Tag: Estates Act
The requirement to post a bond can be found in section 35 of the Estates Act. An Estate Trustee will be required to obtain an administration bond in instances including where: the deceased passed away without a will; the will does not name the applicant seeking to be appointed; or, the Estate Trustee resides outside of Ontario.
The amount of the bond is to be double the sworn value of the estate. However, practice has developed (see D’Angelo Estate) such that the size of the bond has been reduced to the sworn value of the estate.
While section 36(1) of the Estates Act sets out specific instances where security is not required, it is section 37(2) which gives the court the general power to reduce the amount of the bond or dispense with it altogether. In the helpful decision of Henderson (Re), the court indicates that the applicant Estate Trustee who seeks an order dispensing with the requirement to post a bond, should file affidavit evidence in support, containing the following:
- The identity of all beneficiaries of the estate;
- The identity of any beneficiary of the estate who is a minor or incapable person;
- The value of the interest of any minor or incapable beneficiary in the estate;
- Executed consents from all beneficiaries who are sui juris to the appointment of the applicant as estate trustee and to an order dispensing with an administration bond should be attached as exhibits to the affidavit. If consents cannot be obtained from all the beneficiaries, the applicant must explain how he or she intends to protect the interests of those beneficiaries by way of posting security or otherwise;
- The last occupation of the deceased;
- Evidence as to whether all the debts of the deceased have been paid, including any obligations under support agreements or orders;
- Evidence as to whether the deceased operated a business at the time of death and, if so, whether any debts of that business have been or may be claimed against the estate, and a description of each debt and its amount;
- If all the debts of the estate have not been paid, evidence of the value of the assets of the estate, the particulars of each debt – amount and name of creditor – and an explanation of what arrangements have been made with those creditors and what security the applicant proposes to put in place in order to protect those creditors.
Applicants should make sure to address each of these factors when applying to dispense with an administration bond.
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The death of the Queen of Soul, Aretha Franklin, on August 16 sent reverberations through Motown and the music industry as a whole. However, equally as shocking to estates law practitioners is the fact that Franklin died intestate, that is, without having executed a valid Last Will and Testament.
Reports have emerged that Franklin died leaving an estate valued at approximately US$80 million. Notwithstanding the insistence of her longtime lawyer to take proper estate planning steps, Franklin’s estate will now likely be distributed in accordance with Michigan intestacy laws rather than in accordance with her wishes. As Franklin died leaving four children and no surviving spouse, a cursory review of applicable authorities in Michigan suggests her estate will be distributed equally amongst her children, as would be the case under Ontario intestate succession laws.
With that said, the fact that Franklin died intestate means that the courts will now be tasked with the appointment of a personal representative to consolidate and distribute the assets of her estate and attend to the payment of any liabilities. In Ontario, where an individual dies intestate, the court is empowered to appoint an Estate Trustee without a Will pursuant to section 29(1) of the Estates Act. While the appointee is entitled to seek professional assistance from lawyers, accountants, and certain other professionals to provide assistance, the administration of an estate, particularly one as large as Franklin’s, can be burdensome especially if the trustee is unsophisticated.
The size of Franklin’s estate will also likely lead to all manner of creditors coming out of the woodwork to stake their claim and create further headaches for the eventual executor. As was the case with other celebrities who died intestate, the chaos that will presumably result is likely to be well-publicized in the media, notwithstanding the wishes of Franklin’s close family. A well-crafted estate plan, including the selection of a willing and competent executor to administer the estate, may very well have allowed the administration of Franklin’s estate to remain largely private. If recent history is any indication, that is no longer likely to be the case.
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When concerns are raised about the conduct of an Attorney for Property, those raising the concerns often seek an Order compelling the Attorney for Property to commence an Application to Pass Accounts pursuant to section 42 of the Substitute Decisions Act. Should such an Application to Pass Accounts be commenced, the objecting party will often make allegations against the Attorney for Property that the incapable person and/or estate has suffered damages as a result of the Attorney for Property’s conduct, often seeking monetary damages against the Attorney for Property in relation to such objections.
An interesting question was recently posed to me in the context of such an Application to Pass Accounts for an Attorney for Property. Can the objecting party pursue damages against the Attorney for Property within the actual Application to Pass Accounts itself, or do they need to commence a separate claim against the Attorney for Property for the recovery of such damages?
The ability to pursue damages against an Estate Trustee within the Application to Pass Accounts process is well established by statute, with section 49(3) of the Estates Act providing:
“The judge, on passing any accounts under this section, has power to inquire into any complaint or claim by any person interested in the taking of the accounts of misconduct, neglect, or default on the part of the executor, administrator or trustee occasioning financial loss to the estate or trust fund, and the judge, on proof of such claim, may order the executor, administrator or trustee, to pay such sum by way of damages or otherwise as the judge considers proper and just to the estate or trust fund, but any order made under this subsection is subject to appeal.” [emphasis added]
Section 49(3) of the Estates Act makes it clear that a separate claim against an Estate Trustee is not necessary to pursue damages for breach of trust when an Application to Pass Accounts has been commenced, and that the Judge may order damages against the Estate Trustee within the actual Application to Pass Accounts itself. Perhaps importantly however, the Estates Act appears to suggest that section 49 only applies to a passing of accounts for an “executor, administrator or trustee under a will“, making no reference to an Attorney for Property. Sections 42(7) and 42(8) of the Substitute Decisions Act also set out the “powers of the court” in an Application to Pass Accounts for an Attorney for Property, with such provisions notably containing no reference to the ability to order damages against the Attorney for Property for any wrongdoing.
As there appears to be no statutory equivalent to section 49(3) of the Estates Act which specifically contemplates that it applies to Attorneys for Property, and the ability to pursue damages within the Application to Pass Accounts itself in other circumstances appears to be derived from statute, the question of whether there is a “legislative gap” as it relates to the ability to pursue damages against an Attorney for Property within an Application to Pass Accounts can at least appear to be raised. If such a “legislative gap” does exist, would this mean that a separate claim would have to be commenced by the objector to pursue such damages even when an Application to Pass Accounts was currently before the court?
When I have raised the question to other estate practitioners, some have suggested that while there may be no statutory authority to order such damages against the Attorney for Property within the Application to Pass Accounts, the court may have inherent jurisdiction to order such damages by way of a “surcharge order” in the Application to Pass Accounts. Some have also suggested that as section 42(6) of the Substitute Decisions Act contemplates that the procedure to be utilized on passing an Attorney’s accounts is to be the same as that as an executor’s accounts, that this should be read as evidence to show that section 49(3) of the Estates Act would apply to the passing of an Attorney for Property’s accounts. In response to this, I would suggest that it is at least questionable if section 49(3) of the Estates Act is “procedural” in nature, and, even if it is found to be procedural, whether the “powers of the court” provisions of sections 42(7) and 42(8) of the Substitute Decisions Act, which notably does not include the power to award damages against the Attorney for Property for wrongdoing, would trump section 49(3) of the Estates Act in any event.
I am aware of no decision which specifically addresses the issue of whether there is a “legislative gap” when it comes to whether damages can be sought against an Attorney for Property within the Application to Pass Accounts itself. While the issue may simply be academic at this time, it is not unforeseeable that someone could attempt to argue that an objector cannot seek damages against the Attorney for Property within the Application to Pass Accounts itself, and that a separate claim is required. If such an argument is successfully raised, and the length of time between the alleged wrong and the separate claim being commenced was such that the limitation period may have expired, it is not unforeseeable that the Attorney for Property may attempt to argue that the separate claim must now be dismissed as a result of the expiry of the limitation period.
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You are the Estate Trustee of an estate in which the testator left a substantial portion of the residue to certain specifically named charities. The charities who are named as beneficiaries are well established large charitable organizations whom you have corresponded with directly. Such charities have retained counsel to represent them concerning their interests in the estate, and such counsel have in turn requested that you commence an Application to Pass Accounts regarding your administration of the estate.
In preparing the Application to Pass Accounts you turn your mind to who you should serve with the Application. Rule 74.18(3) of the Rules of Civil Procedure provides that an Application to Pass Accounts shall be served on “each person who has a contingent or vested interest in the estate“.
Although you are aware of the general supervisory role that the Office of the Public Guardian and Trustee (the “PGT”) has over charities in the Province of Ontario, as the charities in this instance are well established and represented by counsel, you question whether you need to serve the PGT in addition to the charities with the Application to Pass Accounts. It is, after all, the charities themselves who have a “contingent or vested interest in the estate“, and as the PGT and the charities would be representing the same financial interest you question whether it is necessary.
The requirement to serve the PGT with any Application to Pass Accounts where a charitable bequest is involved is established by section 49(8) of the Estates Act, which provides:
“Where by the terms of a will or other instrument in writing under which such an executor, administrator or trustee acts, real or personal property or any right or interest therein, or proceeds therefrom have heretofore been given, or are hereafter to be vested in any person, executor, administrator or trustee for any religious, educational, charitable or other purpose, or are to be applied by them to or for any such purpose, notice of taking the accounts shall be served upon the Public Guardian and Trustee.” [emphasis added]
The requirement to serve the PGT with any Application to Pass Accounts when a charitable bequest is involved as established by section 49(8) of the Estates Act exists in addition to the general requirement to serve all individuals with a “contingent or vested interest” as established by rule 74.18(3). To this respect, when a Will leaves a bequest to a specifically named charity, the Application to Pass Accounts must be served upon the specifically named charity as well as the PGT. Although from a practical standpoint the PGT’s active participation in an Application to Pass Accounts where a charity is representing itself is unlikely, with the PGT deferring to the charity to protect their own interest, the service requirements remain nonetheless, and both entities could in theory participate in the Application to Pass Accounts, and both could in theory file separate Notices of Objection to Accounts.
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The commencement of litigation requires a Plaintiff to have standing to sue; and Probate (or a Certificate of Appointment of Estate Trustee With (or Without) a Will) is required if an Estate Trustee wishes to obtain Judgment against a Defendant.
While an action can technically be commenced without probate (see the remedial provisions of Rule 9 of the Rules of Civil Procedure discussed below), the Court will not grant Judgment in favour of an Estate unless the Estate Trustee has been granted authority to administer the Estate.
The rationale for this requirement is nicely explained by Professor Oosterhoof (in Oosterhoof on Wills and Succession Chapter 2):
The grant of probate is only evidence (really, the only evidence) which a court will recognize that a person has authority to administer the assets of the deceased. For this reason, while an executor can do many acts of office before obtaining a grant he or she cannot obtain judgment before that time, although he or she can commence an action. Similarly, no action can be maintained against a named executor unless he or she has obtained a grant of probate.
This position was supported by the Ontario Court of Appeal in Re Eurig Estate (appealed on other grounds to the Supreme Court of Canada) where Morden A.C.J.O. stated:
Further, apart from the general legal duty to administer the estate promptly and efficiently, which almost invariably requires the executor to obtain probate, the law imposes the requirement that an executor must have probate to prove his or her title when an estate matter is before the court. Letters probate are the only evidence of an executor’s title which a court will receive (see Hull and Hull, Macdonnell, Sheard and Hull, Probate Practice, 4th ed. (1996) at pp.185 and 188), even in a case where the defendant is willing to concede that the executor has title without evidence of probate: Re Crowhurst Park; Sims-Hilditch v. Simmons,  1 W.L.R. 583 (Ch), (at p. 792)
Moreover, the Estates Act ensures the estate trustees named in a Certificate of Appointment of Estate Trustee have sole authority in respect of the estate:
- After a grant of administration, no person, other than the administrator or executor, has power to sue or prosecute any action or otherwise act as executor of the deceased as to the property comprised in or affected by such grant of administration until such administration has been recalled or revoked.
In the event that the Certificate of Appointment of Estate Trustee is obtained subsequent to the commencement of the Action, the Rules of Civil Procedure, contain a remedial provision:
9.03 (1) Where a proceeding is commenced by or against a person as executor or administrator before a grant of probate or administration has been made and the person subsequently receives a grant of probate or administration, the proceeding shall be deemed to have been properly constituted from its commencement.
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Where an estate trustee becomes aware of a potential claim against the estate, but no claim has yet been commenced, it can be difficult to decide how to proceed. Sections 44 and 45 of the Estates Act contain a seldom used procedure that may be of some assistance to estate trustees in this situation.
Under these sections, where someone makes a claim or demand against an estate, or where the estate trustee has notice of a claim or demand, the estate trustee can serve a Notice of Contestation on the claimant. The effect of this is to accelerate the claimant’s limitation period. The Act provides that, upon being served with a Notice of Contestation, the claimant has 30 days to apply to the Superior Court for an order allowing the claim, after which the claimant is deemed to have abandoned the claim and it is forever barred.
The Court has jurisdiction to extend the 30 day window by three months.
While potentially useful, there are some important limits on the use of this procedure. A 2008 decision of the Ontario Court of Appeal, Omicuolo Estate v. Pasco, explored the meaning of “claim or demand” under these sections. David Smith has previously blogged about this case as well. Upon a thorough review of relevant case law, the Court held that this provision refers to a claim or demand against the estate by a creditor for payment of a money demand. The Court held that a claim for dependant’s support under the Succession Law Reform Act was in the nature of declaratory relief, and therefore fell outside of the meaning of “claim or demand”, and thus sections 44 and 45 could not be used to accelerate a support claim.
In its review of the case law and relevant texts, a number of other types of claims were discussed. A claim to enforce a gift mortis causa (or deathbed gift) was held to fall outside the scope of these sections. These sections have been found not to apply to a claim for a judicial sale or foreclosure in the context of a mortgage. They also cannot be used to dispute a beneficiary’s claim to a legacy.
Where, however, there is a potential claim against an estate that does fall within these sections, they can be a useful way of moving things along.
Section 10(1) of the Estates Act provides that appeals in proceedings under the Act are to be made to the Divisional Court. This is a procedural holdover from the old days before the Surrogate Court was merged with the Superior Court of Justice (or more perhaps more accurately, acquired by). The Surrogate Court was an inferior court, and therefore appeals had to be made to the Divisional Court.
By section 10(2), any person beneficially interested in the estate may appeal, even if the personal representative does not. This provision resolves potential technical complications associated with standing. It is also required from a practical perspective since in many cases, the personal representative is also a litigant personally, and is largely and acceptably silent in his or her capacity as personal representative.
Note that this provision does not preclude appealing to the Court of Appeal, which by section 6(2) of the Courts of Justice Act has jurisdiction to hear and determine an appeal that lies to the Divisional Court, if an appeal in the same proceeding lies to and is taken to the Court of Appeal.
Have a great day,
Christopher M.B. Graham – Click here for more information on Chris Graham.
Testamentary instruments, that is.
A common burr among beneficiaries is that the estate trustee often resists disclosing the deceased’s Will or other testamentary instruments. Without reviewing the entirety of the testamentary instruments, beneficiaries may never feel certain of the extent of their interest in an estate. This strategy tends to add fuel to pre-existing distrust among the parties.
Fortunately, there is a simple solution. By section 9(1) of the Estates Act, any person may be forced to produce any testamentary instrument, and by section 9(2) any person with knowledge of a purported testamentary instrument can be forced to answer questions about the document:
9. (1) Whether a suit or other proceeding is or is not pending in the court with respect to a probate or administration, the Superior Court of Justice may, on motion or otherwise in a summary way, order any person to produce and bring before the registrar, or otherwise as the court may direct, any paper or writing being or purporting to be testamentary that is shown to be in the possession or under the control of such person.
(2) If it is not shown that such paper or writing is in the possession or under the control of such person, but it appears that there are reasonable grounds for believing that he or she has knowledge of such paper or writing, the court may direct such person to attend for the purpose of being examined in open court or before the registrar or such person as the court may direct, or upon interrogatories respecting the same, and to produce and bring in such paper or writing, and such person is subject to the like process in case of default in not attending or in not answering questions or interrogatories or not bringing in such paper or writing, as the person would have been subject to if he or she had been a party to a suit in the court and had made such default, and the costs of such motion or other proceeding are in the discretion of the court.
With these provisions, motions are often not necessary. A simple letter bringing the provision to the attention of the estate trustee along with a polite request to produce the document(s) is all that should be required. By the same token, estate trustees (or anyone else with possession or knowledge of documents purporting to be testamentary) have no justification for secrecy. Happily, this provision creates a powerful incentive for information-sharing, which is often a prerequisite to ending or preventing an estates dispute.
Have a great day,
Christopher M.B. Graham – Click here for more information on Chris Graham.
In Ontario, the Divisional Court (by amending legislation) now has jurisdiction to hear an appeal made from a final judgment of the Ontario Superior Court of Justice for an amount of not more than $50,000 (previously $25,000), exclusive of costs. Any award over that amount is appealed to the Court of Appeal. Seems clear enough.
However, the jurisdictional issue is muddied by the provisions of the Estates Act, section 10 of which provides that, for any party taking part in a proceeding under that Act, an appeal lies to the Divisional Court. But what if the value of the amount in dispute exceeds $50,000?
Does this cause the Divisional Court to lose jurisdiction? The answer would appear to be “no.” The Court of Appeal, in Re Sinicropi Estate  O.J. No. 838, by agreement of the parties, transferred an appeal from an order on a passing of accounts application to the Divisional Court in which the amount in dispute was over $60,000.00 (as disclosed in the Divisional Court decision: see  O.J. No. 4493).
However, a nice question arises when an appeal is made from a judgment on a contested passing of accounts of an attorney under power of attorney for property. Is the appeal properly made to the Divisional Court? The Estates Act (s. 49(1)) specifically contemplates the passing of accounts by a “guardian.”
It is arguable that, as is the case under s.38 of the Substitute Decisions Act, (“SDA”) this reference to guardian (assuming it means “court appointed guardian”) should be read to include an attorney for property. Of course the references in the SDA significantly postdate the Estates Act, inevitably giving rise to some question as to what was the intention of the legislature when the statute was proclaimed (or whether such a procedural nicety was even considered).
Have a great weekend,