Right from the start, 2021 is starting to look like it will be another extraordinary year of historic significance. In the world of estates, trusts, and capacity litigation, there was a decision released on January 5th where serious breaches of fiduciary duty by an attorney for property were found and the PGT was ordered to take over. The facts in Public Guardian and Trustee v. Cherneyko et al, 2021 ONSC 107, read like a law school case study and the reasons are worth noting.
Jean Cherneyko is a 90 year old woman. Jean did not have any children of her own. Her closest known relative was a niece in the US. By the time of the PGT application, Jean was in a long term care home. Prior to that, Jean lived alone in the same home that she had lived in since 1969. Jean had a friend named Tina who she had known for about five years. On August 15, 2019, Jean and Tina went to a lawyer’s office. Jean named Tina as her attorney for property and personal care. Jean also made a new Will which named Tina as the estate trustee and sole beneficiary of her estate. A week or so later on August 27th, Jean and Tina went to Jean’s bank where $250,000.00 was transferred to Tina, and $195,329.50 was transferred to Jean’s niece. Days later on August 31st, Jean was hospitalized for acute delirium and progressive cognitive decline. During Jean’s admission, Tina noted that Jean had become increasingly confused over the prior few months and that Jean exhibited lethargic behaviour and complained of bodily soreness. On September 1, 2019, Jean was diagnosed as being cognitively impaired. Thereafter, Jean was transferred to long term care on October 1st based on Tina’s authorization as Jean’s attorney for property. Short time after that, Tina’s son moved into Jean’s home and the PGT started to investigate in March, 2020 when the bank froze Jean’s accounts.
As a result of their investigation, the PGT brought an application to remove and replace Tina as Jean’s attorney for property. The PGT also sought to set aside the $250,000.00 transfer to Tina and the return of various other sums that were received by Tina, which totalled approximately $350,000.00.
First, the Court found that the transfer of $250,000.00 to Tina was not a gift. Tina failed to rebut the presumption of resulting trust for the gratuitous transfer. Tina put forth evidence that there was a bank manager who spoke to Jean at the time of the transfer, and that the banker told Jean that she would have still have enough money to live after the transfers to Tina and the her niece. This evidence was tendered through Tina’s affidavit without any direct evidence from the banker. The Court disregarded Tina’s reliance on the banker’s involvement because Tina herself had deposed that Jean was having “moments of delirium and irrationality, her condition fluctuated between lucidity and confusion” in late August, 2019 (para. 31) and there was no evidence that the banker was informed.
The Court also seriously questioned whether any of the payments to Tina were truly what “Jean wanted” because Jean’s power of attorney for property clearly stated that there was to be no compensation. The Court agreed with the PGT’s contention that Tina should not have paid herself $2,000.00 per month in compensation and on how that sum was unreasonably high given that Jean’s long term care costs were only $2,701.61 per month.
The value of the transfers, which was about a quarter of Jean’s net worth at the time, when considered in the context of Jean’s September 1st diagnosis also led the Court to find that Jean lacked capacity to gift Tina such a substantial sum.
The Court’s focus on context, timing, and proportionality as benchmarks in its analysis are very important for litigators and advisors to keep in mind.
Stayed tuned this week for Part 2 on Cherneyko: the breaches of fiduciary duty.
Thanks for reading,
Elder financial abuse is a growing concern. What is being done in Ontario to prevent it?
I recently came across a new service called Estate Protect which acts as a registry and fraud monitoring service for important estate documents, including powers of attorney.
Lawyers (on behalf of their clients) are able to register estate planning documents with Estate Protect being a secure and accessible place. The idea is that the most recent documents, and a record of any changes, are available to the appropriate person when necessary to ensure that valid estate planning documents are used (and relied upon).
Using a power of attorney document as an example, through Estate Protect’s notification service, designated parties are made aware when someone tries to rely on a power of attorney document. If the document is the valid power of attorney, the notified individual need not take any steps. However, should the power of attorney be, for example, a fake or previously revoked power of attorney, or should the transaction seem suspicious, the notified individual has the opportunity to intervene to avoid misuse.
The service also allows people accepting instructions, such as banks, to determine whether the power of attorney is valid before acting on instructions.
It makes sense that Estate Protect relies on tackling financial elder abuse through preventative measures, as opposed to remedial options.
Find this blog interesting? Please consider these other related blogs:
Elderly persons are unquestionably at greater risk of abuse than the general public. The five general categories of abuse are physical, sexual, psychological or emotional, financial, and neglect. No doubt such abuse is on the rise, and is an issue that is generating attention worldwide.
The Australian Law Reform Commission (ALRC) was reported to have taken a substantial step forward through its recent release of a lengthy report addressing abuse of the elderly.
The report includes many recommendations for change, with a focus on the betterment of care provided to those living in care facilities, including improving (i) the reporting and monitoring of abuse, with the process overseen by an independent body, and (ii) quality of care and staffing.
The authors of the article linked to this blog cite that little is known in Australia about the overall number and severity of abuse, with sexual assault being the least acknowledged, detected and reported. They applaud the ALRC for recommending a national study to explore how common elder abuse is.
Their chief critique of the report, however, is that although it addresses the legal aspects of elder abuse, the impact on health and well-being of the victims is ignored. Moreover, absent is any comment on whether inappropriate health care is a form of abuse (e.g. using resuscitation against someone’s wishes).
The authors highlight the primary challenge to prevention, which is to equip the legal, healthcare and elder care sectors to better screen, identify and intervene. As we face similar difficulties, I expect that the initiatives and recommendations made by the ALRC would be well-received in Canada as well.
Thanks for reading,
Other blog posts that may be of interest:
In an aging society, our elderly can easily fall prey to predators looking to exploit them. Elder abuse can take many different forms: physical, psychological or financial abuse, or simply neglect.
I read an article yesterday about Huguette Clark, the 104 year old heiress whose wealth is estimated at half a billion dollars. During her lifetime, Clark made generous gifts towards those who cared for her. For instance, it is reported that Clark gifted $10 million dollars to her social secretary.
It is reported that Clark’s wealth is being managed by her lawyer and her accountant.
A former paralegal who worked for Clark’s attorney, has now blown the whistle on what she alleges is improper behavior by Clark’s attorney and accountant. According to reports, it is alleged that they “drafted a will that would have left money to [one of them], trying repeatedly to persuade her to sign it — then joked about their client and cursed her behind her back when she would not sign the will.” It is also reported that her lawyer allegedly solicited from Clark $1.5 million dollars to build a security system for a community where his daughters and their families live. In addition he allegedly sold a Stradivarius violin for $6 million dollars and a Renoir painting for $23.5 million.
A criminal investigation has now been launched by the Manhattan district attorney, who has the Elder Abuse Unit of the New York County District Attorney’s Office looking into the handling of Clark’s finances.
It bears repeating that the complaints at this stage are unproven allegations. Nonetheless, the mere thought that this could happen provides us with a dreadful reminder of what the elderly face in our society today.
Thank you for reading,
Rick Bickhram – Click here for more information on Rick Bickhram.
There were several estate related web postings that came to my attention this week.
The Elder Abuse Awareness component of the Federal Government’s New Horizons for Senior’s Program announced 16 new projects directed at the prevention of elder abuse. Somewhat to my surprise (largely because I assumed it was an area under provincial jurisdiction), the Federal Government has significantly increased funding to this program.
In Britain, a committee is being charged with the task of considering future changes aimed at preventing the reigning monarch from sealing wills. Her Royal Highness Queen Elizabeth II directed that the Last Wills of both Princess Margaret and the Queen Mother be sealed, a decision that has been criticized in many quarters.
And lastly, let’s not forget the Last Will of George Washington which was drafted by the late President himself with "no professional character being consulted", his Will being an endeavour that "occupied many of my leisure hours." Clocking in at 23 pages, Washington’s Will also had an addendum detailing the location, description and value of his numerous properties (knowledge gleaned from his days as a land surveyor and speculator).
Have a great weekend!
David M. Smith
By all indications, the abuse of Powers of Attorney to misappropriate assets is on the rise.
When a grantor gives powers to an attorney to manage the grantor’s property, it allows the attorney to assist the grantor in managing property, and in fact to take over management of property altogether if the grantor does not monitor the situation. Often the very goal of the grantor is to allow someone else to completely take over management of one’s property due to age, potential incapacity or other reasons, so the grantor has no intention to monitor.
This is often a reasonable choice, and the law holds attorneys to a high standard to protect grantors. However, the potential for abuse is immense. Abuse can be willful or simply negligent, but in either case the damage can be devastating and irreversible. In many cases attorneys who stray from their duties are never made to account, although they have that obligation. Often they live with the grantor and have little or no oversight. The legal fees in securing justice are generally high, and the chances of recovering on a judgment can be low. In the result, legal proceedings might be impractical, however blatant abuse may be in a given case.
The best defence against this problem is awareness, so these varied results from a quick internet search are somewhat encouraging: a Florida law firm website; an excellent Vancouver Sun article; a synopsis of a TV news story; the New York Attorney General’s website; a news report of a Philadelphia trial; and a news release from Prince Edward Island’s provincial government commenting on the problem for World Elder Abuse Day.
This is the tip of a very large iceberg: by all indications lawyers, financial institutions, governments and of course the public will be wrestling with a growing problem for years to come.
Thanks for reading.
BREACH OF FIDUCIARY DUTY BY THE WILL MAKER – EXECUTOR AND TRUSTEE’S ROLE – WHAT TO DO ABOUT ABUSE CLAIMS? – PART III
As is sometimes the case, an unequal distribution of an estate as between children can arise from a testator who has had a long history of mental illness, chronic alcoholism or other such personal reasons, which may affect the testator’s state of mind over a period of many years.
For example, if a child who has been treated unequally grew up in a home where he or she suffered through instances of physical violence, as between the parents and him or herself, this may be the type of fact situation to consider when looking to pursue a claim for breach of fiduciary duty of parental obligations. Similarly, if the unequally treated child lived in a home that was constantly in turmoil, as a result of a chronically alcoholic parent, this situation should also be considered in the context of the fiduciary obligations of a parent.
In our view, one must find several compelling supporting facts to bolster any claim of breach of fiduciary duty or breach of parental obligation. Such facts should also be combined with a clear and identifiable estrangement as between parent and child.
In the decision of M. (K.) v. M. (H), the Supreme Court of Canada considered the whole concept of what is meant by the term "parental obligation".
The Court considered this issue in the context of a particularly gruesome and egregious set of facts.
In M.(K.) v. M.(H.), the Supreme Court of Canada examined the parent-child relationship in the circumstances of long-standing allegations of incest and abuse by a parent to a child.