Tag: estate trustees
In recent months, an Ontario Superior Court of Justice province-wide Notice to the Profession has permitted the filing of applications for a Certificate of Appointment of Estate Trustee with a Will or a Certificate of Appointment of Estate Trustee Without a Will (“probate applications”) by email. Since then, the Rules of Civil Procedure were updated, effective January 1, 2021 to permit for the service of most court materials by email (among other updates).
Most recently, as of January 8, 2021, the Rules of Civil Procedure were further updated to provide for the options of serving notice of probate applications by email, courier, or personal service. Amended sub-rules 74.04(7) and 74.05(5) now read as follows:
Notice under this rule shall be served on all persons, including charities, the Children’s Lawyer and the Public Guardian and Trustee, and, unless the court specifies another method of service, may be served by,
(a) personal service;
(b) e-mail, to the last e-mail address for service provided by the person or, if no such e-mail address has been provided, to the person’s last known e-mail address; or
(c) mail or courier, to the person’s last known address.
Previously, the Rules of Civil Procedure required the Notice of Application in respect of a probate application to be served by regular lettermail.
Forms 74.06 and 74.16 (Affidavits of Service in respect of probate applications) have also now been updated to refer to these new manners of service of the Notice of Application in respect of a probate application. The revised forms are available here.
This further development in the modernization of estates law procedures is welcome and can be expected to better enable lawyers to assist clients in serving and filing probate applications more efficiently while working remotely during the pandemic and beyond.
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On March 30, 2020, Noah Weisberg blogged about the estate trustee’s duty to invest during COVID-19, a time when market fluctuations have become the norm. Today, I consider how pandemic-induced changes in the housing market may impact an estate trustee’s management of real property held by an estate.
Real properties – including primary residences, cottages, and vacation properties – are often some of the largest assets an estate trustee will deal with during the course of their administration of an estate. Unless otherwise stated in the deceased’s will, the estate trustee has a fiduciary duty to sell the estate’s real property for its fair market value and is expected to do so in a timely manner.
However, the exact timing for the market and sale of real property can depend on many factors. It is common for a will to grant an estate trustee the discretion to choose whether to sell or retain assets. As it pertains to real property, this power allows the estate trustee to hold onto a property until such time as they can achieve the best possible sale price on behalf of the beneficiaries. At the same time, the estate trustee needs to be mindful of the costs incurred by the estate in having to maintain the property. Beneficiaries of the estate may also put pressure on an estate trustee to sell the property and convert it to money sooner rather than later.
Like most industries, the real estate market has been impacted by COVID-19. An estate trustee should be attentive to whether recent changes in the housing market make it an ideal or inopportune time to market a particular property for sale, while also bearing in mind the factors described above.
If an estate trustee decides to list a property for sale in today’s uncertain housing market, there are a few things they can do to help protect themselves against future claims from beneficiaries. First, the estate trustee should have the property appraised for its fair market value by a professional appraiser who is an independent third party. For added protection, the estate trustee may want to have the beneficiaries sign off on the property’s price. The estate trustee should also make an effort to keep the beneficiaries apprised of each step of the sale process. Lastly, the estate trustee should take care to keep detailed records of all advice received and steps taken in the event that they need to justify their actions at a later date.
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We all know how long an Estate Trustee typically has to wait for a Certificate of Appointment of Estate Trustee With or Without a Will, if filed in Toronto. Sometimes a Certificate of Appointment is not granted for six to eight months from the filing date.
The Court recently expressed its frustration with the frequency of motions being commenced by Estate Trustees seeking to expedite the granting of the Certificate of Appointment. The option of obtaining the Certificate of Appointment on a more urgent basis appears to no longer be available as a result. Apparently, it was not unusual for Estate Trustees to seek to expedite the process when real property of an Estate needed to be sold. The Court does not always agree that the sale of real property cannot wait until the Certificate of Appointment is granted.
Despite the Court’s stance on expediting the granting of Certificates of Appointment, there are special circumstances that would arguably warrant the Court’s intervention. What if an Estate Trustee’s authority is required to manage a certain asset of an Estate such that, if it is not obtained within a reasonable amount of time, the Estate could suffer significant expense?
An option that is available which should be carefully considered (particularly given the Court’s position on expediting the process overall) is seeking a limited grant from the Court for a particular purpose. Historically, this was known as a grant ad colligenda bona, and was limited to particular purposes as well as limited until such time as a general grant could be made (see Charles H. Widdifield, Surrogate Court Practice and Procedure, 2nd ed. (Toronto: Carswell, 1930) at 190).
Today, where the conditions for an appointment of an Estate Trustee During Litigation are not met, and there is a delay in the appointment of an Estate Trustee, a limited grant for the purpose of gathering in and protecting the assets may be sought by way of a motion or application for directions under Rule 75.06 of the Rules of Civil Procedure (see Ian M. Hull & Suzana Popovic-Montag, Macdonell, Sheard and Hull on Probate Practice, 5th ed. (Toronto: Carswell, 2016) at 384).
This option should be carefully considered where the circumstances are truly special such that the Court’s intervention is required on an urgent basis and the Estate Trustee cannot wait until the Certificate of Appointment is granted.
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There are new developments regarding the Estate of Maurice Sendak, the famous American author and illustrator who passed away in 2012 and is best known for authoring Where the Wild Things Are. As reported by the New York Times, Mr. Sendak’s Estate was mostly successful in an ongoing legal dispute with the Rosenbach Museum and Library in Philadelphia.
First, a bit of background: prior to his death, the Rosenbach Museum housed a large archive of Mr. Sendak’s work, including many original illustrations and portions of his book collection. However, these items were not gifted to the Rosenbach Museum. Instead, under his Will, Mr. Sendak left his collection to the foundation created in his name prior to his death, and directed the creation of “a museum or similar facility” in his hometown of Ridgefield, Connecticut. However, Mr. Sendak did leave his “rare edition books” to the museum under his Will.
In 2014, the executors of Mr. Sendak’s Estate withdrew Mr. Sendak’s collection at the Rosenbach Museum. The museum subsequently commenced a legal proceeding in Connecticut probate court, arguing that the Estate had kept two books by William Blake and a selection of rare books by Beatrix Potter. According to the museum, these books fell into the category of “rare edition books” gifted to the museum under Mr. Sendak’s Will.
According to the article in the New York Times, the Connecticut court held that the William Blake books did not fit the definition of “rare edition books,” but that the Beatrix Potter books belonged to the museum. In the result, the Estate and Mr. Sendak’s foundation were awarded 252 of the 340 items that were in dispute between the parties.
I recently blogged about the famous Mexican architect Luis Barragan, and the broader public debates that often emerge about how best to preserve an artist’s legacy after his or her death. A similar debate has served as the backdrop to the legal wrangling between the museum and the Estate.
In a 2014 article, the New York Times profiled Mr. Sendak’s long-time housekeeper and caretaker Lynn Caponera, who was now acting one of his executors and the president of his foundation. The article highlighted some of the questions and criticisms that had been directed at the executors’ decision to withdraw Mr. Sendak’s collection from the museum, with some questioning the appropriateness of Mr. Sendak’s property in Ridgefield as a site for a museum and the skill and ability of Ms. Caponera to manage and administer Mr. Sendak’s foundation.
Thank you for reading and have a great weekend,
Umair Abdul Qadir
As a second part to Tuesday’s blog, our very own Ian Hull was also a presenter at the recent Law Society of Upper Canada Practice Gems: Probate Essentials 2016 program on September 20, 2016. Ian and our associate, Laura Betts, wrote a paper on various issues surrounding the obligation to locate and notify the beneficiaries of an estate and what may be done when a person cannot be located.
These issues may arise when a named beneficiary is simply unknown to the estate trustee and the family, or they may arise when a class of beneficiaries are named and the exact identities of the deceased’s “cousins”, for example, may be unknown.
In a previous blog, Laura has outlined the obligation of an estate trustee to identify the beneficiaries of an estate with tips on how an estate trustee may conduct his/her “reasonable inquiries”.
As a tip for will drafting solicitors, Ian Hull suggested during the program that it will be helpful to include the known occupation and location of a beneficiary on the face of the will (e.g. Doreen So, lawyer, City of Toronto).
The Ontario Office of the Registrar General may also be a helpful resource to estate trustees as it is responsible for issuing birth, death, and marriage certificates in Ontario.
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Our blog has previously discussed Graduated Rate Estates (“GRE”) and changes to the Income Tax Act, which now limit the benefit of graduated rates of taxation for up to 36 months from the date of death if the estate qualifies as a testamentary trust, and is designated as a GRE in its first taxation year.
Changes to the tax benefits of testamentary trusts raise a number of planning considerations that should be considered when making an estate plan. First, when drafting a testamentary trust, a key consideration should be whether it would be beneficial to the estate and its beneficiaries to delay the distribution of the estate for up to three years to potentially maximize the progressive taxation rates of all income in the trust.
If a testamentary trust is established with a view to take advantage of the new tax regime, then another important consideration is the extent of discretion that a testator wishes to grant to his or her Estate Trustee. Since an estate must maintain its status as a GRE, a testator may wish to clearly direct his or her Estate Trustee to take steps necessary to use or manage the estate assets in a manner that is consistent with the GRE requirements set out in section 248(1) of the Income Tax Act. Alternatively, the testator may wish to authorize his or her Estate Trustee to determine whether it is necessary or beneficial to preserve the estate’s status as a GRE in light of circumstances that may arise post-mortem.
All estate planning considerations that are intended to take advantage of changes to the Income Tax Act should be discussed with a tax professional throughout the estate planning process.
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Estate trustees can have a difficult task ahead of them, especially when it comes to the administration of complex estates. While the following list is not exhaustive, it outlines some questions for individuals to consider when acting as estate trustees.
- How much do you expect to get paid? Estate trustees are entitled to compensation that is a “fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate”. While there is no statutory calculation for trustee compensation, section 62(1) of the Trustee Act allows a judge to determine what is allowed.
- How far do you need go to find beneficiaries? Section 24(1) of the Estates Administration Act requires a trustee to make reasonable inquiries for persons who may be entitled by virtue of a relationship traced through a birth outside marriage. In situations such as an intestacy or where beneficiaries are not specifically named in a will, this can be an onerous task complicated by geography, language and family dynamics. Doreen So previously blogged about searching for beneficiaries here.
- Who needs to be served? When applying for probate, an estate trustee must issue an application to the court and serve all persons entitled to a share in the distribution of the estate. This is governed by the Rules of Civil Procedure. Of note is the provision that if a person entitled to a share is less than 18 years of age, notice of the application is to be served on the Children`s Lawyer. The Children’s Lawyer is also to be served in circumstances involving unborn and/or unascertained beneficiaries.
- When can you start distributing assets? While estate trustees need to be prudent about their distribution responsibilities, there may be factors that prevent the early distribution of estate assets. For example, s. 6(14) of the Ontario Family Law Act prevents the distribution of a deceased spouse`s estate within 6 months of the spouse`s death without consent in writing from the surviving spouse or court authorization.
- What is worth keeping? When it comes to cleaning out a deceased`s papers and personal effects, there may be a fine line between valuable items and junk. In the case of items such as photographs, letters and documents that beneficiaries do not want, do the items have any significance? When items possibly have historic or academic value, estate trustees may consider canvassing options of donation to university archives or libraries.
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Just what to call the person administering an estate in Ontario can be somewhat confusing. A number of terms have been used over the years. The same person can be referred to in a number of different ways by different pieces of legislation. In some cases, there are real differences in the legal effect of these different titles. I thought it worth taking a brief look at the legal distinctions between the various names that are given to estate trustees.
An executor is a person nominated by the testator in a will to carry out its terms. There is a feminine form, “executrix” (pl. “executrices”), however the term “executor” is commonly applied to either gender. An executor’s authority comes from the will itself, and he or she generally has authority to administer the estate with or without an appointment from the court.
If there is no will, there can be no executor. Upon application, a court will appoint an administrator to handle the affairs of the intestate estate. There is also a feminine form, “administratrix” (pl. “administratrices”), but again, “administrator” tends to be applied in a gender-neutral way. An administrator’s authority to act is derived solely from his or her appointment by a court.
If there is a will but no executor, (e.g. where the will does not name an executor or where the named executor is unable or unwilling to act), the court can appoint an administrator to carry out the terms the will. This person is called an “administrator with the will annexed”. Like other administrators, an administrator with the will annexed derives authority from court appointment.
One key difference between executors and administrators is that there is a “chain of executorship”. If an executor, Y, obtains a certificate of appointment for estate X and later dies, the executor of Y’s estate becomes the executor of X’s estate as well. This chain can continue indefinitely. However, an administrator’s authority to administer an estate is not heritable in this way and his or her grant of authority dies with the administrator.
Some of our legislation uses the term “personal representative”. The Trustee Act, for example, defines a “personal representative” as an executor, an administrator, or an administrator with the will annexed. The Rules of Civil Procedure use the term “estate trustee”, also defined as meaning an executor, administrator, or administrator with the will annexed. Further, an executor or an administrator with the will annexed can be called “estate trustee with a will”, and administrator where there is no will can be called “estate trustee without a will”.
To make things trickier, many wills create trusts. Usually the executor/estate trustee with a will/personal representative is also named as the trustee of any trusts created under the will (although a will can appoint different trustees). When this happens, the estate trustee is also a trustee. While trustees and estate trustees are generally treated similarly under the law, there are some significant differences For example, section 2 of the Trustee Act provides a mechanism for a trustee to retire if there are three or more. The section states that it does not apply to executors or administrators, however, who can only be removed by a court. Some cases have treated the two offices separately as well, holding that a person can resign or be removed from one office while retaining the other. An estate trustee can be removed as trustee but still be estate trustee.
I hope that this helps to disambiguate some of the many names that are given to a person who is in the role of administering the assets of a deceased person. Although many of these terms overlap, it is sometimes important to appreciate the distinctions where they exist.