Category: Power of Attorney
It is often said that an Attorney for Property can do anything on behalf of the grantor’s behalf except make a will. This is on account of section 7(2) of the Substitute Decisions Act (the “SDA“), which provides:
“The continuing power of attorney may authorize the person named as attorney to do on the grantor’s behalf anything in respect of property that the grantor could do if capable, except make a will.” [emphasis added]
Although at first glance it would appear that the potential tasks that an Attorney for Property could complete on behalf of a grantor are almost absolute, with the Attorney for Property being able to do anything on behalf of the grantor except sign a new will, in reality the tasks that an Attorney for Property may complete relative to the grantor’s estate planning is more restrictive than this would suggest at first glance. This is because the definition of “will” in the SDA is defined as being the same as that contained in the Succession Law Reform Act (the “SLRA“), with the SLRA in turn defining “will” as including not only typical testamentary documents such as a Last Will and Testament or Codicil, but also “any other testamentary disposition“. As a result, the stipulation that an Attorney for Property can do anything on behalf of the grantor “except make a will” would include not only a restriction on the Attorney for Property’s ability to sign a new Last Will and Testament or Codicil on behalf of the grantor, but also a restriction on the Attorney for Property’s ability to make “any other testamentary disposition” on behalf of the grantor.
It is fairly common for individuals such as spouses to own real property as joint-tenants with the right of survivorship. When one joint-owner dies ownership of the property automatically passes to the surviving joint-owner by right of survivorship, with no portion of the property forming part of the deceased joint-owner’s estate. Although such an ownership structure may make sense when the property is originally purchased, it is not uncommon for circumstances to arise after the property was registered (i.e. a divorce or separation) which may make one of the joint-owners no longer want the property to carry the right of survivorship. Should such circumstances arise, one of the joint-owners will often “sever” title to the property so that the property is now held as tenants-in-common without the right of survivorship, making efforts to attempt to ensure that at least 50% of the property would form part of their estate should they predecease the other joint-owner.
Although severing title to a property is fairly straight forward while the owner is still capable, circumstances could become more complicated should the owner become incapable as questions may emerge regarding whether their Attorney for Property has the authority to sever title to the property on behalf of the grantor, or whether such an action is a “testamentary disposition” and therefor barred by section 7(2) of the SDA.
The issue of whether an Attorney for Property severing title to a property is a “testamentary disposition” was in part dealt with by the Ontario Court of Appeal in Champion v. Guibord, 2007 ONCA 161, where the court states:
“The appellants argue that the severing of the joint tenancies here constituted a change in testamentary designation or disposition and is therefore prohibited by s. 31(1) of the Substitute Decisions Act because it is the making of a will.
While we are inclined to the view that the severance of a joint tenancy is not a testamentary disposition, we need not decide that question in this case. Even if it were, we see no error in the disposition made by the application judge, because of s. 35.1(3)(a) of the Substitute Decisions Act.” [emphasis added]
Although the Court of Appeal does not conclusively settle the issue in Champion v. Guibord, the court appears to strongly suggest that they are of the position that an Attorney for Property severing a joint-tenancy is not a “testamentary disposition” within the confines of the SDA.
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In the recent decision of Fica v Dmytryshyn, 2018 ONSC 2034, the Ontario Superior Court of Justice confirmed that an attorney for property and/or estate trustee has a duty to pass accounts in accordance with the Rules of Civil Procedure.
The facts in Fica feature a family dynamic in which the mother of two sons heavily favoured one over the other. The mother’s favouritism towards her younger son (the “Favoured Son”) was evident throughout his whole life, and manifested in him receiving generous financial support from his mother, for anything and everything that he needed. Her other son (the “Older Son”) appears to have had a fractured relationship with his mother and was somewhat estranged from his family.
In January 2012, the mother appointed her Favoured Son, and the mother’s brother, as her co-attorneys for property and personal care, and as her estate trustees. Both sons and Uncle were beneficiaries under the mother’s will, and entitled to share equally in the residue of the mother’s estate.
In August 2012, the mother became very sick with cancer, at which time the Favoured Son and Uncle began acting under the mother’s power of attorney for property. Even after the Favoured Son and the Uncle began acting in their roles as attorneys for property for the mother, the Favoured Son continued to receive generous financial support from the mother’s assets and, with the knowledge of his mother, continued to use her credit card to support his lifestyle.
After the mother died, the disgruntled Older Son demanded information about alleged misappropriated money and expenses incurred when his younger brother and Uncle were acting as co-attorneys for the mother. However, in what would prove to be a significant error, the Favoured Son and the Uncle declined to provide an accounting upon request. Steps were only taken in this regard by the Favoured Son and the Uncle after the Older Son brought an application to compel and obtained an order to pass attorney/estate accounts.
The Older Son also sought a court order requiring the Favoured Son and the Uncle to reimburse the mother’s estate for the funds that he alleged had been misappropriated by them. In light of the mother’s pattern of behaviour, of being frequently and consistently generous towards her Favoured Son throughout his life, as well as her knowledge that the payment of such expenses continued after the Favoured Son and the Uncle had begun acting as her attorneys for property, the judge dismissed the Older Son’s motion. The judge stated that it was the mother’s prerogative to decide what she wanted to do with her money. The judge concluded that the funds were accounted for and no undue influence was present.
The big takeaway from this decision is with respect to costs. Notwithstanding their success on the merits, the Favoured Son and the Uncle could not recover any of the costs incurred in passing their accounts. The rationale for this decision was that, as co-attorney/co-estate trustee, the Favoured son and the Uncle failed to comply with their obligations pursuant to the Rules of Civil Procedure.
Under the Rules, an estate trustee, attorney or guardian can pass his or her accounts voluntarily on notice to the appropriate parties, or can be compelled by an order of the court under Rule 74.15. Rule 74.15(1) provides that any person who appears to have a financial interest in an estate may move for an order requiring an estate trustee to pass accounts. Furthermore, Section 42(1) of the Substitution Decisions Act provides for the passing of accounts of an attorney or guardian of property.
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In Ontario, we are fortunate to have the ability to execute powers of attorney in respect of our property and our health care. I recently learned that Jersey, in the Channel Islands, has only lately gained the ability to execute a “Lasting Power of Attorney” to record their decisions and intentions in respect of their assets and care. On that note, I thought I would take the opportunity to provide a quick reminder of the importance of executing powers of attorney, and the possible consequences of not doing so.
Powers of attorney in Ontario are governed mainly by the Substitute Decisions Act, 1992, S.O. 1992, c. 30 (the “SDA”). The SDA sets out, among other things, the requirements for powers of attorney, the requisite capacity to grant a power of attorney, and the powers and duties of attorneys. There are two types of powers of attorney: powers of attorney for personal care (dealing with your health, medical care, and other matters related to your well-being) and powers of attorney for property (dealing with your property and financial matters). Generally, powers of attorney will come into play if you become incapable of managing your property or personal care, respectively, but it is also possible to grant a power of attorney for property that is effective immediately (that is, not conditional upon later incapacity).
What Happens if I Don’t Execute Powers of Attorney?
If you do not execute powers of attorney, and you never lose capacity, you may never realize how important they are. However, as we have blogged about previously, as our population begins to live longer, there has been an increase in dementia and other aging-related conditions associated with cognitive decline, meaning that the use and activation of powers of attorney is increasing.
Taking the step of executing powers of attorney means that you have the chance to make your own decision regarding who will handle your affairs in the event that you are no longer capable. If you become incapable, and have not named an attorney for property or personal care, it is open (and may become necessary, depending on your circumstances) for an individual to bring an application seeking to be appointed as your guardian for property or personal care, thus allowing them to act as your substitute decision-maker. The application process requires that notice be given to certain people (including certain family members), and if someone disagrees with the appointment of the proposed guardian, they may contest the guardianship—but the key detail to remember is that the ability to make the decision is taken away from you.
A guardianship application can also be brought if a person has executed a power of attorney, but the existence of a power of attorney will be an important factor for the court’s consideration: pursuant to the SDA, if the court is satisfied that there is an alternative course of action that is less restrictive of the person’s decision-making rights, the court shall not appoint a guardian.
Naming someone to act on your behalf with respect to your property and personal care is a big decision. It is almost certain that you are in the best position to make a determination as to who you want acting for you in this regard. We should all take the opportunity to exercise our own decision-making rights, to choose the person that we want to play the important role of attorney, and not leave it up to others to make this decision for us.
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The deceased left a will that divided his estate amongst his three children. The deceased also left the following note:
“Nov 3, 2014
The way I interpret any existing Will is Healy Lake is in 3 names Ken Ludlow Bob Ludlow Kathy Clubbe So on my demise they become the owners in joint tenancy & Susan is left out of Healy Lake property. However Susan shares any Cash available with Bob and Kathy on a one third basis. This should be changed so she gets cash up to the current value of Healy Lake Property, before the one third sharing should happen. Kenneth Robert Ludlow (wrote by hand) KRL
Must see Terry Fraser about his change KRL”
Was the note a codicil? The question was answered in the decision of Pattillo J. in Ludlow v. Clubbe, 2019 ONSC 941.
As a bit of background, the deceased, Ken Ludlow, had 4 children: Bob Ludlow, Kathy Clubbe and Susan Ludlow . He was estranged from the fourth child. At one point, the deceased had transferred his cottage to himself and his children Bob and Kathy. Susan was not but on title as she lived in B.C. and would not be able to enjoy the cottage. He later wanted to put the cottage in the names of himself and 3 of his children, including Susan. However, his son Bob did not agree to such a transfer.
The deceased discussed options with his lawyer (the “Terry Fraser” referred to in the note). One option discussed was to redo the deceased’s will, so as to provide for Susan, the child that was not on title to the cottage, with an equalizing bequest of cash.
The son argued that the note was not a testamentary document, but rather, simply the “musings” of the deceased with respect to potential changes to his will.
Justice Pattillo disagreed. He observed that “A holographic paper is not testamentary unless it contains a deliberate or fixed and final expression of intention as to disposal of property on death. Further, the onus is on the moving party to show, by the contents of the paper or by extrinsic evidence that the paper is of that character and nature: Bennett v. Toronto General Trusts Corp., 1958 CanLII 49 (SCC),  S.C.R. 392 at para. 5.”
He went on to find that the note clearly established a testamentary intention on behalf of the deceased. Further, the note “has a formal manner to it” which supported the conclusion that the deceased intended it to be of a testamentary nature. Justice Pattillo referred the manner in which the note was signed (see extract of note, above). Further, the note was put in an envelope and was found amongst the deceased’s papers. “By formalizing it like he did and putting it in an envelope, I am satisfied that Mr. Ludlow considered that he had created a formal document which he intended to finally have dealt with resolving Susan’s earlier exclusion from the ownership of the Cottage.”
Interestingly, Justice Pattillo noted that the deceased’s handwritten note was intended to equalize the gifting by the deceased. However, the note actually provided for a greater benefit for Susan, the daughter who was not on title. It gave her a cash bequest equal to the full value of the cottage. As it turned out, this was not an issue as the cash value of the estate was roughly equal to 1/3 of the value of the cottage.
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It is well established that in order for a will to be valid in Ontario, strict compliance with the process of execution must be followed. For example, a formal will with only one witness will not be valid.
However, this is not necessarily the case with a power of attorney. A power of attorney can be declared valid by court even if the formal requirements of execution are not followed.
Section. 10(4) of the Substitute Decisions Act provides that:
A continuing power of attorney that does not comply with subsections (1) and (2) is not effective, but the court may, on any person’s application, declare the continuing power of attorney to be effective if the court is satisfied that it is in the interests of the grantor or his or her dependants to do so.
(Subsection (1) provide that a continuing power of attorney shall be executed in the presence of two witnesses, each of whom shall sign the power of attorney as witness. Subsection (2) itemizes who may NOT be witnesses.)
Thus, if a power of attorney only has one witness, or is witnessed by a prohibited witness, the court may still declare that it is effective.
Another basis for finding a power of attorney valid even if the Ontario requirements for execution are not strictly complied with is under s. 85 of the Substitute Decisions Act. This section provides that a continuing power of attorney for property or a power of attorney for personal care is valid if at that time of its execution it complied with the internal law of the place where the power of attorney was executed, or where the grantor was domiciled or where the grantor then had his or her habitual residence.
Thus, even if the requirements of due execution are not complied with, all may not be lost.
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Abraham Harold Maslow ( April 1, 1908 – June 8, 1970) was a psychologist best known for creating Maslow’s “Hierarchy of Needs” theory on fulfilling human needs in priority, culminating in self-actualization. But, he is also known for the “Law of the Instrument” or the over-reliance on the familiar. He is quoted as saying, “I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” (The Psychology of Science 1966).
When thinking of a Power of Attorney, the temptation for an estate lawyer may be to first think of the Substitute Decisions Act. However, there are times when the Powers of Attorney Act might be more appropriate for part of an estate plan or administration. For example, dealing with a beneficiary resident in a foreign jurisdiction can be made much more manageable with a Power of Attorney. This type of Power of Attorney does not, however, qualify as a Continuing Power of Attorney.
Another consideration is the differences in the form and wording of the Power of Attorney and the formalities of execution. As noted on page 8 of Kimberly Whaley’s “Powers of Attorney” (2016) in a chapter by Andrea McEwan:
“The Powers of Attorney Act does not impose any formal requirements for the power of attorney document. This is in contrast to the Substitute Decisions Act which is formalistic, with a prescribed form, and validity and execution requirements.”
The Continuing Power of Attorney has strict requirements for two independent witness signatures, whereas the Power of Attorney Act does not state any witness requirements or formalities of signing. Consideration should therefore be given to those occasions when you could rely on the Powers of Attorney Act instead of the Substitute Decisions Act.
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In 1934, Fred Coots co-wrote “Santa Claus is Comin’ to Town” with lyricist Haven Gillespie. The song went on to be one of the highest money-making songs of all time (so far). It has been performed by over 200 artists, including, most notably, Bruce Springsteen. The song is the basis for the 1970’s classic Christmas special of the same name.
Fred Coots died on April 8, 1985. Haven Gillespie died in 1975.
In 2015, after an eight year battle, the U.S. Second Circuit Court of Appeals held that the music rights should revert to the heirs of the Coots estate. They were previously sold to a musical publishing company. However, under U.S. copyright laws, songwriters have the right to terminate publishing contracts in certain circumstances. The Court of Appeal found that Coots had effectively given notice of the termination of the copyright, and that the copyright therefore would revert to the Coots heirs in 2016.
A similar lawsuit was commenced by the Gillespie family in 2017. The family sued the music publisher Memory Lane Music for royalties claimed to be owing to the Gillespie estate.
In the recent decision of Charles v. Charles Estate, 2018 ONSC 7327, the court discussed the interplay between a claim for interim support, and claims for equalization.
There, the Applicant was the deceased’s spouse of 22 years. There was some evidence that the Applicant and the deceased may have been separated prior to the deceased’s death.
Fifteen days before the deceased died, the deceased severed the joint tenancy on the matrimonial home and other properties, transferred certain properties to his son, liquidated various RRSPs, and drew money on a line of credit secured by the matrimonial home. He also changed his will to significantly reduce the bequests to the Applicant.
The Applicant commenced proceedings for an equalization under the Family Law Act, and to set aside various transactions entered into by the deceased just prior to his death. She also commenced a claim for dependant support.
In the court decision, the court addressed the Applicant’s claim for interim support.
In deciding whether to award interim support, the court considered whether the Applicant was in need of and entitled to support. Relying on the decision of Perkovic v. Marion Estate, 2008 CanLII 52315, the court stated that the test was:
- whether the claimant falls within a “qualifying relationship” under the Succession Law Reform Act;
- whether the deceased was providing support or was under a legal obligation to provide support immediately before his death;
- whether the deceased did not make adequate provision for the claimant’s support.
The burden is on the Applicant to satisfy each of the three elements necessary to obtain an order for interim support on an arguable or prima facie basis.
In Charles, the court found that the Applicant was not in need of support. She earned more income than the deceased, and was the primary provider for the household. There was no evidence that the economic circumstances of the Applicant had worsened to any significant extent since the date of death.
The court did, however, order that the estate pay the interest on the line of credit incurred by the deceased.
In concluding, the court stated that the Applicant’s claim for interim support was “conflated with her property based claims”. Those claims would continue. However, they did not entitle the Applicant to claim interim support. The court did not comment on the merits of such claims.
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Estate law is centred on asset planning for an end-of-life experience. So not surprisingly, we’ve seen just about every end-of-life situation you can imagine. I can tell you first-hand, many of these situations are painful, fearful, and depressing.
Does it have to be this way? The answer, in many cases, is “no.” We’re beginning to learn about new treatments that can help – and one of the most promising is the use of psilocybin, the active compound in hallucinogenic mushrooms.
Thank you legal cannabis
The legalization of cannabis in Canada and many U.S. states is breaking down barriers for research that was previously taboo, illegal, or underfunded. This is especially so in areas of mental health.
The treatment of physical pain with restricted drugs like morphine has long been accepted. But the use of mind-altering drugs for mental health? Not so much.
That stigma is changing. We’re on the edge of a new frontier in the treatment of “mental pain” – anxiety, depression, and fear of death – and psilocybin is front and centre.,
Research has shown that one of the most promising uses for psilocybin is in end-of-life situations. For those with a terminal illness, psychedelics not only provide relief from the terror of dying during the actual psychedelic sessions, but for weeks and months after.
According to researchers, psilocybin can create a deeper meaning and understanding of terminal situations – and is helpful in relieving the agony of the inevitability of death. Patients could reassure themselves and their loved ones that from a mental standpoint, they truly were okay. Many reported that using psilocybin was one of the most important experiences of their life. You can read more about the studies here.
Change is coming
There are calls for psilocybin to be reclassified for medical use, paving the way for the drug to be used to treat a number of mental health conditions – from fear of death, to depression, to addiction. The New York Times discussed this movement in a recent article.
This new attitude embracing research into the possible use of psychedelics for mental health is a welcome change. I look forward to the findings.
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Applications to pass accounts are unique as civil proceedings go. The nature of the inquiries being made by the Court, the relief that a judge is empowered to grant, and the procedural considerations that apply are all features that distinguish applications to pass accounts from other civil applications. Procedural considerations in particular have garnered some notoriety recently as a result of several notable decisions released in the past few years. The recent decision of the Court of Appeal for Ontario (then sitting as the Divisional Court) in Wall v Shaw, 2018 ONCA 929, provides some clarity to a few of the loose ends.
In Wall, the Deceased died leaving a Will naming the appellant as estate trustee and which created two testamentary trusts for the benefit of her two children. The Deceased’s nieces and nephews were also named as contingent beneficiaries in the event that both children died before vesting in the trust property.
The estate trustee acted for more than 10 years, but never formally passed his accounts. Instead, the estate trustee held frequent informal meetings with the Deceased’s children to review the administration of the estate and to discuss the estate trustee’s compensation.
A dispute between the Deceased’s daughter and the estate trustee relating to the latter’s compensation eventually led the daughter to bring an application seeking an order compelling the estate trustee to pass his accounts.
The estate trustee subsequently commenced an application to pass accounts in March 2015. In June 2015, the Deceased’s daughter filed a notice of objection to the accounts, followed in January 2016 by a notice of objection delivered by two of the Deceased’s nieces.
In response, the estate trustee brought a motion seeking to strike out the objections of the daughter on several grounds. Notably, the estate trustee took the position that the daughter’s approval of the accounts at the informal meetings constituted acquiescence of the estate trustee’s conduct. In the alternative, the estate trustee argued that the daughter’s objections were now statute-barred pursuant to sections 4 and 5 of Ontario’s Limitations Act or barred by the doctrine of laches.
The estate trustee was unsuccessful at first instance on all three grounds, but only chose to appeal the first ground. Specifically, the estate trustee argued on appeal that the judge at first instance had erred in refusing to apply the two-year limitation period under section 4 of the Limitations Act. The appeal was dismissed, and the reasons on appeal provide some procedural clarity in respect of the interplay between limitation periods and passings of accounts.
Section 4 of the Limitations Act generally provides that a “proceeding” cannot be commenced in respect of a “claim” if more than two years have elapsed since the date the claim was discovered. The Court of Appeal took issue with each of the quoted terms.
Notably, the held that a notice of objection does not commence a “proceeding” for the purposes of section 4 of the Limitations Act. Rather, a notice of objection ought to be viewed as a response to a proceeding that has already been commenced, being the application to pass accounts. The Court also pointed to its prior ruling in Armitage v The Salvation Army, in which it was held that an application to pass accounts was not a “claim” pursuant to section 4 of the Limitations Act. Accordingly, it followed that a responding objection raised in that application could also not constitute a claim.
Finally, the Court highlighted an important distinction between applications to pass accounts and other civil applications. Unlike a traditional civil claim, the Court in an application to pass accounts is not tasked with awarding judgment in favour of one party or the other. The purpose of an application to pass accounts to is initiate a “judicial inquiry” into the management of an estate and, if appropriate, provide redress to the estate, rather than to the beneficiaries personally.
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