Hull on Estates #602 – Can You Appoint a Litigation Guardian for Unborn and Unascertained Beneficiaries?
This week on Hull on Estate, Stuart Clark and Garrett Horrocks discuss the distinction between appointing a “litigation guardian” or seeking a “representation order” when dealing with the interests of unborn and unascertained beneficiaries in estate and trust litigation.
Should you have any questions, please email us at email@example.com or leave a comment on our blog.
An insured may designate a beneficiary of the proceeds of a policy of insurance. This can be done by a beneficiary designation that is signed by the insured. No other formality is required.
An insured may also designate a beneficiary of a policy of insurance in a will.
What happens, however, if the will is found to be invalid?
Section 192(1) of the Insurance Act provides that a designation in an instrument purporting to be a will is not ineffective by reason only of the fact that the instrument is invalid as a will.
This may be due to the different procedural requirements of due execution of a will, versus the minimal procedural requirements of the execution of a beneficiary designation. Thus, a document signed by the testator/insured but not witnessed by two witnesses may be ineffective as a will, but may be effective as a beneficiary designation.
Different considerations may apply where the will is found to be invalid on the basis of lack of testamentary capacity. If the testator/insured is found to be incapable of executing a will, it may follow that he/she is incapable of executing a beneficiary designation. However, the applicable burden of proof may lead to a finding that one is incapable of signing a will, but capable of signing a beneficiary designation. In Fawson Estate v. Deveau, 2016 NSCA 39 (CanLII), the Court of Appeal was faced with a case where a will executed on April 23, 2004 was found to be invalid. The estate trustee then moved for summary judgment in a separate proceeding brought to declare beneficiary designations executed shortly before and after the execution of the Will invalid. The motion for summary judgment was dismissed, as the judge found that there was a genuine issue for trial. The Nova Scotia Court of Appeal agreed.
In dismissing the appeal, the Court of Appeal referred to the different burdens of proof. In the will challenge, the burden was on the will challenger to show suspicious circumstances. The burden then shifted to the propounder to show that the testator had testamentary capacity. In the challenge to the beneficiary designations, the burden was said to be on the challenger, throughout, to show that the insured did not have capacity to execute the beneficiary designations.
In a case of undue influence, a will found to be invalid due to undue influence may not necessarily mean that the insurance beneficiary designations were the result of undue influence: a separate analysis is required.
In conclusion, when considering rights and remedies in the face of a potentially invalid will, do not immediately assume that an invalid will means that insurance beneficiary designations contained in the will are invalid as well. A deeper analysis of the reason for the invalidity is necessary.
Thank you for reading.
On Tuesday, I blogged about Registered Education Savings Plans (“RESPs”), the statute governing their administration, and the difference between Family Plans and Individual Plans.
When people usually hear about RESPs though, they often think that it is some kind of trust. However, that is most likely not the case.
What Are Trusts?
The general structure of a trust under Canadian law is that a settlor gives property to a trustee for the benefit of some third party. In turn, the trustee holds legal title to the property but is bound by fiduciary duties to administer such trust, on behalf of the beneficiary.
To create a trust, under Canadian law, there must be:
1) A certainty of intention;
2) A certainty of subject matter; and
3) A certainty of object.
How are RESPs Different?
In the case of an RESP, as discussed previously, the subscriber keeps title to the property until the beneficiary uses it for his/her post-secondary education. A promoter, which is the financial institution that is administering the RESP, similarly does not take title to the property in the RESP. As such, the property belongs to the subscriber until such time that the beneficiary attends a post-secondary institution, or a successor subscriber is appointed.
How Have the Courts Treated RESPs?
Multiple courts have held that the RESP does not meet the criteria of “certainty of intention”, and as such, it cannot be considered a trust.
The Alberta Court of Queen’s Bench held that a person who filed for bankruptcy was not holding the RESP for the exclusive benefit of her children but, rather, that she could have cancelled the plan at any time (see Payne, Re (2001), ABQB 894, 109 ACWS (3d) 687). This Court further held that since there was no intention to create a fiduciary relationship in the case of an RESP, it did not meet the certainty of intention. The same result was reached by the New Brunswick Court of Queen’s Bench and the Saskatchewan Court of Queen’s Bench (see Vinneau, Re (2007), NBQB 332, 160 ACWS (3d) 939 and MacKinnon v Deloitte & Touche Inc. (2007), SKQB 39, 155 ACWS (3d) 27).
The Ontario Superior Court of Justice has, however, come to a different conclusion. The Court held that the subjective intent at the time of the creation of the RESP could create a trust (see McConnell v McConnell (2015, ONSC 2243, 252 ACWS (3d) 300). This case dealt with a family law dispute and the question arose whether an RESP belonged to the beneficiary child or the subscriber parent. The Court did not consider certain characteristics of an RESP that are not congruent with the finding that it is a trust, such as the fact that a subscriber may collapse the RESP at any time, as well as use it as security for a loan.
As such, it is possible that McConnell v McConnell could be restricted to the facts at hand and assessed in the context of the circumstances that the Court was presented with; namely, whether or not to attribute an asset to the child or the parent, in a divorce proceeding.
Thanks for reading.
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Registered Education Savings Plans or “RESPs” are education savings accounts registered with the Canada Revenue Agency. RESPs are used by individuals to save for their children’s post-secondary education. Once it is registered, it becomes the repository for education savings incentive payments made on behalf of an eligible beneficiary.
RESPs are a creature of statute and are governed by section 146.1 of the Income Tax Act (the “Act”). An RESP must be terminated by the end of the 35th year, following subscription.
A subscriber of an RESP is the person who makes contributions, and in whose name it is registered. A beneficiary, on the other hand, is a person on whose behalf the subscriber opens the RESP.
There are two types of RESPs that one could subscribe to: a family plan and an individual plan.
Under a family RESP, the subscriber can name one or more children as beneficiaries with the requirement that each beneficiary be related to him or her by blood or adoption.
A “blood relationship” is defined under section 250(2) and (6) of the Act, as a relationship between:
- a child and his/or her parents;
- a child and each set of his or her grandparents; and
- a child and each set of his or her great-grandparents.
An aunt/uncle, niece/nephew or cousins, are not considered related by “blood” under the Act.
A relationship by “adoption” includes both legal adoption and “adoption in fact”. When a beneficiary is legally adopted s/he is considered to be connected to the adoptive parents and both sets of grandparents and great-grandparents. Where, however, a legal adoption has not taken place, an “adoption in fact” may exist. For example, the beneficiary is considered to be the adopted child “in fact” of the common-law relationship, if the spouse provided parental care on a continuing basis.
An aunt/uncle, niece/nephew or cousins, are not considered related by adoption under the Act.
Under an individual plan, only one child can be named as a beneficiary; however, there is no requirement that the beneficiary be related to the subscriber under the Act. In fact, the subscriber can even name himself or herself as a beneficiary under such an RESP.
In addition to the statutory provisions of the Act that deal with RESPs, the contract between the subscriber and the promoter (the organization administering the RESP), can provide additional terms and conditions. It is important to review such terms before choosing the promoter that suits your needs, as the contract can provide further restrictions than the statutory framework of the Act.
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Have you seen the recent Home Hardware ads, where an adorable young couple tackles a complete home renovation on their own? It’s hard not to root for them. But while the do-it-yourself attitude is admirable, there are some things in life where professional help is needed, and estate planning is one of them. Estate planning mistakes aren’t easily fixed, especially since they might not be discovered until you’re gone. Here are a few reasons why professional help is important.
An objective voice on family dynamics
The influence of family relationships on your plan is greater than any other factor. Who gets along with whom? Who has special needs? Should estate assets be owned jointly by all beneficiaries, or sold? Who do you trust to manage your estate?
That’s where a professional can help. You’re caught up in family dynamics, whether you like it or not. And an objective voice can do wonders for quieting the family voices you hear and providing some clear advice to help you arrange your estate in a manner that reflects the unique dynamics of your situation.
They can also help you communicate your plan to your family during your lifetime, to minimize estate conflicts later. Trust me, we’ve seen it all. If there are issues within your family now, you can be certain they won’t be any better once you’re gone. The more you can do to communicate your estate plan and listen to family members and address concerns during your lifetime, the smoother the estate settlement process will be.
They see things you haven’t thought of
An estate plan doesn’t have to be complicated, but all good plans have one thing in common – they cover all the angles. The mistakes in estate planning often relate to what isn’t in the plan rather than what is.
One of the key benefits of planning with a professional is the use of a methodical approach to cover off the key elements that pertain to your estate, whether related to business, your children from a previous marriage, beneficiaries, or assets in other jurisdictions.
The coordination of beneficiary designations for insurance policies and registered plans is a great example, because it’s a commonly missed item. These policies and plans may have been put in place over many years, with designations that no longer reflect your desired division of assets.
You have a role too
While professional advice is an essential element of a solid estate plan, your input is obviously an important part of it. And the more you know about the estate planning process, the more value you bring to the table. This recent Globe and Mail article highlights three estate planning books you might want to read to learn more about the process and the elements of your estate plan that you may not have considered:https://www.theglobeandmail.com/globe-investor/globe-advisor/beyond-the-beach-read-estate-planning-books-for-canadians/article35981401/.
Thank you for reading,
The recent Court of Appeal of Alberta decision in Goold Estate v. Ashton, 2017 ABCA 295 (CanLII) addresses the issues of presumptions and the burden of proof surrounding lost wills and the presumption of revocation.
There, the deceased died leaving a holograph will. The holograph will revoked a prior formal will. However, the holograph will could not be found following the deceased’s death.
The court referred to the presumption of revocation: a will will be presumed to be revoked by destruction where the original cannot be located after the death of the deceased. The party relying on the presumption of revocation has the burden of proving (a) possession and control of the will by the testator; (b) continuing capacity to revoke the will; and (c) the absence of the will after death.
As to the second point, in order to rely on the presumption of revocation, the party relying on it must show that the testator had capacity to make or revoke a will. On the evidence, it was not clear as to when the will was revoked and when the testator lost capacity. There was evidence that the testator did not have capacity for a significant portion of the time during which the holograph will was under the testator’s control. The party relying on the presumption was therefore not able to discharge the burden on her to establish that the testator had capacity at the time of the revocation of the will. The Court of Appeal upheld this analysis.
Once the presumption is found to apply, the presumption can be rebutted by showing, on a balance of probabilities, that the testator did not destroy the will or intend to revoke it. The judge below found that, even if the presumption did apply, the presumption had been rebutted. The court considered:
- whether the terms of the will were reasonable;
- whether the testator continued to have a good relationship with the beneficiaries of the lost will;
- whether personal effects of the deceased were destroyed prior to the search for the lost will being carried out;
- the nature and character of the deceased in taking care of personal effects;
- whether there were any dispositions of property that support or contradict the terms of the lost will;
- statements made by the testator which confirm or contradict the terms of the lost will;
- whether the testator was of the character to store valuable papers, and whether the testator had a safe place to store them;
- whether the testator understood the consequence of not having a will; and
- whether the testator made statements to the effect that she had a will.
The judge below found that there was sufficient evidence to establish, on a balance of probabilities, the absence of an intention to revoke the holograph will. The Court of Appeal would not interfere with these findings of fact.
For other discussions of lost wills, see What Does One Do When There’s a Lost or Defective Will? and Saving Lost Wills?
Thank you for reading. I presume that you will have a great weekend. Don’t rebut my presumption.
While we don’t wish ill of anyone, one little dream that many people share is the long lost inheritance.
You have a distant aunt who lived happily in Europe until her death five years ago at age 100. You didn’t know you had a distant aunt until you travelled to Europe and visited the village that you knew your family was from. People in the village started talking: “maybe this is Giovanni” and the next thing you know, you’re being whisked to the village lawyer and told that you had a distant aunt who died five years ago and left you 100,000 euros. And the money’s been waiting for you all this time!
Such a win-win scenario – an aunt with a happy life, a potful of money to take home, and an introduction to relatives you barely knew you had. Could it happen to you?
Not likely, especially in today’s digital age. While any one of us could get an inheritance from someone who secretly names us in their will – a scenario that happens more frequently than you might think – if you are named in a will, it’s likely that you’ll find out soon after the person dies.
The reason is twofold: first, estate trustees (executors) have a duty to contact all beneficiaries, and they must make reasonable efforts to find unknown or missing heirs. So, the search is on quickly to find you if you are a beneficiary. You can read more about the duty of estate trustees to track beneficiaries here.
Second, in this digital age, it’s becoming less and less likely that you cannot be found, with search engines, social media and family history all available at the touch of a button. The internet has made those “so you’re Giovanni” moments few and far between.
That said, there may be situations where a somewhat distant family member has died and you think you might be a beneficiary. You wait for a month or two, but hear nothing. In addition, there have been more than a few family disagreements over the years, so you’re worried about your rights as a potential beneficiary and want to get information about the will.
In Ontario, this provincial government site provides a good overview of the estate settlement process, and where you can get information about a will. And this article by Newfoundland lawyer Lynne Butler provides some very practical steps that you can take to gain access to a will if it has not yet been made public.
Thank you for reading!
We know there are many estate planning situations that are enormously complex. Corporate ownership, assets in multiple jurisdictions, multiple family beneficiaries, family dysfunction issues – all of these can complicate an estate plan significantly.
But there are few estate planning issues as urgent as planning for the future care of someone with a physical, mental or emotional disability, especially when it’s a child with a long life ahead but who lacks the capacity to look after their own needs.
I use the word “urgent” because the great fear of loving parents planning ahead for the care of their special needs child is “getting it wrong” and leaving an estate that doesn’t adequately address their child’s needs. The good news is that a combination of good advice and careful planning will go a long way to ensuring you “get it right.” Here are a few high-level suggestions that can help you get there:
- Start as early as possible: When you have a young child with a significant disability, time, energy and the ability to think beyond the needs of the day are often limited. So it’s tough to think about the future – especially when it concerns death. But it’s worth your thinking time. While the risk of you and a spouse passing away at an early age is low, the risk isn’t zero. All new parents should be addressing issues such as life insurance and their will when they have a child. But it’s even more critical if your child is unlikely to be able to care for themselves as an adult. And by starting your planning at an early stage, you may be able to maximize the benefits of certain planning tools, like the Registered Disability Savings Plan (RDSP).
- Get advice – and understand the tools available to you: There is no “one size fits all” when it comes to estate planning for someone with special needs. There are government benefits that an individual may be eligible for, like the Ontario Disability Support Program, savings arrangements available, like the RDSP, and trust arrangements to consider, like a “Henson Trust” https://hullandhull.com/2015/12/henson-trust-advantages-and-disadvantages/ that can provide ongoing income to a beneficiary without jeopardizing eligibility for government benefits. A lawyer or financial professional with expertise in this area can be an invaluable resource.
- Put a plan in place: Act on the good advice you get and put your plan in place. That means moving the drafting and execution of your will up your priority list, because it’s a process that few enjoy and often falls into the “I’ll get to it eventually” category. There’s a lot at stake, so do it sooner rather than later.
- Revisit your plan regularly: Your situation may change, your child’s needs may change, and laws may change. Sit down with a professional every few years to review your plan and determine if a change could be beneficial.
This advisory has a good overview of the main planning tools that may be available to you:
Thank you for reading … Have a wonderful day!