Tag: Estate & Trust
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
Only a few more hours to go until the New Year.
For those who have already planned your New Year celebration, and have a few minutes to spare, consider some last-minute tax and estate planning. Items you may wish to consider include:
making a donation before year end, so that it can be claimed on your 2013 tax return;
· incurring investment-related expenses such as investment counselling fees, or safety deposit rentals;
· incurring deductible expenses that can be deducted under the children’s fitness and arts by signing and prepaying for classes or programs;
· incurring deductible expense that can be deducted as medical expenses;
· incurring self-employed or small business expenses;
· incurring moving expenses in relation to new employment, which may be deductible in 2013;
· triggering capital losses by disposing of investment dead wood;
· if you turned 71 in 2013, you have until December 31, 2013 to make final contributions to your RRSP. This RRSP must be converted into an RRIF or annuity in the new year.
· if you are a beneficiary of an RESP, make withdrawals before year end, so that they are included in 2013 income.
If it is too late to take these steps for 2013, keep them in mind for 2014. (Also, resolve to not wait until the last minute!)
Lastly, the beginning of a new year is an opportune time to consider your overall estate plan, and to prepare or revise your Will. Your estate solicitor would love to see you in early 2014.
Have a great new year.
Engelbert Humperkinck reached #1 with his version of “Release Me” in 1967. Estate Trustees have been singing the tune ever since.
In their Hull on Estates podcast of December 17, 2013, Moira Visoiu and Noah Weisberg discussed whether an Estate Trustee is entitled to insist upon a release prior to making a distribution.
In the decision of Sheard Estate, 2013 ONSC 7729 (CanLII), released December 12, 2013, Mesbur J. of the Ontario Superior Court of Justice considered the binding effect of a release on beneficiaries where the release was not a condition of the distribution.
There, the deceased died on December 28, 2007. An interim distribution of the estate was made in September 2008. The beneficiaries were asked to sign a receipt, and they did. A second interim distribution was made in September 2009. At that time, along with the cheque, the beneficiaries were provided with a release that they were asked to sign. The release stipulated that the beneficiaries were provided with a sufficient accounting of the administration of the estate from December 28, 2007 to June 2009, provided the estate trustees with a full release, and dispensed with a passing of accounts. The beneficiaries signed the release.
A further distribution was made in December 2012. Again, the beneficiaries were asked to sign a release. They did not.
The estate trustees then moved to pass their accounts for the period from July 1, 2009 to June 30, 2012. The beneficiaries objected, and brought a motion to compel an accounting not just from June 1, 2009, but from the date of death.
In response to the motion, the estate trustees argued that the claim to set aside the release was statute-barred. Madam Justice Mesbur agreed. The release was signed in 2009, and the motion to set aside the release was not launched until 2013: well outside the 2 year limitation period. Madam Justice Mesbur rejected the argument that the motion to set aside the release was not a "proceeding" to which the Limitations Act applied.
Madam Justice Mesbur also held, in the alternative, that there was no basis to set aside the releases. Firstly, as the releases were said to be under seal, there was no need for separate consideration. Secondly, there was no evidence that the beneficiaries did not intend to be legally bound by the releases. Thirdly, the fact that the estate trustees did not suggest independent legal advice to the beneficiaries did not take away from their enforceability (although Mesber J. said that it would have been "better" if this was suggested).
Mesber J. noted that in requesting the releases, the estate trustees did not hold the bequest to ransom. There was no question of duress on the beneficiaries. Mesber J. distinguished Rooney Estate v. Stewart Estate, were releases were set aside where the estate trustee demanded a release before delivering accounts, and suggested that there would be no payment unless the release was signed.
A lesson to be taken from this, as estate trustee, is to not tie a release to a distribution. As a beneficiary, consider the effect of signing a release, and, where there is a question, obtain legal advice.
Thank you for reading.
At present, there is no legal framework in Ontario governing the storage of asthma inhalers within schools. The absence of such a framework shifts the decision-making into the hands of the individual school administrators and/or school boards. What has evolved as a result of this legal vacuum is a patchwork of asthma management plans. Many of these plans lump asthma inhalers with other medications (incl. antibiotics, medications used to treat symptoms of ADHD, etc.), thus requiring them to be locked in the principal’s office. This inappropriate one-size-fits-all approach to medication storage in schools is a textbook example of ‘rulitis’: ‘a slavish adherence to rules and regulations that goes beyond common sense’ (with credit to André Marin, Ontario Ombudsman, for coining that apt phrase).
Within schools, the placement and storage of rescue inhalers in a secure, centralized location is problematic for a number of well-documented reasons, including: i) Storage of inhalers away from the person precludes the immediate use of the medication at the onset of symptoms. Centralized storage of asthma inhalers flies in the face of the fact that an inhaler delivers a dose of rescue medication, and thus should be considered a life-saving measure, not unlike an epinephrine auto-injector. It is impossible to overstate the differences in outcomes between immediate use of an inhaler and delayed use after symptoms have progressed; and ii) Students are apprehensive about asking for help accessing a centrally-stored inhaler due to embarrassment around being considered ‘medically vulnerable’ and the fear of being deemed disruptive by staff and/or peers.
Sandra Gibbons and MPP Jeff Yurek (Elgin-Middlesex-London) have been collaborating on a private members’ bill which, if passed, will force every school board in Ontario to implement a comprehensive asthma policy, each of which must also permit a student to carry his or her own asthma medication on their person. On October 9, 2012, Gibbons’ son Ryan died after suffering a severe asthma attack during recess at his school in Straffordville. Ryan’s attack evolved quickly, his classmates carried him to the principal’s office where his inhaler was kept, but Ryan was already unconscious. Ryan’s school, with tragic consequences, had a zero tolerance policy against inhalers, and had gone so far as to confiscate spare inhalers that he had brought to school just in case he suffered from an attack.
In contrast to Ontario, the U.S. has three prongs of federal legislation in place allowing students to carry inhalers on their person: the Individuals with Disabilities Education Act, Section 504 of the Rehabilitation Act of 1973, and Title II of the Americans with Disabilities Act. Approximately 6 million American children have asthma, and 200 of them die each year as a result of an asthma attack. The federal legislation is in place as much to save those 200 lives as it is to reduce outpatient visits to doctors and hospital E.R. visits (~4.6 million and 700,000 visits per yr, respectively). Across Canada, over half a million children are affected by asthma and approximately 20 children die each year as the result of an asthma attack. The Lung Association of Ontario estimates that 1 in 5 children have asthma in this province.
This week’s media coverage of Yurek’s proposed private member’s bill (“Ryan’s Law") has raised corollary questions regarding epinephrine auto-injectors (EpiPens) at schools, since they also deliver a rescue medication. Just last month, the U.S. passed the School Access to Emergency Epinephrine Law which encourages schools to carry ‘stock’ epinephrine (i.e. an undesignated supply). Encouragement is in the form of financial incentives; schools that carry stock supplies will get preference for receiving federal grant monies. While Sabrina’s Law requires all school boards in Ontario to establish an anaphylactic policy, there is currently no provision in the province to allow schools to stock an undesignated supply of auto-injectors.
Ryan’s Law passed second reading with all-party support at Queen’s Park on December 5, 2013 and will return for third reading some time in the spring of 2014.
Jenn Hartman, Medico-Legal Consultant
* photo of Ryan Gibbons, from Tillsonburg News
Legal aside: It should be noted that both Sabrina’s Law and Ryan’s Law (as it has been tabled) include ‘Good Samaritan’ language which provides immunity from lawsuits for ‘any act done in good faith’ in response to an anaphylactic reaction or an asthma attack, respectively.
We live in a global village. Today, more than ever, through the internet and jet travel, we are connected to people living all over the globe. It is not at all uncommon for Canadians to have parents living overseas, siblings spread across the continent, or children travelling for work or school.
Unfortunately, this presents challenges when it comes to estate planning that must be taken into account. These issues were the subject of a recent article in the Globe and Mail, republished on the website of Altro Levy LLP. The article highlights a number of considerations that should be addressed when dealing with an estate plan that crosses international borders.
One important issue that the article focuses on is taxation. Sorting through Canada’s tax regime can be complicated enough. When dealing with cross-border inheritance, the tax rules of the foreign jurisdiction need to be considered as well. Planning techniques which might be effective and prudent within our borders may go awry when assets are left to beneficiaries in other countries, leading to unexpected and undesired tax consequences.
The article also addresses practical problems that can arise when leaving assets in Canada to beneficiaries abroad. The article gives the example of a gift of a condominium in Canada which is producing rental income to a beneficiary outside the country. While the income will no doubt be welcomed, steps may have to be taken in Canada to effect a transfer of title and to manage the property thereafter. The rental income itself may cause international tax issues. Sometimes it may be simpler to have the asset sold and to distribute the proceeds directly.
Yet another concern is where an individual owns substantial assets in more than one jurisdiction. A foreign bank or other financial institution may not recognize the authority of the estate trustee of an Ontario Will. It may be advisable to prepare a will in each jurisdiction where there are substantial assets. However, revocation clauses, which are standard boiler-plate language in many Wills, may lead to the unintentional revocation of Wills in other countries. Careful drafting will be necessary to avoid problems such as this. As well, differences in the requirements of formal validity for Wills between jurisdictions can potentially lead to problems where, for example, different numbers of witnesses are required in different jurisdictions.
Estate planning can already be complicated and overwhelming. When considering the impact that the laws of more than one country may have on the planning process, it is easy to see that a testator may be well served by expert help. Legal advice from an expert at home, as well as in other jurisdictions should be sought in order to prevent some of these problems from arising. It appears that as the world grows closer together, we will need to plan carefully for the future.
A "Guardian of Property" is someone who is appointed to manage the financial affairs of a person who is mentally incapable of doing so for themselves. A Guardian may be appointed by the Office of the Public Guardian and Trustee or by the court. A person is mentally incapable of managing property if they cannot understand the relevant information or appreciate what may happen as a result of decisions they make, or do not make, about their finances.
But what happens if their capacity changes?
In some circumstances, a person who was once found to be incapable by a court may later be found capable, if their condition changes. Research suggests that in the future, treatments for conditions such as Alzheimer’s may improve. A study suggests that our brains eliminate the “gunk” that builds up when we are awake, which could be important to the treatment of Alzheimer’s and other disorders. The medical director of the Stanford Sleep Center stated that in the treatment of people with dementia and other mind disorders, “sleep would perhaps be even more important in slowing the progression of further damage.”
In the case of a person who was found to be incapable by the court, a declaration could be sought that they are no longer incapable and their Guardian could be removed.
Have a great weekend!
In recently updated article by Albert Oosterhoff, a predatory marriage is defined as one in which one spouse, by “devious means”, persuades their spouse, who is typically elderly, lonely, confused, and depressed, and who has failing mental and physical faculties, to enter into marriage, with the object of gaining power over and ultimately receiving their property. According to Oosterhoff, the “devious means” to achieve that goal does not necessarily equate to coercion, fraud or undue influence. More subtle means may be involved, such as isolating the other person from their family.
In the 2012 case of Juzumas v. Barron, the courts addressed the predatory marriage between the parties. Mr. Juzamas was a widower whose English language skills were limited. He had no family in Canada. He met Ms. Barron, who had been married six or eight times before to older men. Ms. Barron befriended Mr. Juzamas and started performing housekeeping services for him. Mr. Juzumas agreed to marry her when she promised to not send him to a nursing home. The day before the wedding, they attended a lawyer’s office. The lawyer drafted a Will appointing Ms. Barron as the sole Executor and beneficiary of Mr. Juzumas’ Estate. The lawyer did not meet with Mr. Juzumas separately.
Ms. Barron convinced Mr. Juzumas to transfer his house to her son. When Mr. Juzumas drafted a new Will, reducing Ms. Barron’s entitlement, she convinced him to reverse it by threatening to send him to a nursing home.
Ms. Barron brought an application for divorce, spousal support, equalization of net family property, and quantum meruit claims for work allegedly done by her and her son. She also claimed $120,000 for an alleged loan. The Court set aside the house transfer because Ms. Barron had obtained it through undue influence and as a result of unconscionability. The divorce was granted but the rest of the claims were dismissed. The Court found that the alleged loan was a fabrication. The Court also found that the house was not a matrimonial home because the parties did not occupy it as a family residence. The Court awarded costs to Mr. Juzumas.
Thank you for reading,
Pets are at the forefront of unconventional bequests, and Leona Helmsley’s dog Trouble is one of the world’s most famous four-legged beneficiaries. In addition to pets, people have left their substantial estates to very unusual and unconventional beneficiaries.
Most recently, there is news on the internet about a Tennessee man, Leon Sheppard, who left his 4,270 foot home and $250,000 to his two cats, Frisco and Jade. The will stipulates that the cats must be kept in the style they’ve grown accustomed to. When Frisco dies, the estate passes to his relatives on the condition that Jade is cared for.
A Portuguese aristocrat Luis Carlos de Noronha Cabral da Camara, picked 70 random people from the Lisbon phone directory and named them beneficiaries of his estate. The designations were properly made 13 years before his death; the beneficiaries were not notified until after death.
Robert Louis Stevenson, the author of Treasure Island and the Strange Case of Dr Jekyll and Mr. Hyde left an unusual gift to the daughter of a friend, Anne H. Ide. Anne was born on Christmas Day and did not have birthday celebrations separate from the family Christmas celebration. Stevenson bequeathed his birthday of November 13th to Anne.
Closer to home, Charles Vance Millar, a Canadian lawyer and financier known for his love of humour and pranks left an unusual will. When he died in 1926, the bulk of his estate was left to the woman who gave birth to the most children in the 10 years following his death. The will generated a lot of world wide media attention including a 1934 Time magazine report. The value of the bequest was approximately $500,000, a significant sum in that era. The bequest became known as the Great Stork Derby.
Litigation challenging the will went all the way to the Supreme Court of Canada. The SCC interpreted the relevant clause and held that it was valid. Four women who had given birth to nine legitimate and registered children each received $125,000 each.
Thanks for reading,
The powers granted under a Continuing Power of Attorney are (POA) pursuant to the Substitute Decisions Actare limited by any restrictions set out in the POA document. There are two further restrictions which often take grantors and attorneys by surprise. These include the inability to use a POA to govern a corporation or deal with corporate assets, and the inability to designate beneficiaries.
Where a director of a corporation becomes incapable, they are prohibited from acting as a corporate director. Where a grantor is a sole director of a private corporation, a POA alone will not provide for on-going corporate governance. Corporations are managed by elected directors, not shareholders. Pursuant to a POA, an Attorney has the authority to act as a personal representative of the shareholder, including legal authority over all of the rights attached to the shares such as voting on resolutions, and the appointment of directors. It is important to keep in mind that the POA, which grants authority to deal with corporate shares, does not grant the Attorney the right to perform duties as a director, or otherwise deal with corporate assets as a shareholder. The Attorney may, subject to any rights or restrictions on the shares, may elect a new director(s) in accordance with Part IX of the Business Corporations Act, (Ontario). While an Attorney is able to appoint themselves as a director, in some circumstances, it may be more advisable to appoint a neutral third party to act as director to deal with corporate assets or the wind-up of a corporation.
Another limitation which may take an Attorney by surprise is the inability to designate a beneficiary. A beneficiary designation is considered a testamentary gift. An Attorney does not have the legal authority to make a will or make testamentary gifts. If a new account is opened on behalf of a grantor while they are incapable, on death, the account will fall to the estate and must be included in the list of estate assets. This can have a significant impact on the probate fees paid for the administration of the estate.
When granting Continuing Powers of Attorney and the grantor is a sole director of a private corporation, it is important to take into consideration that it will not ensure authority for corporate governance of a private corporation. Prior to moving any accounts with beneficiary designations, the Attorney must be advised that they do not have authority to designate beneficiaries.
Thanks for reading,
 1992 S.O. 1992, c. 30
 s. 118, Business Corporations Act, R.S.O. 1990 c. B. 16(BCA)
A Director is not required to be a shareholder, s. 118(2), BCA; In Ontario, directors are elected pursuant to Part IX of the BCA.
s. 1, “personal representative”, BCA
For example, an RRIF, TFSA, or even a Life Insurance policy.
Our friends on the west coast are getting ready for major changes to the law of inheritance. The British Columbia legislature passed the Wills, Estates, and Succession Act (the "WESA") on September 24, 2009. The Act comes into force on March 31, 2014. The WESA replaces BC’s current legislation, the Wills Act. The text of the Bill is available here. It should be noted, however, that there have been a few amendments, and the WESA will look a little bit different when it comes into force.
The new bill has a number of notable effects on inheritance law in British Columbia. These are just a few:
· The WESA clarifies the distribution of property on intestacy.
· It changes the minimum age at which most people can make a Will, lowering it from 19 to 16.
· The WESA contains special provisions dealing with cultural property and the estates of certain members of the Nisga’a and Treaty First Nations.
· The rules and processes for applying for probate are set to change in March when the Act comes into effect.
· New provisions deal with the matrimonial home and spousal property on the death of one of the spouses without a Will.
· The Act provides guidance on when extrinsic evidence will be admissible for the purpose of interpreting ambiguities in a Will.
· Where a document hasn’t been executed as a Will according to the formal requirements, the Act allows the court to treat these as valid Wills if it determines that they represent the testamentary intentions of the deceased, even if the document only exists as an electronic record.
If you live in BC, have a BC Will, or own property in that province, your Will should continue to be valid, but you may want to see a lawyer and revisit your estate plan to ensure that the WESA doesn’t affect its meaning or effect.
Ontario’s legislation, the Succession Law Reform Act, has undergone amendments, but is substantially the same as it was when first enacted in 1978. Perhaps the WESA will inspire Ontario to update its own legislation in the future.