READ THE TRANSCRIBED PODCAST
During Hull on Estates Episode #44, Jason Allan and David Smith discuss the duties and obligations of trustees with specific consideration to trustees of discretionary trusts. They discuss various claims available to beneficiaries against a trustee who is alleged to have acted improperly and the defences available to the trustee.
Understanding frequent causes of estate litigation can help avoid an estate dispute.
As I mentioned in yesterday’s blog, in Ian Hull’s book “Advising Families on Succession Planning, the High Price of Not Talking”, he comments on a number of common causes of estate litigation.
In this and tomorrow’s blog, I will review some of these common causes.
A lack of understanding of the need for an estate plan, or the reluctance to seek advice, can cause a dispute. Regrettably, many people die without knowing what an estate plan could have accomplished with their estate or the disputes that a plan might have prevented. An estate plan should, among other things, ensure that your assets go to those people you intend them to go to.
Obtaining inadequate estate planning advice can also lead to an estate dispute. One should look for an estate planning professional, typically, a lawyer, an accountant, financial planner and/or insurance professional who also has experience with your personal circumstances or, alternatively, can be made aware of all of the details of your circumstances. It is perhaps trite to say that as families have very different circumstances from one another, an estate plan for one family’s circumstance will not be appropriate for or applicable to another’s.
Part V of the Succession Law Reform Act (“SLRA”) provides the legislative framework for claims by a dependent of an estate. It sets out:
(i) who is a dependent;
(ii) what rights a dependant has in relation to the estate;
(iii) the circumstances the court should consider in determining the amount of support that should be awarded; and
(iv) the kinds of orders the court can make for the satisfaction of a dependent support claim.
Rule 60.11 of the Rules of Civil Procedure explicitly states that a party may pursue a contempt motion in order to pursue those who violate court orders other than for the payment of money.
Some have argued that, even in the face of the language of Rule 60.11, support orders involving the payment of money should be enforceable through a contempt proceeding.
In 2000, in its decision of Forrest v. Lacroix Estate (2000) 187 D.L.R. (4th) 280, (Ont. C.A.) the Court of Appeal set aside a contempt order made as a result of a failure to pay a SLRA dependent support award, affirming that Rule 60.11 does not permit contempt orders for the payment of money.
We have made note this week of the fact that a beneficiary designation is subject to considerably less legal formality than a Will. The fact that many Canadians do not have Wills often means that the designation of a beneficiary is the primary means by which an individual engages in estate planning. This is particularly true of those in their thirties or forties whose largest assets will often be RRSPs or life insurance policies. We have noted that such estate planning has the benefit of clearly directing assets to the intended beneficiary without the need for obtaining probate of a Will.
Certainly, non-legal professionals such as financial advisors will frequently highlight the benefits to their clients of structuring their affairs in such a way as to minimize estate administration tax. Lawyers, as well, will recommend such benefits, mindful of the pitfalls associated when a beneficiary does not act as intended. For instance, where an individual designates a beneficiary of an asset, not for that person’s personal benefit but rather, to distribute in accordance with a Will or some other written or verbal instructions (ie. a secret trust), the issue of trust becomes paramount.
What if the beneficiary does not distribute the asset as the deceased intended but keeps it for herself? For the litigation lawyer, it may be a serious challenge to prove a breach of trust on behalf of disappointed beneficiaries. The designated beneficiary can simply take the position that she has received all right, title and interest in the asset. If the designated beneficiary is herself named executor of the deceased’s estate, there may well be some legitimate questions as to whether she was expected to distribute the asset in accordance with the Will. The designation, if contained in the Will, may ideally clarify whether the asset is to be subject to the terms of the Will.
Have a great weekend and we’ll be back on Tuesday, David. ——–
Yesterday’s blog introduced the topic of beneficiary designations and considered the law in Ontario as it related to the making of beneficiary designations. Today, we consider the law as it relates to the revocation of such beneficiary designations. This applicable statute is section 52 of the Succession Law Reform Act which, as annotated, reads as follows (with underlined words added for emphasis):
s. 52(1) A revocation in a will is effective to revoke a designation made by instrument only if the revocation relates expressly to the designation, either generally or specifically.
The revocation of a RRSP, for example, must reference the RRSP in sufficient detail, to leave no doubt as to which instrument is being revoked. However, the Courts have had to consider how to interpret this subsection. We will consider this issue further in tomorrow’s blog.
(2) Despite section 15*, a later designation revokes an earlier designation to the extent of any inconsistency.
*Section 15 of the SLRA states that a will is revoked only by: marriage, a later will, a written declaration made with the formality of a will, or destruction by the testator or another person under his or her presence and direction.
(3) Revocation of a will revokes a designation in the will.
(4) A designation or revocation contained in an instrument purporting to be a will is not invalid by reason only of the fact that the instrument is invalid as a will.
Hello, my name is David M. Smith and I am a partner (and now one of the resident bloggers) at Hull & Hull LLP. The focus of this week’s blogs will be on beneficiary designations. While the natural tendency is to focus on the assets of the estate, we know that the reality is that, quite often, those assets which pass outside of the estate by way of beneficiary designation will exceed the value of the estate assets.
Indeed, an increasingly common estate planning tool is to hold as many assets as possible outside of the estate, primarily as a legitimate means of avoiding estate administration tax (more commonly known as probate fees) and, in certain cases, protection from creditors.
The most common example of such assets that come to mind are Life Insurance, Registered Retirement Saving Plans ("RRSP") or Registered Retirement Income Funds ("RRIF"). Similarly, (and an issue to be considered in future blogs), assets that are jointly held (unless impressed with a trust for the estate) will pass to the surviving joint owner by right of survivorship.
The making and revoking of beneficiary designations are not always simple matters and, regrettably, litigation may ensue where there is uncertainty. Recent caselaw has raised some interesting twists on this developing area of estate litigation.
In Ontario, the provisions of Part III of the Succession Law Reform Act relating to the making of a beneficiary designation are contained in section 51 which reads as follows (within underlining added for emphasis):
s. 51(1) A participant may designate a person to receive a benefit payable under a plan on the participant’s death,
(a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction; or (b) by will, and may revoke the designation by either of these methods.
s. 51(2) A designation in a will is effective only if it relates expressly to a plan, either generally or specifically.