In a recent decision out of the Supreme Court of B.C., Re Thomasson Estate, the Honourable Justice Gerow considered the circumstances where the court may pass over an executor, on an application by a co-executor/beneficiary.
The two Deceased (collectively referred to as the “Deceased”) had been married and had four children together, all of whom survived the Deceased. In their Wills, they named two of their children, as their executors, and directed the executors to distribute the estate to three of their four children.
One son commenced this application to obtain an order that would pass over the other son as his co-executor for the Estates. The Applicant argued that it is necessary for the Estates to make a proper enquiry into the nature of inter-vivos transactions between the co-executor Respondent and the Deceased and such an inquiry must be made independent of the co-executor Respondent as he would be in a conflict of interest.
The co-executor Respondent opposed the Applicant’s application, and argued, amongst other things, that the court should not interfere with the testator’s right to nominate his or her executor and removing him would be prejudging the case.
In her decision Justice Gerow states:
In the circumstances of this case, it is my opinion that there is a perceived conflict of interest between the co-executor Respondent in his role as an executor and his interest in his personal capacity. If an action is instituted by the executors as a result of the transfer of the Property, it would be against the co-executor Respondent. In my opinion, the co-executor Respondent, in his capacity as executor, cannot attack the transfer of the Property to himself while at the same time maintaining, in his personal capacity, that the transfer of the Property was proper. By making such a finding I am not prejudging the case. I am simply of the view that, in the circumstances of this case, if an action is commenced as a result of the enquiries into the transfer, the co-executor Respondent cannot conscientiously act as a plaintiff in his capacity as an executor in a case where he will be the defendant.
B.C. legislation is unique compared to the legislation that governs estate trustees in Ontario; however, if a similar situation arose, an application seeking similar relief could be brought under Rule 14.05(3) of the Rules of Civil Procedure.
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In the matter of Estate of Divina Damm, 2010 ONSC 5119 (CanLII), Justice Brown reflected on the form of accounts to be used upon the filing of an application by a guardian for property to pass accounts.
Justice Brown noted that in passing accounts of a guardian, s. 42(6) of the Substitute Decisions Act, 1992 provides that "the procedure in the passing accounts is the same … as in the passing of executors’ and administrators’ accounts".
Rule 74.17(1) of the Rules of Civil Procedure specifies in detail the form of accounts to be filed. The Rule requires:
(a) an itemized accounting of assets under administration, cross-referenced to entries showing the disposition or partial disposition of the assets;
(b) an account of all money received;
(c) an account of all money disbursed;
(d) where investments are made, an account setting out all money paid to purchase investments, and money received by way of repayment or realization of assets in whole or in part;
(e) a statement of all unrealized original assets at the end of the accounting period;
(f) a statement of all money and investments at the end of the accounting period;
(g) a statement of all contingent or other liabilities at the end of the accounting period;
(h) a statement of compensation claimed; and
(i) such other statements and information as the court requires.
If the will or the trust deals separately with income and capital, the accounts are to show separately the receipts and disbursements of capital and income.
In the matter before Justice Brown, the accounts were said to lack the detail required by the Rules, and provided information at the "30,000 foot" level. Justice Brown felt that he could not hear the matter without greater particularization of the accounts. The accounts did not comply with the Rules; due to this lack of particularity, a question arose as to whether a respondent served with the accounts could properly understand the conduct of the guardian; and the Court could not link the particulars of the judgment (which sets out specific amounts for revenue receipts and disbursements and capital receipts and disbursements) to the evidence.
While he rejected the application, Justice Brown raised the question of whether the Rules should be amended so as to allow for a simpler form of accounts for smaller estates. However, until a rule change, all accounts must comply with the format set out in Rule 74.17(1).
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The 2009 federal Budget contains a few items relevant to Estates, particularly with respect to Registered Retirement Savings Plans (“RRSPs”).
For a thorough review please see the 343-page document. A Bloc Quebecois amendment to the Budget yesterday evening was defeated; Opposition Party amendments have yet to occur. Budget speech to approval of the Budget motion could take up to four days.
While there are benefits for first-time home buyers in the Budget, and a host of infrastructure investments, not everyone is happy. Other media view the bad-time Budget as possibly providing the boost we need.
Regarding Estates, the Budget proposes that certain losses now be applied against terminal income – see page 318 of the Budget. The fair market value of investments held in an RRSP at the time of an RRSP annuitant’s death is generally included in the deceased’s income for the year of death. A subsequent increase in the value of the RRSP investments is generally included in the income of the RRSP beneficiaries upon distribution.
Similar rules apply in the case of Registered Retirement Income Funds (RRIFs).
There is, however, no existing income tax provision to recognize a decrease in the value of RRSP or RRIF investments that occurs after the annuitant’s death and before they are distributed to beneficiaries.
Budget 2009 proposes to allow, upon the final distribution of property from a deceased annuitant’s RRSP or RRIF, the amount of post-death decreases in value of the RRSP or RRIF to be carried back and deducted against the year-of-death RRSP/RRIF income inclusion. The amount that may be carried back will generally be calculated as the difference between the amount in respect of the RRSP or RRIF included in the income of the annuitant as a result of his or her death and the total of all amounts paid out of the RRSP or RRIF after the death of the annuitant.
Assuming the Budget motion passes, this measure will apply in respect of deceased annuitants’ RRSPs or RRIFs where the final distribution from the RRSP or RRIF occurs after 2008.
This change, especially in this uncertain economy, might help to make a weak financial situation a bit more palatable.
Thank you for reading our blogs this week. Enjoy your weekend.
Listen to Deductions from Compensation.
This week on Hull on Estates and Succession Planning, Ian and Suzana finish up the discussion on the question of accounting by reviewing deductions from compensation and briefly sum up the procedure of the passing of accounts.
Cases for Increasing and Decreasing Compensation – Hull on Estates and Succession Planning podcast #122
Listen to Cases for Increasing and Decreasing Compensation.
This week on Hull on Estates and Succession Planning, Ian and Suzana discuss cases for increasing and decreasing compensation.
Listen to Accounting Concepts and Definitions
This week on Hull on Estate and Succession Planning, Ian and Suzana talk about accounting concepts and definitions after receiving requests from listeners to outline a more general framework for estate administration.
Comments? Send us an email at firstname.lastname@example.org, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.
Listen to The Investment Accounts.
This week on Hull on Estates and Succession Planning, Ian and Suzana conduct a quick lesson on capital encroachment and discuss the role of investment accounts in the passing of accounts.
Listen to Accounting
This week on Hull on Estate and Succession Planning, Ian and Suzana discuss how to prepare for review by the beneficiaries of the estate by keeping all accounts in order.
To open this week’s show, they remind listeners that they did this week’s episode of Hull on Estates (#110). They also extend their congratulations to Terry Fallis for winning the Stephen Leacock Medal for his book, The Best Laid Plans.
If you have any comments that you would like to share, send us an email at email@example.com or leave us a message on our comment line: 206-457-1985. You can also find our blog at hullandhull.com.
Listen to Administration of the Assets of the Estate
This week on Hull on Estates and Succession Planning, Ian and Suzana discuss things to consider when administrating the assets of an estate and point out burdens of being and executor.
This week on Hull on Estates, Rick and David discuss procedure under the Substitution Decisions Act and review executor and attorney obligations as well as specific procedures permitting someone to compel an accounting.