Tag: David M. Smith
The moment of death is obviously the seminal triggering event in the context of estate and trust law. As but one example, a Will speaks from the moment of death.
A recent article in the National Post raises an interesting question regarding when death actually occurs and how it is defined. There is a medical difference between "cardiac death" and "brain death." As the article notes, the issue is of most concern in the context or organ donation. Simply put, the cardiac death protocol provides that declaration of death may be made 5 minutes after cardiac death. However, in extremely rare instances, case have been reported of a "Lazarus syndrome" and "auto-resuscitation" as long as ten minutes after cardiac death. In any event, a person may still have brain activity for a period of time after cardiac death.
As Jocelyn Downie, an ethicist at Dalhousie University notes: "It is only after the declaration of death that certain things can happen: we can take your organs, we can bury you, we can do an autopsy…we can trigger all sorts of things around your property." Downie advocates a more rigid definition.
Legislation in most provinces suggests that death is to be determined by physicians according to "current medical practice." PEI’s law is more specific (death can "include brain death"). In Quebec, there is no legal definition at all: the matter is left completely to the physician.
Ontario’s Trillium Gift of Life Network endorsed the new donation-after-cardiac-death (DCD) protocol only after extensive research and consultation that ensured it is a moral and medically appropriate practice.
David M. Smith
Pre-nuptial Agreements, Co-habitation Agreements, Marriage Contracts and Separation Agreements can make for added complexity in any estate dispute. Considering the disproportionate rate of estate litigation in families were there have been second marriages (or spousal relationships), it is inevitable that such contracts will continue to impact our practice.
In the recent edition of the Trust Quarterly review published by STEP, the authors of a paper note that "Pre-nuptial agreements are currently not legally binding in England and Wales, but can be taken into account as one of the circumstances of the case." In contrast, the authors note that agreements made after the date of marriage are likely to be binding, subject to the principles of contract law.
In Ontario, claims advanced under Part V of the Succession Law Reform Act are evaluated based on the existence of a number of factors including, under section 62(1)(m), "any agreement between the deceased and the dependant." Certainly there appears to be a trend towards more careful drafting of agreements which may involve the parties contracting out of statutory entitlements they may assume on the death of the other. Given the gravity of contracting out of such significant entitlements, any challenge to such a contract must consider such factors as: (i) the existence of ILA; (ii) the degree of disclosure; and (iii) the presence of any degree of coercion, to name just a few.
Have a great weekend!
David M. Smith
On April 7, 2009, I blogged on the decision of Justice Strathy in Richardson (Estate Trustee of) v. Mew. In that decision, His Honour considered the situation where a deceased’s first spouse was unexpectedly the named beneficiary of a life insurance policy owned by the deceased, the second spouse seeking to remedy what she argued to be an unjust situation. As I noted, His Honour, while not exercising his jurisdiction to rectify the policy, left open the possibility that, in the right set of circumstances (i.e. clear evidence of a mistake), the court could properly employ such a remedy.
The Ontario Court of Appeal released a unanimous decision on May 14, 2009 upholding Justice Strathy’s decision. Of particular significance to the trusts and estates bar, the Court of Appeal clearly stated that, after the mental incapacity of the donor, the attorney under a power of attorney was not permitted to change a beneficiary designation even in circumstances where there was compelling evidence that the donor would have done so if capable: "As a fiduciary in a role rising to that of trustee, [the second wife] was bound to use the power only for Mr. Richardson’s benefit."
In commenting on the case, The Lawyer’s Weekly has noted that counsel for the disappointed second wife is seriously contemplating an application to the Supreme Court of Canada for leave to appeal. In question: is there ever a situation in which the attorney under a Power of Attorney ought to have power to act in the best interests of the donor to effect a testamentary disposition that accords with his or her last known intentions before becoming incapable?
David M. Smith
For my final blog of this week, I thought I would give further consideration to the unique legal issues arising out of life insurance beneficiary designations.
Because of the increasing complexity of insurance structures, it is not always easy to determine what "property" is held by a policyholder at the time of his death. The question is relevant when one considers that, in Ontario, Estate Administration Tax is levied on the value of "all property that belonged to the deceased at the time of his or her death." In this context, there is good reason to question when a contract between the deceased and his insurer morphs into a legal obligation owed by the insurer to the beneficiary.
While the contractual obligation between the deceased and his or her insurer has been described by at least one court as a "species of property", that property (if we are talking about term insurance) only realizes its true value after (as opposed to "at the time of") the death of the deceased policy owner. More than one commentator has noted that the value of term life insurance before the death of the deceased is arguably nominal. However, in Re Carlisle Estate, discussed yesterday, the Court stated: "No one would suggest that the value of a winning lottery ticket is the price paid for the ticket. The value of an insurance policy is the amount paid to the beneficiary by the terms of the policy."
Have a great long weekend!
David M. Smith
As a segue from yesterday’s blog (which considered the issue of beneficiary designations of life insurance policies), today’s blog considers issues arising from the characterization of life insurance proceeds as trust assets in the context of an overall estate plan. Life Insurance Trusts can be created for specific purposes where the owner of the policy has clearly defined testamentary intentions respecting the use of the funds.
In his recent presentation at the Six-Minute Estates Lawyer, Robin Goodman noted a recent Saskatchewan case, Re Carlisle Estate, in which the Court considered whether a declaration in a Will creating a life insurance trust had the effect of excluding the proceeds from probate under Saskatchewan legislation. In that case the Court determined that, regardless of a clearly stated intention to the contrary, the appointment of the executor of the estate as the trustee of the insurance trust (and, more importantly, as the designated beneficiary of the insurance proceeds) meant that “no exemption from probate fees can be claimed.” However, in a gloss on this case, the decision in Sun Life Assurance Co. of Canada v. Taylor (also a Saskatchewan case) clarified that, where the insurance proceeds did not vest in the executor as beneficiary (albeit as trustee for others) but, instead, were simply held by the executor in trust for the designated beneficiaries, the insurance proceeds were not to be considered as estate assets.
As Goodman notes in his paper, it is not clear how these decisions will impact the law in Ontario. In any event, the decisions serve to give any estate planner pause to consider how best to structure an insurance trust whether inside or outside of a Will.
David M. Smith
The impact of Stone v. Stone will clearly have a lasting impact on the practice of family law. This case stands for the general proposition that a spouse can not deplete their assets with the effect of diminishing their spouse’s entitlement under the Family Law Act. Similarly, the estates bar has recently witnessed a similar effect as a result of the decision in Pecore v. Pecore: Transfers of assets into joint ownership between persons other than spouses are inevitably now subject to even greater scrutiny than before.
In the context of the estates practitioner, it can be seen that the principles raised in Stone clearly have some bearing on estates litigation. When a spouse transfers assets into joint ownership with his daughter from a first marriage, the surviving second spouse will no doubt argue that the presumption of resulting trust applies, having consideration to Pecore. But Stone may have relevance as well, particularly in circumstances in which the deceased and the second spouse enter into a Marriage Contract which provides for a guaranteed entitlement of the surviving spouse on the death of the other. To what extent is the spouse who promises such entitlement precluded from gifting assets or transferring assets into joint ownership? A complex overlay of contract, family, and estates law ensues. Unless the assets are significant, the costs of litigating such a dispute inevitably militate in favour of settlement.
David M. Smith
Powers of Appointment may appear in a Will when a testator wishes to entrust the donee with authority to direct who will be the recipients of the testator’s property. A not uncommon scenario is one in which the donee of the power is given a life interest in the testator’s estate and a Power of Appointment to determine which of the donee’s issue shall be the recipients of the residue of the testator’s estate on the death of the donee.
To exercise such Power of Appointment, the donee has to, first of all, survive the testator and, secondly, make a Will which successfully exercises the Power of Appointment. If the donee dies before the testator whose Will grants the Power of Appointment, the power clearly lapses and the Will will presumably provide a gift over to address such eventuality.
Such a decision to effectively delegate testamentary authority is not without its perils and counsel should probably carefully review with the testator the ramifications of granting a Power of Appointment respecting the distribution of residue. For instance, if the testator has a good relationship with her grandchildren (i.e. the donee’s children) the testator ought not to presume how the donee will in fact exercise the Power of Appointment. In addition, the donee’s Will may be vulnerable to a challenge which could conceivably defeat the testator’s intention in granting the Power of Appointment
David M. Smith
The Interrelationship Between a Guardian of Property and a Trustee Under a Testamentary Trust – Hull on Estates Podcast # 133
This week on Hull on Estates, Rick Bickhram and David M. Smith discuss the complications that can arise when an incapable person is both the subject of a guardianship order and the beneficiary of a testamentary trust.
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