Tag: estate assets
This week on Hull on Estates, Jonathon Kappy and Rebecca Rauws discuss the purchase of estate assets by an estate trustee, and some steps that should be taken in the event of a purchase to ensure compliance with fiduciary obligations.
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Many people are aware of the presumption which was confirmed by the Supreme Court of Canada in Pecore v. Pecore that assets which are held jointly between the deceased and certain individuals (including their adult children) are presumed to be held by the surviving joint owner on a resulting trust for the deceased owner’s estate unless they can rebut the presumption and show evidence that the deceased intended them to receive the property by right of survivorship. While the application of such a presumption is clear when the property is owned jointly between a parent and an adult child, what about when the property is owned jointly between two married spouses? Does a similar presumption to that in Pecore apply, such that the surviving spouse is forced to show that the deceased spouse intended them to receive the asset upon their death, failing which it is presumed to form part of the deceased spouse’s estate?
The common law presumption that joint assets are held on a resulting trust for the benefit of the deceased owner’s estate has been altered in Ontario as it relates to married spouses by the Family Law Act. Section 14 of the Family Law Act provides:
“The rule of law applying a presumption of a resulting trust shall be applied in questions of the ownership of property between spouses, as if they were not marries, except that,
(a) the fact that property is held in the name of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants; and
(b) money on deposit in the name of both spouses shall be deemed to be in the name of the spouses as joint tenants for the purposes of clause (a).”
As a result of section 14 of the Family Law Act, property which is held jointly between two married spouses is presumed to pass to the surviving spouse by right of survivorship. That being said, it is a rebuttable presumption, such that if there is evidence that the deceased spouse did not intend the property to pass to the surviving spouse upon death, the deceased spouse’s estate could seek a declaration that the asset in question is held on a resulting trust for the benefit of the deceased spouse’s estate. Section 14 of the Family Law Act effectively reverses the presumption as described in Pecore in the case of married spouses, whereby property held jointly between two married spouses is presumed to pass to the surviving spouse by right of survivorship unless there is evidence to the contrary such that the presumption can be rebutted.
Notably, section 14 of the Family Law Act only reverses the presumption as it relates to married spouses. As a result, an argument could be raised that in circumstances where common law spouses own property jointly, that the standard presumption as confirmed by Pecore would apply, such that the surviving common law spouse is presumed to hold the asset on a resulting trust for the benefit of the deceased spouse’s estate unless they can show evidence to rebut the presumption.
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Last week we blogged on limited grants in the event that the executor is located out of the jurisdiction. There are two other types of limited grants to consider: grants where an original will or codicil is unavailable and administration durante animi vitio. Furthermore, it is important to consider making alterations in grants in the case of an error.
A limited grant may be necessary where an original testamentary document is unavailable or if there will be a delay in the production of certain codicils. The grant may be limited until the time when the original or the codicils are produced. This grant will allow an individual to act as administrator of the estate until such documents can be located. If the original will is with somebody abroad who is unwilling to produce it, it is possible to grant probate pending the receipt of the original. In a case of urgency, it is possible that a copy of an original will may be admitted, limited until the original arrives. If a copy is admitted, an individual must apply to the court by an order for directions under Rule 75.06 of the Rules of Civil Procedure.
Another type of limited grant is administration durante animi vitio, roughly translated as “administration for the use and benefit of a person under a disability”. If a person entitled to a grant of administration was of unsound mind at the time of the deceased’s death, or became of unsound mind after receiving the grant, administration for his or her use and benefit would be granted to someone else until the individual returned to sound mind. If a sole executor or administrator becomes incapacitated through mental or physical illness, the grant can be revoked and administration can be granted to his or her guardian.
If a certificate of appointment has been issued, but there is a defect in the document, it is important to alter or amend the document. If an error is a bona fide mistake and is not of significant importance to require the revocation of the grant, the amendments may be made based on satisfactory evidence. These types of amendments include minor details such as the name of the executor, or the date of death. This will result in the execution of a new bond. When an error is discovered, an affidavit should be filed confirming the mistake on the original and attesting to the correction, and the registrar will then make any changes required. If property is discovered after the grant of probate or administration and was not originally included in the application, the executor or administrator must deliver a true statement of the property verified by oath to the registrar in Ontario. This may result in the individual having to pay an increased surety to account for the extra value of property.
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Issues involving estates with international aspects are on the rise. Technological advances over the last century have resulted in increased mobility and connectivity, such that people are now choosing to invest, live, work, study or retire abroad. As a result, it is becoming increasingly common for people to pass away with assets, such as bank accounts, investments or real estate, in foreign jurisdictions.
What happens when an individual dies with assets located in Ontario but is domiciled in another jurisdiction?
Attaining the authority to deal with assets located in Ontario can be puzzling for a foreign personal representative charged with the task of administering these assets.
Common law has traditionally distinguished between moveable property (personal property) and immoveable property (land or interests in land). Moveable assets are typically governed by the law where the deceased was domiciled, whereas immoveable assets are typically governed by the law where the land is situated.
However, in Ontario, a grant of probate is typically required in order for a personal representative to establish his or her authority to deal with assets located in Ontario. Banks and land titles offices generally require a grant of probate before they will release or transfer the assets. This position is the same whether or not a grant has been obtained from a court in some other jurisdiction.
It is possible to have a foreign grant recognized in Ontario, in lieu of obtaining probate in Ontario. Depending on the size of the worldwide estate, this may be the better option, as tax is typically levied on the value of the worldwide assets with a grant of probate in Ontario. If seeking recognition of a foreign grant in Ontario, estate administration tax will likely only be levied on the value of the assets in Ontario.
Where the original grant was made in a Province or Territory of Canada or a country that is a member of the Commonwealth, an Application may be made for Confirmation by Resealing of Appointment of Estate Trustee. The procedure is the same whether the deceased died with or without a Will. The requirements for a Confirmation by Resealing are set out in Rule 74.08 of the Ontario Rules of Civil Procedure (the “Rules”).
Where the original grant was made in a country that is not a member of the Commonwealth and the deceased died with a Will an Application may be made for a Certificate of Ancillary Appointment of Estate Trustee With a Will. The requirements for a Certificate of Ancillary Appointment are set out in Rule 74.09 of the Rules.
Where the original grant was obtained in foreign jurisdiction and the deceased died without a Will, an Application may be made for a Certificate of Appointment of Foreign Estate Trustee’s Nominee as Estate Trustee Without a Will. The requirements of this Application are set out in Rule 74.05.1 of the Rules.
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When we think of assets, items such as real property, investments, bank accounts, and even jewellery and vehicles are what typically come to mind. Aside from cases where a client has an obviously valuable collection or rare painting, we may not immediately think of art as an asset. However, this may be changing as studies show that investment art is quickly becoming one of the fastest growing and dynamic markets in North America.
According to The Capgemini World Wealth Report of 2013, fine art made up 16.9% of high net worth individuals’ investments of passion, not far behind jewellery and watches. It is no longer uncommon to hear of art being sold in Canada for hundreds of thousands or even millions of dollars at high-end auction houses such as Sotheby’s. More than ever, art is being seen as providing a good source of return by investors. As the report points out, a well chosen piece of art can not only act as a hedge against inflation, but it also has the potential to outperform over the long term.
As a result, when dealing with estate assets where art is involved, it is important that the Estate Trustee manage investment art with the same level of care and attention that they would any other traditional asset. This may involve ongoing maintenance or ensuring proper insurance coverage is in place to protect against theft or damage. Together with obtaining a formal appraisal, these steps can help protect the Estate Trustee against liability while realizing the best possible return on the investment for the beneficiaries.
Obtaining an appraisal when administering estate assets that include investment art and in estate planning where art is to make up a significant portion of the estate, can be invaluable. For a testator, the formal appraisal can be of great assistance in determining the true value of an art asset. This will allow them to make a more informed decision as to the division of their assets. Appraisals are also a useful means for the Estate Trustee to avoid unpleasant surprises where the fair market value is later discovered to be significantly higher than the sale price, resulting in unanticipated taxes.
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“He who touches the ashes of the past,
Will burn himself with still glowing coals.” –Elizabeth Heyking
Han Sachs invoked this quote in his autobiographical work: "The World’s Greatest Poster Collection: How it came into being and How it Disappeared From the Face of the Earth." As the title of his book suggests, Sachs (who was, among other things, Einstein’s dentist) compiled an invaluable poster collection that was confiscated by the Nazis in November, 1938. He died without ever recovering his treasured collection.
In a recent essay published in the Timesonline, his great-granddaughter recounts the subsequent efforts made by Sachs’ son to recover his late father’s collection. Despite the fact that Germany: (i) committed to return confiscated art found in museums by signing the Washington Conference Principles on Nazi-Confiscated Art in 1999, and (ii) where the Third Reich was implicated, implied that it would not invoke any statute of limitations, a recent Court decision in favour of the estate was nonetheless appealed by the German government and the decision is pending.
The efforts of an executor of an estate to recover lost art poses special challenges that I recounted in this blog reviewing the efforts of the estate trustees of the estate of Max Stern and the advent of the Lost Art Internet Database.
David M. Smith
David M. Smith – Click here for more information on David Smith.
Yesterday I talked about Section 13 of the Evidence Act (Ontario), which mandates that before someone can bring a claim by or on behalf of an Estate, he or she must have some corroborative evidence. The standard of evidence required was dealt with by the Ontario Court of Appeal in Burns Estate v. Mellon.
The Estate Trustees, who were arguing that a transfer to a friend of the deceased during lifetime ought to be reversed because it was subject to a resulting trust, argued that the recipient’s defence that the transfer was a gift ought to be defeated because her corroborative evidence did not remove all reasonable doubt that she had received a gift. The Court of Appeal agreed with the recipient, finding that the strength of evidence need only succeed on a balance of probabilities:
In principle, I see no justification for applying the criminal standard in a civil action. A criminal prosecution differs fundamentally from a civil action, and the criminal standard serves different ends and operates on different assumptions from the civil standard. (See R. v. Schwartz,  2 S.C.R. 443 (S.C.C.), at 462, per Dickson C.J.C. and Lamer J.) Moreover, nothing in s. 13 itself suggests that the Legislature intended to displace proof on a balance of probabilities with proof beyond a reasonable doubt.
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Listen to Valuations and Appraisals
Ian celebrates the 100th episode of Hull on Estate and Succession Planning.
He discusses the question of valuations and appraisals and how these affect estate mediation.
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I read an article in this week’s Maclean’s magazine that more and more of Canada’s "Super Rich" are drafting family value statements. According to the article, approximately $3 trillion (though the figure varies depending on the source) will be transferred in the coming decades to the next generation. The Super-Rich are particularly concerned that their children, as beneficiaries of this wealth transfer, will take the easy way out and decide not to work or give back to the community. Warren Buffet received a great deal of press when he stated publicly that he would not leave his fortune to his children. Instead, the Bill and Melinda Gates Foundation was the recipient of Mr. Buffet’s considerable largesse.
According to the article, a value statement spells out those values that are important to the family and can include values that speak to community, work ethic, and religion. Apparently, the Super Rich are willing to pay various consultants significant amounts of money to get the statement just right. Every family member is asked to participate so that everyone buys into the process and the statement withstands the test of time.
Whether the average Canadian family actually sits down and crafts a family value statement is debatable. However, most families will discuss informally, whether over dinner or around the campfire, the values that motivate them and help them navigate life’s many choices.
However it is done, it makes good sense for parents to sit down with their children to not only talk about the pending transfer of wealth, but their expectations (and aspirations) as to how their children will spend their inherited wealth. It is a truism that money has always been hard to handle.
Have a good weekend.