Tag: Estate & Trust
These days, life expectancy is longer than ever. We have previously blogged (for instance, here and here) about some considerations and consequences of having a longer life expectancy. A recent article in The New Yorker considers aging, and in particular, anti-aging now that people are generally living longer. The online version can be found here: Can We Live Longer but Stay Younger?
One of the problems with living longer, as highlighted in the New Yorker article, is that we still must deal with the challenges and realities of aging. What we really want is not eternal life but rather, eternal youth.
The article discusses several efforts to address or counteract the types of issues that we face as we age. For instance, a geneticist at Harvard has successfully extended the life of yeast, and is moving on to human trials. A Harvard molecular biologist, George Church, has had success reprogramming embryonic stem cells to essentially turn an old cell into a young cell. Church’s work has been done so far on mice and dogs, but there are plans to commence human clinical trials within the next five years.
The goal of the work being done by Church is to live better, not necessarily longer: “The goal is youthful wellness rather than an extended long period of age-related decline.” The article discusses the nature of this age-related decline, through the illustration of a “sudden aging” suit that allows the wearer to experience the physical challenges of aging, including boots with foam padding to produce a loss of tactile feedback, and bands around the elbows, wrists, and knees to simulate stiffness. The point of the aging suit is to help create empathy and understanding about how difficult each and every task (an example was reaching up to a top shelf and picking up a mug) can be for older adults, both physically and mentally. So the question becomes, if we are living so much longer, but with age, every day and every task becomes much more difficult, what can we do to counteract that?
The work being done related to anti-aging and the creation of products to make older people’s lives easier is interesting and seems to be moving in new directions. For instance, the article mentions the difficulty of marketing certain products aimed at older people, because we do not like the idea of buying something that reminds us that we are old. So instead of selling a personal-emergency-response system to send an alert and seek assistance in the event of a fall, or some other physical emergency, in the form of a pendant worn around the neck, it is suggested that the most effective such device would be an iPhone or Apple Watch app.
Unfortunately, the issue of dementia is still a concern. There still does not appear to be a cure in sight for Alzheimer’s or other forms of dementia. The causes remain unclear. The effects, however, are evident. One of the individuals mentioned in the article was Professor Patrick Hof, who studies brains. On the physical effects of dementia on our actual brains, Professor Hof notes that “[y]ou can’t tell any difference, even under extreme magnification, between an aging non-demented brain and a younger human one…But, holding an Alzheimer’s brain in your hand, you can see the atrophy.” It appears that there is still a lot of work to be done in this area, in particular.
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Capacity is a fundamental consideration in many aspects of estate, trust, and attorneyship litigation. The capacity of an individual to take a particular legal step, for example, to effect a distribution of property or to make a valid testamentary document, will often form the basis of a claim or court application. However, as set out in today’s blog, capacity is specific as to task, time, and situation. Context is a key factor in assessing capacity or lack thereof.
Whether an individual will be found to be capable of taking a particular legal step depends on the nature of the step being taken and when this step was taken. By way of example, the threshold for the capacity required by a testator to execute a valid Last Will and Testament differs from, and is considerably higher than, the threshold of an individual seeking to grant a power of attorney for property or personal care.
The capacity to make a valid will requires an individual to have a clear understanding of the nature and extent of their assets, and to understand the effects of the dispositions being made including any claims that might arise as a result. The capacity to grant a power of attorney for property, while similar to testamentary capacity, is a lower threshold. An individual will be capable of granting a power of attorney for property provided that,
- they have a general understanding of the nature and value of their property;
- are aware of the obligations owed to any of their dependants; and
- understand the nature of the rights being given to the attorney as well as the rights that they retain as the grantor of the power of attorney, for example, the right to revoke the power of attorney if capable.
While the capacity to grant a power of attorney for property only requires the grantor to have a general understanding of their property or their obligations, testamentary capacity requires specific knowledge and appreciation of potential legal ramifications. Accordingly, an assessment of an individual’s capacity in each respect will impart different requirements.
Capacity is also specific as to time, particularly as an individual’s capacity may fluctuate depending on illness or circumstance. While somewhat uncommon in practice, an individual who was previously assessed as incapable may subsequently regain the capacity to take a particular legal step. Accordingly, when acting on behalf of an individual challenging the validity of a testamentary document or disposition of property, it is important to consider not only the grantor’s historical capacity or lack thereof, but also whether capacity may have been regained at some point prior to the disposition being challenged.
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Although rare, disputes over the final resting place of a deceased are not unheard of. Such a dispute was the subject matter of Mason v. Mason, a decision of the Court of Appeal of New Brunswick.
There, the deceased died at the age of 53. He was survived by his mother, and his wife of 13 months. At first, the relationship between the mother and the wife appeared to be harmonious. The mother wanted the son’s cremated remains buried next to his father, and the deceased’s wife agreed. Later, however, the wife had a change of heart, as she came to believe that her husband did not have a good relationship with his father. She asked the cemetery to agree to disinter the remains and have them buried in another cemetery. As the original plot was owned by the mother, the cemetery required the consent of the mother. The mother refused to consent.
The wife then applied for and obtained letters of administration. This would normally cloak her with the authority to dispose of the body. The wife then applied to court to exercise this right. The court refused to assist her.
The applications judge held that the administrator had the right to determine the proper burial or disposal of the remains. However, this right was limited to carrying out those actions. The applications judge concluded that the remains were properly dealt with, with the agreement of the mother and the wife. At the time, there was no administrator, and therefore the next of kin could determine the disposition of the body, which they did.
The wife argued that as administrator, she had an ongoing right to determine the burial place. Support for this proposition was found in the Saskatchewan case of Waldman v. Melville. There, the deceased’s sister wished to disinter the deceased, over the objection of the executor. The court held that “The rights of the executor continue after the burial of the body, otherwise it would be an empty right … and those who oppose the executor could disinter the body as soon as it was buried.”
The applications judge distinguished the Melville decision. The rights of an administrator appointed months after burial did not entitle the administrator to disrupt burial arrangements agreed to by the person in her capacity as spouse.
The Court of Appeal upheld the applications judge’s decision. They went on to hold that once the body was properly discharged, it could not be moved, under s. 15 of the Cemetery Corporations Act, without the written consent of the Medical Health Officer or the order of a judge. The Court of Appeal stated that the powers conferred on the court by s. 15 of the Cemetery Companies Act were discretionary in nature. A judge to whom an application is made under that section is required to consider and weigh all the circumstances and make the order he or she considers appropriate. In this case, the court found no valid reason for moving the body.
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Likely to be of a surprise to most readers, Canada has a law on the books governing, among other things, policy and financing with respect to the disposal of nuclear waste. The purpose of the federal Nuclear Fuel Waste Act (the “NFWA”) is to “provide a framework to enable the Governor in Council to make […] a decision on the management of nuclear fuel waste that is based on a comprehensive, integrated, and economically sound approach for Canada.”
The intersection of trust law with the NFWA occurs with respect to how the purpose and the goals of the act are to be financed. Section 9 of the NFWA provides that every “nuclear energy corporation” must maintain a trust fund with a duly incorporated financial institution, the purposes of which are described in greater detail below. The following entities are defined as a “nuclear energy corporation” under the NFWA:
- Ontario Power Generation;
- New-Brunswick Power Corporation; and
- Atomic Energy of Canada Limited.
When the NFWA came into effect, each nuclear energy corporation was required to make a substantial initial deposit into its respective trust fund, and each must make a minimum annual deposit of a prescribed amount to the capital of the trust. To provide some context, the largest trust fund is that maintained by Ontario Power Generation. At its inception, OPG was required to make an initial contribution of $500,000,000.00 to its fund, and its minimum annual levy is $100,000,000.00.
The NFWA provides that the corporations may only make withdrawals from their respective funds for the purposes of implementing a plan selected by the Governor in Council to “[avoid or minimize] significant socio-economic effects on a community’s way of life or on its social, cultural or economic aspirations.” In layman’s terms, the nuclear energy corporations must use the capital of their respective trusts exclusively for the purposes of ensuring the nuclear waste is managed and disposed of in an efficient and comprehensive manner while minimizing the social impact.
Control and management of all aspects of nuclear power generation is top of mind in the wake of the Fukushima nuclear disaster in 2011. We may all hope the capital of the trusts established under the NFWA continue to be used for their intended purpose rather than to fund clean-up efforts in the event of a similar tragedy. However, consider that the most recent financial statements for all of the aforementioned trust funds list a total combined balance of approximately $4 billion. Now consider that some have estimated the total cost of cleaning up and containing the waste and fallout from the Fukushima disaster as exceeding $626 billion. A drop in the proverbial bucket, to be sure. Indeed, the magnitude of the Fukushima incident likely far surpassed any reasonable expectations, though it gives us pause to consider whether we are giving nuclear power the deference it deserves.
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You’re planning a client’s estate. You’ve identified the assets and tax issues and planned accordingly. Most importantly, your client has provided clear instructions on her wishes for the distribution of her estate. You’ve prepared her will and it’s ready for execution. It’s taken some time to get things right, but it’s a job well done.
Or is it?
What about your client’s family – have they been kept in the loop about what the plans are? Your client undoubtedly has the best of intentions in distributing her estate, but even the best of intentions can be misunderstood.
In my experience, a successful estate plan is no longer solely developed from the top down; it also involves planning from the bottom up. Family members are far less likely to experience emotional distress or family discord – or challenge a will – if they have been given an explanation of the reasons for the distribution of property and have had a chance to express their opinions about that distribution.
This quick video on the Ontario Security Commission’s Get Smarter About Money website brings the point home well.
If you have clients currently in the estate planning process, have them build in some time for a family discussion. It could save a lot of heartache and litigation down the road.
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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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When dealing with the administration of an estate, there is the possibility that a bequest will be left to a minor, resulting in the need for it to be held in trust until the minor reaches the age of majority. It is also possible to have a situation where the executor named in a will is a minor at the date of death of the testator, pursuant to section 26 of the Estates Act. This will result in a Certificate of Appointment of Estate Trustee being issued to the guardian of the named executor, until he or she turns 18. The guardian acting as executor is called durante minore aetate, which translates to “during the minority”.
Pursuant to section 26 of the Estates Act:
(1) Where a minor is sole executor, administration with the will annexed shall be granted to the guardian of the minor or to such other person as the court thinks fit, until the minor has attained the full age of eighteen years, at which time, and not before, probate of the will may be granted to the minor
(2) The person to whom such administration is granted has the same powers as an administrator has by virtue of an administration granted to an administrator during minority of the next of kin.
The powers of durante minore aetate to act in the place of a minor are not limited. As per Re Cope, (1880), 16 Ch. D. 49 (Eng Ch Div) at 52:
The limit to his administration is no doubt the minority of the person, but there is no other limit. He is an ordinary administrator: he is appointed for the very purpose of getting in the estate, paying the debts, and selling the estate in the usual way; and the property vests in him.
In Monsell v Armstrong, (1872) LR 14 Eq 423 at 426, the court held there is “no distinction between a common administrator durante minore aetate as regards the exercise of a power of sale.” Along with the power of sale, it seems too that an administrator for the use and benefit of a minor may also assent to a legacy and may be sued for the debts of the deceased.
An application for a certificate of appointment for the use and benefit of a minor should be in Form 74.4, 74.4.1, 74.5, or 74.5.1 (forms can be found here) and should include an explanation stating that the executor named in the will is not the applicant due to the minority of the named executor. Once the application is filed, the matter will be referred to a judge. If the judge orders a certificate of appointment of estate trustee with a will, it will include the phrase “Right of (name of minor executor) to be appointed estate trustee on attaining 18 years of age is reserved.”
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For parties who are thinking about litigating an estate-related dispute in Court, the possibility of an adverse costs award should always be top of mind. A recent costs endorsement from the Ontario Superior Court of Justice serves as a reminder that the legal fees of a successful party may be payable personally by the losing party.
In Ontario, the general rule in civil litigation is that costs – some or all of the successful party’s legal fees – are to be paid by the losing party. Such a costs award can be daunting: in addition to paying his or her own legal fees, the losing party may also be on the hook for some or all of the other party’s legal fees.
With respect to estate litigation matters, Ontario Courts have moved away from the historical rule that costs are to be paid from the assets of the estate. While costs may still be payable from the estate in certain circumstances, the Courts have held that costs are generally to be paid personally by the losing litigant. Rule 57 of the Rules of Civil Procedure sets out the factors the Court may consider in exercising its discretion in awarding costs.
In Tierney (Estate) v Brown, 2015 ONSC 4137, certain beneficiaries of the Estate brought a motion seeking the removal of the estate solicitor in the context of a contested passing of accounts. The beneficiaries alleged that the solicitor was in conflict of interest and would be a witness in the passing of accounts, whereas the responding Estate Trustees argued that the motion was premature. The Honourable Justice Hackland held that the solicitor was in a conflict, and granted the request for an order removing him as solicitor for the Estate.
In a subsequent costs endorsement, Justice Hackland considered the conduct of the parties in the proceedings and noted that there was no misconduct by any of the parties. The Court also noted that the beneficiaries had tried to resolve the issue out of Court. In the result, Justice Hackland held that the costs would be payable on a partial indemnity basis.
After setting the quantum of the costs award, the Court then considered who should pay for the beneficiaries’ costs. Justice Hackland noted that “a more difficult question is whether the costs award herein should be paid by the Estate Trustees personally, as opposed to the estate.”
Justice Hackland went on to hold that the present case did not fit the narrow circumstances in which costs are payable from the assets of the Estate, and that the Estate Trustees should have agreed to the beneficiaries’ request without resort to Court proceedings. The Estate Trustees were ordered to pay the costs of the motion personally, on a joint and several liability basis.
Courts have a broad discretion when it comes to awarding costs, and Justice Hackland’s recent endorsement in Tierney reiterates the importance for litigants to understand the risks with respect to costs if they find themselves on the losing side of a Court proceeding.
Thank you for reading,
Umair Abdul Qadir
In yesterday’s blog post, I discussed a recent Ontario Superior Court of Justice decision that shows the litigation that can arise between beneficiaries when the deceased dies intestate and uses joint bank accounts as a form of estate planning. Today, I would like to discuss a recent decision from the Ontario Court of Appeal where the deceased made a will, but subsequently deposited some of the bequeathed property into a joint bank account with a right of survivorship to his adult children.
In Foley (Re), 2015 ONCA 382, the deceased was survived by his son Donald and his daughter Dorothy. The deceased made a Will in 1990 where he made a specific bequest of “all Canada Savings Bonds registered in my name only at the time of my death” to Dorothy.
In 1996, the deceased established a joint bank account with a right of survivorship and named Donald and Dorothy as joint tenants of the account. The deceased’s financial advisor testified that he was trying to avoid the costs associated with probate, and the Court of Appeal noted that “he assured [the financial advisor] that his children would know how to divide the assets” in the joint account.
The deceased was the only contributor to the joint account. Unbeknownst to Donald and Dorothy, the deceased deposited the Canada Savings Bonds into the joint account. Upon his death, the Canada Savings Bonds were redeemed and distributed to Dorothy in accordance with the Will.
In addition to challenging three money transfers that the deceased made to Dorothy prior to his death, Donald argued that the deceased intended to gift the contents of the joint bank account equally between his children. In the alternative, Donald argued that the gift of the Canada Savings Bonds adeemed when the bonds were deposited into the joint bank account.
As I noted yesterday, there is a presumption of resulting trust when a parent makes a gratuitous transfer of property into a joint account with an adult child unless the child can rebut the presumption and prove that the parent intended to make a gift. In addition, under the principle of ademption, when a deceased makes a specific bequest but the subject property is not found among the deceased’s assets after death, the gift can fail or “adeem.”
At trial, the Honourable Madam Justice Mullins rejected Donald’s arguments, holding that he had failed to rebut the presumption of a resulting trust. The bonds were endorsed by a teller’s stamp prior to being deposited into the joint bank account. Justice Mullins held that the bonds became negotiable instruments because of the endorsement but the gift did not adeem because the bonds were still in the deceased’s name, as required by the terms of the bequest under the Will. The Court of Appeal upheld the trial judge’s findings and dismissed the appeal.
In yesterday’s post, I noted the importance of ensuring that your intentions are clear when using joint accounts as an estate planning tool. The Foley decision highlights the need to also ensure that joint accounts are used in a manner that is consistent with the rest of your estate plan. When you intend to make a specific bequest to a beneficiary under your will, great care should be taken to ensure that the bequeathed property is not placed in a joint bank account that is meant to pass outside the estate. The failure to do so may lead to confusion about your intentions and potential litigation between the beneficiaries of the estate.
Thank you for reading and have a great weekend.
Umair Abdul Qadir
The use of joint accounts as an estate planning tool continues to gain in popularity. For example, parents may create joint bank accounts with their adult children, with the intention that the children receive the remaining balance in the joint account as a “gift” by right of survivorship upon the parent’s death.
In theory, joint accounts are easy and convenient to set up, and allow you to minimize estate administration tax because the jointly-held assets pass outside the estate. However, in practice, the use of joint accounts may create unintended results.
In Pecore v Pecore, 2007 SCC 17, the Supreme Court of Canada confirmed that there is a presumption of resulting trust when a parent makes a gratuitous transfer of property into a joint account with an adult child. In other words, the transferee will be found to be holding the assets in trust for the benefit of the estate unless he or she can rebut the presumption by proving that the transferor intended to make a gift.
Over the next two days, I will highlight two recent decisions where the use of joint bank accounts by the deceased became a litigated issue between the parties.
In Johnson v Johnson Estate, 2015 ONSC 3765, the deceased was survived by one son (“Wayne”). The deceased’s other son predeceased her, but left a son (“Michael”). The deceased died without a will, and her grandson Michael claimed that he was entitled half of the value of the estate in accordance with the rules of intestacy. However, the deceased’s son Wayne took the position that Michael was not entitled to the monies in the bank accounts and investment accounts that Wayne held jointly with the deceased prior to her death.
Wayne argued that the joint accounts passed to him by right of survivorship, and that there was sufficient evidence to rebut the presumption of a resulting trust. He claimed that the deceased was using the joint accounts as an estate planning tool and wanted the accounts to pass to him without forming part of the estate. Michael maintained that Wayne had not rebutted the presumption.
The Honourable Madam Justice Woollcombe considered the evidence to determine if the presumption had been rebutted on a balance of probabilities. Justice Woollcombe held that there was insufficient evidence to suggest that the deceased intended to make an outright gift of the jointly-held accounts to her son upon her death. The bank documents did not show the deceased’s intention behind opening the joint accounts, and there was no explanation for why the deceased chose not to similarly hold her home in joint ownership with her son. In addition, there were no testamentary documents or tax documents to help assess the deceased’s intention.
In the result, Justice Woollcombe held that the funds in the joint bank accounts were held on a resulting trust for the deceased’s estate and would be distributed in accordance with the rules of intestacy. Wayne and Michael were each entitled to half of the total value of the deceased’s estate.
The Johnson decision is a strong reminder for individuals who are using joint accounts as an estate planning tool to ensure that their intentions are clearly ascertainable. In the absence of clear evidence, a joint account may unintentionally fall into the deceased’s estate. In addition, confusion regarding a deceased’s intentions can lead to protracted litigation between beneficiaries – likely a far greater expense than the potential savings on probate taxes!
Thank you for reading.
Umair Abdul Qadir