Tag: estate administration
Sometimes, the court will say that enough is enough. It will put the brakes on frivolous estate litigation.
One such case is the Court of Queens’ Bench of Alberta decision of Re Klein. There, the deceased died in 2012. She was survived by her three children, who were the beneficiaries of her estate. The estate appears to have consisted of a real property, and some bank accounts. Notwithstanding the apparent straightforwardness of the estate, it appears that multiple proceedings were commenced as between the beneficiaries and the estate trustee in relation to the estate.
On August 27, 2021, after various earlier court attendances, Justice Graesser put a stop to the litigation. The matter was before the court as two of the beneficiaries sought further disclosure of banking activity in relation to a $99.25 deposit into the estate account.
In the decision, Justice Graesser reviewed the history of the estate administration and the evidence of the parties. He concluded that there was no merit in requiring the estate trustee to make any further disclosure. He noted the “proportionality” provisions of the Rules of Court. While the estate trustee may not have accounted perfectly, “Any further work, by [the estate trustee] or by the Courts in receiving or reviewing any further information or submissions, would be completely disproportionate to the magnitude of any possible failings.”
Justice Graesser also noted the court’s readiness to dismiss frivolous claims as an abuse of process. “I subscribe to [ACJ Rooke’s] comments about the need for a cultural shift in civil litigation and to save the Courts and the litigants themselves from frivolous litigation.”
Justice Graesser pointed out that the estate trustee had previously passed her accounts, rendering may of the current complaints by the beneficiaries as res judicata. Further, the passage of time had rendered many of the claims by the estate trustee against the beneficiaries as statute-barred.
While the judge determined that he could not strike claims without hearing from the parties, he was able to continue a stay of proceedings, and not allow any of the parties to take any further steps without leave of the Chief Justice. The parties were, however, permitted to move to dismiss any existing claims.
Justice Graesser concluded by advising: “I do not encourage the parties to continue their disputes in Court. From my extensive review of the Court filing from its beginning, I am satisfied that the parties have nothing to gain by continuing their fight.”
Thanks for reading.
If a loved one has died and you are named in the Last Will and Testament as a beneficiary, the estate trustee will probably ask you to sign a release before any assets are distributed. This legal document confirms that you approve how the estate has been administered to date.
As a residual beneficiary, you are entitled to receive a detailed report of all income, expenses, and distributions from the estate, plus be given the chance to review and approve any compensation requested by the estate trustee. These reports should be as complete and informative as possible, so that when you sign the release you feel you are doing so in an informed fashion.
Along with the request for the release to be signed, there should be a statement that makes it clear that you have the option not to sign the release. At this stage, it is a good idea to seek independent legal advice. You may be unsure of the estate accounting, or the level of compensation claimed by the estate trustee, or there could be other issues related to how the estate was handled.
As the court stated in Rooney Estate v. Stewart Estate, “It is not an answer to say that the beneficiary approved of the accounts and gave a release. One of the obligations of the solicitor acting for the trustee is to ensure that all beneficiaries have competent, independent advice in reviewing the accounts. There is no suggestion by the solicitor that he advised the [beneficiaries] to obtain independent legal advice when reviewing the trustee’s accounts which he had prepared.”
It can be expected that the estate trustee will have received a Tax Clearance Certificate from the Canada Revenue Agency, confirming that all monies owing by the deceased and the estate have been paid. If the estate is distributed before this Certificate is received, the estate trustee could be held liable for any unpaid tax debts.
While it is easy to understand why beneficiary releases are commonly sought by estate trustees, Ontario courts have held that it is improper for trustees to withhold payment or delivery of an inheritance if a beneficiary has refused to sign. At this point, a passing of accounts may be the next step.
From the estate trustee’s perspective, a passing the accounts is the easiest way to deal with uncooperative or unreasonable beneficiaries. Approval of your accounts by the court also removes the need to obtain the consent of the beneficiaries.
If the estate trustee has not sought to pass his or her accounts, the beneficiaries may seek a court order that compels that to happen. During this court approval process, beneficiaries can raise any concerns they have with how the estate was handled. The estate trustee will also be able to explain to the court what they did for the estate, why certain expenses were incurred/payments made, and provide justification for any claim for compensation.
As part of this process, the beneficiaries can request and review the estate trustee’s documentation, such as bank statements and invoices received. Having said that, you should have a good reason for contesting the handling of the estate, as an unnecessary or ill-founded challenge may end up costing you greatly. For example, if you are challenging the honesty and integrity of the estate trustee but in the end the court finds they acted ethically and competently, you may have to pay not only your own legal expenses, but also the legal expenses incurred by the estate trustee in defending your allegations.
If you have any questions or concerns about a beneficiary release, it is wise to seek legal counsel before making the decision to sign it.
Thanks for reading – and have a great day!
Administering an estate can be problematic, regardless of the size of the estate. Even small estates can be fraught with administrative difficulties that can arise by reason of actions or inactions of the deceased, issues as to the relationship between the surviving beneficiaries, or both.
The matter of Gibbons v. Lemont is a good example of the problems that can arise, and their reasonable resolution.
There, the deceased was survived by her three children. In her will, the deceased appointed two of her children as estate trustees.
The estate was a relatively small one, consisting of a house having a value of $100,000 at the time of death. The low value was partially attributed to the fact that the deceased was a hoarder.
To complicate matters, the two estate trustees had a strained relationship with their brother. The brother took issue with the actions of the estate trustees, which lead to a trial and a decision. The decision reflects some of the difficulties in dealing with estates, small or large, and addresses ways of dealing with those issues.
- The trial proceeded by way of a summary procedure. Affidavits were relied upon in lieu of examinations in chief, and cross-examination was limited. The judge observed that “the parties were well advised not to run up the costs by days of evidence and cross-examinations.” However, in the same paragraph, the judge notes that as a result of the extremely limited cross-examination, the judge did not have any assistance in making determinations as to credibility and reliability.
- Rather than sell the home “as is”, the estate trustees spend thousands of hours cleaning and repairing the house to prepare it for sale. This resulted in a gain in the value of the house of approximately $70,000. But for this work, there would probably have been no estate to distribute after the mortgage was paid. The judge commended the estate trustees for their efforts, and observed that in hindsight, the estate trustees might have been better off in declining to act, and to let the mortgagee take enforcement proceedings and sell the property.
- With respect to the time spent to clear, clean and improve the real property, the court found that the estate trustees were entitled to compensation for their work. While the deceased’s will expressly provided that the estate trustees were not entitled to compensation for acting as estate trustees, the work done by the estate trustees went beyond the work reasonably expected of an estate trustee.
- The brother alleged that the estate trustees unfairly and unequally distributed the deceased’s personal effects. However, the estate trustees tried to contact the brother for the purpose of distributing the items, but the brother did not respond. The estate trustees then divided the personal property into lots and assigned a number to each lot. A number was drawn for each child, and the personal effects were distributed accordingly. The court held that this was a fair way of dealing with the personal effects in the circumstances.
At the end of the day, after payment for compensation and out-of-pocket expenses (but before any award of legal costs) the net estate for distribution would be about $47,000, or $15,000 to each beneficiary. Even with the summary procedure that was adopted, the trial took two days to hear. However, notwithstanding the size of the estate, it appears that the issues were important enough to the beneficiaries and estate trustees so as to warrant a judicial determination.
Unfortunately, whether a large estate or a small one, sometimes a determination by the court as to the rights of the parties or the propriety of the action of the estate trustees is necessary. Unfortunately, often the parties are not able to cooperate to ensure that the legal determination can be obtained as efficiently and cost-effectively as possible. The parties and their counsel, in this case, should be commended for their cooperation in having the diverse legal issues put before the court in an efficient manner.
Thank you for reading.
If you are asked to be someone’s estate trustee/executor, you may wonder what liability you are assuming. That is on top of the regular workload, as settling the testator’s financial affairs and distributing the remaining assets to their beneficiaries usually takes a year, involving visits to banks, lawyers and other relevant parties. Much can happen in that time, and beneficiaries may be pressuring you to quickly pass along their share of the estate.
Here are some important points to keep in mind with personal liability.
Many Last Wills and Testaments contain phrasing meant to protect loved ones as they carry out their executor duties, usually along the lines of: “No trustee acting in good faith shall be held liable for any loss, except for loss caused by his or her own dishonesty, gross negligence or a wilful breach of trust.”
That type of clause is important, but there is still some liability that comes with the position.
First, let’s make it clear that an executor does not incur personal liability for the debts and liabilities of the deceased. However, it is the executor’s duty to ensure that financial obligations are paid from the estate before any money goes to beneficiaries.
The potential liability here is particularly significant with respect to taxes. Most estates will have taxes owing, so it is the executor’s duty to ensure that all outstanding tax matters are resolved. Section 159 of the Income Tax Act requires executors to obtain a clearance certificate. This document confirms that the taxes of the deceased have been paid in full. If the executor does not obtain this certificate and the funds from the estate have already been distributed, they will be personally liable for taxes owed.
There is always a chance that an executor could discover the testator was not meeting their tax obligations to the Canada Revenue Agency (CRA). There are a number of reasons this may arise, ranging from simple carelessness to deliberate tax evasion. No matter the situation, the executor is responsible for rectifying that shortcoming using the estate’s funds, before money is given out to beneficiaries.
The CRA has created a Voluntary Disclosure Program that allows executors to come forward and voluntarily correct any errors or omissions without being subject to penalties or prosecution.
Personal liability for executors also arises if they spend money on professionals to help with the administration of the estate. That could include such people as lawyers, accountants, investment advisors, real estate agents, or art appraisers. Estates can be complex, so it is well within the scope of diligent executors to seek professional guidance. Accordingly, the cost for these services will be borne by the estate, not by the executor.
Detailed records must be kept of any money spent, as executors have a duty to account to the beneficiaries. These records must show all expenses paid by the estate and what money the estate received, from insurance benefits, banks or other sources.
In most cases, beneficiaries of an estate will approve, or consent to, the accounts as kept by the estate trustee. But if they feel finances were not properly managed, they can ask for court approval of the records, known as a “passing of accounts.”
Since executors have a duty to maximize the recovery, and value, of estate assets, they are personally liable for any losses they cause. That could include being reckless with the assets, which causes a loss in monetary value. Examples of this would be if an estate has to pay penalties on a tax return that the executor filed extremely late for no good reason, or if a home was sold for much less than market value.
The good news is that if an executor performs their duty diligently and honestly, any financial liability they assume will be paid by the estate.
Be safe, and have a great day.
The recent decision of Mervyn Estate, Re, 2020 ONSC 6989 (CanLII) illustrates the types of issues that can arise on a passing of accounts, and also the underlying factors that can lead to a contested hearing.
In Mervyn, Bud died leaving a will. In his will, he appointed his second wife Anne, a long-time employee and his daughter as estate trustees. He also had two sons, who were beneficiaries. The estate trustees prepared an accounting, and his two sons raised objections.
Before getting to the specific objections, the court noted that there were a number of factors that contributed to the distrust and animosity between the trustees and the sons. Some of these pre-existed the estate administration, and several arose in the course of the estate administration. For example, the sons had a strained relationship with the second wife and their sister for some time. (Alarm bell: testators should reconsider appointing estate trustees who already have a strained relationship with the beneficiaries.) In addition, the estate trustees failed to disclose a bank account in their initial accounting. (Alarm bell: even though the judge found that this was an oversight, and that the estate trustees did not know of the account, this served to heighten the distrust.) Another factor was a “different understanding” between the parties as to whether Bud wanted a one-day open-casket visitation. (Alarm bell: this trigger point could be avoided by a testator making his or her plans clear to all.)
With respect to the specific objections to the accounts, one was that two rifles listed as estate assets in fact belonged to one of the sons. This led to the son reporting the “theft” to the police. The estate trustees countered by alleging that the son’s position that he owned the guns “effectively amounts to theft” by him. (Alarm bell: accusations of theft and the involvement of police can only intensify the animosity and distrust.)
The court ultimately accepted that the son had purchased the guns. Spouse Anne didn’t get the guns.
Which brings me back to the title of this blog. What came to mind was Squeeze’s “Annie Get Your Gun” from 1982. A great song that I will now be humming all weekend. What I wasn’t thinking about and only learned of after further digging was the 1946 musical about sharpshooter Annie Oakley, “Annie Get Your Gun” by Irving Berlin. The musical features the song “There’s No Business Like Show Business”. Think Ethel Merman. Another song that I might be belting out this weekend. Sorry family.
Have a great weekend.
I blogged about Estate Information Returns on April 29, 2019 and what they mean for a recently appointed Estate Trustee.
There have since been a few changes to the obligations of an Estate Trustee in connection with an Estate Information Return.
Whereas the Estate Information Return had to be filed with the Ministry of Finance within 90 calendar days after a Certificate of Appointment of Estate Trustee (with or without) a Will was issued, that requirement is changed to 180 days since January 1, 2020.
Another important change is that whereas before January 1, 2020, an Estate Trustee had to file an Amended Estate Information Return within 30 calendar days of becoming aware of any information submitted that was inaccurate or incomplete, that period was increased to 60 days.
Since January 1, 2020, there is also no Estate Administration Tax payable on the first $50,000.00 of the Estate assets. The Estate Administration Tax is paid on the basis of $15.00 for every thousand dollars of the remainder of the Estate assets (i.e. above and beyond $50,000.00).
These changes are important because they allow an Estate Trustee more time to investigate the nature of the Estate assets and provide as accurate information to the Ministry of Finance, as possible.
A helpful guide from the Ontario government in respect of Estate Information Returns and the issues surrounding them can be downloaded here.
Thanks for reading!
Find this blog interesting? Please consider these other related posts:
The Canada Revenue Agency (CRA) recently provided an update regarding its processing of clearance certificate requests.
Due to COVID-19, clearance certificates may be taking longer to process because employees have limited access to CRA offices and are receiving minimal submissions by mail or fax. Any new clearance certificate applications submitted after March 12, 2020 may not form part of the inventory being processed. As such, CRA is encouraging legal representatives who submitted a clearance request after March 12, 2020 to resubmit the request and supporting documents electronically, either through My Account, Represent a Client or My Business Account.
If the applicant cannot use one of these portals, in order to help stop the spread of COVID-19, CRA has created a temporary procedure allowing taxpayers and their representatives to submit clearance certificate requests and supporting information by e-mail. To do so, we can contact the CRA at CCTX19G@cra-arc.gc.ca, and the province where the executor lives should be named in the subject line. CRA has a sample e-mail accessible in the link at the top of this blog, and CRA warns that sensitive information or attachments should not be included in the e-mail request. We can expect a CRA officer to reply by e-mail with requirements to authorize e-mail communication and to advise when/if we are permitted to submit the clearance certificate application by e-mail.
This e-mail option is helpful to applicants, as it may avoid delay in attending to an estate’s tax matters. However, it is a route to consider carefully, as there is greater risk in proceeding by e-mail than through portal access.
Thanks for reading and have a great day,
Natalia R. Angelini
This week on Hull on Estates, Natalia Angelini and Doreen So discuss the estate administration issues surrounding the disposition of the body, where there is no will, in Re Timmerman Estate, 2020 ONSC 3424 (CanLII) and Re Timmerman Estate, 2020 ONSC 3425 (CanLII).
Should you have any questions, please email us at email@example.com or leave a comment on our blog.
As it relates to the administration of an estate:
- the Estate’s T3 tax return is now due on June 1, 2020 instead of April 14, 2020. Tax payments owed by a trust remain deferred until September 1, 2020
- the filing of an individual’s tax return remains uncertain as mentioned in Paul’s blog
Information is changing daily. If the above applies to you, or an estate that you are responsible for, you should contact a professional accountant and/or monitor the CRA website.
Stay safe and wash your hands,
Please click on this link to see our COVID-19 related resources.
Tattoos are, without a doubt, popular. According to a clinical report in Pediatrics, in 2010, 38% of 18 to 29 year olds had at least one tattoo. A study conducted in 2015 found that 47% of Millennials had at least one tattoo. Tattoos, once the hallmark of rebel culture, have now crossed over into the mainstream. It may be that the rebels are the ones without tattoos.
Tattoos are now also making a mark on the administration of estates.
Take Chris Wenzel, who died in 2018. His dying wish was that his tattoos, which covered most of his body, be preserved and given to his wife. According to a CBC report, with the assistance of an organization called “Save My Ink Forever”, she was able to preserve Chris’ tattoos.
Legal issues relating to the process are discussed in the December 2019 issue of Step Journal. In an article entitled “Whose Skin Is It Anyway?”, authors Julia Burns and Matthew Watson discuss the legal implications of such tattoo preservation services from the point of view of English and Welsh succession law.
One issue is that in the common law, there is “no property in a corpse”. A person cannot dispose of their own body through their will. However, the authors note that courts are relaxing this rule, particularly where the body or parts have “a use or significance beyond their mere existence”.
Estate trustees have the responsibility of disposing of the body. The deceased’s wishes are not binding on the estate trustee. However, while not binding, they are relevant. The authors cite a decision, RE JS (Disposal of Body),  EWHC 2859 (Fam), where the deceased asked that her body be cryogenically frozen. The deceased’s mother wanted to abide by these wishes, but her father did not. The court appointed the mother as estate trustee. The court could not order that the wishes of the deceased be followed, but did order that the father be restrained from interfering with the mother’s arrangements as estate trustee.
If a tattoo is property of the estate, how is it to be disposed of? The authors suggest that the will should specifically address this.
Another issue that the authors identify is whether an estate trustee would have an obligation to preserve a tattoo, assuming that it has value. Is such a tattoo an asset of the estate that the estate trustee must “call in”? There appears to be no easy answer to this. However, the authors conclude that “Common law’s strength is its ability to adapt to new social developments; treating preserved tattoos as art that can be disposed of in the same manner as any other chattel may be one of them.”
Thanks for reading.