Category: Estate & Trust
A recent CBC article demonstrates the importance of having a testator regularly review, or at least consider, their current estate plan to ensure that it conforms to their testamentary intentions, and the potential pitfalls of failing to do so or of failing to seek legal advice.
Eleena Murray, of Vancouver, British Columbia, died leaving a Last Will and Testament dated sometime in 2003. The Will provided cash legacies to various relatives, totaling approximately $440,000, and left the residue of Eleena’s estate to a charitable organization, the SPCA.
Although it is not clear, at the time the Will was drawn, it appears as if the residue of the Estate would have largely consisted of her interest in her house, situated in the Point Grey neighbourhood of Vancouver. Presumably, although it is unclear, the total value of all of the cash legacies was likely close to the fair market value of the house, such that Eleena intended to divide her estate roughly equally between the legatees and the charity.
However, in the years since the Will was drawn, the real estate market in Vancouver saw massive growth, with property values rising significantly, and the value of the residue of Eleena’s estate along with them. In 2017, perhaps recognizing what had become a considerable discrepancy between the values of the cash legacies and the value of the house, Eleena apparently drafted a handwritten note containing, among other instructions, an intention to limit the SPCA’s interest in her estate to a flat bequest of $100,000.
It is unclear whether the note was signed by Eleena or subscribed to by attesting witnesses (although two witnesses swore affidavits attesting to the fact that the note was prepared by Eleena). Eleena died only months later, without having amended her Will to reflect her purported intentions by way of the note. Although the value of the house, and therefore the residue of the Estate, increased significantly, Eleena never formally amended her estate plan.
Litigation has since ensued, with Eleena’s family members asserting that the handwritten note is a testamentary document that accurately represents her intentions.
Were this litigation taking place in Ontario, a court might find that the handwritten note would constitute a holograph will, assuming it was signed by Eleena. A holograph will is a will that is made entirely in the handwriting of the testator and signed by them, without the need for attesting witnesses.
In British Columbia, the analysis is slightly more nuanced. There is no equivalent provision under BC legislation that specifically recognizes the validity of holograph wills, as the Succession Law Reform Act does in Ontario. That said, British Columbia’s Wills, Estates and Succession Act empowers a court to make an order that a record purporting to be a will if the court is satisfied that the document represents,
- The testamentary intentions of a deceased person;
- The intention of a deceased person to revoke, alter, or revive a will; or
- The intention of a deceased person to revoke, alter, or revive a testamentary disposition in a document other than a will.
The court is equally empowered to make an order that a will that is not made in conformity with the applicable legislation is equally as effective as if it had been.
In the case at hand, the prevailing question will likely be whether the court is satisfied that the handwritten note accurately represents Eleena’s testamentary intentions. If so, the subsequent issue to be considered is whether the balance of the Estate that is not dealt with pursuant to the note passes by way of an intestacy, but that is a topic for another day.
Thanks for reading.
Prudent estate planning techniques frequently lead a testator or settlor to contemplate gifts or distributions to alternative beneficiaries to whom they do not necessarily intend to convey an express interest.
Often, these gifts-over are made in contemplation of a particular condition coming to pass – for example, where the intended beneficiary predeceases the testator. Failing to account for such instances could result in a lapsed gift (subject to the applicability of the anti-lapse provisions at section 31 of the Succession Law Reform Act), a partial intestacy, or, more generally, the conveyance of an interest to a person that the testator did not intend to benefit.
Although gifts-over are generally granted in favour of individuals of the testator’s choice, to maximize their control over their estate, that need not be the case. Gifts-over may be made in favour of individuals who may not yet have been born, such as the issue or lineal descendants of a testator’s young grandchildren. When litigation that impacts the interests of these unborn or unascertained beneficiaries arises, the first questions that ought to come to a litigator’s mind are who should be appointed to act on their behalf, and how should that appointment be achieved?
One’s mind might immediately jump to the appointment of a litigation guardian. In the case of a beneficiary who is a minor, that would be correct. Pursuant to Rule 7 of the Rules of Civil Procedure, a party under disability (which would include a minor) must be represented by a litigation guardian. Furthermore, the Children’s Lawyer is the presumptive litigation guardian for all minors unless and until another individual files an affidavit following specific criteria set out at Rule 7.02.
However, where the interests of an unborn or unascertained person or class of persons is concerned, recent direction from the Children’s Lawyer suggests it is Rule 10, not Rule 7, that guides us. Rule 10.01 empowers a judge to appoint a person to represent “any person or class of persons who are unborn or unascertained” who have a present, future, contingent, or unascertained interest in the subject matter. Strictly speaking, an unborn or unascertained individual is not a person under disability or a minor as defined under the Rules, and so a litigation guardian, although filling a similar role as a representative, should not be appointed.
As a point of practice, a party seeking a representation order would be well advised to serve the Children’s Lawyer whether or not the applicant is seeking to have the Children’s Lawyer act as representative, or whether another individual is seeking that appointment. Although Rule 10 differs from Rule 7 in that the latter requires the Children’s Lawyer to have notice of any motion to appoint a litigation guardian while the former does not in the context of a representation order, it is nonetheless recommended that the Children’s Lawyer be given notice to ensure the interests of the unborn beneficiaries are appropriately represented.
Thanks for reading.
As 2020 begins to wind down and mercifully come to an end, we are reminded of new rules coming into force for administrators of trusts beginning January 1, 2021.
As part of its 2018 federal budget, the Government of Canada introduced new tax return filing and information reporting requirements for trusts. Currently, a trust must file a T3 return if it has tax payable on its assets, or income or capital is distributed to beneficiaries.
Going forward, the Canada Revenue Agency (CRA) will begin to collect detailed information on the identity of all trustees, beneficiaries and settlors, as well as any person who has the ability to apply control over trustee decisions about appointment of income or capital. This information includes the name, address, date of birth, jurisdiction of residence, and taxpayer identification number (“TIN”). This information must now be filed with a T3 return.
For some trusts, a T3 return may never have been required before, for others, these new reporting requirements could prove very onerous. Trustees and administrators are encouraged to plan ahead and seek the advice of a tax professional as non-compliance carries significant penalties of around $2,500.00 on top of any existing penalties.
When it comes to estate planning, the new rules will affect most express trusts, and settlors preparing their testamentary documents should also seek the advice of a planning professional. Especially as it is yet unknown how the new rules may affect the use of secret and semi-secret trusts.
Oosterhoff on Trusts (9th ed.) reminds us that with a secret trust, “the Will neither discloses the existence of the trustee, nor the beneficiary,” and under a “semi-secret trust, the Will discloses the existence of the trustee, but not the beneficiary” (p.830).
We are expecting the CRA to issue clarification and guidance in the coming months as the new rules yield a host of as yet unanswered questions, namely: By seeking out personal details from beneficiaries, does a trustee then risk breaching the terms of a trust that was settled on terms meant to stay private? Is there a risk of increased non-reporting through the use of secret trusts? And what happens if the required information is not available, or withheld?
As our managing partner, Suzana Popovic-Montag told the Law Times in February of this year, “There has been a historical lack of transparency in the administration of trusts and estates, and governments are now taking an interest in the use of these tools in the transfer of assets for taxation purposes.” Beyond the questions raised above, Suzana goes on to say that we should “‘expect concern surrounding privacy issues’ any time there are new or enhanced disclosure obligations.”
The federal government is looking to crack down on aggressive tax avoidance, and beginning January 1, 2021, a new era of disclosure will begin. While the full picture is not yet completely clear, we will keep you posted.
Thanks for reading!
Ian Hull and Daniel Enright
 The TIN includes a social insurance number for individuals, a business number for corporations and partnerships, or an 8 digit trust account number issued by CRA to trusts.
This week on Hull on Estates, Natalia Angelini and Kira Domratchev discuss secret trusts and the recent decision of the British Columbia Court of Appeal in Bergler v Odenthal, 2020 BCCA 175.
Should you have any questions, please email us at email@example.com or leave a comment on our blog.
We have previously blogged extensively on the issue of inaccessibility of digital assets and the absence of legislation in Canadian provinces, including Ontario, to clarify the rights of a fiduciary to access and administer digital assets on behalf of a deceased or incapable rights holder.
While the Substitute Decisions Act, 1992, and Estates Administration Act provide that attorneys or guardians of properties and estate trustees, respectively, are authorized to manage the property of an incapable person or an estate, Ontario does not currently have any legislation that clarifies these rights by explicit reference to digital assets. While continuing powers of attorney for property and wills can be crafted to explicitly refer to digital assets and the authority of an attorney for property or estate trustee to access accounts and information in the same manner in which the user him or herself was able, access issues can still arise during incapacity or after death.
A recent CBC article highlights the inadequacy of legislation facilitating access to digital assets. A surviving wife of over forty years was the estate trustee and sole residuary beneficiary of her late husband’s estate. In seeking access to an Apple account that she shared with her husband, she was told that she would require a court order, even after providing Apple with a copy of her husband’s death certificate and will. Apple cited the United States’ Electronic Communications Privacy Act, which predates the prominence of computers and the internet in our daily lives, as prohibiting them from distributing personal electronic information. Four years after her husband’s death in 2016, the Ontario woman is now obtaining pro bono assistance in seeking a court order granting access to the shared account in the absence of any other options.
It is anticipated that the adoption of the Uniform Law Conference of Canada’s Uniform Access to Digital Assets by Fiduciaries Act would resolve some or all of the issues currently faced by Ontario residents in accessing and administering digital assets. However, now over four years since its release, only Saskatchewan has implemented provincial legislation mirroring the language of the uniform act.
It will be interesting to see in coming years whether legislative updates will address continued barriers to the access and administration of digital assets and the corresponding access to justice issue.
Thank you for reading,
Other blog entries that may be of interest:
Recent reports suggest that divorce and separation rates are on the rise during the pandemic (with rates of separation cited as having increased as much as 20% to 57% from last year, depending on the jurisdiction). This has been in part attributed to the stresses of lockdown and worsening financial situations.
Many Canadians may not be fully aware of the legal impact that separation and divorce have upon an estate plan, mistakenly believing that there is no real difference between marriage and a common-law partnership. However, the distinction in Ontario remains important from an estate planning perspective – for example:
- A common-law or divorced spouse does not have any automatic rights upon the death of a spouse who does not leave a will, whereas married spouses take a preferential share and additional percentage of a predeceasing married spouse’s estate on an intestacy;
- A married spouse has the right to elect for an equalization of net family property pursuant to the Family Law Act on death, whereas common-law spouses have no equalization rights on death;
- Marriage automatically revokes a will (unless executed in contemplation of the marriage), whereas entering into a common-law relationship has no such impact; and
- Separation (in the absence of a Separation Agreement dealing with such issues) does not revoke a will or any gifts made to a separated spouse, whereas gifts under a will to a divorced spouse are typically revoked and the divorced spouse treated as having predeceased the testator.
While top of mind for estate lawyers, lawyers practising in other areas of law and their clients may not necessarily turn their minds to the implications that separation and divorce may have on an estate plan, particularly soon after separation and prior to a formal divorce. With the potential for family law proceedings to be delayed while courts may not yet be operating at full capacity, combined with elevated mortality rates among certain parts of the population during the pandemic, it may be especially worthwhile in the current circumstances to remind our clients of the importance of updating an estate plan following any material change in family circumstances, including a separation or divorce.
Thank you for reading and stay safe,
Need a little help from the court to move an estate matter along? Then Rule 74.15 is the rule for you!
Found under Rule 74: “Estates – Non-Contentious Proceedings”, Rule 74.15 allows “any person who appears to have a financial interest in an estate” to move for various forms of relief. Often, such a motion is required due to the failure of a party to take a required step. Despite the name of the rule, these matters are often contentious.
Under Rule 74.15, a number of various orders can be sought. These include:
- An Order to accept or refuse an appointment as estate trustee. This can be useful where a person is named as Estate Trustee in a Will, but is not taking any steps to administer the estate. The Order usually provides that if the person does not make an application for a Certificate of Appointment within a certain time, they are deemed to have renounced as Estate Trustee, opening the door to the appointment of an alternate;
- An Order to consent or object to a proposed appointment. If an Order appointing an estate trustee is required, either because there is no estate trustee appointed in the Will, or the person appointed in the Will cannot act, or if there is no Will, then usually the beneficiaries receiving the majority of the estate can consent to the appointment of an estate trustee. If such consent cannot be obtained, then a motion for an Order that the person consent or object can bring the matter to a head;
- An Order requiring the estate trustee to file with the court a statement of the nature and value of the assets of the estate as at the date of death. Can’t get information about the estate from the estate trustee? Then this is the Order you need;
- An Order for further particulars. If you get an Order requiring that the estate trustee file a statement of assets, but are still in the dark, then obtaining this Order will require the estate trustee to provide further particulars;
- An Order requiring a beneficiary who is also a witness to satisfy the court that the beneficiary or the beneficiary’s spouse did not exercise improper or undue influence on the testator. Normally, under s. 12(1) of the Succession Law Reform Act, a bequest to a person who witnesses the Will or that person’s spouse is void. The court, however, can find that the bequest is not void if it is satisfied that the person or spouse did not exercise any improper or undue influence. If an estate cannot proceed because the estate trustees do not know if a certain bequest is void or not, this type of Order can break the log jam, and put the person to the test of disproving improper or undue influence;
- An Order to Pass Accounts. If you want an estate trustee to “show their work”, then an Order requiring the estate trustee to pass their accounts will give you a good look into the estate records.
Although Rule 74.15(2) provides that a motion for an Order for Assistance may be brought without notice, case law has established that notice should be given in most cases. See Noah Weisberg’s blog on that topic, here.
There is also significant case law on who can apply for an Order for Assistance; that is, who “appears to have a financial interest in an estate”. That is a discussion for another day.
Have a great weekend.
In June of this year, the Divisional Court of Ontario clarified that Section 10(1) of the Estates Act did not supersede the Courts of Justice Act where leave is required in order to appeal an interlocutory order.
In Luck v. Hudson Re: Estate of Albert Luck, the court however did grant leave, in order to immediately dismiss an appeal that raised issues not heard by the judge in the court of first instance and revealed ulterior concerns.
Steven Luck is the son of the late Albert Luck. Albert owned a house jointly with his wife Marylou Hudson. The relationship between Steven and Albert had deteriorated during Albert’s life and litigation ensued. Albert sued his son, who in turn filed a counterclaim- skidoos and cottage upgrades were all under dispute. Then Albert died, and the Will challenge began.
The motion judge, Justice Salmers, held that money from the sale of the house of Albert and Marylou be paid into court to the credit of the estate of Albert and to be paid out and distributed pursuant to the terms of the Will.
Subsection 10(1) of the Estates Act says that a party to a proceeding under that statute “may appeal to the Divisional Court from an order, determination or judgment if the value of the property affected” exceeds $200. Steven did not seek leave to appeal the interlocutory order and instead relied on 10(1) saying that he had an appeal as of right.
Since only this brief decision is reported, we do not know the underlying dispute which gave rise to Salmers, J’s interlocutory injunction, but the panel made two issues clear:
1: Leave is required to hear an appeal of interlocutory injunction
2: An appeal is not the appropriate venue to raise new issues, or air grievances.
The Courts of Justice Act is clear in section 133 that no appeal lies without leave from an order made on consent, or where the appeal is only to costs. The test for granting leave to appeal from an interlocutory order is an onerous one. If the panel feels the decision was well reasoned and the issues raised are not of general importance (Bell ExpressVu Ltd v Morgan (2008) O.J. No. 4758) leave will not be granted.
In this case, the court determined that Steven was seeking not only to appeal the injunction but that, “at its root the true purpose of that motion was to raise concerns as to the validity of the Will.” While Steven made no objection to the appointment of Trustees or to the Will in first instance, the court went on to say:
“What has become apparent is that Steven Luck wants to contest the Will in order to overturn the distribution of the funds held in court. He wishes those funds to remain available as security for the enforcement of a counterclaim he has made in response to an action commenced by his father (prior to his death) against Steven Luck.”
The court determined that Steven was actually seeking a Mareva injunction: A freezing of the estate assets, as security, in advance of any judgement made, potentially, in his favour.
The court found Steven had not met any of the prerequisites for such an order, and in fact, may have been barred by the Limitations Act, 2002, as previously determined by Justice Salmers.
In the end, as quickly as leave was granted, the appeal was dismissed. And Steven, now on the hook for a $25,000 cost award, was no better off.
A valuable caution to those considering the appeal route.
Thanks for reading!
Suzana Popovic-Montag and Daniel Enright
Occupation rent is an equitable remedy available in cases of unjust enrichment. It is a rebuttable presumption that one party shall pay reasonable compensation to another for occupying a premises, which may be rebutted if there is evidence proving that no compensation was to be paid.
In the recent decision of Cormpilas v. Ioannidis, 2020 ONSC 4831, Justice Kurz ordered occupation rent to be payable by the beneficiary of an estate. In this case, Gregory and Barbara owned a home as tenants in common. When Barbara died in 2012, her half-interest in the home was transferred to her grandchildren, as the beneficiaries of her estate. At this time, John, Gregory and Barbara’s son (and the grandchildren’s uncle) moved into the home with his family to help Gregory. Gregory died in November 2017 and his half-interest in the home was transferred to John, as the beneficiary of his estate. John and his family continued living at the home until April 30, 2020.
Despite lengthy negotiations between the grandchildren and John, no agreement could be reached for John to buy out the grandchildren’s half-interest in the home, nor did John and his family move out. The Court found that John had exclusive use of the home from November, 2017 to April, 2020 and that although he paid some expenses as a co-owner, he received a far greater benefit in the exclusive, rent-free occupation of the home. Accordingly, Justice Kurz found that John was unjustly enriched at the grandchildren’s expense and that occupation rent for the period of John and his family’s occupation of the home, was an appropriate remedy in the circumstances.
Interestingly, although the Court found in the grandchildren’s favour, because there was no proper request for rent prior to the commencement of the underlying proceeding, the grandchildren were only entitled to occupation rent from February 1, 2019 to April 30, 2020.
The Court further determined that $1,500/month for the above-noted period was a reasonable award for occupation rent after considering the value of the home, John’s half-interest in the home, the term of its occupation by John and his family, the fact that John maintained the home by paying certain carrying charges (such as taxes and insurance) during the period in question, the fact that the home was not maintained in the best of conditions, and the fact that the home value increased significantly during the period of John’s sole possession.
Thanks for reading!
The Henson Trust, and planning for individuals receiving ODSP, has been thoroughly discussed on this Blog in the past, but today we look at the potential necessity for multiple Henson Trusts.
In July of 2019, Stuart Clark discussed the concept of a Henson Trust and the risk to provincial entitlements if “a testator does not take steps prior to their death to ensure that their estate plan includes tools such as a Henson Trust that would allow the beneficiary to receive the inheritance as well as continue to receive their benefits from ODSP.”
A 2019 decision by the BC Court of Appeal upheld a lower court’s finding that a distribution of estate assets to a trust that was settled by the Deceased during his lifetime was inoperable. Such a distribution is known as a pour-over clause as the assets are said to “pour over” into the separate trust.
In Ontario, the fundamental issue with the use of pour-over clauses is that by allowing a distribution from a Will to a separate trust (that can be easily altered after the Will is executed), it may not conform to the strict formal requirements otherwise required for a Will to be altered. The formalities required to alter or amend a trust are much lower than those required to create a Will.
Which brings us to today’s topic: Families may need multiple Henson Trusts.
A family-owned business, for example, may yield assets for both uncles and aunts, as well as for the parent of an individual who receives provincial assistance. Because of the issues with pour-over clauses, it becomes extremely difficult for a gift to vest in a beneficiary and then be subsumed by a current or future Henson Trust. As a result, an outright gift to a nephew may jeopardize his provincial entitlements despite the existence of a separate Henson Trust.
Further, while a Will can be changed or altered at anytime prior to death, it is never a good idea to rely on other people to provide for a particular family member. However, because multiple Henson Trusts can feel cumbersome, discussing plans with family members is always a good idea when appointing the same trustee is a possibility.
Depending on the family and circumstances, talking with family members about estate plans can be challenging, but sharing ideas about Henson Trusts can potentially ensure that no one loses access to ODSP.
Thanks for reading.
Ian Hull and Daniel Enright