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: