Tag: delay

02 Sep

Limited grants as a stop-gap when probate is delayed

Stuart Clark Executors and Trustees Tags: , , , , , , , , , , 0 Comments

An unfortunate reality with the administration of estates is that probate can take a long time to be issued. It is not uncommon for it to take six to eight months, if not longer, after the application is filed before the Certificate of Appointment is issued. As many institutions such as banks require a Certificate of Appointment before they will grant access to estate funds, and the Estate Trustee is generally unable to deal with any real estate owned by the estate until the Certificate of Appointment has been issued, this delay can often result in complications with the initial administration of the estate. These complications can be particularly acute when there is an urgent need for the Estate Trustee to complete a particular task which requires probate, such as the potential urgent need to deal with certain real estate or assets on behalf of the estate.

In the past when faced with the urgent need for probate a common solution would be to bring a Motion seeking an order directing the Registrar to expedite the issuance of the Certificate of Appointment. As anyone who has recently attended an event at which an estates court judge has spoken can attest however this option generally appears no longer to be available, as the message being conveyed is the court is generally not prepared to order the Registrar to expedite the process absent extraordinary circumstances. Such a reluctance appears in part based on the court not wanting to place the Registrar in a position of being in contempt of court if they are unable to comply with the expedition order, as well as administrative issues the expedition orders were causing at the estate office.

The general inability to expedite the issuance of probate absent limited circumstances has raised a number of questions about what, if anything, an applicant Estate Trustee can do if faced with the urgent need for probate and their situation does not meet one of the limited circumstances the court has indicated they will consider expediting probate. Would the applicant Estate Trustee simply have to wait however long the probate application takes in the normal course, or are there other options absent expediting probate that may be available to them?

One potential solution is the use of a “limited grant” under section 29(3) of the Estates Act as a stop-gap, with the applicant Estate Trustee being provided with the authority to complete the particular urgent task under the limited grant until such a time as probate is issued at which time the limited grant would expire. As the limited grant should not require the active involvement of the Registrar, with the individual’s authority to complete the task being derived from the order itself, many of the concerns raised in relation to ordering the Registrar to expedite probate do not appear present with the limited grant.

The limited grant is technically a separate appointment from Estate Trustee, such that the order providing for the limited grant should likely contemplate items such as what is to happen to any assets subject to the limited grant upon the limited grant expiring (i.e. are they to be returned to the Estate Trustee), as well as whether an accounting for the limited grant and/or any compensation to the appointee is payable now or if it is to be deferred to any accounting for the main estate.

Thank you for reading.

Stuart Clark

14 Jun

Zombie Deeds – Can you intentionally delay registering a deed until after death?

Stuart Clark Estate Planning Tags: , , , , , , , , , , 0 Comments

You are the owner of real property that you would like to transfer to one of your children upon your death. Although you could include the bequest of this property in your Last Will and Testament, in the hope of potentially minimizing estate administration tax you decide to sign the transfer for the property now and provide your lawyer with clear instruction that it is not to be registered until after your death. Is this transfer valid and/or an effective estate planning tool?

A transfer/deed of land for real property which is not registered until after the transferor’s death is known colloquially as a “zombie deed”, insofar as they are said to come back to life after the transferor’s death. The use and availability of zombie deeds in Ontario is highly problematic.

The potential validity and/or enforceability of “zombie deeds” was recently considered by the Ontario Superior Court of Justice in Thompson v. Elliott Estate, 2020 ONSC 1004, wherein the court confirmed that zombie deeds were generally inoperable and could not be registered by a lawyer after the transferor’s death. In coming to such a decision the court places great emphasis on the fact that the Ontario registry office is correct in refusing to allow the registration of “zombie deeds” as they require the lawyer registering the document to knowingly make false statements, namely that the individual completing the transfer is still alive.

The Ontario Court of Appeal in Re Sammon (1979), 22 O.R. (2d) 721, confirmed that in order for a transfer to be valid the transferor must have intended to be “immediately and unconditionally bound” by the transfer at the time of signing. This requirement to be “immediately and unconditionally bound” by the transfer raises obvious questions surrounding whether a transfer that was signed under the instructions not to be registered until after the transferor’s death could be a valid transfer, as by the very instruction it would appear the transferor did not intend to immediately be bound by the transfer.

The Ontario Court of Appeal in Carson v. Wilson, [1961] O.R. 113, confirmed that a transfer that was signed under direction not to be registered until after the transferor’s death could not be considered effective due to the issues surrounding the requirement to be “immediately and unconditionally bound”. As summarized by the court in Tubbs v. Tubbs, [2006] O.J. No. 4373:

The court held that the documents did not operate as present assignments or either immediate or remainder interests in the particular lands because there was no acknowledgement by the deceased, express or implied, of any intention to be immediately and unconditionally bound by them. Nor could the deeds be regarded as effective escrows. Delivery was contingent on death, and accordingly the court found that they were not effective deeds or assignments but testamentary dispositions which failed for want of compliance with the Wills Act. The Court of Appeal went on to hold that it could not be argued that the documents amounted to valid declarations of trust by the deceased.” [emphasis added]

The requirement that the individual transferring the property must have intended to be immediately and unconditionally bound by the transfer makes the potential use and availability of zombie deeds problematic, for by their very design the transferor likely intended to continue to enjoy some level of control over the property after signing the deed, whether it be the continued use and occupation of the property or otherwise. As a result any individual considering the potential use of a “zombie deed” should likely approach the topic with caution.

Thank you for reading.

Stuart Clark

07 Oct

Just sue me already – Notice of Contestation of Claim

Stuart Clark Executors and Trustees Tags: , , , , , , , , , , , , , , 0 Comments

What’s an Estate Trustee to do when faced with a situation in which an individual has threatened to bring a claim against the estate but has not yet actually taken any formal steps to advance the claim. As Estate Trustee you have certain obligations to the beneficiaries of the estate, including seeing to the administration in a timely manner. An Estate Trustee also has obligations to the creditors of the estate however, and needs to ensure to that all debts of the estate are paid prior to distributing the estate to the beneficiaries. If they fail to do so, the Estate Trustee could face potential personal liability to the creditors of the estate.

An active claim being commenced against the estate can significantly delay the amount of time it takes for an estate to be administered, as the Estate Trustee cannot see to the final administration of the estate while the claim remains active as they must ensure that there are requisite funds in the estate to satisfy any damages award should the estate ultimately not be successful in the claim. The same is also true for a claim that has been threatened against the estate, as the Estate Trustee may be apprehensive to distribute the estate in the face of a claim possibly being commenced for the same reason. When faced with a such a threatened claim the Estate Trustee could be put in a difficult dilemma, for on the one hand they wish to administer the estate in a timely fashion to the beneficiaries and there is no active claim that has been commenced that would otherwise stop them from doing so, yet because of the threatened claim they may be reluctant to do so for fear of their own potential liability should the claim later be commenced after the funds have been distributed. When faced with such a situation the “Notice of Contestation of Claim” could become the Estate Trustee’s new best friend.

At its most basic the Notice of Contestation of Claim provides a mechanism by which a Estate Trustee can require the potential claimant to formally advance their claim against the estate failing which they are deemed to have abandoned the claim. The “Notice of Contestation of Claim” process is governed by sections 44 and 45 of the Estates Act. If a potential claimant is served with a Notice of Contestation of Claim they are provided with 30 days to issue a “claim” pursuant to the Notice of Contestation of Claim, failing which they are deemed to have abandoned the claim. The 30 day deadline may be extended up to a maximum of three months by the court if the claimant should seek such an extension.

The process by which a Notice of Contestation of Claim is issued is governed by rule 75.08 of the Rules of Civil Procedure, providing the form (Form 75.13) that the Notice of Contestation of Claim must be in, as well as the steps that the claimant must follow to bring their claim before the court upon being served with the Notice of Contestation of Claim should they intend to pursue the matter.

Through the Notice of Contestation of Claim an Estate Trustee can force a potential claimant to make a decision regarding whether they intend to bring a claim against the estate. If the potential claimant does not take the appropriate steps following being served with the Notice of Contestation of Claim their potential claim is deemed to be abandoned and can no longer be pursued before the court, with the Estate Trustee being theoretically free to proceed with the administration of the estate.

Thank you for reading.

Stuart Clark

27 Feb

Is interest payable on legacies?

Nick Esterbauer Estate & Trust, Executors and Trustees, Litigation, Wills Tags: , , , , , , , , , , , , , , 0 Comments

An Ontario Court of Appeal decision released yesterday provides clarity regarding the situations in which beneficiaries of legacies will be entitled to interest on the sum payable to them under a Last Will and Testament.

In Rivard v Morris, the testator had held farmland of significant value.  A prior Will left a farm of comparable value to each of his daughters (as the testator had previously gifted a farm property to his son), and divided the residue of the estate equally between the three children.  In the months preceding his death, however, the deceased amended his estate plan to provide for a greater benefit to his son, leaving him the residue of his estate (inclusive of the farm properties) after distributions to each daughter in the amount of $530,000.00.

After the testator died, the daughters challenged his Last Will on the basis of alleged undue influence.  The will challenge was unsuccessful.  The daughters subsequently commenced another proceeding after their brother (the sole remaining estate trustee after their previous resignations) refused to pay to the sisters interest with respect to the legacies of $530,000.00.  They argued that they were entitled to interest commencing one year after the date of their father’s death, notwithstanding that the payment had been delayed in part because of the will challenge initiated by the daughters.  Any interest would have been payable out of the assets to which their brother was otherwise entitled as sole residuary beneficiary of the estate.

The daughters were unsuccessful at the hearing of their application and appealed.  The Court of Appeal found in their favour.  Justice Paciocco ordered the payment to each daughter interest in the amount of $53,000.00 out of the residue of the estate.  In doing so, Justice Paciocco relied upon the “executor’s year” and the “rule of convenience”.  In describing the rule of convenience, Justice Paciocco stated as follows (at paragraphs 24, 25):

The “rule of convenience” can be easily explained, in my view.  One of the maxims of equity is that it presumes as being done that which ought to be done. Since the beneficiaries should be enjoying the earning power of their legacies by at least the anniversary date of the testator’s death, where that enjoyment is postponed and the testator has not provided an alternative date for payment of the legacy, interest is to be paid…This general rule has been adopted in Ontario.

The rule of convenience was considered by the Court of Appeal to promote certainty and predictability, and the lower court’s decision to deny the daughters’ interest on the basis that they had commenced litigation against the estate was said to be contrary to principle, as this would have the impact of discouraging “even meritorious litigation”.  While the Court of Appeal did neither confirmed nor denied whether judges are able to exercise discretion to deny interest to beneficiaries of legacies, it found that it had been inappropriate for the application judge to do so in this case.

Thank you for reading,

Nick Esterbauer

 

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