Category: Estate Planning
Estate planning lawyers have both the privilege and the responsibility of providing guidance and advice to clients while they are at key stages in their lives. A good lawyer’s role involves turning a client’s mind to the future and planning for turbulent times before they arise. As one grows old and the risk of serious illness increases, it is important to consider difficult medical decisions that will need to be made, and the impact those decisions might have on your loved ones. Lawyers can help in this preparation, for example with naming a substitute decision-maker who can help direct doctors when the patient becomes incapable, as well as by drafting advanced care directives that lay out the wishes of the patient regarding treatment of serious illness and the extent that life-prolonging measures should be used. While such “advanced care directives” have no legal standing in Ontario, they are still important in that they can provide crucial guidance to decision-makers and medical practitioners when drafted correctly. On the other hand, they could be confusing to decision-makers and hinder medical professionals when drafted in an inflexible manner.
The Lawyer’s Role
Firstly, the language of these directives should be directed to the patient’s decision-maker, and not to the medical practitioner. They should be drafted as advice and guidance to the decision-maker, and not as rigid rules that a medical professional might feel obligated (but not legally compelled) to follow. This is crucial as any lawyer drafting such a document should appreciate the “shared decision-making” model between patient and doctor. Important medical decisions are not made in a vacuum and the availability of different treatment options as well as the weight of their risks and benefits can vary with changing circumstances. It is difficult for a rigid legal document to accommodate the nuances of such a complex situation, but one that supports and guides a decision-maker in their conversations with medical professionals can be extremely valuable. With skilful drafting, the two-way decision-making process between doctor and substitute decision-maker can be facilitated, instead of hindered.
The drafting of advanced care directives should be centered around the values and preferences of the patient as opposed to specific treatment options. The American Bar Association advises that there should not be a focus on specific clinical intervention for “distant hypothetical situation” but rather on the patient’s “values, goals, and priorities in the event of worsening health”.
Finally, the planning process for important medical decisions regarding serious illness requires input from both doctors and lawyers to ensure treatment directions can be drafted with the nuance required for complex medical situations. The ABA suggests that “lawyers and health professionals should aim for greater coordination of advance care planning efforts”, and such collaboration will help clients and decision-makers be as prepared as possible to make informed decisions.
The Client’s Role
When it comes to what clients can do, while preparing a legal document is an important step, it should be reinforced by candid conversations with decision-makers, family, and friends. This significantly eases the burden on decision-makers, as they can carry out their role in stressful situations with the peace of mind that they are not second-guessing their loved one’s wishes when it comes to treatment.
Another way clients and their decision-makers can prepare for the future is by consulting resources that facilitate the planning process. An example of such a resource is planwellguide.com, which provides guidance on important issues from choosing a substitute decision-maker, to elaborating on the pros and cons of different care options, to specific factors to consider when making an advanced care plan.
A Gift of Great Value
While the lawyer’s skill in drafting is important to making an effective plan, a lawyer’s role can extend past legal documents and into transmitting a forward-thinking approach to clients. This approach requires careful consideration and reflection on the part of the client regarding their values and priorities when faced with serious illness, as well as having frank conversations with loved ones. While having these types of conversations may not be the most merry activity over the holiday period, giving a loved one that peace of mind is a gift of immeasurable value.
Thank you for reading!
Ian Hull and Sean Hess
Sir Terry Pratchett was a noted author and activist. His genre was fantasy, and more than 85 million copies of his books have been sold. He was most noted for his Discworld series of 41 novels.
Sir Terry Pratchett died on March 12, 2015 at the age of 66 as a result of early-onset Alzheimer’s disease (which he referred to as an “embuggerance”). Prior to his death, he was a vocal supporter of Alzheimer’s research and assisted suicide.
Pratchett left a significant number of unfinished works upon his death. These works will never be enjoyed. Pratchett’s daughter, the custodian of the Discworld franchise, has stated that these works will never be published.
More definitively, Pratchett told his friend and collaborator, Neil Gaiman, that he wanted whatever he was working on at the time of his death to be destroyed. More specifically, he asked that his works and computers be put in the middle of the road and run over by a steamroller.
This wish was fulfilled on August 25, 2017. His hard drive was crushed by a vintage John Fowler & Co. steamroller named Lord Jericho at the Great Dorset Steam Fair. The destroyed hard drive was put on display at The Salisbury Museum
Presumably, the destruction was agreed to by his estate trustees. Otherwise, the works would fall into his estate to be dealt with as assets of the estate.
The wishes of authors with respect to their posthumous works are not always fulfilled. Notably, Franz Kafka asked his friend and literary executor Max Brod to destroy all of his works after he died. Brod ignored this request, and as a result, some of Kafka’s most famous works, The Trial, The Castle, Amerika and The Metamorphosis were published after his death. In an essay by Scott McLemee, it is noted that Kafka was a lawyer, and must have known that his intentions set out in a couple of notes would not be binding on his estate trustee.
Thanks for reading.
It is the start of a new year and a new decade. Many of us recently enjoyed some holidays and had much to eat and drink. Many of us are also feeling the lingering effects of this merriment. I figured that an uplifting, feel good read would be a nice way to start 2020. I was thus delighted to learn about Eva Gordon, and her estate.
Ms. Gordon passed away at the age of 105. She grew up on an orchard in Oregon, never graduated from college, and worked as a trading assistant at an investment firm in Seattle. In 1964, she married her husband, who was a stockbroker. They did not have any children together. Neither Ms. Gordon or her husband came from money, and they lived a modest life. Ms. Gordon’s godson, who was the Estate Trustee, joked that if Ms. Gordon and her husband went out for lunch or dinner, then they would make sure to bring their Applebee’s coupon.
From the salary that Ms. Gordon received from her employer, she purchased partial shares in numerous stocks, including oil and utility companies, and was an early investor in Nordstrom, Microsoft, and Starbucks. Unlike many at that time, Ms. Gordon held onto these valuable stocks. As a result of this shrewd investing, Ms. Gordon’s wealth increased considerably over the latter years of her life.
Instead of wasting away her money, in her Will, Ms. Gordon decided to bequeath $10 million to various community colleges, with about 17 colleges each receiving cheques for $550,000. Interestingly, no stipulations were put into place as to how the money was to be spent by the colleges. The colleges could do with the money as they wished. For many of them, it was one of the largest donations they had ever received.
For an interesting perspective on the impact of donations to modest, as opposed to elite, institutions, you should listen to Malcolm Gladwell’s Revisionist History podcast (episode 6).
If you find this blog interesting, please consider these other related blogs:
It is the end of 2019. I therefore of course feel the need to use this blog to urge you to resolve to either make a will if you do not already have one, or, if you already have one, to review your current estate plan to see if it requires updating.
Why the urgency you might ask? The answer lies in the most festive of NYE tipples – champagne!
Apparently, approximately 24 people die annually from being hit by champagne corks. In fact, it has been alleged that more people die as a result of being hit by a champagne cork, than from poisonous spiders. This article highlights the death of a Hong Kong billionaire by champagne while celebrating his 50th birthday. As he opened a celebratory bottle of champagne, the cork hit the businessman in the temple causing a fatal brain hemorrhage. His death was confirmed on the way to the hospital.
Champagne corks as a cause of death have received much doubt and there have been steps to debunk as a ‘myth’. For instance, according to this article, the average rate at which a champagne cork exits a bottle is about 24.8 miles per hour. In extreme circumstances, if there was up to 3 bars of pressure, a cork could reach speeds of 60 miles per hour. Regardless, these speeds are not enough to cause a cork to be deadly.
So, while death by a champagne cork may not be a valid reason to urge you to consider your estate plan, there are many other good reasons as discussed in these related Hull & Hull blogs:
- Benefits of Estate Planning for Today’s Young Adults
- Make Estate Planning One of Your New Year’s Resolutions
- Happy New Year! And Be Careful!!
HAPPY NEW YEAR!
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.
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
My father used to have a saying: “Whatever drags gets dirty.” He would trot it out whenever one of us waited too long to do something and as a result, doing that thing became messy, complicated or impossible. For example: I was supposed to mail a letter. I didn’t mail the letter. Now I can’t find the letter. “Whatever drags gets dirty!”. Thanks, Dad.
Growing up, I thought that this was a widespread adage. Apparently, it isn’t. I searched it up on the internet and most of the results referred to Rupaul’s “Drag Race”.
The adage may fittingly sum up the lesson contained in the decision of the Nova Scotia Court of Probate in Kelly Estate, 2019 NSPB 1 (CanLII).
There, the deceased’s daughter and estate trustee, Carrie, brought an application for the possession of an urn containing the cremated remains of the deceased. The deceased died 13½ years before the application. Probate was granted 8 years before the application.
In the deceased’s will, cremation was requested, and Carrie was expressly given “the powers to decide what will happen with the said ashes.” This was consistent with the court’s observation that “Disposition of the deceased is one of the most fundamental tasks an executor/rix can undertake on behalf of the deceased.”
However, after the deceased’s death, the ashes were taken by Carrie’s sister, Cheryl. They remained at Cheryl’s home, apparently with the acquiescence of Carrie. The court noted that there was no evidence to suggest that there were prior attempts by Carrie to regain custody and control of the ashes over the 13½ years since death.
The court cited the BC decision of Re Popp Estate, 2001 BCSC 183 (CanLII) where the deceased’s husband, as estate trustee, was said to be entitled to control the disposition of the deceased’s remains, provided he did not act capriciously. As the husband was acting capriciously, he lost the right to deal with his spouse’s remains.
The court went on to find that by allowing the urn to remain in Cheryl’s possession for 13½ years, Carrie as estate trustee had in fact determined the disposition and final resting place of the urn: with Cheryl. A change of Carrie’s decision this late in the game “seems capricious at best or malicious at worst”, and the court was not prepared to order a transfer of the urn from Cheryl to Carrie.
When administering an estate, as in life in general, don’t let things drag.
Thanks for reading.
Earlier this year, Ian M. Hull, Suzana Popovic-Montag, and I were pleased to co-author the Canada Chapter of the 2019 Chambers & Partners Global Private Wealth Guide for the third consecutive year.
The guide provides an overview of the law as it relates to a number of issues relevant to financial planning and estate planning in jurisdictions throughout the world. Specifically, the following topics are covered (among others):
- tax regimes;
- succession laws;
- laws relating to the transfer of digital assets and other assets;
- family business planning;
- wealth disputes;
- elder law; and
- obligations of fiduciaries.
With chapters summarizing the state of the law and related trends in 34 countries, including the United Kingdom, United States, Switzerland, France, and Israel, the guide can be a great resource to be used as a starting point when assisting clients who have assets (or are beneficiaries of assets) in other jurisdictions.
A complete electronic copy of the 2019 Chambers & Partners Global Private Wealth Guide is available here: https://practiceguides.chambers.com/practice-guides/private-wealth-2019. The online version includes a “compare locations” feature, which allows readers to quickly review differences between two or more jurisdictions.
Thank you for reading.
Acting as an estate trustee can be complicated. Complications are multiplied where the estate includes property that is or has been used in a manner contrary to the Cannabis Control Act.
Under the Cannabis Control Act, S.O. 2017, Chapter 26, as amended, various offences are created involving the production, sale or other distribution of cannabis. Vis-à-vis landlords, section 13 of the Act makes it an offence to “knowingly permit a premise of which he or she is a landlord to be used in relation to activity prohibited by section 6”. Section 6 provides that no person shall sell cannabis, other than an authorized cannabis retailer.
The Act provides for penalties for landlords of at least $10,000 and not more than $250,000 or imprisonment for a term of not more than two years less a day, or both. Fines are subject to an additional 25% Victim Fine Surcharge.
Additionally, the court may, upon conviction, order that a premise be closed to any use for a period not exceeding two years. Prior to conviction, the police may cause the premises to be closed immediately. The premises are to be closed until the final disposition of the charge, subject to an order of the court lifting the closure.
A defense to a charge against a landlord under the Act is the fact that the landlord took reasonable measures to prevent the prohibited activity.
Additionally, forfeiture could be sought by the Crown under the Civil Remedies Act.
An estate trustee holding real property should take steps to ensure that he or she knows what is happening at the property, and to ensure that the property is not being used for illegal activity. In addition, the estate trustee should document the steps that are taken to prevent illegal activity. Leases should be reviewed in order to ensure that they prohibit illegal activity.
For further information, see “The Ontario Cannabis Control Act and Implications for Commercial Landlords” by David Reiter and Brian Chung.
For a blog on Cannabis and Estate Law, see my prior blog, here.
Have a great weekend.
Last month, in the case of McKitty v Hayani, 2019 ONCA 805, the Ontario Court of Appeal had to consider a challenge to the medical and common law definition of death on the grounds of freedom of religion. The Court also considered whether someone’s religious beliefs should be a factor when deciding whether they are legally deceased. In the end, the Court unanimously declined to rule on whether religious beliefs should be taken into account, but there were some key takeaways from the decision, and a framework was made that invites future challenges. This issue could have an important application in estates law, as it examines the standard for when someone is considered legally deceased.
Taquisha McKitty was declared dead in September 2017 following a drug overdose. The medical staff attending to her declared her dead due to “neurological criteria”; however her relatives were granted an injunction to keep her on life support, arguing their Christian faith only considers someone deceased upon cessation of cardiovascular, instead of neurological, activity. They made the argument that according to the freedom of religion in section 2 of the Canadian Charter of Rights and Freedoms, they have the right to have their religious views taken into account when it comes to determination of death and removal of life support. The point is now somewhat moot because McKitty has since died from both neurological and cardiovascular criteria; however important groundwork was laid for a potential future challenge.
The Court of Appeal unanimously concluded that it did not have enough information to rule on the matter. To be able to appropriately rule on the Charter issues, the Court held it would need more evidence on the duties and legal obligations of doctors, McKitty’s religious beliefs, and the religious beliefs of her community. The Court did accept the common law definition of death as being cessation of neurological activity, but left this definition open to future challenges based on freedom of religion. While not providing a definitive answer, the Court did craft a legal framework for how this issue should be addressed in future. This framework includes acknowledging that death is not just a medical determination but also an “evaluative” legal concept. The Court also ruled that the Charter still applied to McKitty as a legal “person” even though she was clinically dead, and a lack of neurological activity does not remove her right to challenge the criteria used to declare her death. With this framework in place, it remains very possible that we might see a further challenge within this framework in the near future.
In this case, the current definition of death as cessation of neurological activity was confirmed, but it remains very possible that this could be challenged on freedom of religion grounds. This has very interesting implications for estates law. For example, in families of mixed faiths, some members of the family might consider a relative to be deceased, while other members might consider them to be alive. This would cause a tricky situation when it comes to dividing up the estate. Watch this space!
Thanks for reading,
Ian Hull and Sean Hess