Considering an application for partition or sale of real property that was bequested to you? Then consider the effect of s. 3(2) of the Partitions Act, R.S.O 1990, Chapter P.4.
The Partitions Act allows a joint tenant or tenant in common to bring an application or an action for the partition or sale of the land. However, s. 3(2) of the Act contains a prohibition on when such a proceeding can be commenced. In particular, where the land is held in joint tenancy or tenancy in common by reason of a devise or an intestacy, no proceeding shall be taken until one year after the decease of the testator or person dying intestate in whom the land was vested.
In Clayton v. Clayton, 2018 ONSC 1612 (CanLII), the court dismissed a motion for “partition and sale” of a property by the estate trustee of a joint holder of a property because it was brought before the expiration of one year after the death of the deceased applicant. As such, it was held to be a nullity.
The court dismissed the application for partition or sale without any reasons, other than a reference to s. 3(2) of the Partitions Act. It is not entirely clear, however, that the section applies, as the application was not brought by the beneficiaries of the estate, but rather, by the estate trustee of the estate. It is not entirely clear that the land was held in joint tenancy or tenancy in common “by reason of a devise or an intestacy”. It appears that the tenancy was between a husband and wife. The sole beneficiaries of the wife’s estate were her two children, who were not parties to the proceeding.
Clayton dealt with two other issues, as well. One issue was dismissed, and one was abandoned.
On the question of costs, the court held that as the respondent was entirely successful, he was prima facie entitled to costs. However, as there was no evidence that the applicant estate trustee was acting in breach of her duties to the estate or the beneficiaries, the court declined to make a costs award against the applicant personally. Further, as a costs award against the estate would ultimately come out of the pockets of the beneficiaries, the court declined to make a costs award against the estate. No order as to costs was made.
Keep s. 3(2) of the Partition Act in mind when considering any proceeding for partition or sale involving estate property.
Have a great weekend.
Is an Estate Trustee allowed to withhold an inheritance? What if the inheritance is a specific bequest and the Estate has claims against the beneficiary? These questions were considered in June Brayford v Brayford.
I will do my best to simplify the facts. The testator named his two sons as Estate Trustees. His Last Will left a specific bequest, the proceeds of a CIBC account, to his wife (from a second marriage). The residue passed to the Estate Trustees. While the testator was still alive, a joint account was set up with his wife (an investment account with Desjardins Financial and Edward Jones).
After the testator‘s passing, the Estate Trustees took issue when the wife withdrew funds from the joint account, believing that the funds should have fallen into the residue. They alleged that the testator lacked the capacity to set up a joint account, and that the wife (who was also the testator’s guardian for property and personal care) breached her fiduciary duty by the setting up of the joint account. In response, the Estate Trustees refused to pay the specific bequest.
Two claims arose – the wife demanded payment of the specific bequest and the Estate Trustees claimed an equitable set off of the specific bequest pending the resolution of the joint account assets.
The Court first considered the right of retainer as set out in Cherry v. Boultbee (41 ER 171), which sets out the right that an estate trustee has of keeping out of the share of an inheritance, a debt owing to the estate by the beneficiary. The court noted an exception to this right though – when the inheritance is a specific bequest. It is this exception that the wife relied on to compel the payment of the specific bequest.
The Estate Trustees claimed an equitable set-off. They wanted to withhold the payment of the specific bequest until the claim against the wife regarding the joint account was heard.
The Court looked to Olympia for the procedure to be followed when considering a claim for both right of retainer and set-off. It was held that given that the two claims were so closely connected, that it would be unjust to allow the wife to enforce the payment of the specific bequest without taking into account the claim by the Estate Trustees regarding the joint account. So, the Estate Trustees were allowed to hold off on paying the specific bequest, pending the outcome of their claim regarding the joint account.
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An insured may designate a beneficiary of the proceeds of a policy of insurance. This can be done by a beneficiary designation that is signed by the insured. No other formality is required.
An insured may also designate a beneficiary of a policy of insurance in a will.
What happens, however, if the will is found to be invalid?
Section 192(1) of the Insurance Act provides that a designation in an instrument purporting to be a will is not ineffective by reason only of the fact that the instrument is invalid as a will.
This may be due to the different procedural requirements of due execution of a will, versus the minimal procedural requirements of the execution of a beneficiary designation. Thus, a document signed by the testator/insured but not witnessed by two witnesses may be ineffective as a will, but may be effective as a beneficiary designation.
Different considerations may apply where the will is found to be invalid on the basis of lack of testamentary capacity. If the testator/insured is found to be incapable of executing a will, it may follow that he/she is incapable of executing a beneficiary designation. However, the applicable burden of proof may lead to a finding that one is incapable of signing a will, but capable of signing a beneficiary designation. In Fawson Estate v. Deveau, 2016 NSCA 39 (CanLII), the Court of Appeal was faced with a case where a will executed on April 23, 2004 was found to be invalid. The estate trustee then moved for summary judgment in a separate proceeding brought to declare beneficiary designations executed shortly before and after the execution of the Will invalid. The motion for summary judgment was dismissed, as the judge found that there was a genuine issue for trial. The Nova Scotia Court of Appeal agreed.
In dismissing the appeal, the Court of Appeal referred to the different burdens of proof. In the will challenge, the burden was on the will challenger to show suspicious circumstances. The burden then shifted to the propounder to show that the testator had testamentary capacity. In the challenge to the beneficiary designations, the burden was said to be on the challenger, throughout, to show that the insured did not have capacity to execute the beneficiary designations.
In a case of undue influence, a will found to be invalid due to undue influence may not necessarily mean that the insurance beneficiary designations were the result of undue influence: a separate analysis is required.
In conclusion, when considering rights and remedies in the face of a potentially invalid will, do not immediately assume that an invalid will means that insurance beneficiary designations contained in the will are invalid as well. A deeper analysis of the reason for the invalidity is necessary.
Thank you for reading.
Guardians of property (and attorneys for property) need to make reasonable efforts to determine whether the incapable person has a Will, and if so, to determine what the provisions of the Will are. This requirement is mandated by s. 33.1 of the Substitute Decisions Act (“the Act”).
Section 33.2 of the Act authorizes the guardian to obtain information from third parties with respect to the Will. The section requires that a person having custody or control of property belonging to the incapable person provide the person’s guardian with any information requested by the guardian that concerns the incapable person, and to deliver the property of the incapable person to the guardian when requested. “Property” is specifically deemed to include the incapable person’s Will.
Why is this important? Because a guardian is required to not dispose of property that is the subject of a specific bequest in the incapable person’s Will (other than money): s. 35.1 of the Act.
This prohibition is subject to certain exceptions. The property may be disposed of if the disposition of that property is necessary to comply with the guardian’s duties, or the guardian may make a gift of the property to the person entitled to it under the Will, if the gift is authorized under s. 37 of the Act. Section 37 sets out rules that apply to the making of gifts of the incapable person’s property.
In the event that property is the subject of a specific gift, and is disposed of by the guardian, the doctrine of ademption does not apply. Rather, the person who was entitled to the property under the Will is entitled to receive from the residue of the estate the equivalent of a corresponding right to the proceeds of the disposition, without interest: s. 36(1) of the Act. This is, however, subject to a contrary intention set out in the person’s Will.
The provisions relating to determining the terms of the Will and dispositions of property under a Will apply equally to attorneys acting under a Power of Attorney: s. 38(1) of the Act.
Have a great weekend.
An Ontario Court of Appeal decision released yesterday provides clarity regarding the situations in which beneficiaries of legacies will be entitled to interest on the sum payable to them under a Last Will and Testament.
In Rivard v Morris, the testator had held farmland of significant value. A prior Will left a farm of comparable value to each of his daughters (as the testator had previously gifted a farm property to his son), and divided the residue of the estate equally between the three children. In the months preceding his death, however, the deceased amended his estate plan to provide for a greater benefit to his son, leaving him the residue of his estate (inclusive of the farm properties) after distributions to each daughter in the amount of $530,000.00.
After the testator died, the daughters challenged his Last Will on the basis of alleged undue influence. The will challenge was unsuccessful. The daughters subsequently commenced another proceeding after their brother (the sole remaining estate trustee after their previous resignations) refused to pay to the sisters interest with respect to the legacies of $530,000.00. They argued that they were entitled to interest commencing one year after the date of their father’s death, notwithstanding that the payment had been delayed in part because of the will challenge initiated by the daughters. Any interest would have been payable out of the assets to which their brother was otherwise entitled as sole residuary beneficiary of the estate.
The daughters were unsuccessful at the hearing of their application and appealed. The Court of Appeal found in their favour. Justice Paciocco ordered the payment to each daughter interest in the amount of $53,000.00 out of the residue of the estate. In doing so, Justice Paciocco relied upon the “executor’s year” and the “rule of convenience”. In describing the rule of convenience, Justice Paciocco stated as follows (at paragraphs 24, 25):
The “rule of convenience” can be easily explained, in my view. One of the maxims of equity is that it presumes as being done that which ought to be done. Since the beneficiaries should be enjoying the earning power of their legacies by at least the anniversary date of the testator’s death, where that enjoyment is postponed and the testator has not provided an alternative date for payment of the legacy, interest is to be paid…This general rule has been adopted in Ontario.
The rule of convenience was considered by the Court of Appeal to promote certainty and predictability, and the lower court’s decision to deny the daughters’ interest on the basis that they had commenced litigation against the estate was said to be contrary to principle, as this would have the impact of discouraging “even meritorious litigation”. While the Court of Appeal did neither confirmed nor denied whether judges are able to exercise discretion to deny interest to beneficiaries of legacies, it found that it had been inappropriate for the application judge to do so in this case.
Thank you for reading,
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A recent article featured in the New York Times highlights the need to reconsider estate planning strategies in light of developments in the law of inheritance taxation.
As our blog has previously reported, during his presidential campaign, Donald Trump vowed to eliminate inheritance taxes, then payable on the value of American estates exceeding $5.45 million, altogether. To the disappointment of many wealthy citizens of the United States, President Trump has not carried out his promise and, while the exemption has been increased, inheritance tax remains payable in the United States in respect of estates of a size greater than $10 million.
The New York Times reports that these changes to the exemption in respect of inheritance taxation are temporary in nature and that the measures currently in effect will expire in 2026. At that time, Americans (and individuals who hold property of significant value in the United States) may need to amend their estate plans with a view to tax efficiency.
Gifts, including testamentary gifts, are not typically subject to taxation in Canada. While there is no Canadian estate or inheritance tax, assets that are distributed in accordance with a Canadian Last Will and Testament or Codicil that is admitted to probate will be subject to an estate administration tax (also known as “probate fees”). Many of our readers will already be aware of the relatively new requirement (as of 2015) that estate trustees in Ontario file an Estate Information Return with the Ontario Ministry of Finance within 90 days of the processing of a probate application. In some circumstances, details regarding both traditional estate assets and assets typically considered to pass outside of the estate are required, notwithstanding that the latter category may nevertheless be exempt from probate fees. Some anticipate that the law in Ontario may at some point be amended to require further details regarding assets passing outside of an estate in Estate Information Returns and/or the payment of estate administration tax or other fees in respect of these assets. Like variations in the exemptions to American inheritance tax, changes to estate administration taxes may in the future necessitate amendments to existing estate plans with a view to limiting the taxes payable on the transfer of wealth.
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In Marasse Estate (Re), 2017 ABQB 706 (CanLII), the Court of Queen’s Bench of Alberta recently ordered a man to make ongoing support payments to his dead spouse’s estate.
In that case, Tracy and Jean were married in October, 1998. They separated in April, 2012. A divorce was granted in March, 2015.
Tracy and Jean entered into a Separation and Property Agreement (“the Agreement”) in October, 2014. Both Tracy and Jean were represented by counsel.
The Agreement dealt with all issues of spousal support and the division of property. It provided that Jean was to pay support to Tracy in the amount of $3,000 per month, for 60 months. Jean’s obligations were secured by a policy of insurance in the event that Jean died before full payment was made. The Agreement provided that it was non-reviewable by the Court, and that it was binding on and would inure to the benefit of the estate of the parties. It was otherwise silent with respect to what would happen in the event that Tracy was to die before all payments were made.
Tracy, who was ill at the time of the negotiation of the Agreement, died in June, 2015. At the time of her death, only 8 of the 60 support payments had been made.
Tracy’s Estate Trustee brought a claim for the payment of the balance of the support payments. Jean opposed, arguing that:
(a) as Tracy died, there was no longer economic need on Tracy’s part; and
(b) Tracy’s right to support was personal to her.
The Court disagreed, finding that it was not clear that the support was “non-compensatory”. Nothing in the Agreement specifically addressed the conceptual basis for the support payments.
The Court held that the entitlement to support payments was contractual in accordance with the Agreement. While a claim for spousal support under statute may die with the Claimant, contractual rights do not necessary suffer the same fate.
The Court did not order a lump sum payment of the total of the outstanding payments, but rather, declared that Jean’s obligation to make ongoing payments to Tracy’s estate continued.
Have a great weekend.
The importance of careful will preparation, with the assistance of counsel, cannot be sufficiently underscored. Certain mistakes can result in a testator’s wishes being unfulfilled. One such instance is when (i) the will (in error) fails to dispose of the residue, and (ii) there is an exclusionary provision in the will (e.g. a provision expressly excluding the testator’s spouse/children as beneficiaries). The outcome – in Ontario at least – would be that the excluded spouse/children are entitled to inherit the residue as intestate beneficiaries under the SLRA.
In Re Snider, a testator’s will barred his wife and children from inheriting his estate, but the will failed to dispose of the residue, such that the wife and children were nonetheless entitled to benefit as intestate beneficiaries. In reaching its decision, the Ont. S.C.J. reviewed the leading English case law that, in essence, pronounces that where there is no gift of the undisposed-of residue a testator cannot by negative words alone exclude next of kin from participating in it. The testator would need to give the residue to someone else for the intention to be given effect. If he does not do that the next of kin have, by law, the right of intestate succession to the residue.
In contrast stands the Manitoba Court of Queen’s Bench case of Mathers v Murname,  MJ No 604 (MBQB), where the MBQB held that the intestate beneficiaries could be excluded from sharing in the estate. In that case, the deceased failed to include provisions relating to her residue, but expressly disentitled her two sons from any inheritance.
Mathers does not seem to have been cited in any Ontario decisions, and it has not found favour in other courts. In Re Butler Estate, 2008 NLCA 39, the Newfoundland and Labrador Court of Appeal found Mathers to be unpersuasive. The NLCA saw the Mathers decision as being contrary to existing law, and it refused to accept it as authority for the broad principle that a will can modify the application of a statutory intestacy scheme.
It therefore appears that Mathers is an outlier that does not modify settled English case law that a person whose will fails to dispose of residue cannot avoid the statutory scheme for intestacy via an exclusionary provision.
Thanks for reading and have a good day,
With the growing number of common-law relationships, it is important to recognize the difference in family structures one might encounter when assisting LGBTQ clients. Not only do these differences impact the type of estate planning that a practitioner might suggest, it should also serve as a reminder of the importance of fully informing clients of the differences in legal rights that they and their partner will experience as common-law spouses.
Below are three steps LGBTQ individuals can take to ensure their wishes are carried out and their loves ones are provided for.
(1) Prepare Power of Attorney Documents
First, LGBTQ individuals should ensure they have properly planned for potential incapacity by having power of attorney documents in place. If you experience a serious health problem that leaves you unable to make decisions on your own, it is important that you appoint a trusted friend or loved one who will be able to communicate your health care wishes. A Power of Attorney for Personal Care is a document that describes your health care preferences and names a substitute decision-maker who can make health care decisions on your behalf when you are no longer able to do so yourself.
Appointing an Attorney can be especially important for transgender individuals. Having a Power of Attorney is one way a transgender individual can ensure that someone who is supportive of their gender identity manages their health care decisions. This is one step an LGBTQ individual can take to ensure that they will have a strong advocate on their side in their time of need when receiving medical care.
(2) Make a Will
Second, LGBTQ individuals should ensure their testamentary documents make proper provision for their children. Relying on intestacy laws to provide for their children should be avoided at all costs. Careful will planning should be undertaken which takes into account the unique needs and structure of the family.
One way of ensuring that children are properly provided for is to name the individual children being benefited in the will. Rather than leaving an equal share of the estate to “my children” or “my grandchildren”, the will should specifically name the individuals to be benefited. Careful will drafting is one step an LGBTQ individual can take to ensure their loved ones are provided for after their passing.
(3) Provide Instructions for Funeral and Memorial Wishes
Finally, to make certain their legacy is left intact, LGBTQ individuals should provide their instructions for both funeral and memorial planning. At common law, the right to determine the manner and burial of a deceased lies with the executor of the deceased person’s estate. In order to ensure that unsupportive family members do not control the manner of burial after death, LGBTQ individuals will want to carefully choose an executor for their estate.
By following these three steps, LGBTQ individuals can rest easy knowing their wishes, and their loved ones, will be protected to the best of their ability.
Thank you for reading … Have a wonderful day.
Suzana Popovic-Montag and Jacqueline Palef
Do you ever wonder how your emotions impact your decision-making? Or more specifically, how many sub-optimal decisions you make based on emotion?
We get caught up in the hype, or succumb to an emotional appeal, or bring our business to someone we like rather than someone who can get the job done. It’s easy to have happen, and it happens to many of us quite often.
A high-profile example? The Academy Awards each year. You’d think that 6,000 people would select “best pictures” that are regarded as a high artistic achievement for years to come. But in fact, emotion, hype and other factors often come into play. As a result, many past winners of best picture are quickly forgotten, while many non-winners become timeless classics.
See for yourself – don’t you agree?
So how can you make “best picture” decisions in your life – those decisions where you look back five years later and say “yup, that was a great move.” These can be especially important for estate and financial management matters where the bottom line is usually what matters.
The key is to take emotions (that sales guy is nice) and extraneous factors (I’ve always banked here) out of the equation and use your critical thinking to decide. Here are three areas you might want to review:
- Investment fees: High fees can be justified by high performance, but are you getting value for the thousands of dollars you spend in management fees each year? The tough part is that there’s often a personal advisor relationship at stake. But it’s your money: take a good hard look and decide.
- Banking: We’re sometimes proud of the long-term banking relationships we have, but pride is not a great emotion for financial decision-making. Just because your bank was great when it gave you a law school loan when you were 23 doesn’t mean it’s providing great value today. Yes, it’s a hassle to switch, but a review every few years can ensure you’re still getting “best picture” service and value.
- Service providers: The house cleaning person, the dog walker, the cottage checker, the tutor for your children – there are definitely great ones out there. But are you getting the best? Use your critical thinking – not your emotions – to make any changes you need to.
For a broader view of emotion and financial decision-making, this article describes the issues well, with some tips on making better decisions.
Thank you for reading,