Category: Estate Planning
A recent decision of the Court of Appeal illustrates the importance of documenting intentions with respect to inter-familial loans. It also addresses the importance of solicitors’ evidence in establishing the wishes and intentions of a testator.
The case, ), involves a promissory note given by the deceased’s daughter to the deceased. The daughter was borrowing $142,000 to buy an interest in a cottage. A promissory note was signed by the daughter on July 16, 2014. Prior to signing, the note was reviewed by the deceased’s lawyer. The daughter discussed the note with the deceased and added a clause stating that the loan was to be forgiven upon the deceased’s death. The deceased’s lawyer reviewed this revision and advised against it. The deceased took the forgiveness term out of the promissory note, and the daughter signed it.
Following the deceased’s death, the daughter produced a second promissory note dated July 22, 2014. This promissory note provided that the loan was to be forgiven upon the deceased’s death. The daughter gave evidence that she discussed the loan with the deceased and the deceased had originally wanted to put a forgiveness clause in her will, but after having second thoughts, decided to have the forgiveness clause put into the second promissory note.
In rejecting the validity of the second promissory note, the lower court found that the deceased relied on the first promissory note only when advancing the funds. The second note was never discussed with her lawyer after the first note was signed. The deceased then went to another lawyer to discuss her estate plan. This second lawyer was given a copy of the first promissory note by the deceased, and there was no mention of the second promissory note.
Thus, while the second promissory note was signed by the daughter, there was insufficient evidence to convince the court that the deceased had accepted those terms.
Thank you for reading.
After our recent blog about estate matters in Ancient Rome, I was reminded that to the Ancient Greeks, the “dog days” happened when the star ‘Sirius‘ appeared to rise just before the sun in late July and August. The Greeks referred to these days, the hottest days of the year, and a period that could bring fever or even catastrophe, as The Dog Days of Summer.
Cottages, if not carefully considered in estate planning, can often bring fever and catastrophe, to families when their transfer is not properly planned in estate plans. Be it an unexpected tax liability, or unhappiness amongst siblings, cottages can cause great pains.
Today, we look at two scenarios of cottage transfer, specifically the living gift (inter vivos) and the testamentary gift (after death).
Emotion and attachment to the family cottage can run deep and go well beyond the financial value of the property. As we discussed here in 2013, proper planning is essential to avoid the kind of strife that was examined in our blog post, “Perils in the Succession of the Family Cottage.”
One way to clearly establish your wishes and see them carried out is to gift the cottage while still alive. A “gift inter vivos” is Latin for a gift among the living and is a common way of transferring ownership, particularly if you no longer use or visit the cottage. A tax advisor is an important and necessary resource when considering such a gift, as the gift of a cottage can give rise to a tax burden on the giftor.
It’s important to remember that once the cottage gift is complete, it is, technically, no longer yours and the receiver of the gift, be it a child or sibling, would be free to do as they wished…. even sell it. So it’s not necessarily the right vehicle for transfer, as it were, for every family.
Another very common means of transfer is by Will.
You are free to name your heirs to the cottage as you so choose, but often when there is more than one child inheriting, for example, a trust becomes a very good way to address possible conflicts that might otherwise arise. It also insulates the property from potential legal disputes like bankruptcy or divorce.
A trust also becomes a good way to establish responsibility for the cottage and its expenses. The Will can stipulate that funds are set aside for maintenance or yearly upkeep and those funds can ease the burden on a beneficiary who may not be in the best financial position to inherit such a gift.
As the Dog Days of Summer roll on and another cottage season soon comes to a close, proper planning for that beloved family cottage can prevent the fever and catastrophe that the Greeks were so alive to each time that Dog Star came bounding across the sky.
Thanks for reading and enjoy the sun!
Suzana Popovic-Montag & Daniel Enright
Life insurance can be an important part of an estate plan, be it taken out to fund payment of anticipated tax liabilities triggered by death, to assist in supporting surviving family members, or to equalize the distribution of an estate within the context of the gift of an asset of significant value (such as a family business) to one child to the exclusion of another, who can be designated as beneficiary of the policy.
In a time when many Canadians are facing their mortality and taking the pause from normal life as an opportunity to review and update estate plans, many Canadians are turning their minds to other aspects of estate planning, including supplementing an estate plan with life insurance. A recent Financial Post article suggests that life insurance applications have doubled during the pandemic, as more Canadians take steps to plan for the unexpected during this period of uncertainty.
At the same time, premiums for new permanent life insurance policies have increased by as much as 27%. While term life insurance policies may remain a more affordable option, they too are anticipated to become more expensive, with upcoming premium increases of up to 20%. The increase in premiums has been linked to lowering interest rates and restrictions to the investment options available to insurance companies.
Other changes to life insurance during the pandemic include the exclusion of the standard medical examination required in order to obtain some types of coverage. The maximum coverage offered by many providers without a medical exam has increased to reflect limitations to the ability for applicants to safely attend an in-person examinations. For other providers and types of plans, medical examinations are simply on hold.
Lastly, insurance companies have updated intake questionnaires to include COVID-screening questions. If an applicant is experiencing potential symptoms, they may be required to wait two weeks before taking out the policy, but are not typically ineligible from coverage altogether. Some insurers, however, are no longer offering new coverage to seniors or others who are at a higher risk of complications during the period of the pandemic.
One life insurance provider has already doubled its projected COVID-19-related payouts during 2020 from the figures it had released earlier this year. While there may have been changes to certain eligibility requirements and the cost of life insurance, it remains a suitable estate planning tool for many Canadians.
Thank you for reading,
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Calmusky v. Calmusky is a recent decision that determines the issue of entitlement to certain joint assets. The dispute appears to be a fairly typical one, in that we have an adult child, Gary, who was a joint bank account holder together with his father. Gary claims that after his father’s death the joint account funds passed to him by right of survivorship. Gary’s brother, Randy, argues that the joint account funds revert to the estate.
The Court reviewed the evidence surrounding the opening of the joint account, as well as the making of the father’s Will that happened around the same time. In applying the principles elicited from Pecore, the Court concluded that Gary had not satisfied the burden of proving that his father intended to gift Gary with the remaining funds in the joint account. In so doing, the Court noted the insufficiency of the corroborative evidence relied upon by Gary. It described the bank documentation as “bare bones”, and found the evidence of the bank personnel insufficient to support the conclusion that Gary’s father wanted him to have the beneficial entitlement to the funds.
Nothing new here…so far. But what makes this case noteworthy is the disagreement over the father’s RIF funds. The father designated Gary as the beneficiary of his RIF. Gary claims that these funds belong to him as the designated beneficiary, whereas Randy asserts that the funds belong to the estate. Randy’s argument was that the law relating to the presumptions applicable to annuities and/or life insurance contracts applies by analogy to RIFs, whereas Gary argued that there is no binding authority in Ontario that extends the principles in Pecore to RIF designations.
The Court agreed with Randy, reasoning that the principles set out in Pecore apply more generally to other gratuitous transfers of property interests. The Court also saw it as sensible from a policy perspective that the evidentiary obligation be on the transferee or designated RIF beneficiary. In coming to these conclusions, the Court agreed with the obiter comments in McConomy, another lower court decision, that the principles in Pecore should apply to the RIF designation. The Court also agreed with the reasoning of the Manitoba Court in Dreger, viewing that case as providing additional support for the conclusion that resulting trust presumptions apply to the beneficiary designation under a RIF.
After deciding that the resulting trust principles applied, the Court turned to assessing the father’s intention, again finding that the evidence of the bank personnel and bank documentation was insufficient to corroborate Gary’s position. Thus, the RIF funds were held to form part of the estate.
It does not appear that the Court considered the legislation that uniquely applies to beneficiary designations (e.g. Income Tax Act, Succession Law Reform Act or Insurance Act), which could support the argument that a RIF should be differentiated from a joint account.
Although I expect that this decision may be met with some criticism, until the issue is addressed by a higher court, the case raises several concerning questions – What does it mean for banks, investment advisors and financial planners? Are they now obliged to recommend that their clients seek legal advice to ensure that their intention is documented? Can banks no longer rest assured that they are free to pay out designated funds after the account-holder’s death? Hopefully, the answers to these questions and more will become clear to us in due time.
Thanks for reading and have a great day,
Natalia R. Angelini
As the 21st century progresses, societies across the world have moved towards legalization and decriminalization of drugs and, in general, a narrower definition of what constitutes a “vice”. At the same time, there have been increasing efforts, both legally and culturally, to safeguard people from falling into dependence. The Canadian Radio-television and Telecommunications Commission prohibits alcohol advertising that depicts the consumption of alcohol. In contrast to decades wherein Santa Claus and doctors were advertised smoking, cigarette packaging is decidedly less festive – indeed, its gore is more characteristic of a horror film than a consumer product. So wary have some of us become that there have been studies published in Australia and Britain that have analyzed James Bond’s drinking habits and stated that he would be “at high risk of multiple alcohol-related diseases and an early death” (as though Bond blanches at risk!).
In previous centuries, there was far less legal regulation (except under Prohibition, a marked exception) of the aforementioned indulgences, but there was no less apprehension with respect to their widespread usage. In the 1887 case of Jordan v. Dunn,  W.L. 9876 (Ont. Q.B.), a testator devised his lands to his son on the condition, in part, that he abstain from intoxicants and card-playing. The Court decided that the gift did not vest until the beneficiary adhered to the testator’s rules:
“If a devise be only on the performance of some particular duty or upon some particular event; that is, if it be a condition precedent, there is no gift unless the condition is fulfilled; and it makes no difference that the event is impossible, impolitic or illegal.”
In Quay, Re,  CarswellOnt 706, a testator’s gift to his son came with the condition that he was not “engaged in malt or spirituous liquor traffic or in any form of gambling or games of chance”. The son, perhaps a little piqued at the testator’s implication, sought a determination of the condition’s validity. The Court upheld the condition, not construing it as an in terrorem clause but as a “competent direction in furtherance of public interests”. A distinction was also drawn between “playing games by way of diversion or amusement” and gambling as a daily occupation.
The testatrix in Kennedy Estate, Re,  CarswellMan 72, was yet more prohibitive, giving her daughter farmland rental proceeds only as long as her daughter did not “smoke or drink intoxicating liquor”. The Court approved of this provision:
“Conditions that a person must not drink intoxicating liquor, or play cards, or must ‘continue steady’ are valid conditions and although there is no specific authority I hold that a condition against smoking comes within the same category and is a valid condition.”
Ostensibly, these “continue steady” conditions are still legally valid, but we cannot say with great certainty, for it seems that these days testators are less inclined to make such conditions for their testamentary gifts. This is unfortunate for students of the law eager for test cases, although it is fortunate for fun loving beneficiaries, whose smiles might otherwise dampen from the constant accompaniment of a sober-faced condition precedent.
Thank you for reading … Have a great day,
Suzana Popovic-Montag & Devin McMurtry.
One of the primary and often urgent duties of an Estate Trustee is to dispose of the deceased’s body. Often, issues arise with respect to the proper disposal of the deceased’s remains: how it is to be done, and by whom. These issues are exacerbated when the deceased dies intestate. No one has the immediate authority to make the necessary decisions.
The difficulties that can arise are illustrated in the companion decisions of Re Timmerman Estate, 2020 ONSC 3424 (CanLII) and Re Timmerman Estate, 2020 ONSC 3425 (CanLII).There, Marguerite died on October 16, 2019. She was survived by a daughter, Shannon and a son, Craig. Craig died shortly thereafter, on November 12, 2019. Both died without a will and with only nominal assets.
Marguerite’s sister (Craig’s aunt) applied for a Certificate of Appointment as Estate Trustee for both estates. However, she did not have Shannon’s consent or a Renunciation from Shannon, as required by the Rules of Civil Procedure. She applied to the court to dispense with these formalities.
There was evidence before the court that Marguerite wished to be cremated. Shannon objected to this. However, there was evidence that Shannon may have had capacity issues. After raising her objection to the cremations, Shannon appears to have disappeared.
The judge hearing the applications noted that the bodies had remained in a hospital morgue for over 7 months, a delay that was “unconscionable” and “intolerable”, and due for the most part to difficulties in contacting Shannon despite reasonable efforts.
The court granted the applications notwithstanding the lack of consent or a renunciation from Shannon, citing Rules 2.01 and 2.03, which allow a court to dispense with the strict compliance with the Rules of Civil Procedure where it was necessary and in the interest of justice. “It is in no-one’s interests to delay the administration of this estate and, hence, the removal of the bodies and their cremation or burial, because of Shannon Timmerman’s failure or inability to take any steps herself to address the need to attend to these formalities.”
In both estates, the court directed the Estate Trustee to make best efforts to bring the Certificate of Appointment to the attention of Shannon before the bodies were finally laid to rest. However, this requirement was not to unduly delay things further. If Shannon could not be located using best efforts, the Estate Trustee was to proceed with the disposal of the remains as she saw fit.
See here for our blog on The Duty to Dispose of the Body.
Thanks for reading.
An oft-repeated maxim of equity is that “equity regards substance rather than form”. Just outcomes, it is thought, should not be frustrated by mere technical shortcomings or other superficial flaws. However, in applying this principle, courts are mindful not to neglect form in every case or to too great an extent, lest legal drafting becomes slipshod and legal results unpredictable.
A recent British Columbia decision dealt with, in part, the dichotomy of form and substance in the context of will drafting errors. In Conner Estate v. Worthing, there were three patent errors on the face of the deceased’s will: (1) the will provided for 150% of the sale proceeds of the deceased’s house, owing to, seemingly, a mathematical error (50% given to the husband, 20% to five others); (2) the residue was gifted twice, once to the husband and once to the children; and (3) several lines appeared to have been missing. While the court acknowledged that it was generally barred from adding words to erroneous wills (though it had the power to delete words), it found that this case was an exception to the rule, for the deceased’s intentions could be clearly ascertained from the extrinsic evidence – the solicitor’s notes and the deceased’s letter of instructions – and the solicitor was responsible for the errors:
“While the exception to the prohibition against adding words on an application to rectify a will at the court of probate stage in Moiny Estate is extremely narrow, I conclude that the facts in this case fit within that narrow exception. Ms. Conner’s stated intentions should not fail simply because her solicitor failed to draft her will in a manner that gave effect to her wishes.”
A similar result likely would have been reached in Ontario, where it has long been held that in matters of “equivocation” – when the words in a will apply to two or more persons – courts can look to extrinsic evidence to infer a testator’s actual intention. If a will is not equivocal, and the testamentary intention can be discerned in the will, the courts cannot examine extrinsic evidence – and whatever the substance, the form will prevail.
As we have previously written, the courts may be hindered from rectifying drafting errors in scenarios where the errors are subtle and there is little extrinsic evidence of true testamentary intention. It is important, therefore, for both drafting solicitors and testators to carefully review their wills before executing them, and to watch out, in particular, for those minor errors which may burn while emitting no smoke.
Thank you for reading!
Suzana Popovic-Montag and Devin McMurtry.
As many of our blog readers will know, Ian Hull, Jordan Atin and Suzana Popovic-Montag have been working hard during the pandemic to host weekly webinars in efforts to increase resource sharing and practice management tips.
I have had the opportunity to help out with this endeavour, and have attended each webinar to date. Many helpful practice tips and resources have been shared, so I thought it may be useful to provide an overview summarizing some of the main takeaways that have been touched upon to date:
Virtual and Counterpart Execution of Wills/POAs
- After swift responses from the Attorney General of Ontario, Wills and POAs can now be witnessed virtually, and, executed in counterpart for the duration of the pandemic. Of course, the Emergency Order does not set out explicitly how to do so. Therefore, Ian and Jordan have attempted to outline best practices on how to accomplish the virtual and counterpart execution of Wills and POAs. Jordan has prepared a detailed blog setting out the process he uses, providing links to helpful checklists which can be found here.
- Some further tips discussed include circulating locked versions of the documents to be executed with a unique identifier so that the solicitor can ensure everyone is working off the same document.
- While the Emergency Order has opened up the possibility for counterpart and remote execution of Wills and POAs, clients should be encouraged to re-sign their Wills and POAs when in-person meetings can resume.
Holograph Wills and the use of an Amanuensis
- Some early discussions in the webinar series, before counterpart and remote execution was a possibility, focused on the possible use of holograph wills, or the use of an amanuensis (signing a testator’s Will, on their behalf, at their direction).
- Jordan has summarized these discussions in two blogs. To learn more about the use of holograph wills, see here. To learn more about the use of an amanuensis, see here.
- An important topic that has been touched on throughout the webinar series is avoiding LawPRO claims in a COVID-19 world. While much thought has been given to the actual execution and witnessing of Wills and POAs during the pandemic, practitioners should not let their regular practice management fall to the back burner. Regardless of COVID-19, LawPRO claims continue to result from errors such as: inadequate investigation, miscommunication, errors of law and poor time management.
- Now with the increasing necessity to take Will planning instructions by phone or video conference, heightened steps need to be taken to ensure that both client and solicitor understand the client’s instructions and intent, as well as testing for things like capacity and undue influence. WEL Partners have prepared a checklist for indicators of undue influence during virtual meetings which can be found here.
Tools and Technology for Practice Management
- LawPRO has prepared a resource page which includes links to various tools, articles, checklists and other resources which can be accessed by practitioners.
- E-State Planner – one of the many ways in which E-State Planner can be used to avoid claims, regardless of COVID-19, is by providing the client with visuals. Using visual aids while taking instructions ensures that there is an understanding between client and solicitor, right from the spelling of names to the actual impact their instructions have on the distribution of the estate.
- Virtual Web Conferencing Systems – while there are many options to choose from, it is clear that the web conferencing has become a significant part of the daily practice of law, one which is likely to stay. Whether using Zoom, Webex, Microsoft Teams, Google Hangouts or any of the many other systems available, lawyers should take the opportunity now, to familiarize themselves with web conferencing. In particular, screen sharing, which has become integral to virtual meetings, mediations, hearings, examinations and so forth, is a particular skill that should be honed.
- Protecting privacy – as we have learned, it is extremely important to take all necessary precautions to protect privacy when utilizing web conferencing systems. Examples of such steps are: using passwords, using the “waiting room” or “lobby” feature so that the host can limit access to the meeting to authorized individuals, or, requiring registration.
- Recordings – another unique feature of web conferencing systems is that the recording of meetings is becoming increasingly more common. While this can be helpful for ensuring that there is a complete record of instructions and advice given, it also means that lawyers will likely be held to a higher standard (as the recording will allow for greater scrutiny).
- Inter-office communication resources – with lawyers and staff working from home, there is greater need for fostering instant communication and resource sharing inter-office. Services such as Slack can be used for both inter-office communication and file management. Slack also allows for you to add in tools and apps to assist in practice management, such as Notability, the use of check lists, work flows, and even web conferencing platforms.
- File management in a “remote world” – with the office working from home, there is a greater need for remote office software. Programs such as Clio and Monday.com are examples of such software.
Moving Matters Forward
- With courts limited to hearing only urgent matters, lawyers have had to get creative in how we can continue to move matters forward and continue to meet and exceed client expectations. As discussed in the webinar series, this has included (for cases that are appropriate) conducting examinations and mediations virtually. To learn more about the Estate Arbitration Litigation Management initiative spearheaded by Suzana, see here.
Finally, as we have had a regular and significant turn out to the weekly webinar series, I would like to remind all participants that they qualify for CPD credits for having attended the webinars. In case you missed which credits you are eligible for, please see below:
- Webinar 1 – March 27, 2020: 15 mins substantive, 15 mins professionalism
- Webinar 2- April 3, 2020: 45 mins substantive, 15 mins professionalism
- Webinar 3 – April 11, 2020: 30 mins substantive, 30 mins professionalism
- Webinar 4 – April 17, 2020: 45 mins substantive, 15 mins professionalism
- Webinar 5 – April 23, 2020: 45 mins substantive, 15 mins professionalism
- Webinar 6 – April 24, 2020: 15 mins substantive, 15 mins professionalism
- Webinar 7 – May 1, 2020: 45 mins substantive, 15 mins professionalism
- Webinar 8 – May 8, 2020: 45 mins substantive, 15 mins professionalism
- Webinar 9 – May 15, 2020: 45 mins substantive, 15 mins professionalism
- Webinar 10 – May 22, 2020: 45 mins substantive, 15 mins professionalism
- Webinar 11 – May 29, 2020: 45 mins substantive, 15 mins professionalism
Thanks for reading!
A recent decision out of Alberta on holograph wills is interesting. The Alberta Court of Queen’s Bench decision released on February 20, 2020 in Edmonton in the Estate of Dalla Lana, 2020 ABQB 135 starts with the following :
“Mr. Dalla Lana made a will in 1997. On March 1, 2018 (four days before he died) and via notes made on two sticky notes, he made what he described as “changes to my earlier will”. The “changes” if valid, effectively rewrote the entire will.”
The decision then goes on to find that the “two sticky notes” were a valid will. This was one more decision in a long line of cases (in substantial compliance jurisdictions, unlike Ontario) with wills being upheld when written on everything from napkins to tractor fenders.
If a valid will can be done on a sticky note, one should ask is there any reason now why an electronic will could not be done on an iPad or smartphone?
Pandemic emergency Orders in Ontario have recently accepted wills being signed and witnessed by video conference or by counterpart. However, there is still a requirement for a “hard copy” of the will. A purely electronic will with a digital signature is still not permissible.
Some jurisdictions have already allowed electronic wills into probate. In Australia, the High Court of Queensland gave probate to a will in 2013 contained in the iPad of the deceased, in Yu Estate 2013 QSC 322.
Although digital electronic signatures have been allowed in Ontario for use in some business situations for many years, there are some restrictions on doing electronic will signatures which are found in the Electronic Commerce Act, 2000, SO 2000, c 17,
31 (1) This Act does not apply to the following documents:
- Wills and codicils.
- Trusts created by wills or codicils.
- Powers of attorney, to the extent that they are in respect of an individual’s financial affairs or personal care.
Given the emergency statutory provisions triggered by the pandemic, it seems inevitable that a meaningful debate will soon ensue about the merits of electronic wills and the broader question of whether Ontario should adopt substantial compliance in its estates legislation.
Thanks for reading.
Please enjoy these blogs on the subject:
Many of us are in the midst of spring cleaning, or, this year, the deeper, extended COVID cleaning.
As part of cleaning process, consider cleaning up your estate plan. Organize the documents and information relevant to your estate plan for your own reference, and for the ultimate ease and convenience of your estate trustees.
There are many websites that offer tips on organizing and simplifying your estate documents. There are apps available to help organize and store your information.
As a starting point, BDO has produced a comprehensive list, “My Financial Story and Estate Organizer”, that can be completed by the testator and left in a readily accessible place: perhaps with the testator’s Estate Trustees.
I have seen too many estates where a person passes away leaving a state of chaos. Often, it is not known whether the person left a Will, or who the estate trustee is. This presents immediate problems when trying to address the steps necessary upon death, such as making or implementing burial decisions. In addition, after burial, the estate trustee is often scrambling to find out what assets the deceased had, and where they are.
This game of cat and mouse can be readily avoided by listing what and where your assets are. Not making such a list is simply vexatious.
Remember Gerald Cotten? He was the founder of QuadrigaCX who died in 2018. He was the only one who knew the password to access the $137m or more of holdings of the company’s clients. Leaving an organized estate plan (or even a sticky note with a password scrawled on it) would have eased a lot of tension. See Natalia Angelini’s blog on this, here.
The issues that arise upon one’s death are difficult in the best of cases. Make them easier to address by organizing your affairs so as to assist your estate trustees. Take advantage of the time available now to clean up your estate plan.
Have a great weekend. Stay safe.