Tag: deemed disposition
We previously blogged about the decision in Ozerdinc Family Trust v Gowling Lafleur Henderson LLP, 2017 ONSC 6, where a failure to advise of the deemed disposition date of trust assets resulted in an avoidable tax liability. Recently, additional reasons were released which set out the court’s decision with respect to costs arising from the motion for partial summary judgment. The court awarded costs to the successful plaintiffs in the amount of $160,889.76 (including tax) plus disbursements of $100,000.00
The costs decision is interesting as it thoroughly considers a number of elements of the litigation in relation to the factors listed in Rule 57.01 of the Rules of Civil Procedure.
Interestingly, while the court held that the matter was “obviously a very complex matter”, it nonetheless concluded that the costs claimed by the plaintiffs were higher than required for a motion of this nature. The court also noted, in considering the time spent by the plaintiffs on the motion for partial summary judgment, that the “total amount of time spent exceeds a fair amount and that which would reasonably be expected to be required in the circumstances”. This conclusion was made despite the court’s acknowledgment that the bulk of the plaintiff’s time was spent by junior counsel.
Another interesting comment was related to the costs awards with respect to disbursements. It seems that a large portion of the plaintiffs’ disbursements were expended to retain several experts. However, the court found that the amount claimed by the plaintiffs was out of proportion with the amounts spent by the defendants to address similar issues, and reduced the award for disbursements accordingly.
This decision may serve as a helpful reminder to litigators to be aware of the amount of their legal fees and disbursements. One should also try to ensure, as much as possible, that costs are proportional, both with respect to the size of the matter at issue, but also, based on this costs decision, with respect to the costs that may be incurred by the other parties.
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The recent Ontario Superior Court of Justice decision in Ozerdinc Family Trust provides a helpful reminder as to the steps lawyers should take when advising trustees of a Trust with respect to the twenty one year rule against perpetuities.
Under the provisions of the Income Tax Act, capital property is normally taxed upon its “disposition”. In the case of a Trust, according to section 104(4) of the Income Tax Act, there is a deemed disposition every twenty one years after the original settlement of the Trust as long as the Trust holds property that is subject to the rule.
Such property includes: shares of a qualified small business corporation, qualified farm property, and qualified fishing property; marketable securities (including mutual funds and portfolio investments); real and depreciable property; personal-use and listed-personal properties; Canadian and foreign resource properties; and, land held as inventory. At the same time, certain types of capital property are exempt or excluded from the operation of the rule depending on such factors as residency or the nature of the trust.
In order to avoid and/or mitigate any taxes owing as a result of the deemed disposition, there are numerous planning options available to trustees including changing the residency of the trust, or entering into a corporate freeze. Trustees may also simply decide to do nothing.
Therefore, at a minimum, trustees must consider the date of the impending deemed disposition, as well as available tax planning measures to avoid/mitigate any taxes resulting from the deemed disposition. An obligation to advise trustees of these issues often falls on the professional who assisted with the settling of a Trust.
In Ozerdinc Family Trust, Justice Marc R. Labrosse found that the defendant law firm was negligent in failing to advise the trustees of the impending deemed disposition date, as well as the available tax planning measures available to them. Although the facts in this case are nothing novel, it nonetheless acts as a helpful reminder as to the steps lawyers should take when advising trustees of a Trust.
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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.