Hull on Estate and Succession Planning Podcast #35 – The Family Conference – Special Needs Beneficiaries
READ THE TRANSCRIBED PODCAST HERE
During Hull on Estate and Succession Planning Podcast #35, we discussed:
- Special needs beneficiaries;
- What the definition of a special needs beneficiary is;
- The use of trusts for special needs beneficiaries; and
- The proper planning for special needs beneficiaries and what happens to the assets and the trust when the special needs beneficiary dies.
READ THE TRANSCRIBED PODCAST
During Hull on Estates Podcast #35, we discussed the following:
- Competing beneficiaries who join forces to challenge a Will when they do not have identical interests;
- People that need to be served in a Will Challenge;
- How to decide if you need your own lawyer or if you should join forces with the same solicitor; and
- How to deal with the costs of the Will Challenge when dealing with several lawyers.
In a will challenge proceeding, after the Notice of Objection is filed, the next step, procedurally, is the Motion for Directions. On this motion, the Court grants an Order that sets out the issues to be tried, and sets out the procedure for advancing the claim. The Order normally allows the parties to obtain evidence from medical professionals, lawyers involved with the deceased, and financial institutions. It provides for discovery, and, often, for mediation.
An issue that often arises where an objection is seen as unfounded is whether the Motion for Directions can be opposed on substantive grounds. Propounders of a will are often of the view that because the will challenge is so weak, it shouldn’t even be allowed to get off the ground.
However, it must be noted that on a motion for an Order Giving Directions, the Court will not make an inquiry into the merits of the proceeding. The Court does not have any authority to dispose of the claim based on the alleged lack of testamentary capacity or undue influence in a summary manner on a Motion for Directions.
Authority for such a proposition is found in the decision of Hie v. Lonsberry Estate (1989), 32 E.T.R. 288 (Ont. Div. Ct.). There, the Court recites the principal that next of kin are as of right entitled to have the Will approved in solemn form and to put the executors to the strict proof thereof.
The recent decision of the Ontario Superior Court of Justice in the matter of Hutchison v. Hutchison  O.J. No. 3231 (W.A. Jenkins J.) provides an illustration of the court considering the concepts of undue influence and testamentary capacity.
The plaintiffs in this case were three of the four children of the deceased. The defendants were the youngest child, and the child’s wife.
The evidence as considered by the court seriously called into question the capacity of the deceased. By 1996, the deceased was showing early signs of dementia. In 1998, he was found in his car, parked on a railway track. He was disoriented, and was taken to hospital. He was diagnosed as suffering from dementia. While in the hospital, he wandered away, and had to be returned by the police.
Following his diagnosis, he was released from the hospital and lived with the defendants at his home until his death in February, 2002 at the age of 86.
Shortly after his assessment in 1998, the deceased transferred his home to his youngest son. He also transferred his investment account. He then made a new Will wherein he bequeathed the whole of his estate to his youngest son. (In a prior Will, executed in 1992, he divided his estate equally amongst his four children.)
In parts I to IV of my notes on due execution, I discussed some issues relating to the execution of “formal” or non-holograph wills.
Today, I will touch briefly on the execution of other types of wills. Significantly, it should be noted that the requirement of two or more attesting witnesses does not apply in the case of the will of a member of forces on active service, or in the case of a holograph will.
A “member of forces on active service” is defined in the Succession Law Reform Act (“SLRA”) as any person who is:
(a) a member of the Canadian Forces placed on active service under the National Defence Act (Canada);
(b) a member of any other naval, land or air force while on active service; or
(c) a sailor when at sea or in the course of a voyage. Such a person may make a will by “a writing signed by him or her or by some other person in his or her presence and by his or her direction without any further formality or any requirement of the presence of or attestation or signature by a witness”.
In addition to a “soldier’s will”, special allowance is made in Ontario for holograph wills. To be a valid holograph will, the will needs to be wholly in the handwriting and signature of the testator. The requirement that the holograph will be “wholly” in the handwriting of the deceased means that a will that is typewritten by the deceased will not qualify as a holograph will. Similarly, the testator cannot simply sign a document handwritten by another.
The Succession Law Reform Act (“SLRA”) requires that the will be signed or acknowledged in the present of two or more witnesses present at the same time. If the will is not signed in the presence of the two witnesses, the signature can be acknowledged. This requires: a. that the signature be on the document at the time of the acknowledgement; b. that the witnesses see or have the opportunity to see the signature; and c. that the testator, by acts or words, indicate that he or shee has signed the document. The witnesses do not need to know that they are attesting to a will.
The SLRA requires that the witnesses each subscribe the will in the presence of the testator. They must also be present at the same time when the testator makes or acknowledges his signature. In a British Columbia case, Simkins Estate v. Simkins, the Court granted probate where the testator signed the will in the presence of only one of the witnesses, who then subscribed the will. The testator, moments later, acknowledged his signature in the presence of both of the witnesses, and the second witness signed the will. The court held that while, technically, the first witness should have re-signed the will, “To rule such a will invalid is an absurdity and, what is worse, a total defeat of the acknowledged intent of the testator by means of a document that complied with all the formalities, save and except the exact sequence, that have been held to be necessary.” (The outcome of this case may have been different if it was decided in Ontario.
Tomorrow, I will discuss the issue of “substantial compliance”, and whether it applies in Ontario.) The witnesses must sign after the testator and not before. They need not both be present when they sign as witnesses, although they both need to be present when the testator signs or acknowledges her signature. Therefore, a will can be valid where one witness leaves before the other witness signs. The testator must be able to see the witnesses attest, if he chooses. Thus, if a testator is unable to move, and is not facing the witnesses when they sign, the will may be invalidated(!). Similarly, witnesses must have the opportunity of seeing the testator’s signature, whether it be signed in their presence, or acknowledged. A will will not be valid where the testator’s signature is covered up.
Have a good day, Paul Trudelle
We have made note this week of the fact that a beneficiary designation is subject to considerably less legal formality than a Will. The fact that many Canadians do not have Wills often means that the designation of a beneficiary is the primary means by which an individual engages in estate planning. This is particularly true of those in their thirties or forties whose largest assets will often be RRSPs or life insurance policies. We have noted that such estate planning has the benefit of clearly directing assets to the intended beneficiary without the need for obtaining probate of a Will.
Certainly, non-legal professionals such as financial advisors will frequently highlight the benefits to their clients of structuring their affairs in such a way as to minimize estate administration tax. Lawyers, as well, will recommend such benefits, mindful of the pitfalls associated when a beneficiary does not act as intended. For instance, where an individual designates a beneficiary of an asset, not for that person’s personal benefit but rather, to distribute in accordance with a Will or some other written or verbal instructions (ie. a secret trust), the issue of trust becomes paramount.
What if the beneficiary does not distribute the asset as the deceased intended but keeps it for herself? For the litigation lawyer, it may be a serious challenge to prove a breach of trust on behalf of disappointed beneficiaries. The designated beneficiary can simply take the position that she has received all right, title and interest in the asset. If the designated beneficiary is herself named executor of the deceased’s estate, there may well be some legitimate questions as to whether she was expected to distribute the asset in accordance with the Will. The designation, if contained in the Will, may ideally clarify whether the asset is to be subject to the terms of the Will.
Have a great weekend and we’ll be back on Tuesday, David. ——–
BREACH OF FIDUCIARY DUTY BY THE WILL MAKER – EXECUTOR AND TRUSTEE’S ROLE – CONCLUDING THOUGHTS – WHAT TO DO ABOUT ABUSE CLAIMS? – PART VI
While a claim for damages against the assets of an estate for breach of parental fiduciary duty may be rare and fraught with evidentiary problems, it is clearly founded on the strong common law principals of fiduciary duty and the overall concept is supported by the Supreme Court of Canada. Given the nature of these claims, a case of this type can be persuasive and can present a compelling problem for any executor of an estate.
The head of damages has been identified by the Supreme Court of Canada and it really is a question of quantum. In the right circumstances, combined with a proper and legitimate will challenge, a claim of this nature can change the overall dynamics of any estate litigation matter. At the very minimum, it may have a salutary effect on the considerations of the executor and beneficiaries.
Nonetheless, given the evidentiary frailties of these types of claims, one must be careful not to embark on such an action without careful consideration of the cost consequences. In this regard, see Fox v. Fox Estate (1994), 5 E.T.R. (2d) 174 (Ont. Gen. Div.), (1996) 10 E.T.R. (2d) 229 (Ont. C.A.), Application for Leave to Appeal to the Supreme Court of Canada submitted September 13, 1996 and refused January, 1997; Schnurr, B.A., "Estate Litigation – Who Pays the Costs?" , 11 E.T.J. 52; and Hull, I.M., "Costs in Estate Litigation", 18 E.T.R. (2d) 218.
We hope this review of this interesting area of fiduciary duties has been helpful.
All the best, Suzana and Ian. ——–
BREACH OF FIDUCIARY DUTY BY THE WILL MAKER – EXECUTOR AND TRUSTEE’S ROLE – LIMITATION ISSUES? – Part IV
As to the question of fiduciary duty between parent and child, the Supreme Court of Canada in M.(K.) v. M.(H.) held that the relationship of parent and child is fiduciary in nature and that incest was a breach of the parent’s fiduciary duty to protect the child’s well being and health.
It is perhaps the most compelling defence available to counsel defending a parent in such cases that the claim has been brought outside of the conventionally recognized limitation periods.
A significant portion of the decision in M.(K.) v. M.(H.) was devoted to the question of the limitation defences raised by the parent.
In contrast, counsel for the child argued that incest was a separate and distinct tort which was not subject to any limitation period; that incest constituted a breach of fiduciary duty by a parent and is not subject to any limitation period; and if a limitation period applies, the cause of action does not accrue until it is reasonably discoverable. Furthermore, it was argued that the child was of unsound mind pursuant to section 47 of the Limitations Act; that the tort is continuous in nature and the limitation period does not begin to run until the child is no longer subjected to parental authority and conditioning; and that the equitable doctrine of fraudulent concealment operates to postpone the limitation period.
The limitation defence failed and the Supreme Court of Canada held that the tort claim, although subject to limitations legislation, does not accrue until the child is reasonably capable of discovering the wrongful nature of the parent’s acts and the nexus between those acts and her injuries. Furthermore, that the discovery took place only when the child entered therapy and the lawsuit was commenced promptly thereafter.
All the best, Suzana and Ian. ——–
BREACH OF FIDUCIARY DUTY BY THE WILL MAKER – EXECUTOR AND TRUSTEE’S ROLE – WHAT TO DO ABOUT ABUSE CLAIMS? – PART II
A claim for breach of the parent/child fiduciary relationship can have an impact in the context of claims in estate litigation matters.
As is sometimes the case, parents may choose to treat their children unequally under the provisions of their will. In these kinds of circumstances, a disgruntled child may challenge the validity of the will and so become a party to estate litigation.
A further claim against the assets of the estate for breach of parental fiduciary duty may be a useful avenue for a child to pursue against the estate of a parent.
As has been known to happen, a parent may have a long-standing bias against one child or another, which is reflected in an unequal distribution of his or her estate. This long-standing bias may have been as a result of an estrangement as between the parent and the particular child. The reasons for the estrangement are usually numerous and it can be difficult to pinpoint precisely the actual reason for the unequal treatment of the child.Often, the estrangement between parent and child dates back many years and, in some situations, the breakdown of the relationship ties closely to the child leaving home at an early age and then not pursuing any meaningful contact with his or her parent.
In our view, when dealing with these kinds of cases, a careful inquiry must be undertaken into the circumstances of the estrangement, dating even back to childhood.
More to come on this interesting topic in a future blog …
All the best, Suzana and Ian. ——–