Tag: Banton v Banton

23 Oct

Can a Guardian Settle a Trust?

Noah Weisberg Capacity, Estate Planning, Ethical Issues, Guardianship, Power of Attorney Tags: , , , , , , , , , , , 0 Comments

Does an attorney, or guardian, have the power to change a grantor’s estate plan?

According to section 31(1) of the Substitute Decisions Act, a guardian of property (or attorney for property) has the power to do on the incapable person’s behalf anything in respect of property that the person could do if capable, except make a will.

The statute, however, is deceptively simple.  Can a guardian transfer property into joint tenancy?  Can a guardian sever a joint tenancy?  Can a guardian change a beneficiary designation on a RRSP, RRIF or insurance policy?  Can an inter vivos trust be established or an estate freeze undertaken to save taxes?  There are numerous cases which have tested these issues.

For instance, in Banton v Banton, Justice Cullity found that although the grantor’s attorneys had the authority to create an irrevocable inter vivos trust, they nonetheless breached their fiduciary obligations owing to the grantor, in creating the trust.

The irrevocable trust provided for income and capital at the trustee’s discretion for the grantor’s benefit during his lifetime and a gift over of capital to the grantor’s children, who were also the attorneys.  The scheme of distribution of the irrevocable trust was the same as provided for in the grantor’s will.   However, the court found that the fact that the remainder interest passed automatically to the grantor’s issue defeated the grantor’s power to revoke his will by marriage and would deprive his common law spouse of potential rights under Parts II and V of the Succession Law Reform Act and Part I of the Family Law Act.  The court found that the gift of the remainder of the interest went beyond what was required to protect the grantor’s assets.

Justice Cullity stated:

“I do not share the view that there is an inviolable rule that it is improper for attorneys under a continuing power of attorney to take title to the donor‘s assets either by themselves or jointly with the donor .  This must depend upon whether it is reasonable in the circumstances to do so to protect or advance the interest, or otherwise benefit, the donor.”

Noah Weisberg

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27 May

How to Change a Beneficiary Designation by Procuration

Noah Weisberg Beneficiary Designations, Capacity, RRSPs/Insurance Policies Tags: , , , , , , 0 Comments

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A recent decision by the Ontario Superior Court of Justice addresses the issue of whether the owner of a life insurance policy, who is mentally competent but physically disabled, can validly instruct another to change a beneficiary designation on a life insurance policy.

In Hanson Estate, the owner of a life insurance policy, after being diagnosed with multiple sclerosis, sought to change the beneficiary designation of the policy.  Although the owner was mentally competent, as a result of the debilitating disease, the owner was physically incapable of altering the beneficiary designation.  As such, the owner’s attorney for property was directed to make the amendment (by the owner).

In reaching her decision, the Honourable Madam Justice H.M. Pierce first considered s 7(2) of the Substitute Decisions Act, which states that an attorney may “…do on the grantor’s behalf anything in respect of property that the grantor could do if capable, except make a will”.  The Judge dismissed the applicability of the SDA on the basis that the attorney was “…not acting as a substitute decision-maker pursuant to the power of attorney”.

Instead, the Judge turned her analysis to s 171(1) of the Insurance Act (which deals with beneficiary designation under a contract of life insurance) and considered in what circumstances a declaration is “signed by the insured”.

Consideration turned to Lord Denning’s decision in London City Council v Agricultural Food Products, [1955] 2 Q.B. 218 (UK C.A.), which states that “…there are some cases where a man is allowed to sign by the hand of another who writes his name for him.  Such a signature is called a signature by procuration, by proxy, ‘per pro’, or more shortly ‘p.p.’  All of these expressions are derived from the Latin per procurationem…he can get someone else to write his name for him; but the one who does the writing should add the letters ‘p.p.’ to show that it is done by proxy, followed by the initials so as to indicate who he is”.

Consideration also turned to Justice Cullitty’s decision in Banton v Banton which states that “…[a]n attorney for a donor who has mental capacity to deal with property is merely an agent notwithstanding the fact that that the power may be conferred in general terms…[a]s an agent, such an attorney owes fiduciary duties to the donor but these are pale in comparison with those of an attorney holding a continuing power of attorney when the donor has lost capacity to manage property”.

Justice Pierce held that given the attorney advised the insurer that he changed the policy designation as agent for the owner by procuration, the amended beneficiary designation was deemed valid.

 Noah Weisberg

25 Apr

Predatory Marriages and their Effect on Wills

Ian Hull Capacity, Elder Law, Estate & Trust Tags: , , , , , , , , , 0 Comments

A recent article in the Toronto Star discusses how the current state of the law in Ontario makes elderly individuals vulnerable to predatory marriages. In Ontario, under section 16 of the Succession Law Reform Act, RSO 1990, c S.26 (the “SLRA”), a will is automatically revoked by the marriage of the testator.

blog photo - predatory marriageThere is a discrepancy regarding the capacity required to
make a will and the capacity required to marry. In Banton v Banton, [1998] OJ No 3528, the court considered a situation in which an 88 year old man, George, married a 31 year old waitress at his nursing home, Muna. After their marriage, amidst concerns regarding his capacity, George prepared a will leaving everything to Muna. The court found that George did not have testamentary capacity and that his will was invalid, but found that the capacity to marry was a lower standard, requiring that an individual be capable of understanding the nature of the relationship and the obligations and responsibilities it involves. Accordingly, George and Muna’s marriage was valid and George was found to have died intestate.

The issue is that, even if wills executed following a potentially predatory marriage are found invalid as a result of incapacity or undue influence, the marriage may still be valid, and thus the intestacy provisions of the SLRA will be relevant. Under Part II of the SLRA, if a deceased passes with a spouse and children, the spouse is entitled to a preferential share in the amount of $200,000, in addition to a share of the residue of the property after payment of the preferential share.

The Star article suggests that the law nullifying wills on marriage makes it easy for a predatory bride or groom to take advantage of elderly individuals. It points out that Ontario law regarding revocation of wills upon marriage is lagging behind other provinces, namely Alberta, British Columbia and Quebec, none of which statutorily revoke wills after marriage. In Alberta in particular, it was noted that the remedial legislation was made after a study revealed that few people were aware that wills did not survive a new marriage.

It is therefore possible in Ontario that an elderly person who intends to leave their entire estate to their children could be caught unaware that their existing will was revoked by marriage, with no knowledge of the need to execute a new one. It is also possible that a testator may not even have the capacity to make a new will after entering a predatory marriage and will be left without recourse. With an aging population, elder abuse, which often takes the form of financial abuse, is a very serious concern. Consequently, it may be time for Ontario to consider measures to protect elderly or vulnerable individuals against predatory marriages.

Thanks for reading.

Ian Hull

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