Tag: estate planning
As an estate planner and a lawyer, it is important to remember that when creating an estate plan, familial relations may turn negative. It becomes crucial for estate planners to ensure that their instructions are complete, in order to protect themselves in the case of a family fight.
Often, in the process of a married couple jointly retaining a lawyer to prepare their wills, “mirror wills” are prepared. Mirror wills typically provide for all estate assets to pass to the surviving spouse.
An issue arises in the case of a lawyer who prepares mirror wills and one of the spouses decides to make a change, adversely affecting the other spouse. What are the lawyer’s ethical obligations?
Pursuant to the Rules of Professional Conduct, Rule 3.3-1 states that a lawyer has an ethical obligation to hold in confidence all information concerning their clients, and Rule 3.4-1 creates an ethical obligation to avoid conflicts of interest.
It is important, therefore, that when acting for a married couple, the lawyer outlines his or her ethical obligations, and specifically, if applicable, outlines that they are acting in a joint retainer. Rule 3.4-5 outlines the ethical obligations of a lawyer in the case of a joint retainer:
Before a lawyer acts in a matter or transaction for more than one client, the lawyer shall advise each of the clients that:
(a) the lawyer has been asked to act for both or all of them;
(b) no information received in connection with the matter from one client can be treated as confidential so far as any of the others are concerned; and
(c) if a conflict develops that cannot be resolved, the lawyer cannot continue to act for both or all of them and may have to withdraw completely.
While outlining the joint retainer rules to a client, it is important that the lawyer considers what they would do in the case of one of the spouses asking the lawyer to alter a mirror will. While the lawyer could refuse to draft a new will, the requesting spouse may be able to find another lawyer to do the will, and the lawyer will still have the issue of whether or not to tell the disadvantaged spouse. This may give rise to a conflict of interest.
The second Commentary to Rule 3.4-5 specifically contemplates and guides the lawyer acting for a married couple as to what should happen in this scenario. Simply put, any subsequent communication to change the will by one of the spouses would be “treated as a request for a new retainer and not as part of the joint retainer.” The lawyer would therefore have a duty to decline the new retainer unless the other spouse consented to the change.
The critical issue is that this possibility must be conveyed to the spouses at the outset of the joint retainer.
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A testamentary document may be set aside if it is not accurately representative of a testator’s intentions, for reasons such as an innocent mistake on behalf of the testator or solicitor, or the fraud of another.
In the British Columbia Supreme Court case of Johnson v Pelkey (1997) 36 BCLR (3d) 40, the Court stated that “any will that does not express the real or true ‘intention’ of the testator will be set aside, even if the testator had testamentary capacity, and was not subject to undue influence.”
Additionally, in Coleman v Coleman Estate, 2008 NSSC 396 (CanLii), the Nova Scotia Supreme Court observed that even if testamentary capacity is found to exist, it is possible that a testator did not properly know or appreciate the contents of their will due to an innocent mistake or by the fraud of another. As established in Vout v Hay,  2 SCR 876, the Supreme Court of Canada held that the propounder of a will must demonstrate “that the testator knew and approved of the contents of the will.”
When drafting a will, there is a duty on the solicitor drafting the testamentary document to make necessary inquiries. This duty is required so that the solicitor can demonstrate, based on discussions with the testator, that the testator fully appreciated what he or she was doing when they made the will.
In Johnson v Pelkey, the British Columbia Supreme Court found that there were differences between the solicitor’s notes and what appeared in the executed will, there were errors in the will, a property lot was left out of the will entirely, and an intended gift was missing. The solicitor testified these omissions were his mistakes or that his instructions may have been changed between receiving them and the execution. It was reported that upon the solicitor’s review of the will with the testator, the testator did not notice any of the omissions, errors and ambiguities.
When considering whether the testator had the knowledge of his or her testamentary document as well as approval of the contents of his or her will, based on mistake, are matters of fact to be determined based on all of the evidence of the case.
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An estate trustee may be bound to a contract previously entered into by the deceased. This duty is distinct from the duty of an estate trustee to discharge all debts of the deceased.
There are four main elements of a contract:
- Intention (consensus ad idem/meeting of the minds)
Prior to the formation of a contract, it is possible for an offer to be revoked by death, if the contract has not been accepted by the surviving party. If performance of a contract has already been initiated by the surviving party, the contract may not be able to be revoked. This is due to the fact that part-performance of a contract may validate a contract. The doctrine of part-performance has been upheld in cases such as Lensen v. Lensen, 1984 CanLII 2424 (Sask CA), and Thompson v Guaranty Trust Co.,  S.C.R. 1023.
In general, contracts often will have a clause stating that the terms are binding on the estate of a contracting party. Therefore, if a contract is found to be valid, the estate of a deceased may be bound by a contract entered into by the deceased. It is important to note that a contract need not be formally executed and signed in order to be considered enforceable by the court.
In Bayer Estate v. Blue Button Club, 2007 BCSC 517, the British Columbia Superior Court upheld a contract on the death of a party. In this case, the deceased, Bernard Bayer, and his employer, Blue Button Club, entered into an employment agreement for 10 years, with an annual base salary of $60,000.00 plus benefits. The contract provided that, upon the death of Bayer, the Club would pay into deceased’s estate an amount equal to the salary and benefits that the deceased would have earned. The amount paid into the estate was to be based on how much time was left in the employment contract. The contract also had a provision naming the Club as a beneficiary of the deceased’s insurance policy, so long as the Club was to maintain insurance on the life of Bernard. Upon the death of Bayer, the Club tried to submit that the employment contract was not enforceable. The Court rejected the Club’s submissions and upheld the contract, requiring the Club to pay the deceased’s salary into his estate.
Aside from part-performance of a contract or having a formally executed contract, it is possible to enter into a verbal contract prior to the formal contract being executed. Where a tentative agreement is reached from oral negotiations, the intentions of the parties are the key factor in determining if a contract is in existence. In attempting to enforce a contract in which one of the parties is deceased, the Court will look to the intention of the deceased in order to determine whether or not they intended for a contract to be formed.
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If an estate trustee is not fulfilling their duties and is not acting in the best interests of the estate, it is possible to commence an application for removal.
When seeking to remove an estate trustee in Ontario, anyone with a financial interest in an estate can apply to have an executor passed over or removed, pursuant to s. 37(3) of the Trustee Act. Rule 14.05(3)(c) of the Rules of Civil Procedure, allow an application to be commenced for the purpose of “the removal or replacement of one or more executors, administrators or trustees, or the fixing of their compensation.” The applicable principles for the removal of an executor have been established in Letterstedt v Boers (1884), 9 App Cas 271 (South Africa PC) and have been summarized in Johnston v Lanka Estate, 2010 ONSC 4124:
- The court will not lightly interfere with the testator’s choice of estate trustee;
- Clear evidence of necessity for removal is required;
- The court’s main consideration is the welfare of the beneficiaries; and
- The estate trustee’s acts or omissions must be of such a nature as to endanger the administration of the estate/trust.
A recent British Columbia Court of Appeal decision, Al-Sabah v Al-Sabah, 2016 BCCA 365, upheld the removal of an estate trustee of an estate on the basis that she did not comply with the notice provisions of the Wills, Estates and Succession Act, and was not acting in the best interests of the estate.
In this case, the deceased died in 2003, intestate, and left 15 beneficiaries, including his two sons, two wives, and seven daughters. One of his daughters was the appellant and the estate trustee of the estate. The respondents on the appeal comprised 79% of the beneficiaries to the estate.
Upon the death of Mr. Al-Sabah, estate litigation was commenced across several countries, as he had held property in many different locations. The appointment of the estate trustee by British Columbia was successful, however, the appellant had also applied to be the estate trustee of the estate in London, and had her position revoked, and she commenced at least 4 actions in Kuwait against other beneficiaries, all of which were unsuccessful.
In chambers, the estate trustee was removed, and appealed that ruling. On appeal, it was upheld that the estate trustee did not exercise reasonable diligence in providing notice to the other beneficiaries of her intention to apply for the position, and that she failed to disclose relevant information to the beneficiaries.
The British Columbia Wills, Estates and Succession Act section 121, and the British Columbia Supreme Court Rules establish the requirements for notice of the beneficiaries. It was established that the estate trustee did not provide notice to the proper addresses required by the rules, as the addresses to which she forwarded notices were almost all incorrect. The judge also noted that the application was made amidst “hotly contested” and “acrimonious” estate litigation, and that when she applied for her grant of administration, she did not disclose that there was significant litigation surrounding the estate in other countries.
If this case were to have taken place in Ontario, it is likely that the Ontario courts may have come to the same decision as the British Columbia court, in applying the principles as established in Letterstedt v Boers. The court would not have been interfering with the testator’s choice of estate trustee as he died intestate, and it is clear that the removal was required due to her dishonesty and her lack of consideration of the welfare of the beneficiaries, thereby endangering the administration of the estate.
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Apparently, the tax changes which were introduced in Japan in 2015 lowered the existing tax exemption threshold from ¥50 million to ¥30 million and reduced the existing deduction of ¥10 million for each heir to ¥6 million per heir.
As a result, the estates of a significantly wider segment of the population are now subject to inheritance taxes, and there appears to be a corresponding rise in the number of individuals seeking to reduce their tax burden through adoption.
According to the article, adoption for the sake of “financial adjustment” has always been a common practice in Japan. In fact, such adoptions, usually of adults who only need to be at least one day younger than the adopting parent, constitute the overwhelming majority of adoptions in Japan. In many cases, adults are adopted when a family does not have someone to take over a family business or a male heir who can carry on the family name. The article states that more recently, however, such adoptions appear to be motivated by the desire to reduce inheritance taxes.
The article refers to a recent case of the Supreme Court of Japan, in which the deceased had adopted his son’s son (his “grandson”), thus giving him four heirs instead of three — his son, his grandson (now second son) and two daughters. As a result, the son’s family stood to receive more of the father’s assets than either of the daughters. The daughters commenced proceedings seeking that the adoption be declared void as it had merely been intended as a tax-savings measure. However, the Supreme Court of Japan ruled that the intention to reduce the amount of taxes would not automatically annul the adoption itself and upheld the adoption, which many believe in effect, condones this practice.
This is not the first time adoption has been used in estate planning. Before same-sex marriage was legalized, adoption was used on occasion in Canada and the United States as a means of ensuring the transfer of an inheritance between same-sex couples. An article published in the New York Times in 2009, which outlines the use of adoption for such purposes can be accessed here.
Other Hull & Hull LLP Blogs & Podcasts that may be of interest to you:
- A novel argument by an adopted child in British Columbia
- Reducing probate fees
- The All Families are Equal Act Has Passed
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As many people are aware, the Succession Law Reform Act, R.S.O. 1990, c. S.26 (the “SLRA”) governs the formalities with which Wills, both formal and holograph, must be executed. The SLRA also governs the necessary formalities for making alterations to a Will after it has been executed. Section 18 states as follows:
18. (1) Subject to subsection (2), unless an alteration that is made in a will after the will has been made is made in accordance with the provisions of this Part governing making of the will, the alteration has no effect except to invalidate words or the effect of the will that it renders no longer apparent.
(2) An alteration that is made in a will after the will has been made is validly made when the signature of the testator and subscription of witnesses to the signature of the testator to the alteration, or, in the case of a will that was made under section 5 or 6, the signature of the testator, are or is made,
(a) in the margin or in some other part of the will opposite or near to the alteration; or
(b) at the end of or opposite to a memorandum referring to the alteration and written in some part of the will.
The rules for alterations essentially parallel the rules for execution of the Will itself. If the original Will was a formally executed Will, any alterations also require the signature of the testator along with attestation by two witnesses, while an alteration to a holograph Will, need only include the testator’s signature. Section 18 also includes an exception if the alteration renders the words “no longer apparent”. Case law has held that this term means that the words have been completely obliterated such that they can no longer be read using natural means.
With respect to alterations to holograph Wills, it can often be difficult to determine when an alteration was made, as the entire document consists of the testator’s handwriting. For example, if a holograph Will contains a clause that reads as follows:
To my daughter Mary Jane, I leave my pearl necklace.
There are a number of possible scenarios whereby this clause may have come to be, as follows:
- The testator inadvertently wrote “Mary” when they meant to write “Jane” and immediately corrected it;
- The testator initially wanted to leave the necklace to Mary, but upon further consideration, and prior to execution of the Will, decided to leave it to Jane instead. At that point they crossed out “Mary”, wrote “Jane”, and subsequently signed the holograph Will; or
- The testator fully wrote out and signed the holograph will and later decided to change the bequest to Jane.
While the first two scenarios would theoretically be valid as the revisions were made prior to execution, the third would not be valid as it does not include the testator’s signature, and accordingly does not comply with the requirements in s. 18 of the SLRA. However, the issue in this situation is that the testator will most likely not be around to assist with the interpretation when it becomes necessary to determine whether Mary or Jane are entitled to the necklace. Even if one of the first two scenarios is true, there is no way to tell when the alteration was made. Based on the SLRA, the alteration would likely be found invalid, and Mary would be entitled to the necklace.
Unfortunately, in Ontario, strict compliance with the provisions of the SLRA does not leave much flexibility for the Court to uphold what it views as the testator’s true intention, unless the Will, or alteration to the Will, has been executed according to the rules in the SLRA. There are many arguments in favour of, and against maintaining the strict compliance regime, and you can read more about the issue in our previous blog here.
This can be problematic, as many testators who make holograph Wills are doing so without the assistance or advice of a lawyer. Accordingly, they are likely not familiar with the formalities required for alterations, leading to circumstances that can easily result in an interpretation of the holograph Will that may not necessarily be as the testator intended.
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As societal norms are continuously changing and evolving, there has been a change in attitudes toward the relationship between adopted children and their biological parents. Today, society encourages adopted children and their birth parents to re-establish a relationship. For example, we have previously blogged on a change of the law in Saskatchewan, which provides for an adult adopted child to reconnect with their birth parents.
In Ontario, the legal status of adopted children is governed by the Child and Family Services Act (the “CFSA”). Section 158(2) of the CFSA provides that, upon an adoption order being granted, the adopted child becomes the (legal) child of the adoptive parent and ceases to be the child of the person who was his or her parent before the adoption order was granted. Pursuant to this statute, once a child is adopted, they are not entitled to their birth parent’s estate unless specifically provided for in the birth parent’s will.
Furthermore, in Ontario, there are no direct provisions governing a testator’s wishes in distributing their property. There is no requirement that all children must be treated equally, or that an individual must leave a part of their estate to their children through a testamentary document. Statutory protection does exist, for dependants, however, under Part V of the Succession Law Reform Act.
In contrast, the law in British Columbia provides that the Court has discretion to vary a will to remedy disinheritance of a child. Pursuant to s. 60 of the Wills, Estates and Succession Act (“WESA”), a parent must make adequate provision for their children, and if the court does not find a testamentary division among the children to be equitable, the court can intervene.
A recent case out of British Columbia considered a novel argument: does the receipt of a benefit under a birth parent’s will entitle an adopted child to argue for a greater share of the estate under section 60 of the WESA?
In the Boer v Mikaloff, 2017 BCSC 21, Mr. Boer was legally adopted as a baby to an adoptive family. He became reunited with his birth mother around the age of thirty, and in his birth mother’s last will and testament, he received a portion of her estate. Mr. Boer challenged his birth mother’s last will and testament in court, arguing that pursuant to s. 60 of the WESA, he was not given an equitable share of his mother’s estate compared to his mother’s other children.
The court held that Mr. Boer was not entitled to an equitable share, as he was not legally considered to be his birth mother’s child. The court held that section 3(2)(a) of the WESA does not allow an adopted child to manipulate a bequest by the child’s pre-adopted parent into a s. 60 claim and applied the case of Canada Trustco Mortgage Co. v Canada, 2005 SCC 54, to uphold that the text, context and purpose of the statute in this regard was clear.
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Life insurance is a common estate planning tool, whether it may be engaged to increase the assets available to beneficiaries, to assist in equalizing inheritances received by multiple beneficiaries (for instance, when one child will receive an interest in a family business and other assets are not available to leave an equal benefit for other children), or to fund specific types of expenses that will become payable upon death. While the owner of a life insurance policy is more often than not the person whose life is insured, this is not always the case. In Canada, in order to purchase a life insurance policy on another person’s life, the policy owner must have an “insurable interest” in the policy subject’s life. Canada’s Insurance Act defines an insurable interest as follows:
Without restricting the meaning of “insurable interest”, a person, in this section called the “primary person”, has an insurable interest,
(a) in the case of a primary person who is a natural person, in his or her own life and in the lives of,
(i) the primary person’s child or grandchild,
(ii) the primary person’s spouse,
(iii) a person on whom the primary person is wholly or partly
dependent for, or from whom the primary person is receiving, support or education,
(iv) the primary person’s employee, and
(v) a person in the duration of whose life the primary person has a pecuniary interest; and
(b) in the case of a primary person that is not a natural person, in the lives of,
(i) a director, officer or employee of the primary person, and
(ii) a person in the duration of whose life the primary person has a pecuniary interest.
Other jurisdictions similarly allow individuals or companies to take out life insurance policies on the life of another on the basis of an insurable interest in certain circumstances. As David Freedman mentioned in his recent blog post, Disney had a life insurance policy worth $50 million in American funds on the life of Carrie Fisher as one of the stars of the Star Wars franchise, which Disney purchased in 2012 for $4 billion. This is reported to be the largest ever payout of a life insurance policy of this kind.
There is much speculation with respect to how Disney will fill the void left by Fisher’s death in the final entry in the current Star Wars trilogy (Fisher had apparently finished filming for Episode VIII prior to her passing). Some suggest that the script for the following installment will be drastically re-written as a result of Fisher’s absence. Others have referred to the posthumous appearance of Peter Cushing in Star Wars: Rogue One (I personally had no idea that it was not the original actor himself until I read Suzana’s blog on the topic) in support of the potential to use CGI technology to allow Princess-turned-General Leia Organa to appear again in Episode IX. As done with Cushing in Rogue One, Disney could, in theory, digitally impose Fisher’s face onto another actor’s body. In any event, the life insurance proceeds payable to Disney will no doubt assist in offsetting any loss that it will suffer as a result of Carrie Fisher’s untimely passing.
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With the aging population, there are increasing numbers of individuals who may require a caregiver. And that caregiver is not always privately employed, or a direct family member or a spouse.
Currently, the socio-economic situation of such unpaid caregivers has been documented as “financial hardship” due to the void created upon the terminated relationship A recent article published by Canadian Family Law Quarterly suggests a two-pronged statutory remedy be put in place in order to: (i) provide legal recognition of such relationships, and (ii) compensate sacrifices of the unpaid/altruistic caregiver.
Who Should Compensate Unpaid Caregivers?
An important consideration in the contemplation of providing support to unpaid caregivers is whether the state or the individual accepting care should have the onus of providing financial support. In the case of Egan v Canada,  2 SCR 513, Justice Sopinka ruled in favour of individual responsibility and stated “the government was not required to be proactive in recognizing new social relationships [and that]… it is not realistic for the court to assume that there are unlimited funds to address the needs of it all.”
On the other hand, Nicholas Bala in an article published in the Queens Law Journal states: “an adult who shares a home and provides care for another economically dependent adult should be entitled to the same level of state assistance (or tax relief) [as paid caregivers] whether the dependent is a spouse, parent, sibling, uncle or friend.”
Currently, aside from equitable and statutory remedies (not available to all and not certain), the only private law safeguard put in place to protect unpaid caregivers is through wills and estate planning. To protect an unpaid caregiver through a will or estate plan would require forethought by the recipient of the care. The plan would need to be instituted at a point when the individual had capacity, and was able to properly execute a will or testamentary document.
In the case of unpaid caregiving, the care provider who is a family member may be a beneficiary of an existing estate plan (outside of any caregiving obligations). Entitlement to an enhanced benefit would be a fair way to compensate for unpaid care to the testator.
Another recourse for an unpaid caregiver is to apply for dependant’s relief pursuant to section 58(1) of the Succession Law Reform Act (“SLRA”).
Section 58(1) provides that:
Where a deceased, whether testate or intestate, has not made adequate provision for the proper support of his dependants or any of them, the court, on application, may order that such provision as it considers adequate be made out of the estate of the deceased for the proper support of the dependants or any of them
In the case of Cummings v Cummings, 2004 CanLII 9339 (ON CA), the Court of Appeal acknowledged that “caregiving may give rise to both legal and moral obligations to provide support.” Therefore, if an unpaid caregiver can establish themselves as a dependant of the deceased individual who was receiving their care, it is possible they may get some recourse under the SLRA.
It nonetheless bears repeating that the case for law reform relates to the person who does not meet the definition of dependant: the non-direct family member, non-conjugal caregiver who altruistically provides caregiving at significant personal sacrifice and is not named in the Will on the termination (i.e. death) of the caregiving relationship.
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On January 1, 2017, the Government of Saskatchewan implemented changes governing the release of adult adoptees birth registration, and access to birth registration information.
In Saskatchewan, prior to the adoption of the new regulations, adult adoptees required the consent of a birth parent in order to find out their birth name, the name and location of the hospital where they were born, and the name of their biological parents. The requirement of consent was very burdensome on adult adoptees who had to go through the Saskatchewan Government, specifically the Post-Adoption Services branch, in order to track down their biological parents. Locating biological parents and obtaining consent would result in average wait times of approximately three years.
Those eligible to apply for the newly implemented Post-Adoption Services regulations, if the adoption was finalized in Saskatchewan, are:
- an adult adoptee (18+ years of age);
- an adoptive parent of an adoptee who is under 18;
- a birth parent of an adoptee;
- the adult child of a deceased adult adoptee;
- the adult child of a deceased birth parent whose child was placed for adoption; or
- an extended family member of an adult adoptee or birth parent.
With the new regulation, adult adoptees no longer require consent from both parties to access birth registration information. The information is readily available to individuals who file a request. With the current regulation, the wait time for information is expected to be a few weeks.
From January 1, 2016 to January 1, 2017, both adoptees and birth parents had the option to veto the release of their birth registration information, specifically the biological names. There was no option to veto the name of the birth hospital or location. According to an article by CBC News, some 84 vetoes have so far been registered by birth parents, and “significantly fewer” by adult adoptees. Vetoes can only be placed on adoptions that occurred prior to January 1, 2017. Therefore, adoptions after January 1, 2017 must be subject to the new regulations.
The Government of Saskatchewan Post-Adoption Services website offers online forms requiring documentation such as a birth certificate, drivers licence and Order of Adoption. Further documentation will be required if the individual is an adult child of a deceased adult adoptee, or the adult child of a deceased birth parent whose child was placed for adoption. Furthermore, the application allows the searching party to specify their preferred method of contact.
From an estate planning perspective, it is interesting to consider that these revisions will, in certain circumstances, cause adoptees to be named as beneficiaries in the will of their biological parents.
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