Tag: estate trustee
There are few court decisions dealing with the issue of payment by mistake of fact. However, this may be in part because there is settled law for the proposition that when a beneficiary receives an inheritance by mistake he/she is obliged to return it to the estate: Cronan Estate v. Hughes, 2000 CarswellOnt 4587, 37 E.T.R. (2d) 27.
In Cronan Estate, the estate trustee redeemed a RIFF and mistakenly thought that the bank had held back appropriate income tax. The estate trustee held back monies for income tax liabilities and expenses and made an interim distribution to each defendant. The amount owing for income tax at the time of trial was in excess of the holdback, with interest and penalties continuing to run.
The court held that the interim distribution was made on a mistake of fact, and that the estate trustee was not aware that there was income tax liability which had not been taken care of by deduction from the proceeds of the RIFF. The estate trustee was therefore an innocent party in making the interim distribution payments. The court also held that the monies ought to be repaid by the beneficiaries equally, unless they were able to show a “counter-veiling equity” to make it unjust to order the return of the monies. Making a significant investment in a vacation property in anticipation of receiving the funds was not considered a counter-veiling equity in that case.
The principle behind this ruling is that, prima facie, it is against equity and good conscience that the party who receives the money should retain it. Although a beneficiary can avoid payment by showing “a countervailing equity” to make it unjust to order the return of the monies, this will likely be decided on the facts of each specific case, and where the party has altered his position to his prejudice or has placed himself in a compromising situation.
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In Mroz v. Mroz, 2015 ONCA 171 (Ont. C.A.), the Court of Appeal returned to the issue of rebutting the presumption of resulting trust that arises upon a gratuitous transfer from the owner of the property to another or into joint tenancy with another. Here, the testatrix transferred her home to one child in joint tenancy and made a Will at the same time that provided for gifts and referred to the home. In one sense the issues were ones of interpretation of the Will (essentially were the gifts charges against the home) and in another were ones of beneficial ownership (whether the inter vivos transfer of the home was a gift). In writing for the Court, Justice Gillese made three points:
First, the transfer to the daughter inter vivos firmly engaged the presumption of resulting trust as set out in the seminal case of Pecore v. Pecore,  1 SCR 795 (S.C.C.).
Second, the onus was on the daughter who held title to the which passed to her by survivorship on her mother’s death to rebut the presumption. As set out in Sawdon Estate v. Sawdon, 2014 ONCA 101 (Ont. C.A.) the onus is discharged by rebutting the presumption on a balance of probabilities with respect to the transferor’s actual intention at the time of the gratuitous transfer.
Third, the presumption cannot be rebutted while at the same time allowing the asset to be dealt with as part of the Estate. Here the trial judge had erred in both finding that the transferor wished “to gift… [the daughter] full title to the house upon Kay’s death” and at the same time to pay out bequests set our in the Will out of proceeds of the sale of the same house. Justice Gillese held that “once the trial judge found that the sale of the Property after… [the mother’s] death was to be the source of funds for bequests under the 2004 Will, she could not find that the presumption had been rebutted.” In other words, the fact that the Will provided for gifts out of or against the house, it was clear that the presumption was correct rather than rebutted – the house was part of the Estate, not the sole property of the daughter.
It is clear that evidence and common sense respecting the intention of the transferor remains key to resolving these sorts of disputes. In Mroz v. Mroz, 2015 ONCA 171 (Ont. C.A.), it would make no sense that the read the Will as placing an obligation on the Estate Trustee (pay out bequests from the sale of the house) and at the same time put that asset beyond his or her control. The presumption of resulting trust is just that; a presumption of probable intent. Where that presumption is said to be wrong in the circumstances, it must be proved to be so.
On February 27, 2015, I chaired a workshop titled, The Estate Administration Tax Act, 1998: New Reporting Requirements, which was provided as part of the LSUC’s Continuing Professional Development.
As part of this workshop, our speakers, among other things, canvassed the various issues and concerns raised in relation to the introduction of the new Regulation, which came into effect January 1, 2015.
One area of concern we discussed during the workshop was the treatment of mortgages on real property. Specifically, the situation in which a deceased dies with real property in Ontario that is subject to a mortgage and that mortgage is secured by way of life insurance with the proceeds of the life insurance policy made payable to the mortgagee.
At that time of the workshop there was some uncertainty as to what information would need to be included in the value of the estate for the purposes of estate administration tax and the Estate Information Return in such circumstances.
Following the workshop, discussions were held at the Ministry of Finance and the Ministry has since clarified its position on this issue.
The Ministry’s position is that under these circumstances, since the insurance policy is payable to a designated beneficiary, the proceeds do not flow through the estate. They do not form part of the value of the estate for the purposes of estate administration tax. They do not need to be reported on the Estate Information Return. Since the real property is in Ontario, it should be included as an asset of the estate. The mortgage, since it is registered against real property in Ontario, can be deducted from the value of the estate for the purposes of estate administration tax.
So, for example, let’s say Jim dies the registered owner of real property in Ontario valued at $500,000. Prior to his death, Jim registered a mortgage against this property in favour of CIBC. Jim secures the mortgage by way of life insurance with the premiums paid by Jim and the proceeds of the life insurance policy made payable to CIBC.
Upon Jim’s death, the amount owing in respect of the mortgage registered in favour of CIBC, as at Jim’s date of death, is deductible from the fair market value of the property and the life insurance proceeds, as payable to CIBC, would not be included as an estate asset.
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Today on Hull on Estates, Jonathon Kappy and Stuart Clark discuss the recent Parson v. McGovern decision and the circumstances under which a court may compel an Estate Trustee to make an interim distribution to the beneficiaries.
Should you have any questions, please email us at email@example.com, or leave a comment on our blog page.
Today on Hull on Estates, Jonathon Kappy and Stuart Clark discuss removing estate trustees, and reference the recent 2013 case, Hawkins v. Hawkins Estate. If you have any questions, please email us at firstname.lastname@example.org, or leave a comment on our blog page.
Further to yesterday’s blog, in the case of McDougall Estate, the beneficiary complained about the trustee’s compensation on the passing of her accounts. In issue was whether the trustee’s compensation should be reduced because she:
- Made an improper distribution to a charity that was not authorized by the Will.
- Failed to make an inventory of the contents of the deceased’s house and failed to offer the beneficiary any of the deceased’s personal effects.
- Pre-took compensation.
- Paid too much in legal fees out of the estate.
The court found that even though the charitable gift failed because it was not a specified amount or share, the trustee’s interpretation of the Will was not unreasonable and the trustee was not liable for an innocent mistake, made in good faith. She was therefore not required to reimburse the estate and should not have her compensation reduced.
The contents of the house were of little value and had to be cleaned out for sale. The trustee never received any indication from the beneficiary that there was anything of sentimental value that she wished to receive. In the circumstances, the Court found that the compensation should not be reduced for the manner in which the trustee dealt with the personal effects.
The trustee pre-took compensation of 5% of the value of the estate as originally calculated but, after adjustments, she admittedly overpaid herself by $1,163.24. Estate trustees ought not to pre-take compensation unless authorized in the trust document or by approval of the executor’s accounts by the beneficiaries. The proper remedy was payment of interest on the amount pre-taken. Accordingly, the trustee was ordered to repay $1,163.24 plus interest of $360 to the estate.
It was not unreasonable for the trustee to seek legal advice to respond to the inquiries from the beneficiary’s lawyer. While amounts paid to respond to questions about the administration of the estate were not at first instance a proper charge to the estate, such costs were allowed because they were properly incurred by her to respond to the beneficiary’s challenges to her administration of the estate.
The payment of legal fees from the estate that ought to have been paid by the estate trustee is a form of pre-taking of compensation and so the estate trustee was liable for interest on that amount, which was fixed at $70.00.
Sharon Davis – Click here for more information on Sharon Davis.
Listen to The Estate Trustee During Litigation
This week on Hull on Estates Megan Connolly and Craig Vander Zee discuss the topic of the estate trustee during litigation (ETDL). Their discussion is based off a paper Paul Trudelle prepared and spoke about at the Hull and Hull breakfast series on June 4, 2009. They look at the circumstances when you would need an ETDL, the procedure for appointing the ETDL and the powers and duties of the ETDL.
For more information on this topic, see:
Jordan Atin’s article, The Estate Trustee During Litigation, in ‘Estate Litigation’ by Brian A. Schnurr. volume 2. 2nd ed. (Toronto: Thomson Carswell, 2000)
If you have any comments, send us an email at email@example.com or leave a comment on our blog.
Those who follow American politics have probably heard of Roland Burris. He is controversial Governor Rod Blagojevich’s choice to replace the Senate seat vacated by President –Elect Barack Obama. While the constitutional debate continues on whether or not Burris can be seated in the Senate, another issue that has grabbed the headlines is Burris’ final resting place.
Burris has commissioned for himself a grand mausoleum consisting of two columns and three tablets referring to himself as a trail blazer and listing all his political and business accomplishments, both minor and major, with room for more to be engraved. The monument, referred to “as his resume in stone” had attracted unfavourable attention from the media and earned Burris the nickname “Tombstone”. Needless to say, it was probably not the effect Burris intended.
While many people include burial instructions in their Will, such instructions are not binding on the estate. The estate trustee has the ultimate responsibility to make burial arrangements. For those who wish to make elaborate arrangements, they should make those instructions clear to the estate trustee and other family members, so that the estate trustee is not criticized for the expense to the estate. Additionally, we can take Burris’ lead and make our own arrangement during our lifetime. Click here to read Paul Trudelle’s paper on estate issues and dealing with the body after death.
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Upon the death of a person, a duty arises to bury or otherwise dispose of the remains in a decent and dignified fashion. But who does this duty fall upon?
It is well established in the jurisprudence for Ontario that plans for the service and burial arrangements are the responsibility of the estate trustee. This responsibility can conflict with the wishes and expectations of the deceased and family members, particularly in a religious context.
In Saleh v. Reichert, the deceased was of the Muslim faith. Her husband had converted to the Muslim faith for the purpose of there marriage. There was evidence indicating that the deceased expressed her wish to be cremated upon her death. The deceased’s husband was appointed as the estate trustee without a will and intended to honour the deceased’s wishes. The deceased’s father objected to the cremation on religious grounds.
The court affirmed the fundamental duty of an estate trustee is to ensure that the remains of a body be disposed of in a decent and dignified fashion. The court held that religious law has no bearing on the case. In Ontario, burial and cremation are both means that would meet the requirement for disposal in a decent and dignified fashion. The deceased’s father’s action was dismissed.
It is important to note that it was acknowledged that there is no property in a body. Therefore, any instructions left by the deceased, whether in a Will or otherwise are only precatory and are not binding on the estate trustee.
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