In today’s podcast, Paul Trudelle and Garrett Horrocks discuss the court’s decision in Calmusky v Calmusky, which deals with the application of principles from Pecore v Pecore to designated assets.
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There are instances when a lawyer is required to make efforts to “locate missing heirs” of an estate, and until the heirs are identified and located these efforts can be described as being to the “benefit of the unknown heirs”. This work has been done by lawyers for over one hundred years. One of the leading cases is from 1902, that of Neville v Benjamin (1902) 1 Ch 723, that sets out some of the steps that can be taken to obtain a “Benjamin order” in cases where an estate trustee is not able to distribute and finalize administration of an estate because of missing heirs. In popular culture, being a person identified as a “missing heir” has been the subject of much interest. “Big legacies awaiting lost heirs” was the premise of a segment on the Art Linkletter show, where he conducted a television search for missing heirs. The Linkletter show was broadcast in various forms from 1945 to 1970 and had huge audiences in the millions.
A 1965 article in the Madera California Tribune newspaper on the Linkletter search for missing heirs started with the attention getting line “Do you ever wish a long lost relative would leave you a legacy of a bundle of money?” One story featured was of a talented machinist who chose to live the life of a recluse, existing on a diet of dry cereals. It was also known he didn’t trust banks and that he preferred to store his money by hiding it in his house. He died at age 58 and was dead several days before someone made the discovery. The house was robbed of the cash, but the remaining business assets were sold in the estate sale. The business assets went to a sister of the deceased, who only learned of it from a neighbor after she heard it on the Linkletter show. Wouldn’t you want to be “found” if you were indeed “a missing heir”, whether by a lawyer or a television show?
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While digital assets constitute “property” in the sense appearing within provincial legislation, the rights of fiduciaries in respect of these assets are less clear than those relating to tangible assets. For example, in Ontario, the Substitute Decisions Act, 1992, and Estates Administration Act provide that attorneys or guardians of property and estate trustees, respectively, are authorized to manage the property of an incapable person or estate, but these pieces of legislation do not explicitly refer to digital assets.
As we have previously reported, although the Uniform Law Conference of Canada introduced the Uniform Access to Digital Assets by Fiduciaries Act in August 2016, the uniform legislation has yet to be adopted by the provinces of Canada. However, recent legislative amendment in one of Ontario’s neighbours to the west has recently enhanced the ability of estate trustees to access and administer digital assets.
In Alberta, legislation has been updated to clarify that the authority of an estate trustee extends to digital assets. Alberta’s Estate Administration Act makes specific reference to “online accounts” within the context of an estate trustee’s duty to identify estate assets and liabilities, providing clarification that digital assets are intended to be included within the scope of estate assets that a trustee is authorized to administer.
In other Canadian provinces, fiduciaries continue to face barriers in attempting to access digital assets. Until the law is updated to reflect the prevalence of technology and value, whether financial or sentimental, of information stored electronically, it may be prudent for drafting solicitors whose clients possess such assets to include specific provisions within Powers of Attorney for Property and Wills to clarify the authority of fiduciaries to deal with digital assets.
Thank you for reading.
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Just over a week ago, the Canadian Immigration and Citizenship website crashed following the conclusion of the U.S. presidential election. After hearing about this, I started to wonder, how difficult would it really be for Americans who are dissatisfied with the outcome of the recent election to flee to Canada?
Aside from entering the country on a student or work visa, certain individuals wishing to immigrate to Canada may apply for Express Entry as a skilled worker, caregiver, or a refugee. Americans with family in Canada may also be able to apply directly for immigration to a province through the Provincial Nominee Program.
Individuals qualifying for immigration to Canada who may be considering doing so should not neglect cross-border tax and estate planning issues that may result from their relocation before proceeding with such a move.
When moving from one jurisdiction to another, it is important that one takes extra steps to ensure that elements of existing incapacity and/or estate plans will be recognized in his or her new home.
If new Canadian residents own assets cross-border, it may result in difficulty in administering property during incapacity and/or following death. It is important that fiduciaries are chosen appropriately, so as to facilitate their access to assets in the relevant jurisdiction, without triggering cross-border tax issues and issues of inaccessibility. Depending on the jurisdiction, taxes may be payable with respect to foreign assets based on citizenship, residence, location of the individual or his or her assets, domicile, or any combination of these factors.
It is also important to remember that simply immigrating to Canada may not exempt U.S. citizens from the payment of American inheritance tax. As my colleague, Noah Weisberg, blogged last month, President Elect Trump has vowed to abolish inheritance tax altogether. However, Mr. Trump has proposed to replace current U.S. inheritance tax with what is being referred to as a capital gains tax that applies to assets of certain estates valued at $10 million or greater. At this point in time, it remains unclear which of the policies upon which the incumbent president’s campaign was based will ultimately be implemented.
Have a great weekend.
As Christmas Eve is just hours away, it seems fitting to focus today’s blog on family holiday traditions and estates. One such tradition has been in the Ford (not the ex-Toronto mayoral) family for the past 137 years. Yes, this is a blog about a fruitcake. Not to be confused with a Panettone, but a fruitcake baked by Fidelia Ford in 1878 that has since passed through her issue over three generations.
In 1878 Ms. Ford baked a fruitcake that would age for a year and be eaten during the next holiday season. However, Ms. Ford passed away prior and her surviving children considered the fruitcake as the most immediate link to their mother. In fact, the Ford family genealogy states that “…there wasn’t anyone to bake another, so they decided to keep it out of respect for her memory”. As such, they kept the fruitcake in her honour.
It does not appear that Ms. Ford’s Last Will left any specific instructions as to the preservation or management to the custodians of this decadent asset. Steadfastly, the fruitcake has been stored in a glass dish with only one significant intrusion when an Uncle Amos attempted to eat the fruitcake in 1964. This would of course have arisen many years after the fruitcake would have deemed to have been disposed of in accordance with the twenty one year rule against perpetuities.
Lately however, according to a recent article in The Globe & Mail the fruitcake family tradition seems uncertain as Ms. Ford’s issue seem not to want it. Like so many atypical testamentary dispositions, the author of the article states that “an heirloom for one generation becomes a headache for the next. Tradition becomes chore”.
Alas, many hours on google has left me none the wiser as to whether any testamentary trusts have been settled for the benefit of a fruitcake…or any other food for that matter. I am also none the wiser as to whether Ms. Ford’s fruitcake would have fallen into her residue or distributed according to the personal property provisions in her Will (assuming she had one).
While I cannot admit to liking fruitcake, especially the antiquated varietal, Ms. Ford’s story provides a pleasant holiday reminder to enjoy family and traditions that bring family together. And, because this is an estates blog – to ensure that all assets are addressed, including those with sentimental value, in your testamentary documents.
The division of one’s personal property, which may include, jewellery, art, books, furniture, tools and clothing, can often become a significant source of tension and conflict amongst those who collectively stand to inherit such items from the estate.
The sentimental value that is often attached to such items, coupled with the loss of a loved one, can result in emotions running high at the time when important allocation decisions must be made. As such, it is almost inevitable that disagreements will arise.
When such disagreements arise it is important to consult the deceased’s Will. Through the estate planning process individuals often consider and make provision for specific items of personal property within the terms of their Will. A Will may, for example, make a specific bequest of a disputed item. In some instances, the deceased may have gone one step further and referenced an attached memorandum within his or her will. Such a memorandum may contain an itemized list of various items of the deceased’s personal property and outline precisely whom the deceased has directed to receive each item.
It is extremely rare, however, for all items of personal property to be included within the Will or an attached memorandum. Any items not expressly listed will generally fall to the residue of the estate, and as such, must ultimately be divided amongst the beneficiaries of the estate. It is quite common in this regard for the deceased, through the terms of his or her Will, to direct the beneficiaries to “divide any remaining items of personal property equally amongst themselves, as they agree”. Disagreements often arise as a result of the ambiguity created by such wording and where the beneficiaries cannot agree amongst themselves as to the best way to allocate the items.
While there are many options open to executors and beneficiaries, including drawing straws, picking numbers out of a hat or tossing a coin, these options can result in individuals missing out on specific items that they valued above all others purely due to chance. A fair alternative, that allows beneficiaries to walk away with the majority of the items they want and seems to have good results, is to hold an “auction”.
In order to conduct such an action, all items must first be appraised. The total of the appraised value should then be divided by the number of beneficiaries. Each beneficiary can then be provided with a sum equivalent to their share of the appraised value, which he or she will then use to bid on the items. For example, if the appraised value of all items was $10,000.00 and there were two beneficiaries, each beneficiary would receive $5,000.00 to bid on items. A list of all items and their appraised value should be presented to each beneficiary in advance of the auction. On the auction day, each item should be presented one by one before all the beneficiaries. Each beneficiary is given equal opportunity to bid on the items, and the highest bidder will go home with the item. Therefore, if a beneficiary values one item over others, he or she can choose to spend the majority of his or her auction dollars on that item. Any unused auction dollars are returned to the estate. Any remaining items that are not sold at auction can then be divided amongst the parties as they agree, and if they cannot agree they may be listed for sale and the profits split between the beneficiaries. Finally, the value of the items successfully obtained at the auction should be deducted from each beneficiary’s share of the overall estate prior to the final distribution in order to ensure a fair distribution.
For example, lets say there are two beneficiaries to an estate, Jack and Jill. Jack and Jill stand to inherit from the estate equally (50/50) and the Will directs them to divide all items of personal property as they agree. A dispute subsequently arises with respect to specific items of the deceased’s personal property. The total value appraised value of the deceased’s personal property is $10,000.00. Both Jack and Jill would be provided with $5,000.00 to bid with at the auction. Jill bids on items totaling $2,000.00, Jack bids on items totaling $3,000.00. If the total estate value was worth $100,000.00, Jack’s share of the estate would be $50,000.00, and Jill’s share would be $50,000.00. After deducting the value of the items they received at the auction Jack would receive $47,000.00 ($50,000 – $3,000) and Jill would receive $48,000.00 ($50,000 – $2,000).
By using this method each beneficiary has a certain amount of control over the items he or she receives and has the opportunity to actively select the items he or she values most.
Thank you for reading,
Rule 45 of Ontario’s Rules of Civil Procedure contains mechanisms by which a party can freeze assets that are in issue or relevant to the proceeding. However, this should be done prior to the close of pleadings because once the matter is set down for trial, Rule 48.04(1) applies. Rule 48.04(1) requires that any motion brought after the close of pleadings have leave of the court. Leave will only be available where there has been a substantial or unexpected change in circumstances.
A recent example of Rule 48.04(1) barring a motion for interim preservation occured in Trapukowitcz Estate v. Royal Bank of Canada. In this case, an estate trustee was seeking an order that the proceeds of a GIC and a bank account be paid into court pending determination of ownership. Justice Harris refused to grant leave to bring the motion because, on the basis of the admissible evidence, the estate trustee had not shown a substantial or unexpected change in circumstances.
Justice Harris followed Machado v. Pratt & Whitney Canada Inc. (1993), 16 O.R. (3d) 250, which requires strong affidavit evidence to demonstrate a "substantial and unexpected change in circumstances to the extent that to refuse the order would be manifestly unjust". The grounds in the moving estate trustee’s affidavit were unconvincing.
As importantly, viva voce evidence given in submissions was not considered. To do so would be unfair to the respondent, particularly since the evidence had been available since June 4, 2009 and the hearing took place in August 6, 2009. Therefore, Justice Harris cited Rule 37.06(b), which stipulates that every notice of motion must state the grounds to be argued, and refused to consider the viva voce evidence.
There is no requirement under Rule 45 to prove the assets are actually at risk, so a R. 45 freezing order is easier to get before the close of pleadings.
Enjoy your day,
Christopher M.B. Graham – Click here for more information on Chris Graham.
A Mareva injunction is a court order that freezes the assets of individuals or companies. It can be obtained without notice to the target individuals and/or companies and can then be extended on notice.
Mareva injunctions are usually employed in civil actions, typically situations involving fraud, where a plaintiff seeks to prevent a defendant from dissipating assets or removing them from the jurisdiction, pending final determination of the plaintiff’s action.
In Will challenge proceedings, particularly involving large complex estates, a Mareva injunction may be of use in cases where there is a high risk of dissipation or removal of contested assets by one or more parties to the proceedings, thus defeating the purpose of the Will challenge.
A party seeking a Mareva injunction without notice to other affected parties must make out a strong case of dissipation or removal of assets, through sworn evidence. There is also a duty of full and frank disclosure of all material facts and law, given that the affected parties are not able to defend against the injunction at first instance. Finally, the party seeking the injunction must give an undertaking as to damages. That is, the party must undertake to pay damages to the affected parties in the event that it is subsequently determined by a Court that the Mareva injunction should not have been granted. In Ontario, further to Rule 40.02, a Mareva Order obtained without notice is valid for ten days. It can then be extended by a Court, on notice to the affected parties. An affected party, once it receives notice, may immediately move to quash the injunction.
A Mareva Order may prove a valuable tool in preserving contested estate assets in Will challenge proceedings.
Have a great day!
Bianca La Neve
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.
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Listen to Delegation in Investment Accounts
This week on Hull on Estate and Succession Planning, Ian and Suzana discuss delegation issues that arise when dealing with Investment Accounts and address a listeners question about the family cottage.