Trends seem obvious in hindsight – but anticipating them before others has made many people very wealthy. They’re the ones who bought Apple shares for $1 in 2003 and watched the price exceed $200 in 2018. Or the ones who bought Blockbuster Video stock in the 1980s and sold it at its peak in 2002 before its 10-year decline into Netflix-induced irrelevance.
We’ve seen this firsthand, having been involved in the estates of many who “got in early”, moved ahead of the curve and capitalized.
While societal norms and consumer habits are always changing, not every change is one you can cash in on. For example, manual razor sales from stores fell by 5.1% year-over-year – their third straight year of decline. A key reason behind the decline is a simple one: people are shaving less.
Razor manufacturer Gillette says that men shaved an average of 3.2 times per week, compared to 3.7 times per week a decade ago. Stubble is now an acceptable look and more men are growing out their beards. CNN wrote about it recently.
While this is certainly a trend, razors continue to be sold and shaving product companies are adapting (with strategies such as lower prices and a move into beard grooming products). It’s likely not a game-changer.
Breakfast cereals are the same. Sales are down 11% over the past five years as people look for more natural, healthy alternatives – or the takeout convenience of breakfast sandwiches. But take one look down the grocery aisle and you’ll see that cereals are a long way from becoming the Blockbuster Video of food.
So, what change will be monumental?
Where should we be looking to find the next “big thing”, like Amazon and Uber? Like you, I don’t have a crystal ball, but here are my two picks for big changes that could disrupt our world and create opportunities.
- Automobiles: More than 30,000 people continue to die each year in U.S. auto accidents (Canada is typically about 10% of these numbers, so about the same rate). People will look back at the 20th and 21st centuries as barbaric for the number of lives lost crashing metal into metal. We know that driverless cars (and virtually risk-free driving) are coming, but what else will change (auto insurance, in-car entertainment options, ownership models, a declining need for personal injury lawyers)? There could be many related growth trends.
- Farming and meat: Vegetarianism and veganism are growing – along with our ability to manufacture artificial meat. That combination may be enough to turn the traditional food industry on its head. The trick is to identify the companies that could potentially dominate if the trend to less real meat continues.
There are many other possibilities of course. Have you spotted any? Are you moving ahead of the curve?
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As estate litigators, we’ve seen a lot of bad estates and bad estate situations. The good news is because we know the bad, we can advise clients on how to avoid it and make their estate a great one. No uncertainty, no delays, no conflicts, no nasty tax surprises.
If you want to make your estate a great one, here are five essential elements that can make it happen.
- You’ve provided a clear path to the documentation
Ideally, your executor needs the original copy of your will – as do courts to ensure a smooth probate process. So, don’t make your will (and any other estate documents) hard to locate. Whether it’s stored at your lawyer’s office, or registered with the court, or stored in a filing cabinet at home, make sure that you and your loved ones remember where your will is and know how to access it. We discuss this issue in more detail here.
- Your estate assets are easy to identify
Don’t assume your family and your executor know what you own. Many of us scatter our assets and accounts more than we realize. Make a list of all bank and investment accounts, insurance policies, major assets, and any virtual assets of value and keep this list with your will or ensure your named executor has a copy.
- Your executor is trustworthy and can access the help they need
When choosing an executor, trust is essential as the person selected must be capable of acting impartially on behalf of your estate – regardless of their personal feelings about your estate and the beneficiaries.
While your executor doesn’t need to be an accountant or lawyer or investment advisor, they do need to be able to hire the expertise that your estate might require. In other words, they need to know what they don’t know, and have the common sense to seek out the tax, accounting, and legal expertise that may be needed.
This article provides a great “quick list” of things to consider when choosing an executor.
- Everyone knows what’s in your will – in advance
It is dangerous to assume that your intended beneficiaries know what is in your will and have no questions or concerns. Talking today about your intentions and your family members’ expectations lets you address any contentious issues while you’re alive – and avoid potential conflicts after you’re gone.
Even the most well-intentioned gifts – a charitable bequest, the china cabinet to a niece, the vintage hockey cards to a grandson – can lead to questions, hurt feelings and potential conflicts.
Don’t let it happen. Make sure that everyone who might be touched by your will at death knows exactly what’s in it.
- Tax planning in place – if needed
You’re deemed to have disposed of your capital assets at their fair market value when you die. This means your estate is liable for capital gains taxes on assets that have increased in value during your lifetime. Your executors may be forced to sell estate assets to pay for the tax liability – and a forced sale may mean the assets are sold for less than their fair value.
There are many strategies available to help cover an estate’s tax liability, from the use of trusts to the purchase of life insurance. Make sure you’ve considered whether tax planning is needed for your estate, and put a strategy in place if needed.
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The Estate of Irmgard Burgstaler (disability), 2018 ONSC 472, was a costs decision that arose from an application to pass attorney accounts. Erwin was named as the attorney for property for his mother, Irmgard. Erwin was ordered to pass his accounts and his siblings, Barbara and Peter, objected.
A four-day hearing took place. Erwin was self-represented and his accounts were not in court format pursuant to Rule 74.17 of the Rules of Civil Procedure. Extensive written submissions were also filed by both sides.
Erwin was found to have breached his fiduciary duty to Irmgard when $82,000.00 was taken from Irmgard and applied towards the purchase of a home in Erwin’s name. Erwin also took approximately $44,000.00 from his mother’s accounts to pay his legal fees in the proceeding at issue and the Court found that this expense was not for Irmgard’s benefit. Certain other expenses were ordered to be repay to Irmgard as well as the repayment of $5,000.00 from the sale of Irmgard’s trailer.
Given their success, the Objectors sought full indemnity on a blended basis from Erwin (15%) and the Estate (85%). In reviewing the jurisprudence on costs in estate matters, Justice Shaw found that this case fell within the public policy exemption for due administration of estates and allowed the Objectors’ claim for full indemnity.
That said, Justice Shaw disagreed with the Objectors’ proposed 15/85 split on the basis of the “losers pay” principle in general civil costs. Justice Shaw ordered Erwin to pay the Objectors’ costs on a partial indemnity scale while the Estate was ordered pay the full remaining balance. In this case, partial indemnity appears to be close to 70% of the total claimed based on the fixed amounts that were ordered.
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A testator provided in her will that a share of the residue of her estate was to go to three of the testator’s brothers. If any one of them predeceased the testator, their share would go to two nieces of the deceased.
The testator was predeceased by two of her brothers. A third could not be located. What was the estate trustee to do?
This question was addressed in the July 27, 2018 decision of Steele v. Smith, 2018 ONSC 4601 (CanLII). There, the Public Guardian and Trustee suggested that the share payable to the missing brother be paid into court, and that further efforts be taken to locate him. The estate trustee, on the other hand, asked the court for a “Benjamin Order”, allowing him to distribute the estate as if the missing brother had predeceased the testator.
The court reviewed the history of the Benjamin Order. The Order derives from the case of Neville v. Benjamin,  1 Ch. 723. There, the deceased was survived by twelve children. A thirteenth disappeared while on vacation, and after it was suspected that he had stolen money from his employer. The court held that the burden was on the missing person’s administrator (or those claiming through him) to prove that the missing person had survived the deceased. In Benjamin, the burden was not met, and the estate was allowed to be distributed as if the missing person had predeceased.
Benjamin Orders are rare, and not easy to obtain. The court will consider the “sufficiency” of the inquiries made by the estate trustee. In considering this, the court will look for information about:
- How much time has elapsed since the death of the testator?
- What specific steps have been taken to locate the missing person, and over what period of time?
- Who has made the inquiries? Are they appropriately qualified?
- Do the inquiries take into account consideration of the possible location of the missing person?
- Are further inquiries likely to produce any more information?
- What is the amount at state?
In Steele v. Smith, the estate trustee is said to have gone to “extensive lengths” to determine the missing brother’s location in the eighteen months since the testator’s death. The court held that the estate trustee had exhausted all available avenues of inquiry, and that there was no evidence that further efforts would yield positive results. Further, there was no reason why the missing brother would choose not to be found. Unfortunately, the value of the share of the residue in issue is not disclosed in the decision.
The court ordered that the estate trustee was at liberty to distribute the estate as if the missing brother did not survive the testator.
One of the benefits of a Benjamin Order is that it gives protection to the estate trustee. If the missing brother later appeared, he would have no claim as against the estate trustee. However, he may have a claim as against the beneficiaries who benefitted from the Order.
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The Ontario Court of Appeal recently considered the issue of whether the litigation files of the Office of the Children’s Lawyer are subject to a freedom of information access request in Ontario (Children’s Lawyer) v. Ontario (Information and Privacy Commissioner), 2018 ONCA 599. This appeal arose from a father’s request for the production of the Children’s Lawyers’ records. The Children’s Lawyer acted for the father’s children in the course of a custody and access dispute. Accordingly, a portion of the Children’s Lawyer’s records were privileged.
Justice Bennotto, in writing for a unanimous panel, found that the issue turned on whether the records are “in the custody or under the control” of the Ministry of the Attorney General for Ontario (“MAG“) for the purposes of the Freedom of Information and Protection of Privacy Act, R.S.O. 1990, c. F. 31.
The answer was no.
The Children’s Lawyer’s records are not in the custody or under the control of MAG because she operates separately and distinctly from MAG and,
“ [she] is an independent statutory office holder appointed by Cabinet through the Lieutenant Governor. She derives her independent powers, duties and responsibilities through statute, common law and orders of the court.
 To allow a disgruntled parent to obtain confidential records belonging to the child would undermine the Children’s Lawyer’s promise of confidentiality, inhibit the information she could obtain and sabotage her in the exercise of her duties. This would, in turn, impact proceedings before the court by depriving it of the child’s voice and cause damage to the child who would no longer be meaningfully represented. Finally, disclosure to a parent could cause further trauma and stress to the child, who may have divided loyalties, exposing the child to retribution and making the child the problem in the litigation.”
For those practising in the estates and trusts context, it is important to note that the role of the Children’s Lawyer is different in family law.
In civil matters that implicate a minor’s financial interest in property, the Children’s Lawyer acts as the minor’s litigation guardian and she is represented by the lawyers of her choice. In custody and access disputes, the Children’s Lawyer acts, at the request of the court, as the minor’s lawyer.
Bonus answer: the current Children’s Lawyer is Marian Jacko.
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Alberta recently passed legislation which will allow for the use of Henson trusts in estate planning in the province. Although Henson trusts are commonly used in Ontario, prior to this new legislation, the law in Alberta provided that the value of an individual’s interest in a trust was to be included in calculating his or her assets for the purpose of determining eligibility under Alberta’s Assured Income for the Severely Handicapped (“AISH”) program, thus preventing the effective use of Henson trusts.
A Henson trust is a type of trust often used here in Ontario in situations where a beneficiary is a recipient of The Ontario Disability Support Program (“ODSP”). An individual’s eligibility for ODSP is determined based on his or her income and assets. The Henson trust has emerged as a strategy to provide for a disabled beneficiary without compromising his or her eligibility to receive ODSP benefits.
The regulations to the Ontario Disability Support Program Act, 1997, S.O. 1997, c. 25, Sched. B provide that if a person has a beneficial interest in a trust that is derived from an inheritance or proceeds of a life insurance policy, provided that it does not exceed $100,000.00, this interest will not be included in calculating his or her assets. On the other hand, a Henson trust is not restricted as to size, as it is set up to be fully discretionary, such that the beneficiary does not have a vested interest in the trust.
A Henson trust would usually be set up such that the beneficiary who is a recipient of ODSP is the subject of the trustee’s absolute discretion to make distributions to him or her. Upon the beneficiary’s death, there will typically be a gift-over to a person or entity other than the disabled beneficiary. As the disabled beneficiary is not entitled to any assets from the trust (given the trustee’s absolute discretion), it is not considered to be an asset of his or hers. The trustee of a Henson trust should still be mindful in making discretionary distributions to the disabled beneficiary, so as not to exceed the maximum annual income receivable by them, and possibly risk disentitling the beneficiary to ODSP benefits.
As discussed in this article, Alberta recently passed An Act to Strengthen Financial Security for Persons with Disabilities (SA 2018, c 12), which provides that a person’s interest in a trust is not to be included in the calculation of that person’s assets for the purpose of AISH, and repeals the section of the regulations which previously allowed for the inclusion of a trust interest in this calculation. As noted in the article, this will now allow for the use of Henson trusts in Alberta, and provide more flexibility in estate planning where a disabled beneficiary is receiving government support.
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A motion to transfer an estate matter that was commenced in the Brantford Superior Court of Justice to the Toronto Estates List was recently considered in the Estate of Byung Sun Im, 2018 ONSC 2223.
The procedure to be followed in a Rule 13.1.02 motion to transfer is set out in the Consolidated Provincial Practice Direction (at Part III, B) when the request to transfer pertains to a proceeding in the Central East, Central West, Central South and Toronto Regions. Motions to transfer should be brought, in writing, to the court location which the moving party is seeking to transfer the matter. Therefore, if you are seeking to transfer a matter to the Toronto Estates List, then the written motion should be filed with the Toronto Estates List.
Given that the plaintiff (or applicant) has a prima facie right to select the venue of a proceeding (subject to any applicable statutory requirements), the onus is on the party that seeks a transfer to satisfy the test set out in Rule 13.1.02(2).
In this particular case, the action was predominately based on an estate trustee’s dealings with estate assets. The deceased, the estate trustee, the majority of the beneficiaries, and the main estate assets were located in Toronto. The one person in Brantford was the plaintiff.
However, various interim orders and smaller issues were dealt with in Brantford. Prior proceedings related to this Estate were also decided and disposed of in Brantford. Justice Firestone agreed that the location of the assets had little bearing on how the assets ought to be divided. He also noted that there was an absence of evidence related to the convenience of the witnesses in addition to the convenience and location of the parties themselves. The convenience of counsel is not a basis to order the transfer of a proceeding.
Ultimately, the moving party failed to satisfy the test set out in Rule 13.1.02(2):
“… the court may, on any party’s motion, make an order to transfer the proceeding to a county other than the one where it was commenced, if the court is satisfied,
(a) that it is likely that a fair hearing cannot be held in the county where the proceeding was commenced; or
(b) that a transfer is desirable in the interest of justice, having regard to,
(i) where a substantial part of the events or omissions that gave rise to the claim occurred,
(ii) where a substantial part of the damages were sustained,
(iii) where the subject-matter of the proceeding is or was located,
(iv) any local community’s interest in the subject-matter of the proceeding,
(v) the convenience of the parties, the witnesses and the court,
(vi) whether there are counterclaims, crossclaims, or third or subsequent party claims,
(vii) any advantages or disadvantages of a particular place with respect to securing the just, most expeditious and least expensive determination of the proceeding on its merits,
(viii) whether judges and court facilities are available at the other county, and
(ix) any other relevant matter. O. Reg. 14/04, s. 10.”
Thanks for reading! For those of you who are also interested in the Practice Directions for the Toronto Estates List, you may access them here.
The practice of injecting policy considerations into court decisions has long been a tenet of the Ontario judiciary. However, such considerations may arguably raise questions that go beyond the scope of the decision. Cotnam v Rousseau, 2018 ONSC 216, is one such case.
In Cotnam, the Court was tasked with determining whether a pre-retirement death benefit received by a surviving spouse was available to be clawed back into an Estate pursuant to section 72 of the Succession Law Reform Act (the “SLRA”). The Respondent took the position that section 48 of the Pension Benefits Act (the “PBA”) sheltered the death benefit from being clawed back given that she was the spouse of the Deceased. The Court disagreed and held that such benefits ought to be available for claw back in order to prevent irrational outcomes resulting from their exclusion.
In the context of the facts at play in Cotnam, the Court reasoned in favour of equity, in particular, to ensure a dependant disabled child of the Deceased was properly provided for. However, the Court’s reasons appear to gloss over a fundamental conflict between the SLRA and the PBA, a clash about which the estates bar might have appreciated some judicial commentary. Specifically, the Court held that the provisions of the SLRA ascribing pension death benefits as available to satisfy a claim of dependant’s relief ought to prevail over the PBA’s provisions sheltering them from claw back.
Section 114 of the PBA provides that, “[i]n the event of a conflict between this Act and any other Act […] [the PBA] prevails unless the other Act states that it is to prevail over [the PBA].” The SLRA, in contrast, is silent as to whether its provisions are to prevail over those of the PBA.
However, the Court’s reasons make no mention of the interplay between section 114 of the PBA and the equities of ensuring the dependant daughter in Cotnam was properly provided for. While we may opine on the fact that the outcome in Cotnam favours equity over rote statutory interpretation, the estates bar is left to grapple with the apparent inconsistency with the intention of the Ontario legislature, and whether it will affect similar decisions going forward. As of this date, no written decisions have yet interpreted Cotnam, nor has the decision been appealed. Accordingly, it may be some time before the impact of the decision, if any, is felt.
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It is with great pleasure to announce that myself, Ian Hull, and Lionel Tupman will be co-chairing a professional development program on Essential Evidence for Estate Litigators through the OBA.
The program has been created specifically for estate litigators and will run over three evenings on April 5, May 17, and June 6, 2018.
Details of the program can be found by clicking here.
This program is a must for anyone who litigates in the area of estates, wills, and trusts!
When is it appropriate to bring a motion in the Estates Court without notice? The answer requires consideration of both the statute and common law.
The starting point is Rule 74.15(1) of the Rules of Civil Procedure. Here, a person who has a financial interest in an estate is permitted to seek an order for assistance. Some of the more ‘popular’ orders for assistance include: requiring a person to accept/refuse an appointment as estate trustee; requiring an estate trustee to file with the court a statement of the nature and value of the estate assets at the date of death; and, requiring an estate trustee to pass accounts.
Subject to narrow exceptions, Rule 74.15(2) allows these motion to be made without notice (in latin, ex parte).
Notwithstanding this, the Court has not necessarily embraced ex-parte orders with open arms.
For instance, Corbett J. in Robert Half Canada Inc. v. Jeewan found that, before ordering an ex parte injunction, a party needed to demonstrate some element of ‘extraordinary urgency’.
Moreover, and specifically in relation to estates orders for assistance, Justice DM Brown in Ignagni Estate (Re), noted that orders for assistance are not mere administrative devices, and that the consequences of failing to abide by such an order is significant. He went on to say that, “[m]embers of the Estates Bar may regard the requirement to give notice of a motion for an order for assistance unless “extraordinary urgency” exists as imposing undue costs on the administration of the estate. Against that must be weighed the fundamental principle that a court should not issue an order against a person without affording that person an opportunity to explain the other side of the story. Many estate disputes arise in the context of strained family relationships, or out-and-out family battles. Courts should exercise great caution before granting an order that imposes obligations on one side in a family dispute. Unless some extraordinary urgency exists, prudence and the principles of natural justice require a moving party to give notice of the order requested so that the respondent enjoys the opportunity of placing the rest of the story before the court.”
Given this, although permissible, parties who intend to seek orders for assistance without notice, must ensure there is ‘extraordinary urgency’ in doing so.
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