Tag: estate trustee
We have previously blogged on the various ways that an estate trustee may be removed and/or replaced. Examples include scenarios where an estate trustee dies in the midst of administering an estate, or renounces from his or her position, or where an estate trustee is removed by court order.
Ontario legislation provides guidance for beneficiaries and estate trustees in the aforesaid circumstances. Ontario legislation does not, however, specifically address what to do if an estate trustee is deemed mentally incapable to administer an estate, either before or after probate is granted. For more information on what mental incapacity is, and how to address mental incapacity, click here.
If an estate trustee is deemed mentally incapable, the first question to consider is how far along they were in the administration of the estate.
If the estate trustee has not yet applied for a certificate of appointment of estate trustee with a will (hereinafter referred to as the certificate of appointment of estate trustee), then another person may apply for a certificate of appointment of estate trustee in their place. A person acting under a valid continuing power of attorney for property for the mentally incapable estate trustee may renounce and consent (as appropriate) for the estate trustee. If the incapable individual has not appointed an attorney for property, then their statutory or court appointed guardian assumes this responsibility. Where the will names an alternate estate trustee in the event the estate trustee is unable to act, the alternate should be contacted to discuss whether they are willing and able to assume this role.
In circumstances where an estate trustee has been declared mentally incapable of administering an estate after the certificate of appointment of estate trustee has been issued, any person appearing to have a financial interest in the estate may bring a notice of application for the removal and replacement of the estate trustee. Again, the incapable estate trustee’s power of attorney or statutory or court appointed guardian would likely be involved in this process. Once a court order for removal and replacement is obtained, the replacement estate trustee may apply for a Court Status Certificate of Appointment of Estate Trustee with a Will pursuant to Rule 74 of the Rules of Civil Procedure.
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In the past, in estate litigation matters, it was often the case that some or all of the litigating parties’ costs would be paid out of estate assets. However, in more recent years, the courts have been moving away from this general practice, and increasingly making costs awards providing for the payment of costs by one of the parties, personally. In particular, if the court views a party, including an estate trustee, to have behaved improperly or unreasonably, it may decide that such a party must pay the other party’s costs, personally. We have blogged about instances of such an outcome before.
A recent decision of the Ontario Superior Court of Justice has reaffirmed this general trend. The decision in Ford v Mazman, 2019 ONSC 542, involved a motion to pass over the named estate trustee, and appoint the two sole beneficiaries of the estate in question, as estate trustees. Although the named estate trustee and the beneficiaries were initially on good terms, within several months of the testator’s passing, the relationships began to break down, with the estate trustee beginning to make accusations towards the beneficiaries, in relation to the testator. The court found that it was “not a case of mere friction—this is a case of outright hostility from [the estate trustee] to the beneficiaries”, also commenting that it was difficult to fathom why the estate trustee acted as she did, and that her accusations were unwarranted. Ultimately, the court made an order passing over the estate trustee.
After the parties were unable to reach an agreement as to costs, the court made an endorsement in this regard in Ford v Mazman, 2019 ONSC 1297. After a discussion of the costs principles applicable to estate litigation, the court stated as follows:
“I am mindful that an estate trustee should be fully compensated for any reasonable costs incurred in the administration of the estate. However, the actions of the [estate trustee] are far from reasonable. I was not provided any rationale as to why her animus became necessary in the administration of her good friend’s estate.”
Ultimately, the court made a costs award in favour of the beneficiaries, payable by the estate trustee, personally.
This costs decision serves as an important reminder that parties entering into estate litigation proceedings should not count on their costs being paid out of the estate. Additionally, even though the estate trustee’s conduct in this case appears to be extreme, litigants should still keep in mind the importance of acting reasonably.
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I recently blogged about the growing use of home DNA tests and what impact an unexpected result could have upon your rights as a beneficiary of an estate. While such a blog was from the perspective of an individual who discovered through a home DNA test that their biological father was not in fact the individual they previously believed it to be, and the potential impact such a finding could have upon their status as a beneficiary of their “father’s” estate if their interest was based on their status as a “child”, questions would also emerge in such a scenario if you were the Estate Trustee of such an estate regarding what you should do.
If you are the Estate Trustee of an estate in which a bequest is based on parentage (i.e. an intestacy or a bequest to a testator’s “issue” or “children”), and you discover that one of the beneficiaries has voluntarily taken a home DNA test which revealed that they were not in fact related to the deceased, could you still make a distribution to such a beneficiary? If you have already made a distribution to such a beneficiary, is there a risk that the other beneficiaries could now make a claim against you as Estate Trustee, alleging that you distributed the estate to the incorrect individuals and that they have suffered damages as a result?
In response to whether an Estate Trustee could potentially be liable to the other beneficiaries for historically paying out amounts to a beneficiary who it is later discovered was not actually related to the deceased, it would appear that the Estate Trustee likely would not be liable under such a scenario. In my previous blog I discussed the provisions of the Children’s Law Reform Act (the “CLRA“) which establish a person’s legal parentage in Ontario, and the various presumptions establishing an individual’s father. While sections 13(1) and 14(1) of the CLRA allow the court to make a subsequent different declaration as to a person’s parentage, section 14(2) of the CLRA provides that such an Order “does not affect rights and duties that were exercised or performed, or interests in property that were distributed, before the order was set aside“. As a result, it would appear, arguably, that if an Estate Trustee historically made a payment to an individual based off of parentage, and a subsequent declaration is made by the court that the individual in question was not actually the parent of the beneficiary, the historic payment to the beneficiary could not be put in issue or reclaimed provided that at the time the payment was made the beneficiary was still presumed and/or declared to be the child of the deceased.
The issue of what an Estate Trustee is to do if a payment has not yet been made and they discover that an individual who they previously believed to be a beneficiary is not in fact related to the deceased could be more complicated. In the event that the other beneficiaries who could be affected by the distribution do not unanimously consent to continue to allow the distribution to the individual notwithstanding the results of the DNA test, it is possible that one or all of the other beneficiaries may later bring a claim against the Estate Trustee for negligence, alleging that the Estate Trustee knew about the results of the DNA test before making the distribution and that they have suffered damages as a result of the distribution. To offset such a risk, it may be wise for the Estate Trustee in such a scenario to bring an Application for the opinion, advice and direction of the court pursuant to section 60(1) of the Trustee Act and/or rule 14.05, asking the court to determine whether the distribution may still be made to the potential beneficiary in light of the results of the home DNA test.
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One of the most gifted items this past holiday season were apparently the home DNA tests which can reveal your genetic ancestry or even if you are predisposed to certain health conditions. As anyone who has taken one of these tests (myself included) can tell you, the test results also contain a long list of other individuals who have also taken the test who you are related to, allowing you to reconnect with long lost relatives.
While my own test results did not reveal any family secrets, the same cannot be said for other individuals who have taken the test, as there have been a growing number of articles recently about how home DNA tests have revealed family secrets which otherwise may never have come to light. Although not all of these secrets are necessarily negative, such as finding a long-lost sibling, others, such as finding out that the individual who you believed to be your father was not in fact your biological father, could be life changing. For the latter, the phenomena is apparently common enough that the Atlantic has reported that self-help groups have formed around the issue, such as the Facebook group “DNA NPE Friends”, with “NPE” standing for “Not Parent Expected”.
In reading through these stories I couldn’t help but wonder if having such a result could impact your potential entitlements as a beneficiary of an estate. What happens if, for example, the individual who you previously believed to be your biological father but the test reveals was not in fact your father should die intestate, or should leave a class gift to his “children” in his Will without specifically naming the children. Could finding out that you were not actually biologically related to your “father” result in you no longer being entitled to receive a benefit as a beneficiary? Could you potentially be disinherited as a beneficiary of an estate by voluntarily taking a home DNA test if your right to the gift is founded upon you being related to the deceased individual?
Who is legally considered an individual’s “parent” in Ontario is established by the Children’s Law Reform Act (the “CLRA“). Section 7(1) of the CLRA provides that, subject to certain exceptions, the person “whose sperm resulted in the conception of a child” is the parent of a child. Section 7(2) of the CLRA further provides for a series of presumptions regarding the identity of the individual’s “whose sperm resulted in the conception of a child“, including, for example, that there is a presumption that such an individual is the birth parent’s spouse at the time the child is born, or the individual in question certified the child’s birth as a parent of the child in accordance with the Vital Statistics Act (i.e. signed the birth certificate). To the extent that there are any questions about parentage, section 13(1) of the CLRA provides that any interested individual may apply to the court at any time after a child is born for a declaration that a person is or is not the legal parent of the child.
In applying these presumptions to our previous questions about the home DNA test, if, for example, the individual who you previously believed was your biological father was your birth mother’s “spouse” at the time you were born, or signed the birth certificate, it would appear that, subject to there being a declaration under section 13(1) of the CLRA to the contrary, there would continue to be a presumption at law that the individual who you previously believed to be your biological father would continue to be your legal “parent” in accordance with the CLRA. To this respect, in the absence of a formal declaration under section 13(1) of the CLRA that the individual was no longer your legal “parent”, there would appear to be an argument in favour of the position that the individual who you previously believed to be your biological father would continue to be your legal “parent”, and that you should continue to receive any benefits which may come to you as a “child” on the death of your “father”, whether on an intestacy or a class bequest to his “children” in his Will.
This presumption, of course, is subject to the ability of any interested person (i.e. the Estate Trustee or one of the other beneficiaries) to seek a formal declaration under section 13(1) of the CLRA that you were not in fact a “child” of the individual you believed to be your biological father. If such a formal declaration is ultimately made by the court, you would cease to be the legal “child” of the individual who you previously believed to be your biological father, and would likely lose any corresponding bequests which may have been made to you on an intestacy or as a member of the class “children” in the Will.
The use of DNA tests to establish the potential beneficiaries of an estate is not a new phenomenon (see: Proulx v. Kelly). What is new, however, are people voluntarily taking such tests en masse in a public forum, potentially voluntarily raising questions about their rights to receive an interest in an estate when such questions would not have existed otherwise.
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A recent decision of the Ontario Court of Appeal considered whether s. 7 of the Limitations Act, 2002 applies to extend the time within which an estate trustee can bring a claim that arose prior to a deceased person’s death.
Section 7 of the Limitations Act, 2002 provides as follows:
7 (1) The limitation period established by section 4 does not run during any time in which the person with the claim,
(a) is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition; and
(b) is not represented by a litigation guardian in relation to the claim.
(2) A person shall be presumed to have been capable of commencing a proceeding in respect of a claim at all times unless the contrary is proved. 2002, c. 24, Sched. B, s. 7 (2).
(3) If the running of a limitation period is postponed or suspended under this section and the period has less than six months to run when the postponement or suspension ends, the period is extended to include the day that is six months after the day on which the postponement or suspension ends.
In Lee v Ponte, 2018 ONCA 1021, the estate trustee of the deceased person commenced a claim more than 2 years after the date on which the limitation period began to run, as determined by the trial judge. As a result, the action was statute barred.
The estate trustee appealed, taking the position that section 7 of the Limitations Act, 2002 should be “liberally construed”. The estate trustee argued that a deceased person is incapable of commencing a proceeding because of “his or her physical, mental or psychological condition”. He also argued that policy reasons support allowing additional time for an estate trustee or litigation guardian to be appointed and take over the management of the affairs of the incapable/deceased person.
The Court of Appeal disagreed and did not allow the appeal. In its view, the “grammatical and ordinary sense of the words of s. 7 are simply not elastic enough to apply to a deceased person and to construe an estate trustee to be a litigation guardian.”
Although the outcome is not surprising, it does serve as a reminder that limitation periods can be unforgiving. Estate trustees would be well-advised to act swiftly in reviewing the affairs of a deceased person in order to determine whether any claims may have arisen prior to death, and whether the expiry of any limitation periods are looming.
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Applications to pass accounts are unique as civil proceedings go. The nature of the inquiries being made by the Court, the relief that a judge is empowered to grant, and the procedural considerations that apply are all features that distinguish applications to pass accounts from other civil applications. Procedural considerations in particular have garnered some notoriety recently as a result of several notable decisions released in the past few years. The recent decision of the Court of Appeal for Ontario (then sitting as the Divisional Court) in Wall v Shaw, 2018 ONCA 929, provides some clarity to a few of the loose ends.
In Wall, the Deceased died leaving a Will naming the appellant as estate trustee and which created two testamentary trusts for the benefit of her two children. The Deceased’s nieces and nephews were also named as contingent beneficiaries in the event that both children died before vesting in the trust property.
The estate trustee acted for more than 10 years, but never formally passed his accounts. Instead, the estate trustee held frequent informal meetings with the Deceased’s children to review the administration of the estate and to discuss the estate trustee’s compensation.
A dispute between the Deceased’s daughter and the estate trustee relating to the latter’s compensation eventually led the daughter to bring an application seeking an order compelling the estate trustee to pass his accounts.
The estate trustee subsequently commenced an application to pass accounts in March 2015. In June 2015, the Deceased’s daughter filed a notice of objection to the accounts, followed in January 2016 by a notice of objection delivered by two of the Deceased’s nieces.
In response, the estate trustee brought a motion seeking to strike out the objections of the daughter on several grounds. Notably, the estate trustee took the position that the daughter’s approval of the accounts at the informal meetings constituted acquiescence of the estate trustee’s conduct. In the alternative, the estate trustee argued that the daughter’s objections were now statute-barred pursuant to sections 4 and 5 of Ontario’s Limitations Act or barred by the doctrine of laches.
The estate trustee was unsuccessful at first instance on all three grounds, but only chose to appeal the first ground. Specifically, the estate trustee argued on appeal that the judge at first instance had erred in refusing to apply the two-year limitation period under section 4 of the Limitations Act. The appeal was dismissed, and the reasons on appeal provide some procedural clarity in respect of the interplay between limitation periods and passings of accounts.
Section 4 of the Limitations Act generally provides that a “proceeding” cannot be commenced in respect of a “claim” if more than two years have elapsed since the date the claim was discovered. The Court of Appeal took issue with each of the quoted terms.
Notably, the held that a notice of objection does not commence a “proceeding” for the purposes of section 4 of the Limitations Act. Rather, a notice of objection ought to be viewed as a response to a proceeding that has already been commenced, being the application to pass accounts. The Court also pointed to its prior ruling in Armitage v The Salvation Army, in which it was held that an application to pass accounts was not a “claim” pursuant to section 4 of the Limitations Act. Accordingly, it followed that a responding objection raised in that application could also not constitute a claim.
Finally, the Court highlighted an important distinction between applications to pass accounts and other civil applications. Unlike a traditional civil claim, the Court in an application to pass accounts is not tasked with awarding judgment in favour of one party or the other. The purpose of an application to pass accounts to is initiate a “judicial inquiry” into the management of an estate and, if appropriate, provide redress to the estate, rather than to the beneficiaries personally.
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This week on Hull on Estates, Noah Weisberg and Garrett Horrocks review the decision in Steele v Smith, 2018 ONSC 4601, and discuss Benjamin Orders as a remedy for the estate trustee in the event that a beneficiary cannot be located.
Should you have any questions, please email us at firstname.lastname@example.org or leave a comment on our blog.
A recent decision of the Human Rights Tribunal reiterates the necessity of obtaining a Certificate of Appointment of Estate Trustee, with or without a Will, in order to be allowed to continue with a human rights compliant before the Ontario Human Rights Tribunal.
In Pollard v. York Condominium Corporation, 2018 HRTO 1149 (CanLII), the Applicant alleged discrimination on the basis of disability. The Applicant was fired from his employment as a superintendent, allegedly on the basis that he was absent from work due to a disability. The Applicant later died, and the Respondent applied for an Order dismissing the Application because no Certificate of Appointment of Estate Trustee had been obtained. The deceased Applicant’s wife sought to continue the Application.
The Human Rights Tribunal reviewed case law to the effect that an application under the Human Rights Code cannot proceed without the formal appointment of an Estate Trustee.
Rather than dismiss the Application, the Human Rights Tribunal allowed the Applicant’s wife six months to obtain a Certificate of Appointment. If no Certificate was obtained within that time, the Application was to be dismissed.
The requirement of a Certificate of Appointment can cause significant hardship for an applicant. They must incur the costs of applying for the Certificate. In many cases, the estate has no assets: either because it is impecunious or because the assets pass outside of the estate. In other cases, the estate would have to pay Estate Administration Tax that might not otherwise be payable.
There is a similar requirement to obtain a Certificate of Appointment in order to continue other civil litigation: see David Smith’s blog, here.
Have a great long weekend.
For all that is known about chef Anthony Bourdain’s colourful lifestyle, the estate plan he left behind is surprisingly comprehensive.
Bourdain’s Will leaves the residue of his estate to his minor daughter, Ariane. The residue has been valued at approximately $1.2 million, and consists of savings, cash, brokerage accounts, personal property, and intangible property including royalties and residuals. In the event that Bourdain survived his daughter, the residue was to pass to his daughter’s nanny.
Bourdain appointed his estranged wife as estate trustee. This makes sense given that Ariane is the daughter of the marriage and that the mother will likely have her daughter’s best interests in mind while the estate is administered. Bourdain was also mindful to include in his Will other assets – personal and household effects, including frequent flyer miles. Given the amount of travelling Bourdain did, it was shrewd of him to specifically include this in his Will.
A separate trust was also settled, apparently containing most of his wealth. Again, his estranged wife is named as trustee, with Ariane as beneficiary receiving money from the trust when she turns 25, 30, and 35. Presumably, Bourdain settled a trust to avoid the payment of taxes and the publicity associated with probate – another sign of a well thought out estate plan.
While so many celebrities succumb to poor estate planning, it is refreshing that in addition to teaching us about cooking, travelling, eating, and so much more, Bourdain also taught us about the importance of a thorough estate plan.
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The notes and records of the lawyer who assisted the deceased with their estate planning can play an important role in any estate litigation. As a result, it is not uncommon for a drafting lawyer to receive a request from individuals involved in estate litigation to provide them with a copy of their notes and files relating to the deceased’s estate planning. But can the lawyer comply with such a request?
The central concern involved for the lawyer is the duty of confidentiality which they owe to the deceased. This duty of confidentiality is codified by rule 3.3-1 of the Law Society of Ontario’s Rules of Professional Conduct, which provides:
“A lawyer at all times shall hold in strict confidence all information concerning the business and affairs of the client acquired in the course of the professional relationship and shall not divulge any such information unless expressly or impliedly authorized by the client or required by law to do so.”
The duty of confidentiality and privilege which is owed to the deceased by the lawyer survives the deceased’s death. This was confirmed by the court in Hicks Estate v. Hicks,  O.J. No. 1426, where, in citing the English authority of Bullivant v. A.G. Victoria,  A.C. 196, it was confirmed that privilege and the duty of confidentiality survive death, and continues to be owed from the lawyer to the deceased. With respect to the question of who may waive privilege on behalf of the deceased following their death, Hicks Estate v. Hicks confirmed that such a power falls to the Estate Trustee under normal circumstances, stating:
“It is clear, therefore, that privilege reposes in the personal representative of the deceased client who in this case is the plaintiff, the administrator of the estate of Mildred Hicks. The plaintiff can waive the privilege and call for disclosure of any material that the client, if living, would have been entitled to from the two solicitors.”
Simply put, the Estate Trustee may step into the shoes of the deceased individual and compel the release of the lawyer’s file to the same extent that the deceased individual could have during their lifetime.
In circumstances in which the validity of the Will has been challenged, the authority of the Estate Trustee is also being challenged by implication, as their authority to act as Estate Trustee is derived from the Will itself. In such circumstances, the named Estate Trustee may arguably no longer waive privilege and/or the duty of confidentiality on behalf of the deceased individual. Should the notes and/or records of the drafting lawyer still be required, a court order is often required waiving privilege and/or the duty of confidentiality before they may be produced.
Whether or not a lawyer can release their file following the death of a client will depend on the nature of the dispute in which such a request is being made, and who is making the request. If there is a challenge to the validity of the Will or the Estate Trustee’s authority, it is likely that a court Order will be required before the lawyer may produce their file regardless of who is requesting the file. If the dispute does not question the Estate Trustee’s authority, such as an Application for support under Part V of the Succession Law Reform Act, the lawyer should comply with the request to release their file so long as the requesting party is the Estate Trustee. If the requesting party is not the Estate Trustee, and the Estate Trustee should refuse to provide the lawyer with their authorization to release the file, matters become more complicated, and may require a court Order before the lawyer may release their file.
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