Tag: estateplanning

08 Mar

Lucid Intervals

Suzana Popovic-Montag Capacity, Estate & Trust, Estate Planning, General Interest, Trustees, Uncategorized, Wills Tags: , , , , , , , , 0 Comments

If a person has been found incapable of having the capacity to make a will, the law nonetheless recognizes that such person may experience lucid intervals during which testamentary capacity may be temporarily regained. A will made during a lucid interval may be valid.

The legal test for testamentary capacity is the same regardless of whether the testator suffers from a condition that generally deprives him or her of testamentary capacity. The test was summarized in Re Schwartz, 1970 CarswellOnt 163, as follows:

The testator must be sufficiently clear in his understanding and memory to know, on his own, and in a general way (a) the nature and extent of his property, (b) the persons who are the natural objects of his bounty, and (c) the testamentary provisions he is making; and he must, moreover, be capable of (d) appreciating these factors in relations to each other; and (e) forming an orderly desire as to the disposition of his property.

The critical time during which the testator must have capacity is when instructions are given and when the will is executed. In Re Weidenberger Estate, the Court stated:

What the Deceased’s state of mind was one year before or one year after the date of the document is not overly relevant. The courts have recognized that a Deceased may only have temporary periods of rational and lucid behaviour, and in such moments, an individual may competently dispose of his or her estate.

If a testator generally lacks testamentary capacity, but makes a will during a lucid interval, the evidentiary burden on the propounder is heavier than would otherwise be the case.

We have previously blogged on criticism of the concept of the lucid interval. Some studies suggest that cognitive fluctuations are often short in duration, often seconds or minutes. Such a period of time is unlikely to be sufficient to execute a will. Despite this criticism, the legal concept of the lucid interval remains recognized by the Courts. The concept was recently applied to uphold the validity of a will in Re Zukas Estate, a decision of the Court of Queen’s Bench of Alberta.

Thank you for reading.

Suzana Popovic-Montag

Other articles you might enjoy:

Age and Testamentary Capacity

Dementia and Testamentary Capacity

Capacity While Suffering from Dementia

27 Feb

How does Solicitor/Client Privilege Apply on the Death of a Testator?

Ian Hull Beneficiary Designations, Estate & Trust, Estate Planning, Executors and Trustees, General Interest, Litigation, Trustees, Wills Tags: , , , , , , 0 Comments

What happens to communications between a solicitor and a testator once the testator passes away? Can privilege be waived in order to determine the intentions of a testator?

As stated in R v McClure, 2001 SCC 14, “solicitor/client privilege must be as close to absolute as possible to ensure public confidence and retain relevance. As such, it will only yield in certain clearly defined circumstances, and does not involve a balancing of interests on a case-by-case basis.”

It has been established that the beneficiary of privilege (i.e. the client) is able to pass on their privilege to established successors. Pursuant Bullivant v AG for Victoria [1901] (HL), a testator’s death does not destroy the privilege that can be asserted by an executor, and the heirs of the testator.

In Hicks Estate v. Hicks, (1987) 25 E.T.R. 271, the Ontario District Court (as it then was) was faced with the question of whether an Estate Trustee could step into the shoes of the deceased individual and waive privilege in the same fashion as the deceased. In this case, the court clarified that solicitor/client privilege exists for the benefit of the client, not the solicitor.

In Goodman v Geffen, [1991] 2 SCR 353, the Supreme Court of Canada established that there are situations where privilege does not arise where the interests of the party seeking information are the same as those of the individual who retained the solicitor. For example, the court may receive evidence from a solicitor of instructions given to the solicitor by a deceased testator in order to determine the testator’s true intentions. This principle has been further explained in the case of Stewart v Walker (1903) 6 OLR 495 (CA): “the reason on which the rule is founded is the safeguarding of the interest of the client, or those claiming under him when they are in conflict with the claims of third persons not claiming, or assuming to claim under him.” As such, upon the death of a testator, it is possible for the privilege between the testator and their solicitor to extend beyond death.

Aside from trying to determine the true intentions of the testator, the principle of solicitor/client privilege upon the death of a testator can be applied to the disclosure of legal opinions to a trustee, as a trustee is bound to act in the best interests of the beneficiaries and to further their interests. This will be discussed further next week.

Thanks for reading,

Ian M. Hull

Other Articles You May Be Interested In

Can an Estate Trustee Waive Privilege?

Waiver of the Solicitor and Client Privilege

Leaving an Inheritance: An Obligation or Privilege?

 

13 Feb

Expenses Deducted from Estate Trustee Compensation

Ian Hull Estate & Trust, Estate Planning, Executors and Trustees, General Interest, Passing of Accounts, Uncategorized, Wills Tags: , , , , , , , 0 Comments

Pursuant to the testamentary document of a deceased, or the Trustee Act, an estate trustee may take compensation. We have previously blogged on the calculation of estate trustee compensation.

However, in calculating compensation, there are certain expenses that will be deducted from the compensation to which an estate trustee would otherwise be entitled. As a general rule, expenses paid to a third party for tasks that are properly a part of the main duties and expected expertise of the estate trustee (i.e. “executor’s work”) will be deducted from compensation.

Tasks that are Generally Deducted from  Compensation

Generally, the determination of whether the amount will be deducted will depend on the complexity of the task and the circumstances of the particular estate.

If an estate trustee delegates any of his or her general duties to professionals, it is usually a personal expense for which he or she will not be compensated. Examples of this may include preparing the estate tax return, investing the estate assets, and preparing accounts.

Maintaining proper accounts is the primary duty of a trustee and the preparation of  accounts has generally been deducted from estate trustee compensation. If an estate trustee acted improperly, the fees to have accounts prepared will be deducted. While accounts are specialized and the argument has been made that an estate trustee may not have the requisite knowledge to prepare proper accounts, the preparation is still excluded from estate trustee compensation.

An estate trustee is not entitled to be compensated for legal fees paid for their own personal benefit; however, the case of Geffen v Goodman, 1991 2 SCR 353, established that an individual may be compensated for any legal fees incurred to defend the interests of the estate.

If an estate trustee’s actions resulted in a loss to the estate through mismanagement of the estate assets, the amount will likely be deducted from compensation. An example of mismanagement is if the estate trustee fails to prudently invest the estate assets.

Tasks that are Generally Not Deducted from Compensated

In Young Estate, 2012 ONSC 343, the court found that investment management was beyond the skill of an estate trustee, and it was proper to retain and pay private investment counsel out of the assets of the estate. An investment or financial manager may be necessary to hire and pay through estate assets if the expertise is reasonably outside the expertise of the average estate trustee.

An estate trustee can also hire consultants, investment managers, property managers or operating managers if an estate has a corporation as an asset, and can pay their fees out of the estate if it would not be reasonable to expect an estate trustee to have reasonable knowledge of the topic.

In summary, it bears repeating that whether an expense is deducted from compensation will depend on the particular circumstances of the estate and the particular expertise of an estate trustee.

Thanks for reading,

Ian M. Hull

Other Articles You May Be Interested In

Executor and Trustee Compensation

Taxation of Trustee Compensation

When Does an Attorney for Property Lose the Right to Claim Compensation?

09 Feb

Dividing Your Estate Equally

Hull & Hull LLP Estate & Trust, Estate Planning, General Interest, Litigation, Uncategorized, Wills Tags: , , , , , , , , , , 0 Comments

It is often the case that a testator may wish to make a significant inter vivos gift to one or more of their children. He or she may intend that such a gift is to be taken as either an advancement or in addition to a later inheritance. If, in preparing a Will and/or estate plan for a testator, a solicitor becomes aware of prior inter vivos gifts to the testator’s children, the solicitor should inquire further into the testator’s intention in this regard in the context of the estate plan.

Sometimes the dynamics in a family are such that any inequality as between siblings can become a serious issue, potentially leading to estate litigation following a testator’s death. If a testator is aware of this possibility, the testator should be alerted to the possible financial consequences of such a dispute. Of course, there is no way to guarantee that estate litigation will be avoided, but there are steps that can be taken in an estate plan to try to make the administration and distribution of an estate as smooth as possible.

One simple way of at least addressing the issue is to include a clear statement of the testator’s intentions in the Will, such as an indication that any gifts given during the testator’s lifetime are to be considered an advance, or should be given in addition to the child’s entitlement under the Will. Unfortunately, this will not necessarily avoid a fight amongst siblings if any of the children who have not received inter vivos gifts are not happy with the outcome, or if the child who did receive a gift expected to also receive an equal share of the parent’s estate.

An option for ensuring a truly equal distribution is a hotchpot clause. This is also an option if the testator does, in fact, intend that inter vivos gifts were to be given as an advancement on the child’s future inheritance, as is often the case.

A “hotchpot” clause will operate to take into account the value of gifts given during the testator’s lifetime in calculating the division of the estate, with any gifts previously given being subtracted from the portion given to the child in question. Effectively, the value of any substantial inter vivos gifts will be clawed back into the estate for the purpose of determining the value of the estate and the ultimate entitlement of the child or children who received such gifts. The end result of a hotchpot calculation will be that each child will receive from their parent, either inter vivos or from the estate, a share of exactly equal value. Hotchpot can be in relation to inter vivos gifts given, or to the forgiveness of outstanding loans given during the testator’s lifetime.

The concept of hotchpot is based on the equitable doctrine of ademption by advancement, also known as the presumption against double portions. This principle presumes that a parent intends equality between his children, such that if he or she leaves the residue to his or her children equally, but also made an inter vivos gift or advancement to one of the children, the rule will apply to bring the gift into hotchpot so that the intention of equality will not be altered.

Hotchpot, or ademption by advancement, also applies in the case of an intestacy. Section 25 of the Estates Administration Act, R.S.O. 1990, c. E.22, provides that if the child on an intestacy has been advanced assets, with such advancement being expressed by the deceased or acknowledged by the child in writing, the value of the advancement will be considered, for the purposes of s. 25, to be part of the estate to be distributed.

Accordingly, the default position when it comes to inter vivos gifts to a testator’s children will likely be equality, and as a consequence, some form of hotchpot calculation. Chances are that parents usually do intend to divide their estate equally amongst their children, so this rule will probably operate in line with the testator’s intentions in most cases. If a testator does wish to treat their children unequally, the estate plan must be carefully prepared with a view towards all possible consequences.

Thanks for reading,

Rebecca Rauws

Other blog posts you might enjoy:

A Reminder Regarding the Costs of Estate Litigation

Talking About Death with Family

Loan or Gift?

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