Tag: Estates Act
Last Friday, February 12, 2021, the Attorney General for Ontario announced changes to the Estates Act that raise the limit of a “small estate” to $150,000.
“Right now, the process to apply to manage an estate in Ontario is the same, whether the estate is worth $10,000 or $10,000,000. The process can be time-consuming and costly, deterring people from claiming smaller estates – and that isn’t right,” said a press release.
The new regulation, introduced in the Smarter and Stronger Justice Act, does not come into effect until April 1, 2021, but will make it easier to file a probate application for small estates and removes the requirement for a security bond in many small estate probate applications.
Among the changes to simplify the probate process for small estates are allowing for the completion and filing of a new simpler application form; removing requirements for certain supporting documents to be filed (for example, a commissioned affidavit of service); and more guidance for applicants on the process to file a probate application for a small estate.
Estate administration tax is still applicable to the portion of the small estate that is larger than $50,000, but these changes to procedure represent a positive step for grieving families who might otherwise leave a small estate unclaimed.
It’s worth noting that banks and other financial institutions often can’t take instructions from an estate trustee unless probate has been granted. By raising the limit for small estates, and simplifying the probate procedure, many estates will be settled sooner and with fewer burdens or costly hurdles for grieving families.
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Ian Hull and Daniel Enright
In June of this year, the Divisional Court of Ontario clarified that Section 10(1) of the Estates Act did not supersede the Courts of Justice Act where leave is required in order to appeal an interlocutory order.
In Luck v. Hudson Re: Estate of Albert Luck, the court however did grant leave, in order to immediately dismiss an appeal that raised issues not heard by the judge in the court of first instance and revealed ulterior concerns.
Steven Luck is the son of the late Albert Luck. Albert owned a house jointly with his wife Marylou Hudson. The relationship between Steven and Albert had deteriorated during Albert’s life and litigation ensued. Albert sued his son, who in turn filed a counterclaim- skidoos and cottage upgrades were all under dispute. Then Albert died, and the Will challenge began.
The motion judge, Justice Salmers, held that money from the sale of the house of Albert and Marylou be paid into court to the credit of the estate of Albert and to be paid out and distributed pursuant to the terms of the Will.
Subsection 10(1) of the Estates Act says that a party to a proceeding under that statute “may appeal to the Divisional Court from an order, determination or judgment if the value of the property affected” exceeds $200. Steven did not seek leave to appeal the interlocutory order and instead relied on 10(1) saying that he had an appeal as of right.
Since only this brief decision is reported, we do not know the underlying dispute which gave rise to Salmers, J’s interlocutory injunction, but the panel made two issues clear:
1: Leave is required to hear an appeal of interlocutory injunction
2: An appeal is not the appropriate venue to raise new issues, or air grievances.
The Courts of Justice Act is clear in section 133 that no appeal lies without leave from an order made on consent, or where the appeal is only to costs. The test for granting leave to appeal from an interlocutory order is an onerous one. If the panel feels the decision was well reasoned and the issues raised are not of general importance (Bell ExpressVu Ltd v Morgan (2008) O.J. No. 4758) leave will not be granted.
In this case, the court determined that Steven was seeking not only to appeal the injunction but that, “at its root the true purpose of that motion was to raise concerns as to the validity of the Will.” While Steven made no objection to the appointment of Trustees or to the Will in first instance, the court went on to say:
“What has become apparent is that Steven Luck wants to contest the Will in order to overturn the distribution of the funds held in court. He wishes those funds to remain available as security for the enforcement of a counterclaim he has made in response to an action commenced by his father (prior to his death) against Steven Luck.”
The court determined that Steven was actually seeking a Mareva injunction: A freezing of the estate assets, as security, in advance of any judgement made, potentially, in his favour.
The court found Steven had not met any of the prerequisites for such an order, and in fact, may have been barred by the Limitations Act, 2002, as previously determined by Justice Salmers.
In the end, as quickly as leave was granted, the appeal was dismissed. And Steven, now on the hook for a $25,000 cost award, was no better off.
A valuable caution to those considering the appeal route.
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Suzana Popovic-Montag and Daniel Enright
You would be forgiven for thinking that the entire process for an Application to Pass Accounts is set out in rule 74.18 of the Rules of Civil Procedure as the rule appears to provide a comprehensive step by step guide to how an Application to Pass Accounts is to proceed before the court. Although rule 74.18 likely contains the most cited to and fundamental steps and principles for how an Application to Pass Accounts is to proceed, you would be wise to remember and consider the applicable provisions of section 49 of the Estates Act as they may offer additional insights and tools for a passing of accounts beyond those found in the Rules of Civil Procedure.
Yesterday I blogged in part about section 49(4) of the Estates Act, and the general availability to convert more complex objections that are raised in the Notice of Objection into a separate triable issue thereby potentially opening up more typical litigation processes such as discovery and the calling of witnesses at the eventual hearing of the matter. Although the ability to direct certain complex objections to a separate trial is an important tool under section 49(4) of the Estates Act, it is not the only potential tool or thing to consider under section 49 of the Estates Act when involved in an Application to Pass Accounts.
These additional tools and considerations for an Application to Pass Accounts as found in section 49 of the Estates Act include section 49(3), which provides the court with the ability to consider any “misconduct, neglect, or default” on the part of the executor or trustee in administering the estate or trust within the Application to Pass Accounts itself, and may make any damages award against the executor or trustee for such misconduct within the Application to Pass Accounts itself without a separate proceeding being required. As a result, if, for example, a beneficiary should raise an allegation of negligence in the Notice of Objection against the executor for something such as a complaint that certain real property that was owned by the estate was sold undervalue, the court under section 49(3) of the Estates Act has the power to consider such an allegation and, if ultimately proven true, may order damages against the executor for any loss to the estate within the Application to Pass Accounts process itself. Without section 49(3) the beneficiary may otherwise have been required to commence a new and separate Action against the executor to advance these claims and/or be awarded damages.
Section 49 also contains answers to numerous procedural questions which may come up in an Application to Pass Accounts which otherwise are not mentioned in the Rules of Civil Procedure, including section 49(9) which provides what the executor is to do when an individual has died intestate and you are unable to locate any next of kin to serve, and section 49(10) which provides the court with the ability to appoint an expert to review and opine on the accounts on behalf of the court when the accounts are particularly complex.
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The Application to Pass Accounts serves an important function in the administration of estates and trusts, providing the beneficiaries with the ability to audit the administration of the estate or trust and raise any concerns through their Notice of Objection.
The procedure that is followed for the Application to Pass Accounts is somewhat distinct from any other court process, with the process being governed by rule 74.18 of the Rules of Civil Procedure. These procedural steps include the filing of the “Notice of Objection” and the “Reply” to the Notice of Objection, processes and documents which are distinct to the Application to Pass Accounts. Although the Application to Pass Accounts process differs in certain ways from a more traditional Application, at its core the Application to Pass Accounts is still an “Application” and not an “Action”, with the process designed to be more summary in process as compared to the typical Action.
I have previously blogged about the procedural differences between an “Application” and an “Action”, and how things like Discovery and Affidavits of Documents, as well as calling witnesses to give oral evidence, are generally not available in an Application. The same generally holds true for an Application to Pass Accounts, with there generally being no Discovery process or witnesses called at the eventual hearing for the passing of accounts, with the summary process designed to be adjudicated on the paper record of the documents contemplated under rule 74.18.
Although the simplified and summary process intended for the Application to Pass Accounts may present many benefits to the parties, including allowing the beneficiaries to pose questions and objections to the trustee without having to resort to potentially prolonged and expensive litigation as provided in a typical Action, it could present some challenges if the claims that are being advanced are complex or seek significant damages as the process may not allow for the full record to be adequately explored.
If the claims or issues which are being advanced in an Application to Pass Accounts are complex, such as for example claims that the trustee was negligent or committed a breach of trust, the summary process designed for the typical Application to Pass Accounts may not provide the depth of procedural process that the claims may deserve. Under such circumstances the parties may seek to direct and/or convert the complex objections into a separate triable issue, thereby potentially opening up the procedural processes more typically reserved for an “Action” such as Discovery or the calling of witnesses to the issue.
The process by which certain objections are directed and/or converted into a separate “triable issue” is governed by section 49(4) of the Estates Act, which provides:
“The judge may order the trial of an issue of any complaint or claim under subsection (3), and in such case the judge shall make all necessary directions as to pleadings, production of documents, discovery and otherwise in connection with the issue.”
Under section 49(4) of the Estates Act the court may direct any objection which fits under section 48(3) of the Estates Act, which includes allegations of breach of trust, to be separately tried before the court, with section 49(4) noting that the judge shall make necessary directions regarding pleadings, Discovery, and the production of documents for the objection.
If an individual wishes to direct an objection to be tried under section 49(4) of the Estates Act such an intention should be raised at the early stages of the Application to Pass Accounts, with an Order being sought which would specifically direct the objection(s) in question to be tried by way of Action. To the extent that such an Order cannot be obtained on consent a Motion may be brought regarding the issue, with the court also being asked to provide direction regarding the procedures to be followed for the triable issue.
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It appears that the Ontario government is taking action to make it easier and more affordable for executors of modest estates to access the courts.
Where the value of an estate is relatively small, the cost of obtaining a Certificate of Appointment (otherwise known as “probate”) can be perceived as too expensive. As a result, an executor (“estate trustee”) of a small estate often administers the estate without the protection of probate. In some cases, people choose not to administer a small estate at all and abandon the assets altogether.
Foregoing probate may lead to roadblocks when administering an estate. Third parties (like banks and persons buying the deceased’s real or personal property) will often require that the estate trustee obtain a Certificate. Probate reassures these third parties of the estate trustee’s authority and protects third parties from liability, as it verifies that the person they are dealing with is authorized to deal with the estate’s assets.
In the past, we have blogged about the Law Commission of Ontario’s efforts on this issue, including the release of a questionnaire to Ontarians who have administered what they consider small estates.
It now looks like the provincial government is looking to address the issue as well. Attorney General Doug Downey recently introduced the Bill 161, Smarter and Stronger Justice Act. If passed, the Act is intended to improve how court processes are administered to make life easier for Ontarians.
Notably, one of the proposed amendments includes allowing for a simplified procedure to make it less costly to administer estates of a modest value.
Right now, the probate process for all estates in Ontario is the same, no matter the size of the estate.
The Smarter and Stronger Justice Act would make amendments to Ontario’s Estates Act to exempt probate applicants from the requirement to post a bond for small estates in certain cases.
Other proposed changes to the Estates Act include safeguards to protect minors and vulnerable people who have an interest in an estate, and to increase efficiency by allowing local court registrars to perform the required estate court records searches, rather than a central court registrar.
It will be interesting to see if the proposed changes will be passed, and how they may encourage more people to apply for probate and administer an estate of lower value.
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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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