Tag: estate trustee
In Ontario, if there is a claim to be made or continued by a deceased person or their estate, any such claim must be brought by the executor or administrator of his or her estate. If there is no executor or administrator, under Rule 9.02 of the Rules of Civil Procedure, RRO 1990, Reg 194, the court may appoint a litigation administrator, who will represent the estate for the purpose of the proceeding. A beneficiary or other person may also represent the interests of an estate, under Rule 10.02, where it appears that an estate has an interest in a matter in question in a proceeding.
In British Columbia, section 151 of the Wills, Estates and Succession Act, SBC 2009, c. 13 (“WESA”) provides an alternative way of pursuing a claim by an estate. Section 151 states that a beneficiary of an estate may, with leave of the court, commence proceedings in the name and on behalf of the personal representative of a deceased person, either to recover property or enforce a right, duty or obligation owed to the deceased person that could be recovered or enforced by the personal representative, or to obtain damages for breach of a right, duty or obligation owed to the deceased person. Section 151(3) outlines the circumstances in which the court may grant leave in this regard:
(3) The court may grant leave under this section if
(a) the court determines the beneficiary or intestate successor seeking leave
(i) has made reasonable efforts to cause the personal representative to commence or defend the proceeding,
(ii) has given notice of the application for leave to
(A) the personal representative,
(B) any other beneficiaries or intestate successors, and
(C) any additional person the court directs that notice is to be given, and
(iii) is acting in good faith, and
(b) it appears to the court that it is necessary or expedient for the protection of the estate or the interests of a beneficiary or an intestate successor for the proceeding to be brought or defended
In a document produced by the Government of British Columbia entitled “The Wills, Estates and Succession Act Explained” (“WESA Explained”), section 151 is described as overcoming a gap in the law. Previously, if a beneficiary wished for an action to be brought on behalf of an estate, and the personal representative refused to do so, the beneficiary’s sole recourse would be to apply for removal of the personal representative.
However, removal may not always be necessary or convenient. As described in WESA Explained, such a situation could arise in the event that the personal representative’s main concern (as is often the case with executors, generally) is to preserve and distribute the estate. The personal representative is therefore likely more risk adverse and conservative in assessing the potential success of pursuing an action. The beneficiary may have differing views on the merits of the claim, and in his or her assessment of the risk and return.
Section 151 of WESA differs from the process for litigation administrators and representation orders in Ontario in that s. 151 allows the executor and beneficiary appointed to bring a claim on behalf of the estate to co-exist simultaneously.
The concept of s. 151 is similar to a derivative action, in which a shareholder or other person is permitted to bring an action on behalf of a corporation, where the corporation refuses to do so.
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An Ontario Court of Appeal decision released yesterday provides clarity regarding the situations in which beneficiaries of legacies will be entitled to interest on the sum payable to them under a Last Will and Testament.
In Rivard v Morris, the testator had held farmland of significant value. A prior Will left a farm of comparable value to each of his daughters (as the testator had previously gifted a farm property to his son), and divided the residue of the estate equally between the three children. In the months preceding his death, however, the deceased amended his estate plan to provide for a greater benefit to his son, leaving him the residue of his estate (inclusive of the farm properties) after distributions to each daughter in the amount of $530,000.00.
After the testator died, the daughters challenged his Last Will on the basis of alleged undue influence. The will challenge was unsuccessful. The daughters subsequently commenced another proceeding after their brother (the sole remaining estate trustee after their previous resignations) refused to pay to the sisters interest with respect to the legacies of $530,000.00. They argued that they were entitled to interest commencing one year after the date of their father’s death, notwithstanding that the payment had been delayed in part because of the will challenge initiated by the daughters. Any interest would have been payable out of the assets to which their brother was otherwise entitled as sole residuary beneficiary of the estate.
The daughters were unsuccessful at the hearing of their application and appealed. The Court of Appeal found in their favour. Justice Paciocco ordered the payment to each daughter interest in the amount of $53,000.00 out of the residue of the estate. In doing so, Justice Paciocco relied upon the “executor’s year” and the “rule of convenience”. In describing the rule of convenience, Justice Paciocco stated as follows (at paragraphs 24, 25):
The “rule of convenience” can be easily explained, in my view. One of the maxims of equity is that it presumes as being done that which ought to be done. Since the beneficiaries should be enjoying the earning power of their legacies by at least the anniversary date of the testator’s death, where that enjoyment is postponed and the testator has not provided an alternative date for payment of the legacy, interest is to be paid…This general rule has been adopted in Ontario.
The rule of convenience was considered by the Court of Appeal to promote certainty and predictability, and the lower court’s decision to deny the daughters’ interest on the basis that they had commenced litigation against the estate was said to be contrary to principle, as this would have the impact of discouraging “even meritorious litigation”. While the Court of Appeal did neither confirmed nor denied whether judges are able to exercise discretion to deny interest to beneficiaries of legacies, it found that it had been inappropriate for the application judge to do so in this case.
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If someone asks you to act as their Estate Trustee, or you learn to your surprise that you are named as an Estate Trustee after the person’s passing, there are a number of things that you should consider before accepting such a responsibility. Given the significant duties involved in such a role, it is important to be aware of the potential for personal liability.
An Estate Trustee’s Legal Duties
An Estate Trustee is a fiduciary and, as such, s/he owes a duty to exercise the care, diligence and skill that a person of ordinary prudence would exercise in dealing with the property of the Deceased.
Furthermore, an Estate Trustee owes a “duty of loyalty”, which has been described as the duty to act honestly and in good faith, and to use powers solely for the purposes for which they were granted (see Oosterhoff on Trusts: Text, Commentary and Materials, 8th ed.). The “duty of loyalty” means that:
(a) An Estate Trustee must exercise powers and perform duties solely in the interest of the Estate.
(b) An Estate Trustee must not knowingly permit a situation to arise where:
(i) The Estate Trustee’s personal interest conflicts in any way with the exercise of powers or performance of duties; or
(ii) The Estate Trustee derives a personal benefit or a benefit to a third party, except as far as the law or the Will expressly permit.
Additional legal duties of an Estate Trustee are:
- The “prudent investor” rule which ensures that the Estate Trustee properly invests the Estate assets;
- The “even-hand” rule which ensures that the Estate Trustee acts impartially among all the beneficiaries;
- The “duty of transparency” which ensures that the Estate Trustee provides information to the beneficiaries; and
- The “duty to account”.
Some Practical Considerations
From a practical stand point it is also prudent to consider the overall complexity of the Estate and what type and quantity of work will be expected from you in your role as an Estate Trustee. Certainly, some Estate Trustees can be compensated for the work they perform; however, there is a limit to what one may claim and it largely depends on the circumstances.
There are certain tasks that an Estate Trustee may want to delegate to third parties; however, there is a limit as to what type of work may be delegated and what is considered reasonable.
You should consider whether the Will properly sets out the powers as well as the responsibilities of the Estate Trustee which will aid you in the future, should any of your decisions be challenged. Another useful consideration is whether there are any third parties, or specifically, any beneficiaries who may be difficult to deal with in your role as an Estate Trustee, or may want to challenge your authority in the future.
In making the decision whether or not to act as an Estate Trustee, it may also be a good idea to speak to a lawyer regarding whether taking on this role may present an unacceptable legal risk for you in the future.
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In Tyrell v. Tyrell, 2017 ONSC 4063, the Ontario Superior Court of Justice was faced with a situation in which the testator died domiciled in Nevis, having drafted a Last Will and Testament which was executed in Nevis, which itself dealt with estate assets the vast majority of which were located in Nevis. The Will named the testator’s sister, who normally resided in Ontario, as Estate Trustee. Letters probate were issued to the Estate Trustee from the Nevis court following the testator’s death.
When concerns arose surrounding the Estate Trustee’s conduct following the testator’s death, certain of the beneficiaries brought an Application before the Ontario court seeking, amongst other things, the removal and replacement of the Estate Trustee, as well as an accounting from the Estate Trustee regarding the administration of the estate to date. The beneficiaries who brought such an Application were themselves located across several jurisdictions; being located in Nevis, Ontario, and New York.
In response to being served with the Application, the Estate Trustee took the position that the Ontario court was not the proper jurisdiction to seek such relief as against the Estate Trustee, maintaining that Nevis, being the jurisdiction in which the testator died domiciled, was the proper jurisdiction in which to adjudicate such disputes. The beneficiaries disagreed, arguing that the jurisdiction in which the Estate Trustee was normally resident was the proper jurisdiction in which such disputes should be adjudicated.
In ultimately agreeing with the beneficiaries, and ordering the Estate Trustee to complete certain steps regarding the administration of the estate within 60 days, the Ontario court provides the following commentary regarding Ontario’s jurisdiction over the matter:
“For the purpose of administering the Will, the most significant connecting factor is the residence of the estate trustee. Therefore, the Will is most substantially connected to the province of Ontario and the applicable law on matters relating to the administration of the Will is the law of Ontario. Thus, the Courts of Ontario have jurisdiction over matters relating to the administration of the Will.” [emphasis added]
The court’s rationale in Tyrell v. Tyrell appears to be in contrast to the Alberta Court of Appeal’s previous decision in Re: Foote Estate, 2011 ABCA 1. Although Re: Foote Estate dealt with a determination of domicile for the purpose of deciding which jurisdiction’s laws would apply in the context of a dependant’s support case, the court provided general commentary regarding what jurisdiction’s laws governed the administration of an estate. Indeed, in the opening paragraph of the Court of Appeal’s decision in Re: Foote Estate, the following comment is made:
“This appeal arises from a trial finding that the late Eldon Douglas Foote was domiciled on his death in Norfolk Island. The domicile of the deceased determines the applicable law for estate administration purposes.” [emphasis added]
Re: Foote Estate appears to suggest that it is testator’s domicile that determines which jurisdiction’s laws are to govern the administration of an estate, making no reference to the location of the Estate Trustee. Tyrell v. Tyrell appears to suggest the opposite, with the court concluding that, notwithstanding that the testator died domiciled in Nevis, the laws of Ontario governed the administration of the estate on account of the Estate Trustee being located in Ontario.
The contrasting decisions of Tyrell v. Tyrell and Re: Foote Estate likely leave more questions than answers. Whether the fact that Tyrell v. Tyrell is a decision of the Ontario court, while Re: Foote Estate is from Alberta (although from the Court of Appeal), could also potentially play a role. An interesting hypothetical would be what would happen if a testator died domiciled in Ontario with an Estate Trustee located in Alberta. In accordance with Tyrell v. Tyrell, notwithstanding that the testator died domiciled in Ontario, the laws of Alberta would apply to the administration of the estate on account of the location of the Estate Trustee. In accordance with Re: Foote Estate however, Alberta law dictates that it is the law of the jurisdiction in which the testator died domiciled which governs the administration of the estate, which could have Alberta send the matter back to Ontario. Confusion abounds.
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Submissions from the Joint Committee on Taxation Regarding Proposed Changes to Voluntary Disclosure Program
Last month, I blogged about some changes proposed by the CRA to the Voluntary Disclosure Program. It was noted that the CRA would be accepting comments with respect to the proposed changes until August 8, 2017.
The Joint Committee on Taxation of The Canadian Bar Association and Chartered Professional Accountants of Canada (the “Joint Committee”) made submissions in this regard in a letter to the Minister of National Revenue dated August 8, 2017.
In their letter, the Joint Committee recommends that the Minister reconsider a number of points, including, among other things, the introduction of a multi-tier system including the “general program” and the “limited program”. The Joint Committee states that part of the success of the Voluntary Disclosure Program is due to the fact that taxpayers applying to the Program are able, to a certain extent, to predict the consequences of initiating a voluntary disclosure. This allows non-compliant taxpayers to assess the benefits of the Program as opposed to the ongoing uncertainty of non-compliance and the risk of assessment and/or prosecution. The Joint Committee submits that the proposed changes may lead to uncertainty, and therefore, may encourage non-compliance, which would be inconsistent with the objectives of the Voluntary Disclosure Program and with encouraging non-compliant taxpayers to become compliant.
The submissions from the Joint Committee also comment that the draft Information Circular setting out the proposed changes apparently provides that the No-Name method of disclosure, wherein certain information may be provided to a Voluntary Disclosure Program officer without identifying the taxpayer, in order to obtain a better understanding of how the taxpayer’s disclosure may be addressed, will no longer be available for disclosures commencing after December 31, 2017. In the Joint Committee’s experience, non-compliant taxpayers are more likely to proceed with a voluntary disclosure if the process is perceived as transparent and predictable. If they are correct and the Minister of Revenue proposes to eliminate the No-Name disclosure method, the Joint Committee urges the Minister of Revenue to reconsider this proposed change.
The letter from the Joint Committee makes a number of other submissions that are beyond the scope of this blog, but can be read in full here.
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Today on Hull on Estates, Natalia Angelini and Umair Abdul Qadir discuss Justice Myer’s recent decision in Mayer v Rubin, 2017 ONSC 3498, regarding the Court’s discretion to appoint an Estate Trustee During Litigation.
A question that I am often asked by both beneficiaries and Estate Trustees, is whether the Court can compel an Estate Trustee to make an interim distribution.
Beneficiaries and Estate Trustees are often at odds as to how quickly they wish to proceed with an interim distribution. A beneficiary is generally eager to receive their entitlement from an Estate as soon as possible. Estate Trustees, however, carry significant personal liability should they too hastily pay out Estate funds, and therefore tend to exercise caution before distributing.
In the decision of Parson v McGovern, a motion by a beneficiary (who had a one-half interest in the Estate) sought to compel the Estate Trustees to make an interim distribution of almost all of the remaining assets of the Estate to the beneficiaries. The beneficiary requested that this distribution be made before the Estate Trustees passed their accounts (and obtained Court approval).
The Court considered the prior decisions in Re Blow, Brighter v. Brighter Estate, and others, and concluded that the following factors should be considered by the Court when deciding whether to compel an Estate Trustee to make an interim distribution to a beneficiary:
- are the Estate Trustees deadlocked;
- have the Estate Trustees acted with mala fides;
- have the Estate Trustees failed to exercise their discretion to make an interim distribution;
- have the Estate Trustees behaved unreasonably or breached their fiduciary duty and duty of good faith and fairness to the respondent (the beneficiary); and,
- would a beneficiary suffer under undue prejudice.
In applying these factors to the case at hand, the Court considered, in part, that the Estate Trustees were not deadlocked, had proceeded to pass their accounts in an expeditious fashion, did not extort the beneficiary into signing a waiver/release, did not cause delay in administering the Estate, and there was no evidence the beneficiary would be unduly prejudiced if an interim distribution was not made. Based on this, the Court did not compel the Estate Trustees to make an interim distribution, and the motion by the respondent beneficiary was dismissed.
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This week on Hull on Estates, Ian Hull discusses the role of the Estate Trustee During Litigation and the impact of case law over the last 50 years.
Beneficiaries of a Trust who have a vested interest in the capital can sometimes assign their entitlement to another. But to protect the Trustee, it is critical that any such assignment be properly documented.
Section 11 of the Ontario Statute of Frauds states: “all grants and assignments of a trust or confidence shall be in writing signed by the party granting or assigning the same, or by his or her last Will or devise, or else are void and of no effect.”
Section 11, unlike the rest of the Statute of Frauds, applies to both realty and personalty. The section, moreover, requires that the grant or assignment of the equitable interest be itself in writing, not merely evidenced in writing. Where the beneficiary of a trust of pure personalty directs the trustees hold the property in trust for another person, the direction must be in writing to be valid.
This is a good reminder of how strictly the law considers the relationship between beneficiary and trustee. The fiduciary duty owed to a beneficiary by a trustee requires that any voluntary assignment of the beneficiary’s entitlement be carefully documented to protect both parties. In the unusual circumstance where a beneficiary assigns his or her interest, the trustee needs to be protected. The beneficiary, in turn, needs to clearly convey to the trustee the nature of any assignment and understand (ideally with independent legal advice) the ramifications of such a decision.
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This week on Hull on Estates, Paul Trudelle and Nick Esterbauer discuss the state of the law in Canada regarding fiduciary access to digital access, as well as the potential for the Uniform Access to Digital Assets by Fiduciaries Act to provide clarity in respect of the authority of estate trustees and guardians/attorneys of property.