents’ individuality and respects their dignity.
Importantly, section 3(3) of the Act sets out that a resident may enforce the Bill of Rights against the long-term care home “as though the resident and the licensee had entered into a contract under which the licensee had agreed to fully respect and promote all of the rights set out in the Residents’ Bill of Rights.” While I have been unable to locate a reported decision where a resident (or a litigation guardian of a resident) has attempted to enforce the Bill of Rights vis-a-vis section 3(3), arguably, a resident pursuing such enforcement would have access to relief available in any other breach of contract case, including the specific performance of the contract and monetary damages.
In response to the Marketplace investigation, Ontario MPPs have called for a full investigation into the use of trespass orders against visitors and family members in retirement homes.
Thanks for reading!
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
Pursuant to the 2018 Federal Budget, there will be new trust reporting requirements coming into effect for taxation years ending after December 31, 2021.
Prior to the implementation of the forthcoming changes, a Trustee would only have to file a T3 trust return if the trust generated income or distributions were made to beneficiaries during the year.
In addition to this expanded filing requirement, certain parties to the trust (such as trustees, beneficiaries and settlors) will soon be required to provide personal identification information including: names, addresses, dates of birth, social insurance numbers (or in the case of a business, a business number), as well as their jurisdiction of residence.
These requirements will apply to express trusts resident in Canada. The new proposed provisions of the Income Tax Act (the “ITA”) would extend the application of these new requirements to include express trusts that are deemed to be resident in Canada pursuant to section 94 of the ITA.
Express trusts can be loosely defined as those created “on purpose,” that is, the trust is set in express terms, usually in writing, and can be distinguished from trusts that are implied by conduct.
There are exceptions to the application of these changes, including, among others:
- Trusts that have been in existence for less than three months at the end of the tax year;
- Employee life and health trusts;
- Graduated rate estates;
- A lawyer’s general trust account (but not specific client accounts);
- Qualified disability trusts; and
- Trusts that are governed by registered plans such as RRSPs and RRIFs.
Trustees managing trusts that do not fall within one of the enumerated exceptions, may be reluctant to make the disclosure required by these changes, especially where there is a preference to keep personal matters related to the trust private. In such cases, the changes may encourage Trustees to take early steps to wind-up trusts.
Anyone who is subject to the new reporting requirements who fails to file a T3 trust return can be subjected to a penalty in an amount equal to the greater of $2,500 and 5% of the highest fair market value of the assets of the trusts in the year.
Given the risk of potentially significant penalties, estate practitioners should be careful to remind clients who are acting as Trustees that tax advice needs to be obtained, regardless of whether trust assets are generating income.
Thanks for reading!
On December 4, 2019, the Economic and Community Development Committee considered a proposal to improve senior services and long-term care in the city of Toronto, which is set to be considered by City Council on December 17, 2019.
The proposal is based on a Report from the Interim General Manager, Seniors Services and Long-Term Care which recommends ways to improve life for residents in long-term care facilities. The proposal sheds light on certain shortcomings of the current institutional model of long-term care facilities. Under the current system, after tending to basic care needs such as eating, bathing, and safety, and ensuring that they have met government mandated reporting requirements, staff are left with little free time. As a result, residents spend the majority of their days alone, without any form of genuine human interaction or purpose.
The proposal will revamp and hopefully reinvigorate the city’s 10 long term care homes by shifting the model of care to one that is emotion-centred. The key components of an emotion-centred approach to care would see increased staffing (with up to 281 new staff by 2025), more hours of care per resident per day, increased funding from the provincial government, and improved bedding.
More importantly, an emotion-centred approach emphasizes the emotional needs of residents, understanding that human connection leads to enjoyment of life. The new approach is based wholly and substantively on an understanding of ageing, equity, diversity and intersectionality.
If adopted, the city of Toronto will be the first to integrate diversity, inclusion and equity directly and comprehensively into an emotion-centred approach to care framework.
If you are interested in learning more, read this article from the Toronto Star. I also recommend reading this 2018 Toronto Star series called “The Fix” about a bold initiative to change care in a dementia unit in a Peel nursing home.
Thanks for reading!
In a decision out of the Supreme Court of British Columbia, a computer file prepared by the deceased was accepted as a will and admitted to probate. Applying the curative provisions of the Wills, Estates and Succession Act, S.B.C. 2009, c. 13 (“WESA”), which came into force on March 31, 2014, the court was able to conclude that the computer record represented the deceased’s full and final testamentary intentions.
In Hubschi Estate (Re), 2019 BCSC 2040 (CanLII), the deceased died after a short illness. No formal will was found. However, his family was able to locate a Word document on his computer labelled “Budget for 2017”. In that computer file, there was the following statement: “Get a will made out at some point. A 5-way assets split for remaining brother and sisters. Greg and Annette or Trevor as executor.”
By way of family background, the deceased was given up by his birth mother at birth to Children’s Aid. At age 3, the deceased was placed in a foster home with the Stacks. He grew up in the Stack house, and was extremely close to his foster parents and 5 foster siblings. He was treated by the immediate and extended Stack family as a member of the family. Upon his foster mother’s death, her estate was divided into 6 shares, with one share passing to the deceased.
On the other hand, if the document was not found to be a will, the deceased’s estate would pass on an intestacy, and would pass to his birth mother’s sister, with whom the deceased had no contact whatsoever.
The court reviewed a number of decisions applying WESA. The court observed that the purpose of the curative provisions in WESA was to avoid the injustice of a deceased’s testamentary intentions being defeated for no good reason other than strict non-compliance with execution and attestation formalities.
In order to obtain probate of a non-compliant document, the propounder must demonstrate (1) that the testamentary document is authentic, and (2) that the testamentary document contains the full, final and fixed intention of the will-maker. The court found that both of these requirements were met in the Hubschi case.
Previously, I blogged on an Australian case where an unsent text message was admitted to probate under similar legislation. Read about it here. This decision was referred to by the court in Hubschi.
For better or for worse, Ontario legislation does not allow for substantial compliance with the formalities of will execution, and strict compliance is required. While this may lead to greater certainty, it also means that the testamentary intentions of a will-maker are often disregarded where there is not strict compliance with the formal requirements of execution.
Have a great weekend.
In the recent decision of Gabourie v Gabourie, 2019 ONSC 6282, the court considered a motion for (among other things) interim support by the deceased’s separated spouse.
The applicant wife had separated from her spouse (now deceased) approximately two years prior to his death in March 2018. At the time of the deceased’s death, he and the applicant had been in the process of negotiating the terms of their separation and divorce. They had already entered into an interim separation agreement, which dealt with the proceeds from the sale of their matrimonial home. After the deceased’s death, the applicant and the respondent (who was the deceased’s sister, estate trustee, and sole beneficiary) were able to agree on the issue of equalization of net family property, and a payment was made to the applicant. The issue of spousal/dependant’s support remained outstanding.
The applicant sought a lump sum interim support payment of $50,000.00. Ultimately, the court awarded the applicant interim support of $30,000.00.
Providing Support or Under a Legal Obligation to Provide Support
The fact that the spouses had been separated at the time of the deceased’s death was considered as part of the court’s determination of whether the applicant was a “dependant” (specifically as to whether the deceased was providing support to her, or was under a legal obligation to provide support to her, immediately before his death) and whether the deceased made adequate provision for the applicant’s support.
The court found that there was no evidence that the Deceased had been actually providing support to the applicant prior to his death. They had been separated for two years; in that time the deceased had several health complications and lost his job. He was not supporting the applicant, nor was the applicant relying on him for support. However, spousal support remained an issue to be resolved as part of the separation between the deceased and the applicant. The court stated that there was no evidence that the applicant had waived her right to spousal support, and that, as a married spouse, the deceased was under a legal obligation to support the applicant.
Amount of Interim Support
In arriving at the amount of interim support awarded to the applicant, the court considered the financial circumstances of the deceased’s estate, and of the applicant. Based on preliminary disclosure from the respondent, the Deceased’s estate had a value of approximately $650,000.00, as well as an insurance benefit of $75,000.00. The applicant’s net worth was around $220,000.00, and she earned only a modest part-time income. The applicant also had a significant amount of debt relative to her assets, which the applicant submitted she was required to incur as she was not receiving spousal support and was unable to meet her expenses.
However, the court was mindful of the amount of support sought relative to the value of the estate. The applicant sought $50,000.00, stating that this amount was sought for legal fees that she had incurred in pursuing her dependant’s support claim.
The court was disinclined to award the applicant the full amount sought given the stage of the proceeding, and that it was not yet known whether the applicant would succeed on her application, stating that it was nearly seven percent of the value of the deceased’s estate.
Thanks for reading,
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One of the ways a Will can be declared invalid is if the court finds that there were suspicious circumstances surrounding the preparation of it. In Graham v. Graham, the Ontario Superior Court of Justice found that significant involvement from the testator/grantor’s child was indicative of suspicious circumstances regarding the preparation of a Will and Power of Attorney (POA).
The testator, Jackie, had four children: Tim, Robert, Christine and Steven.
Jackie suffered from terminal cancer. She was hospitalized from November 22, 2015 to December 7, 2015, and again from December 22, 2015 to December 24, 2015, to receive treatment for severe pain.
In mid-December 2015, Robert’s wife, Tammy, searched for and contacted a lawyer to prepare a Will and POA for Jackie. Tammy obtained a Client Information Sheet (CIS) from the lawyer’s office and completed it herself. The lawyer prepared the documents based on this CIS. At Robert’s request, the lawyer went to the hospital to meet Jackie and have her sign the Will and POA. This was the first time Jackie met the lawyer and saw the Will and POA.
Jackie’s Will named Robert as estate trustee and sole beneficiary of her estate. The POA named Robert as Jackie’s sole attorney for property. Robert’s wife, Tammy, was named as the alternate estate trustee and attorney.
On January 4, 2018, Robert used the POA to transfer Jackie’s house to himself as sole owner. Four days later, Jackie died of cancer.
Tim challenged the validity of Jackie’s Will and POA claiming that they were prepared under suspicious circumstances and that Jackie was subject to undue influence by Robert and Tammy.
- Jackie had been in ill health for a long time prior to her death, so it was reasonable to infer she had chosen to die without a will, until Robert’s involvement.
- Jackie was treated with heavy painkillers on the night and morning of the day she signed the will and POA.
- Robert and Tammy “orchestrated virtually every aspect of the Will and the POA”, which included searching for a lawyer, providing instructions, arranging for the lawyer to meet Jackie, remaining in Jackie’s room for part of the meeting, and taking part in the discussions concerning the Will and POA.
- The drafting lawyer relied entirely on Robert and Tammy to provide him with all of the information concerning the Will and POA.
After finding that suspicious circumstances existed, the burden then shifted to Robert to prove that Jackie had testamentary capacity and that she knew and approved of the contents of the Will and POA. Using the test for testamentary capacity as outlined in Banks v. Goodfellow (1870), the court found that Robert could not establish that Jackie had testamentary capacity. In coming to this conclusion, the court considered the following:
- There was no evidence that Jackie was given the Will or the POA to read or that it was read to her.
- Although Jackie knew where she was living, there was no evidence to indicate that she had any knowledge or understanding of the monetary value of her house.
- It was unclear whether Jackie could do more than repeat what she was told.
- Jackie was confused and/or mistaken in certain beliefs about her son, Tim.
- The medications that Jackie was taking for her pain left her confused and drowsy.
As a result, the Will and the POA were declared invalid.
Graham v. Graham serves as a cautionary tale for adult children who become too involved in the drafting of their parents Wills and POAs. It warns us that the courts view this type of involvement as suspicious. Moreover, Graham v. Graham suggests that physical impairment can impact a testator’s mental state, thus making them vulnerable.
Thanks for reading!
Ian Hull and Celine Dookie
Recently, the Advance Care Planning in Canada initiative, led by the Canadian Hospice Palliative Care Association, released a new resource to assist with advance care planning and choosing a substitute decision maker.
The “Speak Up” initiative includes two complementary resources.
One resource is the “Living Well, Planning Well” legal toolkit. The development of this toolkit was funded by Health Canada. The legal toolkit was designed to be used by lawyers and their clients, to encourage conversations and reflections about clients’ wishes for advance care planning, and putting appropriate arrangements in place.
The other resource is a public toolkit. It provides plain language information regarding the laws and processes with respect to advance care planning and substitute decision-making throughout Canada. This is helpful as the laws can vary between the provinces and territories.
It is very important to consider advance care planning, and to implement plans as early as possible. In particular, everyone should consider executing a power of attorney, to ensure that they are able to select the person responsible for making decisions on their behalf when they are no longer capable. Without a power of attorney, in Ontario, the ultimate decision as to who will make decisions on an incapable person’s behalf (other than those captured by the Health Care Consent Act, 1996), is left to the court. The court takes such matters very seriously, but most people prefer that the choice of substitute decision maker be their own.
Something else to contemplate is speaking with your family and friends, especially with your named attorney, regarding your wishes. As we enter the holiday season, and plan gatherings with our friends and family, consider taking this opportunity to have a conversation in this regard.
You can review Speak Up’s post about the release of their toolkit here.
Thanks for reading,
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