A recent Superior Court of Justice decision illustrates the test to be met where one is alleging that an attorney for property should be removed.
In Crane v. Metzger, 2018 ONSC 5382 (CanLII), Ms. Metzger was determined to be incapable of managing her property. While capable, she appointed her brother, Mr. Cason, as attorney for property. Her daughter, Ms. Crane brought an application to remove Cason as attorney, and to have Crane appointed as guardian. Crane alleged impropriety on the part of Cason.
In determining the application, the court set out the test for removal. Citing the decision of Teffer v. Schaefers, 2008 CanLII 46929 (ON SC), the court stated that the courts have generally taken the view that a written power of attorney made at the time when the donor was of sound mind is simpler to deal with and gives the donee more flexibility in dealing on behalf of the donor. Continuing with the appointment respects the wishes of the donor. Thus, in order to set aside the power of attorney, “There must be strong and compelling evidence of misconduct or neglect on the part of the donee duly appointed under an enduring power of attorney before a court should ignore the clear wishes of the donor and terminate such power of attorney.”
The court summarized the test for removal as follows:
- There must be strong and compelling evidence of misconduct or neglect on the part of the attorney before a court should ignore the clear wishes of the donor, and
- The court must be of the opinion that the best interests of an incapable person are not being served by the attorney.
In Crane, Crane submitted a “lengthy list of grievances” in her affidavit materials. These grievances, while not fully enumerated in the decision, were apparently answered by Cason in his affidavit materials.
The court concluded that Cason was doing the best he could in the circumstances. There was no evidence of financial mismanagement, and Cason’s accounts were in order.
In dismissing the Application, the court also focused on two incidents where Crane acted improperly, which were said to seriously affect her credibility: one where Crane said that she was taking her mother to Wasaga Beach, but in fact took her to Seattle (and thereby putting her and her property at risk), and another where Crane took her incapable mother to the bank to withdraw $10,000. These two events “make her position untenable. … For these reasons, where there is a conflict between the evidence of the parties, I accept Mr. Cason’s evidence and reject that of Ms. Crane.”
The test for removal of a properly appointed attorney is a difficult one to meet. Further, the alternative, being the appointment of a guardian, must be compelling. The best interests of the incapable will be an overriding consideration.
Have a great weekend.
Many of us are familiar with the concept of “elder abuse” or “elder neglect”, however, it is not always clear what that entails. WEL Partners consulted with the Toronto Police Services in developing an information guide for officers, on this very topic. It is now a guide that has been distributed to officers in the field.
Elder abuse/neglect “is any action or inaction, by a person in a position of trust, which causes harm to an older person”, as the guide indicates. As Toronto Police Services officers are often the only point of contact for older adults with the “outside world”, they are also often their only real chance of getting the help they need.
The guide lists various reasons as to why elder abuse/neglect is often under reported by the older adults that are the victims of such treatment:
- dependence on abuser/family member
- rationalization/minimization of the abuse
- denial of the abuse
- lack of recognition of abuse
- physical inability to report abuse
- feelings that they will not be believed
In the absence of victim/witness statements that are often relied on as evidence, the officers investigating these situations should be able to recognize some subtle warning signs of potential abuse of older individuals.
Some common types of abuse are noted as follows:
- Financial abuse
- Physical abuse
- Psychological abuse
The report describes various red flags for each of the categories listed of the common types of abuse. It further describes some additional considerations such as the mental capacity of the senior adult and the following questions to consider in assessing whether capacity is present:
- ability to understand the information needed to make a decision; and
- ability to appreciate the consequences of making, or not making, a decision.
For more information on this valuable resource in assessing whether the circumstances at hand show signs of elder abuse/neglect, see the Elder Abuse & Neglect: A Guide for Police Officers.
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We sometimes hear about an elderly person marrying a much younger person. What we often do not consider, however, is the possibility that such a marriage is entered into by a “predatory” spouse in order to take advantage of an elderly victim with the ultimate goal of assuming control of his or her finances.
The “predator” is often a caregiver or a family friend or neighbour. In most cases, it is a person who uses a position of trust to cause an elderly victim to change a Will, a power of attorney, an insurance policy designation or other documents. It is also not uncommon for inter vivos transfers to be made while the senior is alive.
According to Ontario law, the act of marriage grants the new spouse certain property rights, specifically with respect to the matrimonial home and spousal support. The most significant effect of a marriage, however, is the fact that the Succession Law Reform Act, revokes any Will executed prior to the marriage. To make matters worse, predatory marriages often occur in private such that the senior’s family members are not aware that he or she has married.
The evidentiary burden imposed upon the elderly victim’s adult family members to prove that a marriage should be declared void as it is a marriage of a “predatory” nature is significant.
Why is it so tough to show that a marriage is void?
Capacity is a fluid concept. It means that a person could have capacity for one task and no capacity for another, as capacity is time and situation specific. Capacity to enter into a marriage, is the lowest threshold of capacity. As such, a person can be entirely capable to enter into a marriage but may be incapable of managing his or her own financial affairs.
In addition, a person likely does not just lose capacity in a day; it is a gradual process such that there is a “grey zone” between having capacity and having no capacity at all. It is in that “grey zone” that a predator will take advantage because a person may start forgetting things but is otherwise capable for all intents and purposes.
Because of that, many are of the opinion that Ontario laws make seniors an easy target for “predatory marriages”. Will there be a change in the law coming our way, in light of the growing phenomenon of such marriages? Only time will tell.
For more information regarding this growing concern and the manner in which this issue has been treated by the courts, please see a paper by Kimberly Whaley of WEL Partners on Predatory Marriages.
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Solicitors preparing Wills need to be mindful of the obligations they owe to a testator. The seminal Court of Appeal decision in Hall v Bennett Estate provides a helpful refresher of the steps a solicitor should consider to ensure best practices are followed.
According to the Court, it is well established that a “solicitor who undertakes to prepare a will has the duty to use reasonable skill, care and competence in carrying out the testator’s intentions. This duty includes the obligation to inquire into and substantiate the testator’s capacity to make a will”.
Testing for capacity is fundamental – a solicitor has a duty to make inquiries into the testamentary capacity of the testator.
Should the solicitor have any doubt as to capacity, Justice Cullity in Scott v Cousins, famously states that “…careful solicitors who are in doubt on the question of capacity, will not play God – or even judge – and will supervise the execution of the will while taking, and retaining, comprehensive notes of their observations on the question”.
The Court of Appeal proceeds to summarize an article written by M.M. Litman & G.B. Robertson outlining errors made by solicitors in the preparation of a Will, leading to negligence claims, including failing to:
- obtain a mental status examination;
- interview the testator in sufficient depth;
- properly record or maintain notes; and
- test for capacity.
As such, notes from a drafting solicitor should ensure that all of these are addressed.
In certain instances, although narrow, a duty of care might also be owed to a disappointed beneficiary. A two part test is applied as set out by the Supreme Court of Canada in Cooper v. Hobart.
While claims for negligence by testators and disappointed beneficiaries cannot be stopped, a file with detailed notes can go a long way in defending such a claim.
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In Foisey v. Green, 2017 ONSC 7140, the estate trustee of the estate was required to pass her accounts as estate trustee, even though the beneficiary signed a full and final release.
There, the deceased died intestate, and was survived by two sisters. One sister, Joyce, was appointed as estate trustee. She distributed what she said was half of the estate to her sister, Darlene, who signed a release as against the estate and the estate trustee.
Darlene was later found incapable of managing her property, and the Public Guardian and Trustee was appointed as her statutory guardian. They looked into the estate, and had concerns about whether Darlene received her full entitlement from the estate. The estate was said to have a gross value of $830,000, but Darlene only received $291,000. The PGT sought an accounting from Joyce. Joyce resisted, relying on the release signed by Darlene.
The court held that Joyce had to pass her accounts, notwithstanding the release. The court referred to the presumption of capacity in the Substitute Decisions Act, and the fact that a person is entitled to rely on the presumption of capacity unless the person has reasonable grounds to believe that the other person is incapable. However, the court noted s. 2(4) of the SDA, which provides that where a contract was entered into within one year of the creation of a guardianship, “the onus of proof that the other person who entered into the contract …did not have reasonable grounds to believe the person incapable is on that other person.”
In the Foisey case, the court found that there were “red flags” that precluded the court from finding that Joyce satisfied the court that she did not have reasonable grounds to believe that Darlene was incapable. These included:
- Darlene was living in an assisted living facility; and
- Darlene was participating in a trusteeship program.
To Joyce’s credit, however, her lawyer met with Darlene, in the presence of Darlene’s apparent lawyer, a childhood friend, and the administrator of the facility of the lodge where Darlene resided. Apparently no one objected to Darlene signing the release, or advised that Darlene did not have capacity.
In ordering the passing of accounts, the judge noted Joyce’s evidence that after the signing of the release, she did not keep any of the estate accounting.
One takeaway is to take steps to ensure that beneficiaries are capable of signing a release if there is anything to suggest that capacity may be in issue. A second takeaway, as noted by the judge, is to always keep records. “Although unfortunate, this case underscores the importance of keeping adequate records notwithstanding the execution of an estate release.”
As a postscript, an appeal to the Court of Appeal was dismissed, as the Court of Appeal determined that because the order directing the passing of accounts was interlocutory, the appeal would lie to the Divisional Court, with leave.
Have a great weekend.
A recent decision from the Court of Appeal for Ontario, Dujardin v Dujardin, 2018 ONCA 597, considers an appeal with respect to a Will challenge on the basis that the testator lacked testamentary capacity. The testator in this situation was a frequent consumer of alcohol. Despite what the trial judge called the testator’s “chronic alcoholism”, it seemed as though he was able to function normally on a day-to-day basis, including in business dealings relating to a family farm owned by the testator and his brother. Following the testator’s death, his wife disputed his Will, under which she received no benefit.
Recently, my colleagues, Noah Weisberg and Garrett Horrocks, discussed whether the classic test for testamentary capacity as set out in Banks v Goodfellow should be updated, and a new test as proposed in an article in the Canadian Bar Review, Vol 95 No. 1 (2017), Banks v Goodfellow (1870): Time to Update the Test for Testamentary Capacity.
The article opines that the context of the testator, including, for instance, family dynamics, should be incorporated explicitly into the test for testamentary capacity. This means that we would be asking the question: “can this particular person, with his or her particular mental abilities, in this particular situation, make this particular Will, at this particular time?”, rather than “can this testator make a Will?”
I thought the suggestions in the article were interesting when considering the facts of the Dujardin decision, and the findings of the trial judge. It seems as though the lower court took into account a number of contextual factors in applying the Banks v Goodfellow test, ultimately leading to a conclusion that the testator did possess the requisite testamentary capacity, a conclusion which was upheld by the Court of Appeal.
In particular, some of the interesting contextual factors included:
- the history of the testator and his brother’s ownership and operation of the family farm, and the brothers’ consistent desires to leave their respective shares of the farm to each other upon their death;
- prior mirror Wills executed by the brothers 13 years before the testator’s death, which reflected the same intention as the later Will that was being challenged (the testator’s prior will was revoked in 2000 when he married his wife); and
- the testator’s relationship dynamic with his wife, with whom it appeared he was not close, and the provision that he made for her outside of his Will.
In particular, the Court of Appeal commented that “[g]enerally, the manner in which [the testator] disposed of his property made sense in the context of his life and familial relationships.”
Had the trial judge not considered the various contextual factors, it’s possible she could have arrived at a different conclusion. Subject to the medical evidence, given that the testator suffered from alcoholism, it may have been open to the court to conclude that this condition had, in fact, affected the testator’s cognition.
In any event, it is interesting to see a practical example of the ideas put forth in the article mentioned above, and to consider how the suggestions of the authors may come into play in real-world situations.
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Capacity is a fundamental consideration in many aspects of estate, trust, and attorneyship litigation. The capacity of an individual to take a particular legal step, for example, to effect a distribution of property or to make a valid testamentary document, will often form the basis of a claim or court application. However, as set out in today’s blog, capacity is specific as to task, time, and situation. Context is a key factor in assessing capacity or lack thereof.
Whether an individual will be found to be capable of taking a particular legal step depends on the nature of the step being taken and when this step was taken. By way of example, the threshold for the capacity required by a testator to execute a valid Last Will and Testament differs from, and is considerably higher than, the threshold of an individual seeking to grant a power of attorney for property or personal care.
The capacity to make a valid will requires an individual to have a clear understanding of the nature and extent of their assets, and to understand the effects of the dispositions being made including any claims that might arise as a result. The capacity to grant a power of attorney for property, while similar to testamentary capacity, is a lower threshold. An individual will be capable of granting a power of attorney for property provided that,
- they have a general understanding of the nature and value of their property;
- are aware of the obligations owed to any of their dependants; and
- understand the nature of the rights being given to the attorney as well as the rights that they retain as the grantor of the power of attorney, for example, the right to revoke the power of attorney if capable.
While the capacity to grant a power of attorney for property only requires the grantor to have a general understanding of their property or their obligations, testamentary capacity requires specific knowledge and appreciation of potential legal ramifications. Accordingly, an assessment of an individual’s capacity in each respect will impart different requirements.
Capacity is also specific as to time, particularly as an individual’s capacity may fluctuate depending on illness or circumstance. While somewhat uncommon in practice, an individual who was previously assessed as incapable may subsequently regain the capacity to take a particular legal step. Accordingly, when acting on behalf of an individual challenging the validity of a testamentary document or disposition of property, it is important to consider not only the grantor’s historical capacity or lack thereof, but also whether capacity may have been regained at some point prior to the disposition being challenged.
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On a recent trip to Rochester, New York, my fiancée and I had the pleasure of touring the George Eastman Museum and came across an interesting piece of estates lore.
George Eastman, the founder of Kodak and a pioneer of bringing photography to the mainstream, died leaving a Will drawn in 1925. As his wife had predeceased him and they had no children, Mr. Eastman devised all of his real property and left a substantial cash legacy to his closest family member, his niece, Ellen Dryden. Mr. Eastman’s estate held significant assets, and the value of liquid assets alone was estimated as exceeding the equivalent of USD$35 million today.
However, on March 9, 1932, only five days before his death, Mr. Eastman had a change of heart with respect to the distribution of his estate. Rather than leave the bulk of his estate to an individual, Mr. Eastman wished to ensure that his legacy would be one of service to the community that had fostered his photography empire. True to form as a philanthropist and benefactor of local enterprise, Mr. Eastman executed a Codicil to his Will, changing the primary beneficiary of his estate from his niece to the University of Rochester.
The testamentary dispositions under the Codicil represented a significant deviation from those under his Will. Typically, where a testator’s dispositions vary substantially from one instrument to another, concerns may arise with respect to the their testamentary capacity or the presence of undue influence.
A shrewd entrepreneur in his own right, Mr. Eastman recognized the risk that the Codicil might later be the subject of scrutiny or litigation. On the date the Codicil was to be executed, Mr. Eastman hosted a gathering at his residence and invited many guests and acquaintances. He devoted time to speaking to each individual guest about topical, personal subjects so that they could attest to Mr. Eastman’s soundness of mind in the event that a certain disgruntled niece chose to commence a Will challenge.
In a way, Mr. Eastman’s goal is not too dissimilar from some of the criteria that are relied on even today to assess a testator’s capacity. Third-party evidence that a testator appeared to be of sound mind immediately prior to the execution of a testamentary document may help a trier of fact draw a favourable conclusion with respect to capacity. While the formal criteria to assess capacity primarily consider a testator’s appreciation and understanding of his or her assets, Mr. Eastman’s clever scheme demonstrates that he turned his mind to questions about his own capacity and took steps to mitigate the risks.
Mr. Eastman’s Codicil was not later subject to any litigation, and the University of Rochester received a handsome distribution out of his estate.
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The general rule, one that most people are probably familiar with when they think of a Will, is that the testator has to have the requisite capacity in order to be able to execute it. But what does that mean?
Generally, it means that a person should be of sound mind and understanding and have sufficient capacity to appreciate the various dispositions of property that would be put into effect with his or her execution of the Will. In other words, the testator must:
(1) understand that they are giving their property to one or more objects of his or her regard;
(2) have the capacity to comprehend the extent of their property and the nature of the claims of others to whom they are giving nothing under the Will.
In the case of a deceased who committed suicide, a question that may arise is whether a person who is about to commit suicide has the appropriate testamentary capacity to be able to execute a Will?
In that regard, it is important to remember that the onus is on the person who is propounding the Will – in other words applying to the court for an order that the Will is valid. In the usual course, there is certainly no presumption against the testamentary capacity of a testator. Indeed, it is quite the opposite. However, in cases where a proposition is made that a death (suicide) note is the last valid will and testament of a testator, it is more likely that someone may object. That is especially the case where an expected beneficiary is disinherited under such a circumstance.
As soon as capacity is called into question, the onus lies on the party propounding the Will to affirm testamentary capacity.
Suicide, in itself, does not equate to testamentary incapacity – although it is a circumstance that may be considered. In fact, a testator may have testamentary capacity even if they are not of entirely sound mind. That means that prior to committing suicide, a person can very well have testamentary capacity. If that is the case, then a death note can be considered a Holograph Will, which in Ontario, in accordance with section 6 of the Succession Law Reform Act, has the following requirements in order to be valid:
(1) It must be entirely in the testator’s hand writing; and
(2) It must be signed by the testator.
There is no requirement for witnesses in the case of a Holograph Will and it must be that the testator intended to dispose of their property after death.
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Previously on our blog and podcast, we discussed Tarantino v. Galvano, 2017 ONSC 3535 (S.C.J.) in the context of the counterclaim for quantum meruit and the costs decision of the Hon. Justice Kristjanson.
Tarantino v. Galvano arose from a lawsuit that was commenced by two out of three Estate Trustees against the third Estate Trustee, Nellie, with respect to her actions as attorney for property for the Deceased, Rosa (i.e. Nellie’s actions while the Deceased was still alive but incapable of managing her own property).
Rosa had two daughters, Nellie and Giuseppina. Giuseppina died before Rosa. Guiseppina’s daughters were the other two Estate Trustees and they are beneficiaries of the Rosa’s Estate along with Nellie. For the better part of her life, Nellie lived with Rosa. She took care of her mother after her father’s death. Nellie and her son were also Rosa’s caregivers as Rosa’s health declined until Rosa’s death in 2012.
Rosa and Nellie owned the home that they lived in together. Rosa held an 80.3% interest and Nellie held an 19.62% interest. Pursuant to Rosa’s 2005 Will, Nellie had a right of first refusal to purchase the home from Rosa’s Estate. In 2008, on the advice of counsel while Rosa was incapable, Nellie entered into an agreement between herself and Rosa. The agreement provided for a transfer of Rosa’s interest in the home and 75% of Rosa’s pension income to Nellie in exchange for Nellie’s caregiving services. The agreement was in writing and it was signed by Nellie. Nellie signed for herself and for Rosa, in her capacity as Rosa’s attorney for property.
Even though the Court found that Nellie was a good daughter who held up her end of the bargain by caring for Rosa, the agreement was set aside because it was a self-dealing transaction that did not meet the requirements of the Substitute Decisions Act, 1992:
“ Under the Substitute Decisions Act, Nellie could only enter into the agreement to transfer the house and pension income if it was “reasonably necessary” to provide for Rosa’s care, which I find it was not. As a fiduciary, an attorney for property is “obliged to act only for the benefit of [the donor], putting her own interests aside”: Richardson Estate v. Mew, 2009 ONCA 403 (CanLII), 96 O.R. (3d) 65, at para. 49. An attorney is prohibited from using the power for their own benefit unless “it is done with the full knowledge and consent of the donor”: Richardson Estate, at paras. 49-50. Rosa lacked capacity at the time of the Agreement, and the transfer of the house and pension income therefore were not done with Rosa’s full knowledge and consent.”
The “reasonably necessary” test was assessed, as of the time of the transfer, rather than from hindsight and it was determined that the decision to transfer 80.3% of a home and 80% of Rosa’s pension income at the outset of care was “an imprudent agreement which benefitted Nellie beyond that ‘reasonably necessary’ to provide adequately for Rosa’s care” (see paragraphs 34-49 for the Court’s analysis of this issue).
As a set off, Nellie’s quantum meruit claim was successful and you can click here for Ian Hull and Noah Weisberg’s podcast on this particular issue. While there was blended success to all parties involved, none of the three Estate Trustees were entitled to indemnification. Our discussion of the denial of costs can be found here and the Endorsement can be found here.
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