Category: Estate & Trust

23 Sep

Inheritance Tax as a Political Issue

Nick Esterbauer Estate & Trust, In the News Tags: , , , , , , , 0 Comments

Our blog has previously covered the issue of inheritance tax.

As a reminder, inheritance tax is charged on estates of a certain value or greater on a percentage basis.  Smaller estates (different amounts depending on the jurisdiction) may be exempt, with the applicable tax charged on the portion of the estate exceeding the exemption limit.  Inheritance tax does not apply to Canadian estates or their beneficiaries.  While we see individuals go to great lengths to avoid the payment of Estate Administration Taxes payable on assets administered under a probated will in Ontario and other provinces, the rate (at approximately 1.5% in Ontario) is significantly lower than what we see in jurisdictions where estates are subject to inheritance tax (up to 55% in Japan).

In particular, we have covered a number of developments in U.S. inheritance tax, which saw some fluctuations during Donald Trump’s presidency.  Trump had proposed the elimination of inheritance taxes all together.  More recently, President Joe Biden’s government has been considering a number of measures to increase the taxation of large estates: the reduction of the estate tax exemption to $3.5 million (from $11.7 million), increasing inheritance tax rates from 40% to 65%, and/or increasing taxes on capital gains in respect of inherited assets.  News reports suggest that there has been resistance to the proposed increased tax burden to estates as the proposed increased capital gains tax makes its way through congress.  However, the measures proposed by President Biden could generate an additional $213 billion to $400 billion over the next ten years.

Having just seen another federal election in Canada, it is interesting to follow along with how inheritance tax has been used as an important part of political agendas in other jurisdictions.  It will be interesting to see if inheritance tax or other taxes applied to estates become part of political platforms locally in coming years, as we continue to approach the greatest ever transition of wealth from one generation to the next.

Thanks for reading,

Nick Esterbauer

 

Other blog entries that may be of interest:

08 Sep

Bob Ross: A Not-So-Happy Mistake

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

An almost ubiquitous figure in pop culture, Bob Ross has been immortalized through references as broad-spanning as t-shirts quoting his famous line, “happy little accidents”, to a cameo in the Marvel action hero movie, Deadpool.

Bob Ross’ long-running series, “The Joy of Painting”, which ran from 1983 until his untimely death in 1994, resulted in the production of thousands of original artworks. The ownership of this substantial art collection was left in the hands of Bob Ross Inc. (“BRI”), as discussed in a previous blog.

Recently, a documentary was released on Netflix, “Bob Ross: Happy Accidents, Betrayal & Greed”, bringing the estate of Bob Ross back into the public eye. It explores behind the scenes Bob Ross’ legacy, delving into the disputes surrounding the use of his name and likeness following his death.

Our previous blog on Bob Ross’ estate explained that, following his death, ownership and control of BRI fell to his business partners, Annette and Walt Kowalski. Bob Ross was known for his easy-going and kind-hearted personality. However, the documentary exposes tensions in the inner business workings of the multi-million dollar empire that was the Bob Ross trademark.

By the end of his life, Bob Ross was allegedly at odds with the Kowalskis and their vision for his brand. Through his will, Bob Ross tried to create a trust in the name of his brother, Jimmie, and son, Steve, that would give them control of his interest in BRI, as well as complete ownership of his name and likeness.

Bob Ross was known for his ‘alla prima’ technique of wet-on-wet paint, which allowed him to be creative in ‘using’ his mistakes to create solutions. Unfortunately for the beneficiaries of the trust, the ink on a contract dries quickly, and the partnership agreement with the Kowalskis was one ‘mistake’ Bob Ross could not fix.

The litigation that followed his death resulted in a settlement granting the Kowalskis complete control of BRI pursuant to the terms of its partnership agreement. Steve, the son, attempted to renew the litigation in 2019 on grounds of an undisclosed term of the trust agreement, granting him exclusive rights to the name and likeness of Bob Ross. The US federal court ruled in favour of BRI, as the plaintiff could not own property that the trust never actually had a legal right to.

The outcome was no doubt disheartening for Steve. However, the law upheld what was ostensibly a valid and enforceable contract, the partnership agreement.

Business vehicles such as partnerships and corporations are commonplace. However, the articles of incorporation of a corporation, for example, can restrict the sale and/or transfer of shares. In entering any kind of business structure, it is always wise to plan ahead. Where so desired, make sure your beneficiaries can benefit from your interest in a business, and remember your estate may not have the power to change or undo contracts you were a party to.

Thank you for reading and have a great day!

Suzana Popovic-Montag & Raphael Leitz

03 Sep

When Enough Is Enough: Ending Estate Claims

Hull & Hull LLP Estate & Trust, Litigation Tags: , , , 0 Comments

Sometimes, the court will say that enough is enough. It will put the brakes on frivolous estate litigation. 

One such case is the Court of Queens’ Bench of Alberta decision of Re Klein. There, the deceased died in 2012. She was survived by her three children, who were the beneficiaries of her estate. The estate appears to have consisted of a real property, and some bank accounts.  Notwithstanding the apparent straightforwardness of the estate, it appears that multiple proceedings were commenced as between the beneficiaries and the estate trustee in relation to the estate. 

On August 27, 2021, after various earlier court attendances, Justice Graesser put a stop to the litigation. The matter was before the court as two of the beneficiaries sought further disclosure of banking activity in relation to a $99.25 deposit into the estate account. 

In the decision, Justice Graesser reviewed the history of the estate administration and the evidence of the parties. He concluded that there was no merit in requiring the estate trustee to make any further disclosure. He noted the “proportionality” provisions of the Rules of Court. While the estate trustee may not have accounted perfectly, “Any further work, by [the estate trustee] or by the Courts in receiving or reviewing any further information or submissions, would be completely disproportionate to the magnitude of any possible failings.”

Enough Is Enough

Justice Graesser also noted the court’s readiness to dismiss frivolous claims as an abuse of process. “I subscribe to [ACJ Rooke’s] comments about the need for a cultural shift in civil litigation and to save the Courts and the litigants themselves from frivolous litigation.”

Justice Graesser pointed out that the estate trustee had previously passed her accounts, rendering may of the current complaints by the beneficiaries as res judicata. Further, the passage of time had rendered many of the claims by the estate trustee against the beneficiaries as statute-barred.

While the judge determined that he could not strike claims without hearing from the parties, he was able to continue a stay of proceedings, and not allow any of the parties to take any further steps without leave of the Chief Justice. The parties were, however, permitted to move to dismiss any existing claims. 

Justice Graesser concluded by advising: “I do not encourage the parties to continue their disputes in Court. From my extensive review of the Court filing from its beginning, I am satisfied that the parties have nothing to gain by continuing their fight.”

Thanks for reading.

Paul Trudelle

24 Aug

The Original Copy of a Will: When to Release It and To Whom?

Juanita Valencia Estate & Trust, Estate Planning, Wills Tags: , , 0 Comments

The importance of safeguarding the original copy of a Will cannot be overstated. For one, the original copy is required to apply for a Certificate of Appointment of Estate Trustee with a Will. Perhaps more importantly, when an original Will cannot be located upon death, there is a presumption that the Will was destroyed by the testator with the intention to revoke it.  We have previously blogged about this presumption and how to rebut it here.

Given the importance of the original copy of a Will, many drafting solicitors offer to hold it. In these circumstances, the drafting solicitor might wonder who is entitled to see the original Will, and when.

Of course, the original Will should be available to the Testator, should they wish to review, amend and/or revoke the document.

In addition, the original Will should also be made available to the named Estate Trustee(s) upon the Testator’s death. Drafting solicitors should be mindful of the fact that there might be multiple Estate Trustees and/or alternate Estate Trustees. If there are multiple Estate Trustees, the drafting solicitor should consider getting a direction from all of them before releasing the Will. Before releasing the original Will, it is also prudent to obtain a copy of the death certificate of the Testator and to ask the Estate Trustee(s) for documentation to confirm their identity.

Can the original copy of the Will be released if the Testator becomes incapable? If so, to whom? If the Testator had appointed an Attorney for Property prior to becoming incapable, the Attorney is entitled to obtain the original copy of the Will pursuant to section 33.2 of the Substitute Decisions Act 1992, S.O. 1992, c. 30. Importantly, the named Estate Trustee(s) is not entitled to obtain the original copy of the Will before the Testator’s death, unless they are also the Attorney for Property for the Testator.

Are the beneficiaries ever entitled to the original copy of the Will? Put simply, they are not. However, at the time of the Application for a Certificate of Appointment of Estate Trustee with a Will, beneficiaries are entitled to receive a copy of the Will and the Notice of Application. Beneficiaries who are entitled to inherit a portion of the residue of the estate are entitled to receive a copy of the entire Will, while beneficiaries who are going to inherit a specific item or a specific sum of money are only legally entitled to a copy of the provision granting the gift or bequest.

Finally, keep in mind that, once an Application for a Certificate of Appointment of Estate Trustee with a Will is filed with the Court, the Will becomes a public document and any individual can contact the court office to request a copy.

Thank you for reading.

Juanita Valencia

23 Aug

Unjust Enrichment in the Context of Insurance Proceeds and Beneficiary Designations

Juanita Valencia Beneficiary Designations, Estate & Trust, RRSPs/Insurance Policies Tags: , , 0 Comments

In the decision of Knowles v LeBlanc, 2021 BCSC 482, the Supreme Court of British Columbia was tasked with determining which party was entitled to insurance proceeds pursuant to the doctrine of unjust enrichment.

This case involved a life insurance policy held by the Deceased, Peter Knowles,  with the CUMIS Life Insurance Company. The policy named the Deceased’s ex-wife, Ms. Knowles, as the sole beneficiary. On the date of Mr. Knowles’ death, the benefit payable under the policy was $100,000.

The Deceased designated Ms. Knowles as the sole beneficiary in 1987, shortly before the two separated. Their divorce was finalized in 1991, when they entered into a consent order, which provided that each party would retain their own property and chattels in their possession or control.

After his separation, the Deceased met Ms. LeBlanc in 1988. They lived in an exclusive common-law relationship until the time of his death in 2019. Throughout their relationship, they shared expenses and made joint decisions about their family property.

After Mr. Knowles passed, Ms. LeBlanc received the proceeds from every other life insurance policy that he held as well as all of his other assets by way of right of survivorship. When she did not receive the proceeds from the CUMIS policy, Ms. LeBlanc contacted the company, who advised her that she was not the named beneficiary of the policy. Ms. Leblanc and Ms. Knowles subsequently made competing claims over the proceeds of the insurance policy.

The Court discussed Mr. Knowles’ intentions, as well as whether he ever attempted to change his beneficiary designation in the life insurance policy. The Court found that Mr. Knowles maintained feelings of hostility toward Ms. Knowles after their divorce, and that he not only intended to change the designated beneficiary on his life insurance policy to Ms. LeBlanc, but that he verily believed that he had done so. As a result, the Court concludes that Mr. Knowles clearly intended to remove Ms. Knowles as a beneficiary from his CUMIS life insurance policy but forgot or neglected to do so.

The Court then considered whether the consent order that Mr. and Ms. Knowles entered into in 1991 precluded Ms. Knowles from recovering the life insurance proceeds. The Court ultimately found that the consent order did not prevent Ms. Knowles from claiming the proceeds of the life insurance policy for three reasons. First, the order did not explicitly refer to the life insurance policy. Second, the order did not specifically revoke Mr. Knowles’ designation of Ms. Knowles as a beneficiary of the life insurance policy. Third, the order did not refer to a “full and final” settlement, or a relinquishment of all claims

Finally, the Court considered whether Ms. LeBlanc had  a claim in unjust enrichment giving rise to a constructive trust remedy. In doing so, the Court applied the test for unjust enrichment from Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57  which requires:

  1. an enrichment of the defendant;
  2. a corresponding deprivation of the plaintiff; and
  3. an absence of juristic reason for the enrichment.

The Court easily found that the first two factors had been met. Ms. LeBlanc suffered a deprivation because the premiums of the life insurance policy were automatically deducted from her joint account with Mr. Knowles for many years. Moreover, because Ms. Knowles stood to benefit from receiving the proceeds of the life insurance policy, there was also a corresponding enrichment to Ms. Knowles at the expense of Ms. LeBlanc.

The third element of an unjust enrichment claim is twofold. First, the plaintiff must show that no juristic reason from an established category exists to deny recovery. Second, the defendant may rebut the plaintiff’s recovery by showing that there is another reason to deny recovery.

In their analysis, the Court concluded that the Insurance Act, RSBC 2021, c 1 does not preclude Ms. LeBlanc’s claim in unjust enrichment. In other words, it does not provide a juristic reason for Ms. Knowles to retain the proceeds against Ms. Leblanc’s corresponding deprivation. The Court also failed to find another juristic reason that would apply in the circumstances of the case.

Ms. Knowles was not able to show that there was a residual reason to deny Ms. LeBlanc’s recovery of the life insurance proceeds. The Court focused on the fact that Mr. Knowles was estranged from Ms. Knowles and their two children since their divorce. As a result, it was not reasonable for Ms. Knowles to expect that she would benefit from the insurance policy. The Court was also not able to find a basis in public policy to rebut Ms. LeBlanc’s recovery.

In determining the appropriate remedy, the Court acknowledged that a personal remedy against Ms. Knowles would not be appropriate, as CUMIS had not paid out the proceeds of the life insurance policy to her. Ultimately, the Court imposed a constructive trust to the full extent of the life insurance proceeds in Ms. LeBlanc’s favour.

Finally, the Court cautioned CUMIS to consider updating its records more frequently and to remind its long-standing policyholders of their designated beneficiaries to avoid similar disputes in the future.

This case was similar to Moore v. Sweet, 2018 SCC 52, where the Supreme Court of Canada held that a beneficiary designation was not a juristic reason to deprive the appellant of the insurance proceeds to which she was entitled under an oral agreement. As you may recall, Ian M. Hull, Suzana Popovic‑Montag and David M. Smith represented the appellant before the Supreme Court of Canada, and blogged about their experience here.

Thank you for reading!

Juanita Valencia

20 Aug

Adoption of an Adult

Paul Emile Trudelle Estate & Trust Tags: , , , , 0 Comments

Adoption of an independent adult person by another is rare, but not unheard of. In Ontario, adoption of an adult is permitted under the Child, Youth and Family Services Act. See section 199(3). A court Order is required.

Case law has developed the test to be met before the court will make such an Order. A four-part test has evolved through the case law. Essentially, the criteria considered are:

  1. The adoption would create an actual (not just legal) change in the relationship between the applicant (adopter) and the proposed adoptee;
  2. Both parties are aware of the legal incidents of adoption, and intend those incidents to govern their new relationship;
  3. The adoption is motivated by the psychological and emotional need of the proposed adoptee for a new parent or for a parent to “fill the gap” in the parenting of the proposed adoptee;
  4. The relationship between the applicant and the proposed adoptee would be “enhanced and strengthened” by the adoption order.

These criteria are set out and applied in the leading case of Re Adoption of M.O.M., 2013 ONSC 3252.

Boiled down, the court will look closely at the bona fides of the proposed adoption. For example, an adoption of a boyfriend of a girlfriend to give the girlfriend access to a trust fund set up for the boyfriend’s children (as blogged on in our blog of February 3, 2013) would probably not be allowed.

The issue of adult adoption was considered in the recent case of Toronto Islands Community Trust Corporation v. McLaughlin, 2021 ONSC 206 (CanLII). There, McLaughlin “owned” a home on Toronto Islands. I put “owned” in quotes as the ownership and transfer of Toronto Island homes are strictly regulated under the Toronto Islands Residential Community Stewardship Act (“the Islands Act”). Owners are not allowed to transfer their Island homes, and they must be sold through a statutory trust. The sale must be to buyers who applied to be on a list of interested purchasers. The list contains up to 500 names. Names can be added, but only when space on the list permits. Since February 1993, only 66 of the 262 homes have been sold.

The sale price is regulated, and is substantially below market price.

One exception to the restrictions on transferring is that an owner can transfer or devise an Island residence to a spouse, child or joint owner. However, if consideration is to be paid, it is also regulated. Further, the transfer must be effected through the Trust.

Back to McLaughlin: McLaughlin had a close relationship with Whitfield. The relationship was strong and long-standing. The relationship was such that McLaughlin formally adopted Whitfeld in 2017. He later purported to transfer one-half interest in his Island home to Whitfeld. The Trust then moved to set aside the transfer, arguing that it was in breach of the terms of the Trust and the applicable legislation. McLaughlin agreed to set aside the transfer. However, the Trust then applied to the court for a declaration that the adoption bestowed no legal right to Mr. Whitfeld to obtain title to McLaughlin’s home.

The court considered at length the relationship between McLaughlin and Whitfeld. It concluded that the adoption was genuine and refused to make the declaration.

“The respondent Peter McLaughlin has acted as a father figure to the respondent Steven Whitfield for approximately 37 years.  This is not a case of two adults with little or no prior relationship engineering an adoption to defeat the purpose of transfer restrictions on Island homes.  This is an example of a genuine family relationship that stretches back decades and that is amply supported by contemporaneous documentation over the course of 37 years.  In those circumstances there is no reason to place any limitation on the definition of a child as including an adopted child under the Islands Act.” …

“Given the depth of evidence of a long-standing familial relationship between Mr. McLaughlin and Mr. Whitfield, I am inclined to apply the words of the Islands Act, literally and find that Mr. Whitfield is a child of Mr. McLaughlin for purposes of that Act.  It is highly unlikely that two other adults would engage in a 37-year relationship involving their immediate and extended family to engineer a transfer of an Island home to circumvent the restrictions contained in the Act.”

The court did not place significant weight on the fact of the prior adoption Order, and felt that it could assess the nature of the relationship afresh, noting that adult adoption Orders are usually unopposed, and noting that the legislative purposes of the Child, Youth and Family Services Act are different from the Islands Act.

The court in McLaughlin considered s. 217(2) of the Child, Youth and Family Services Act, which provides that “For all purposes of law, as of the date of making the adoption order, …the adopted child become the child of the adopting parent … .’ The court concluded that, as a matter of statutory interpretation, it was allowed to review the nature of the relationship between McLaughlin and Whitfeld in order to ensure that the underlying purpose of the Islands Act, being to establish that a fair scheme to make Island homes available to the public at large, was maintained.

Thank you for reading.

Paul Trudelle

19 Aug

Unexecuted Will Found to be Fully Effective in British Columbia

Sanaya Mistry Charities, Estate & Trust, Estate Litigation, Estate Planning, Wills Tags: , , 0 Comments

In the recent decision of Bishop Estate v. Sheardown, 2021 BCSC 1571, pursuant to the court’s curative powers under section 58 of the Wills, Estates and Succession Act, SBC 2009, c 13, (the “WESA”) the court found an unexecuted Will to be fully effective.

In this case, Marilyn Bishop (the “Deceased” or “Ms. Bishop“) had given instructions, reviewed the draft and made a few minor clarifications in respect of her new will (the “2020 Will”). The Deceased had scheduled an appointment with her lawyer to sign the Will in March 2020 but subsequently cancelled the appointment. The Deceased died four months later, at the age of 76.

James Thrower was the executor of the Deceased’s previous will (the “2014 Will”), which named her husband (now deceased) as the sole beneficiary and the respondent Kelowna General Hospital Foundation (the “Foundation”) as the beneficiary in the event that her husband predeceased her. The respondents Robert Sheardown and Deborah Sheardown (the “Sheardowns”) are Ms. Bishop’s nephew and niece-in-law, who she named as executors and beneficiaries of her unexecuted 2020 Will. It should be noted that the Deceased and her husband had prepared mirror wills in 2014.

Mr. Thrower was seeking clarification from the court as to “whether Ms. Bishop’s unexecuted 2020 Will represents her testamentary intention and should be ordered to be effective under s. 58 of the Wills, Estates and Succession Act.”

The Foundation submitted that section 58 of the WESA ““cannot be used to validate a will that is substantially invalid” [emphasis added], citing Hadley Estate(Re), 2017 BCCA 311”. The court noted that in fact, Hadley Estate states that “[a]lthough s. 58 cannot be used to uphold a will that is substantively invalid, it permits the court to cure issues of formal invalidity…” [emphasis added].” Moreover, the court clarified that section 58 of the WESA “does not specify a minimal level of execution or other formal requirement for a testamentary document to be found fully effective” and therefore, ““substantial invalidity” is not a bar to an order under s. 58.”

In order to determine if the unexecuted 2020 Will is valid, the court considered whether (i) the 2020 Will was authentic, and (ii) it represented the Deceased’s fixed and final intentions testamentary intentions.

Authenticity

The authenticity of the 2020 Will was not in question. The Deceased made an appointment with her lawyer (“Mr. Livingston“) and specifically instructed him to prepare a new will naming the new executor and alternate executor, removing the gift to the Foundation, including a possibility of a gift to local charities and to the Sheardowns’ daughter, and giving the remainder of the residue of her estate to the Sheardowns equally with a gift over to their children.

Mr. Livingston prepared a draft pursuant to these instructions. The draft was reviewed by Ms. Bishop and she provided clarifications via a note. Mr. Livingston prepared the final draft on the basis of these instructions and the appointment to sign the 2020 Will was scheduled for March 20, 2020.

Fixed and Final Testamentary Intention

The court inferred “that Ms. Bishop could not attend the appointment because she was not able to leave the care home” as there was evidence to prove that at that time in March 2020 (during the COVID-19 pandemic), “Ms. Bishop’s care home prohibited residents to leave other than for medical appointments”.

In order to determine whether the unexecuted 2020 Will represents the Deceased’s “fixed and final intention”, the court analyzed “whether its departure from the formal testamentary requirements considering the context and contents of the alleged substantial invalidity make it impossible to establish testamentary intention” and also “whether the failure to execute the unexecuted 2020 will from when it was ready for execution until Ms. Bishop’s death nullifies any intention Ms. Bishop may have had when she made her appointment to execute it in March 2020.”

Among other things, the court considered the following:

  1. The 2020 Will departs from testamentary requirements in that it is not signed by the will-maker and that the will-maker’s signature was not witnessed.
  2. After the death of the Deceased’s husband, the Sheardowns moved to Kamloops, BC and became a regular part of her life.
  3. The Deceased’s health had declined and so she had sold her home and mobile home and recently moved into a care home.
  4. The Deceased went to the same law firm that prepared her 2014 Will and met with Mr. Livingston to specifically discuss her plans for her estate.
  5. Mr. Livingston’s evidence was that the Deceased gave him specific instructions regarding the 2020 Will, including the fact that she did not want to include the Foundation as a beneficiary because she did not have a connection to the Foundation and that it was her husband’s idea to include them in their previous wills because he was either from Kelowna or spent a considerable amount of time there.
  6. Mr. Livingston was satisfied that the Deceased had the capacity to make a new will and was not under any undue influence.
  7. After reviewing the draft, the Deceased did not suggest any new changes but rather answered the questions of Mr. Livingston in her note to him.
  8. Although the Foundation argued the Deceased’s note to Mr. Livingston which stated “No charities at this time” [emphasis added] indicated that the Deceased’s “intentions lacked finality”, the court referenced Estate of Young, 2015 BCSC 182 noting that “a fixed and final intention cannot mean that the intention is irrevocable, since wills are, by their nature, revocable until the testator’s death” and “the intention need only “be fixed and final at the material time”.”

The court concluded that the Deceased’s fixed and final intention as of March 17, 2020 was to execute the 2020 Will. The court then considered “whether the failure to execute the unexecuted 2020 will over the following four months indicates a change in Ms. Bishop’s intentions.”

The Foundation noted that the Deceased did not execute the 2020 Will despite the remote execution procedures coming into effect on May 19, 2020. However, the court found that there was no evidence that the Deceased was aware of this option and as a result, “her failure to execute the will either remotely pursuant to the May 19, 2020 order or on her own [did] not undermine her testamentary intentions.”

The Foundation further noted that the Deceased did not order the destruction of her 2014 Will. The court was not persuaded that the Deceased’s lack of instruction to destroy her 2014 Will was evidence that she intended for it to be valid “in the absence of any evidence that she was advised to destroy her 2014 will and informed of the consequences of not doing so”.

The court was “satisfied that the unexecuted 2020 will represents Ms. Bishop’s fixed and final intentions for the disposal of her assets” and concluded as follows:

“Ms. Bishop provided simple, clear instructions as to what she wanted in her will and then responded with minor clarifications after reviewing the draft. It was clear that Ms. Bishop wanted to remove Kelowna General Hospital Foundation as a beneficiary of her will. The four-month period between her appointment to execute the unexecuted 2020 will and her death does not undermine her fixed and final intention to distribute her assets according to the unexecuted 2020 will.”

Accordingly, the court ordered the unexecuted 2020 Will to be fully effective, pursuant to the court’s curative power under s 58 of the WESA.

Thank you for reading.

Sanaya Mistry

18 Aug

A Cautionary Tale of Estates and Defamation

Ian Hull Estate & Trust, Litigation Tags: , , , , 0 Comments

We recently came across an interesting story in the case of Kuehl v. Ross, 2021 ONSC 4251, which we thought was worth sharing.

The facts of the case serve to highlight the importance of maintaining a continuing professional standard in dealings with clients. More importantly, an awareness of the duty of loyalty owed to the client, especially where there has been a termination of a retainer and emotions may be running high.

The claim is centered around the Last Will and Testament of Budd Kuehl, the father of two of the plaintiffs, a mortgage transaction that intertwined with his estate, and communications made by the defendant in the course of her retainer and after the termination of said retainer.

In 2010, shortly before the father’s death, he had retained the defendant and her firm to draft a new Will. At the same time, the defendant also acted in a mortgage transaction for the daughter on her home. The father jointly applied for the mortgage with his daughter and it was arranged by the defendant for him to have a 50% interest in the mortgaged home as a tenant in common, pursuant to requirements of the mortgagee.

The 2010 Will provided for the estate to be held in trust for the benefit of the surviving spouse during her lifetime, and subsequent to her passing, for the residue to be divided equally between the father’s children, subject to the condition that each child’s share would first be applied to pay off any mortgages they held.

The defendant had been retained by the estate trustee to assist with administrative matters. However, over the course of her retainer, disputes arose between the defendant and the daughter concerning the amounts owed, if any, relating to the mortgage on the daughter’s home and her father’s ownership interest in it. The plaintiffs, in their capacity as estate trustees and executors, terminated the defendant’s retainer.

After her retainer was terminated, the defendant communicated with the Office of the Public Guardian and Trustee (the “OPGT”) concerning the father’s surviving spouse. These communications formed the core of the claim of defamation, as they resulted in the OPGT refusing to accept the daughter’s application for guardianship of her mother. The court agreed with the plaintiffs that these communications were defamatory in nature, the defendant’s claims of qualified privilege notwithstanding.

The facts of this case are a sober warning to lawyers who act for multiple related parties, to ensure clear communication of the rights and liabilities of each party and how they may overlap. Where a breakdown of the lawyer-client relationship does occur, the duty of loyalty and confidentiality to the client should be given exceptional attention.

Thank you for reading and have a great day!

Ian Hull & Raphael Leitz

17 Aug

Considerations for Determining the Validity of Powers of Attorney and Appointing Guardians for Property and Personal Care

Sanaya Mistry Capacity, Estate & Trust, Estate Litigation, Guardianship, Litigation, Power of Attorney Tags: , , , , , 0 Comments

In yesterday’s blog, I discussed the recent decision in Rudin-Brown et al v. Brown, 2021 ONSC 3366, focusing on the court’s decision in respect of the admissibility and weight given to the audio recordings of Carolyn Brown’s telephone conversations.

In today’s blog, I discuss the factors considered by the court in (i) determining that the 2016 powers of attorney were invalid, and (ii) declaring Carolyn’s 2009 power of attorney for property to be operative, and (iii) appointing Jeanne and Missy as Carolyn’s co-guardians of the person.

The court applied the factors outlined in  Royal Trust Corporation of Canada v. Saunders,  [2006] OJ No 2291, to determine whether or not Carolyn’s 2016 powers of attorney were executed under suspicious circumstances. Particularly, the court considered the following:

  1. The extent of physical and mental impairment of the grantor around the time the powers of attorney were signed;
  2. Whether the powers of attorney in question constitutes a significant change from the former powers of attorney;
  3. The factual circumstances surrounding the execution of the powers of attorney; and
  4. Whether any grantee was instrumental in the preparation of the powers of attorney.

Note, the consideration of “whether the will in question generally seems to make testamentary sense” does not apply to powers of attorney.

The court noted that, among other things, (i) there was evidence that Carolyn was having memory issues at the time the powers of attorney were signed, (ii) after visiting two law firms without success, Gordon downloaded forms for powers of attorney and some will templates from the internet, and (iii) one of the witnesses to the powers of attorney testified that Carolyn seemed “vaguely puzzled” the day she witnessed Carolyn’s signature and also stated that Carolyn said that Gordon had told her to sign the powers of attorney.

The court concluded that the powers of attorney were executed under suspicious circumstances in respect of capacity and undue influence. The court also concluded that Gordon failed to prove that Carolyn had capacity to execute the powers of attorney and declared the powers of attorney to be invalid. In addition, the court found that Gordon “failed to show that Carolyn signed the powers of attorney as a result of her own “full, free and informed thought” and has failed to rebut the presumption of undue influence arising from his and Carolyn’s relationship” and therefore concluded that “even if Carolyn had the capacity to sign one or both powers of attorney, they are not valid due to undue influence.”

In respect of appointing guardians of property and personal care for Carolyn, the court did not solely rely on Carolyn’s 2009 powers of attorney, but rather entered into a detailed analysis to determine who would be appointed as Carolyn’s guardians. As noted by Justice H. J. Williams,

“In appointing a guardian for property, the court shall consider whether the proposed guardian is the attorney under a continuing power of attorney, the incapable person’s current wishes and the closeness of the applicant’s relationship to the incapable person. Where there is an ongoing valid power of attorney, cases in Ontario and elsewhere have held that the court must first determine whether there is strong evidence of misconduct or neglect on the part of the attorney before the court should ignore the wishes of the donor.”

The court did “not hesitate to find that, in accordance with Carolyn’s 2009 power of attorney for property, Jeanne should be Carolyn’s guardian for property and that Carter should be the alternative attorney.” The court noted that in Carolyn’s 2009 power of attorney for personal care, Carolyn had named Gordon and Missy as her attorneys for personal care. While the court was satisfied that Missy would be able to fulfill the duties of guardian of the person, the court was not satisfied that Gordon would be able to do so for several reasons, some of which are outlined below:

  1. “A guardian must make decisions that are in the incapable person’s best interests”, which Gordon had failed to do consistently for Carolyn.
  2. “A guardian must seek to foster regular personal contact between the incapable person and supportive family members and friends” and Gordon failed to foster Carolyn’s relationships with Missy or Jeanne.
  3. “Gordon did not consult anyone other than Carolyn in preparing his guardianship plan.”
  4. Gordon intended to “discontinue a companion service for Carolyn that had been recommended for her and that she had been receiving and apparently enjoying.” Although Gordon said that “Carolyn does not remember the visits and is unhappy with how much they cost”, the court found that “it is more likely that Gordon was unhappy about the cost.”
  5. The court was also concerned by the fact that Gordon had failed to follow court orders. He failed to comply with Justice Kershman’s “order to stop recording Carolyn’s conversations.” It is important to note that the court found that “it was evident from Gordon’s evidence that he felt justified in ignoring a court order if he did not agree with it.”

In summary, the court concluded that “it is in Carolyn’s best interests for Missy and Jeanne to be jointly appointed as Carolyn’s full guardians of the person.”

Thank you for reading.

Sanaya Mistry

 

11 Aug

Gathering Evidence for a Will Challenge

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

Earlier this year, the Court of Queen’s Bench of Alberta directed that a party challenging a will may be able to obtain orders for disclosure before the Court determines whether the will must be proven in solemn form.

This case may be of interest in Ontario because the procedure for commencing a will challenge in Alberta and Ontario is relatively similar. If a party in either province wishes to challenge a will, that party must establish an evidentiary basis for doing so before a hearing will be ordered. In Ontario, the requirement to provide a “minimal evidentiary threshold” before a will must be proven in solemn form was reiterated by the Court of Appeal in Neuberger v. York, 2016 ONCA 191 (CanLII). The standard is worded differently in Alberta, where applicants must provide an evidentiary foundation to confirm that there is a “genuine issue to be tried” before the hearing of a will challenge will be ordered: see Quaintance v Quaintance (Estate), 2006 ABCA 47 (CanLII) and Logan Estate (Re), 2021 ABCA 6 (CanLII).

Evidence a party challenging a will in Alberta may obtain before a hearing is ordered:

In Gow Estate (Re), 2021 ABQB 305 (CanLII), the will dispute was between four of the deceased’s children. Two siblings were serving as the personal representatives of the estate, and two other siblings applied to challenge the deceased’s will on several bases, including undue influence. The personal representatives opposed the applicants’ request that the will be proven in solemn form.

The applicants also applied to the court for interim relief – an order that would permit them to question the personal representatives and obtain documentary disclosure, including the estate solicitors’ files, the deceased’s medical records and driver’s licence documents, previous wills, and other estate planning records, before the “threshold” application was heard. The personal representatives objected to the interim relief sought by the applicants on the basis that Alberta’s Surrogate Rules did not permit pre-application discovery and also argued that the testator’s privacy was to be respected unless the applicants proved that formal proof of the will was warranted in the circumstances.

Before the interim application was heard, the personal representatives also provided the applicant siblings with partial disclosure relating to the testator’s health, testamentary capacity and intentions, and estate planning, and also examined one of the applicant siblings in anticipation of the threshold application.

The interim application was heard by Justice Feth, who permitted both questioning and limited documentary disclosure, recognizing “the importance of early disclosure in surrogate disputes”. With respect to questioning, the Court confirmed that the personal representatives could be questioned “about their personal interactions with the testator during his lifetime, including their observations of his mental capacity and their involvement in his testamentary decision-making.” Justice Feth explained:

[47]           Access to pre-application questioning advances procedural fairness since the Applicants are obligated to meet an evidentiary burden and obtain corroboration through material evidence from other sources. In meeting their onus, measured litigation procedures should not be foreclosed to them.

[51]           Immunizing an adverse party from questioning is especially concerning when undue influence is raised. The living witness who is likely the most knowledgeable about the interactions with the testator would be hidden from the Court.

Justice Feth also observed that it would not be fair to permit the threshold application to be heard by the Court with only partial disclosure selected entirely by the personal representatives because of the potential for “a misleading presentation of the facts”.

Limited documentary disclosure of some of the deceased’s medical records and previous wills was also ordered in light of the partial disclosure already provided by the personal representatives. While Justice Feth acknowledged that individuals may have a significant privacy interest in their medical records, it was also recognized that such a privacy interest is not absolute and ordered the personal representatives to provide the applicant siblings with disclosure for the period during which the deceased’s testamentary capacity was in question.

Justice Feth acknowledged the potential for “[c]oncerns about fishing expeditions, the testator’s privacy interests, and excessive delay and expense occasioned by exuberant demands for disclosure” during the early stages of estate litigation, but held that those concerns could be managed by the Court rather than prohibiting early disclosure in surrogate proceedings.

Evidence a party challenging a will in Ontario may obtain before a hearing is ordered:

In comparison to Justice Feth’s decision, Ontario courts have in some recent instances been reluctant to provide documentary disclosure in will challenges during the preliminary stages of the litigation. In Seepa v Seepa, 2017 ONSC 5368 (CanLII), Justice Myers held that documentary disclosure should not occur until after a threshold will application has been granted. Recently, in McCormick v McCormick, 2021 ONSC 5177 (CanLII), Justice Wilcox described Justice Myers’ decision as follows:

[24]         In Seepa, Meyers J. expanded on the policy considerations behind the minimum evidentiary threshold requirement. It was to protect from lengthy, intrusive, expensive documentary collection and investigation proceedings untailored to the needs of the individual case and from intrusion into a deceased’s privileged legal files and personal medical records. In the face of these, a litigant was not to be given tools such as documentary discovery that are otherwise ordinarily available to a civil litigant before the litigant has produced some evidentiary basis to proceed.

In keeping with the Court’s decision in Seepa, in Young v Prychitko, 2021 ONSC 3150 (CanLII), Justice George declined to order documentary disclosure in the context of a will challenge, holding that the Court would not entertain a fishing expedition and compel production of documents before the minimal evidentiary threshold had been met. The firm’s blog post about the Court’s decision in Young v Prychitko can be accessed here.

While document disclosure prior to a threshold application may have recently been discouraged, some Ontario decisions have instead permitted cross-examination on affidavit evidence as a next step, as noted in Justice Wilcox’s decision in McCormick. The Court even noted in Young v Prychitko that the parties would be able to cross-examine each other on their affidavit evidence before the threshold issue, in that case, was decided.

Having said that, the practice of permitting parties to cross-examine each other on affidavit evidence before documentary disclosure may not always be optimal. In Shapiro v Shapiro, 2021 ONSC 4501 (CanLII), for example, Justice Hurley noted that cross-examination on an affidavit before documentary discovery in that particular case was “unlikely to accomplish anything of real benefit” and likely “would only add to the legal costs and beget delay” – the very danger that Justice Myers indicated the minimum evidentiary threshold requirement was intended to avoid. The will threshold application was determined in Shapiro without any cross-examination.

In light of these recent decisions by Ontario and Alberta Courts in which we have seen two conflicting approaches in the disclosure of medical records and other documentary disclosure, the minimal evidentiary threshold issue should remain top of mind to lawyers assisting clients with the early steps of a will challenge.

Thanks for reading!

Suzana Popovic-Montag

 

For further reading on threshold will challenges and the evidentiary burden, check out these other blog posts:

Request for Production or a Fishing Expedition?

Corroboration in Will Challenges: Overcoming the “Epic Hurdle”

Lessons from Neuberger Part 1: Does an interested person have an automatic right to proof in solemn form?

Another Will Challenge Threshold Case

Getting Over the Will Challenge Threshold: Applying Seepa v. Seepa

The Threshold for Will Challenges: Joma v Jaunkalns

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