Tag: estate administration
The recent decision in Bunn v. Gordon demonstrates how a breakdown in the relationship between an estate trustee and beneficiary may lead to the removal of the estate trustee.
The Testator made a Will naming his girlfriend of three and a half years as estate trustee. The Will, amongst other things, leaves real property and a portion of the residue to his two children to be held in trust by the estate trustee until attaining the age of 21. As a result of the age of the children, the estate trustee’s office will last until at least the year 2021.
From the outset, the administration of the estate was contentious, such that the children commenced an application under s 37(1) of the Trustee Act for the removal and replacement of the estate trustee. The law with respect to estate trustee removal has remained relatively consistent with the governing principle being the welfare of the beneficiaries and whether the continuance in office of an estate trustee will likely prevent the estate from being administered. From this the courts do not take lightly the wishes of the deceased as expressed in the Will.
The children raised four examples in support of their application to remove the estate trustee:
- failing to provide the children with a copy of the death certificate, despite multiple requests;
- failing to account for a Kodiak trailer demonstrating a lack of care with the estate assets;
- selling a desk and cupboard which was of sentimental value to the children, showing a disregard for the interests and wellbeing of the beneficiaries; and
- failing to report on the sale of real property.
Individually, the evidence in and of itself was not sufficient to call for the removal of the estate trustee. However, the court held that collectively the relationship between the estate trustee and children had broken down and that the antipathy towards the beneficiaries precluded the dutiful administration of the estate. Although the behaviour was not solely the fault of the estate trustee, the court indicated that it is the estate trustee who owes the fiduciary obligation. Therefore, the estate trustee was removed.
This week on Hull on Estates, Natalia Angelini and Nick Esterbauer discuss security bonds within the context of estate administration and guardianship of property, as well as certain situations in which security is typically required and applicants may request to dispense with the requirement to provide security.
Should you have any questions, please email us at firstname.lastname@example.org or leave a comment on our blog below.
After considerable research and public consultation, The Law Commission of Ontario (“LCO”) released its final report for the Simplified Procedures for Small Estates Project on November 19, 2015.
The LCO’s mandate for this project was to recommend law reform measures to enhance and improve the estate administration procedure such that its current benefits would be more accessible to small estates with a gross value of up to $50,000.
After considering a range of alternatives to the court-based supervision that should be used in the small estates process in Ontario, the LCO ultimately concluded that a court-supervised model would be most appropriate in keeping with the protective function of the regular probate system. In this regard, it is recommended that amendments to Rule 74 of the Rules of Civil Procedure and the Estates Act should be amended to provide for a simplified small estate procedure which will result in the issuance of a Small Estates Certificate that will have the same legal effect as a Certificate of Appointment of Estate Trustee.
The only difference between a court-issued Small Estates Certificate and a Certificate of Appointment of Estate Trustee is that estate trustees pursuant to a Small Estate Certificate will only have the authority to deal with the estate assets listed in the application.
To determine whether an estate qualifies for access to the small estate process, the LCO recommends that the value of the estate be calculated in accordance with section 32(1) of the Estate Act and should include all assets belonging to the deceased at the time of death, including those discovered after the issuance of the Small Estate Certificate.
The LCO recommends that a formal application process which mirrors the current probate process should be adopted for small estates with the exception of some of the evidentiary requirements. For example, an applicant under the small estate process would not be required to file proof of the validity of a will and their legal entitlement to administer the estate. Instead, an application would simply be required to make a declaration to this effect. The only evidence required would include:
- a copy of the death certificate;
- a copy of the will if there is one; and
- a form declaring that the application was sent to the beneficiaries, including the Ontario Public Guardian and Trustee and/or the Office of the Children’s Lawyer,
Applicants under the small estate process would also be required to send a copy of the application and an explanatory form to all known persons with an entitlement to a share of the estate, including the OPGT and/or the OCL. This must be done at least 30 days before filing the application. However, payment of security would not be a requirement of the application process.
The LCO also makes recommendations to the Ontario Government and the Ministry of the Attorney General with respect to amendments to the Estate Administration Tax Act and the development of an on-line filing system and paper filing procedures. Other recommendations include information guides specifically for unrepresented applicants with step-by-step instructions and public awareness campaigns to educate the public regarding the importance of making a will and appointing an estate trustee.
To find out more about the LCO’s recommendations and to read the full report visit http://www.lco-cdo.org/en/small-estates-final-report
Thank you for reading and have a great weekend!
According to the Legislative Assembly of Ontario, Bill 120: Estate Administration Tax Fairness Act, 2015, was brought before the Legislature seeking amendments to the Estate Administration Tax Act, 1998 (“EATA“).
The EATA was only recently amended, and entered into force on January 1, 2015. Substantive changes were made at that time. These changes have been the subject of Hull & Hull LLP blogs and podcasts, including such topics as: general changes to the EATA; frequently asked questions; the effect of the EATA on insurance policy proceeds; and, how to file the estate information return.
Bill 120 sought amendments to the EATA with respect to the following areas:
Value of the Estate – In determining the value of the estate, the current procedure is to deduct any encumbrances on real property to the total estate value. The Bill sought to amend the definition of ‘value of the estate’ by deducting not only the value of any encumbrance on any such property, but also any amounts bequeathed or devised for a charitable purpose.
Estate Administration Tax – Currently, the amount of tax payable upon the issuance of an estate certificate is $5.00 for each $1,000 (or part thereof) for the first $50,000 of the value of the estate, and $15.00 for each $1,000 (or part thereof) of the value of the estate that exceeds $50,000. Decreases to the amount of tax payable were proposed such that any estate valued at less than $50,000 would pay nil tax, with increased taxes owing for estates valued more than $50,000, with the maximum of tax payable to be capped at $3,250.
Disclosure to the Minister of Finance – Bill 120 also sought to limit the information given to the Minister of Finance and along with certain continuing obligations imposed therein.
The Second Reading of Bill 120 was held on September 24, 2015, at which time the motion was declared lost, and the Second Reading negatived.
This week on Hull on Estates, Paul Trudelle and Nick Esterbauer discuss artwork and the special considerations that should not be overlooked when it comes to estate planning or administration involving this unique investment asset.
Should you have any questions please email us at email@example.com or leave a comment below.
Estate trustees can have a difficult task ahead of them, especially when it comes to the administration of complex estates. While the following list is not exhaustive, it outlines some questions for individuals to consider when acting as estate trustees.
- How much do you expect to get paid? Estate trustees are entitled to compensation that is a “fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate”. While there is no statutory calculation for trustee compensation, section 62(1) of the Trustee Act allows a judge to determine what is allowed.
- How far do you need go to find beneficiaries? Section 24(1) of the Estates Administration Act requires a trustee to make reasonable inquiries for persons who may be entitled by virtue of a relationship traced through a birth outside marriage. In situations such as an intestacy or where beneficiaries are not specifically named in a will, this can be an onerous task complicated by geography, language and family dynamics. Doreen So previously blogged about searching for beneficiaries here.
- Who needs to be served? When applying for probate, an estate trustee must issue an application to the court and serve all persons entitled to a share in the distribution of the estate. This is governed by the Rules of Civil Procedure. Of note is the provision that if a person entitled to a share is less than 18 years of age, notice of the application is to be served on the Children`s Lawyer. The Children’s Lawyer is also to be served in circumstances involving unborn and/or unascertained beneficiaries.
- When can you start distributing assets? While estate trustees need to be prudent about their distribution responsibilities, there may be factors that prevent the early distribution of estate assets. For example, s. 6(14) of the Ontario Family Law Act prevents the distribution of a deceased spouse`s estate within 6 months of the spouse`s death without consent in writing from the surviving spouse or court authorization.
- What is worth keeping? When it comes to cleaning out a deceased`s papers and personal effects, there may be a fine line between valuable items and junk. In the case of items such as photographs, letters and documents that beneficiaries do not want, do the items have any significance? When items possibly have historic or academic value, estate trustees may consider canvassing options of donation to university archives or libraries.
Thank you for reading.
What follows is a revised edition of this morning’s blog which inadvertently created confusion between the principles of Abatement and Ademption. I apologise for any confusion caused by the initial version.
On Monday, I blogged on the payment of debts of an estate and the steps that an estate trustee ought to take to protect him or herself from any personal liability. Today’s blog is a sequel of sorts (it would have been posted yesterday but a Groundhog Day tie-in was too good to resist).
The issue today is Ademption and Abatement, words that will only be found in a law dictionary. Ademption occurs when a specific gift of personal or real property in a Will is no longer in existence at the date of death, in which case the gift fails. If specific legacies of cash can be partially satisfied (as detailed below) from the funds remaining in the estate after payment of debts, then there is an Abatement of such legacies.
For greater clarity, where there are debts to be paid, the residuary beneficiaries take the hit first. If the debts can be paid and still leave something in the residue, than the specific cash legacies can be paid in full. However, when the residue is exhausted by the payment of debts, and there is a shortfall between the amount remaining and the amount required to fully fund the specific cash legacies, the principle of abatement dictates that these legacies are reduced on a pro rata basis.
The situation gets considerably more complicated if an executor is faced with a cash poor estate and a Will that contains combinations of cash legacies, gifts of real estate, gifts of personal property, and gifts of personal bank accounts (sometimes called general or demonstrative legacies). In such a case, good legal advice is critical.
David M. Smith
David M. Smith – Click here for more information on David Smith.
It is a trite principle of estate administration that "debts must be paid before beneficiaries." Assuming this maxim is followed, the estate trustee will not assume any personal responsibility for the debts of the deceased. On the other hand, if the estate trustee distributes the estate without due consideration to creditors’ entitlements, the estate trustee may be left personally exposed unless the beneficiaries return their entitlement to the estate trustee to fund any unpaid debts.
To be fully relieved from personal liability, the estate trustee must make reasonable efforts to locate and satisfy the creditors of the deceased. Advertising for creditors is therefore an essential step in protecting the estate trustee from liability and ensuring that the creditors of the deceased have had the opportunity to be paid. But the importance of the advertisement ought not to be overstated. If an estate trustee can be proven to have had independent knowledge of a creditor who does not claim (for whatever reason) in response to the advertisement, and if the estate trustee distributes in the face of this knowledge, he or she could conceivably be personally responsible to such a creditor.
The bottom line is that the estate trustee, understandably focused on his or her fiduciary duty to the beneficiaries, stands in the shoes of the deceased and must give more than a passing regard to the creditors of the estate.
David M. Smith
David M. Smith – Click here for more information on David Smith.
Listen to Tracking Down Heirs
This week on Hull on Estates, Diane Vieira and Rick Bickhram discuss the issue of when an estate trustee is responsible to search for potential heirs to an estate.
Comments? Send us an email at firstname.lastname@example.org, call us on the comment line at 206-350-6636, or leave us a comment on the Hull on Estates blog.
Listen to Lost Wills
This week on Hull on Estates, Paul Trudelle and Megan Connolly talk about the issues surrounding lost wills.