Tag: Executors and Trustees
Testamentary freedom is a core tenet of estate planning in Ontario. In general, testators are at liberty to set up their estate plan to include or exclude whomever they wish. Where part or all of a testator’s estate plan fails as a result of an intestacy, Ontario’s Succession Law Reform Act (the “SLRA”) steps in to provide the parties who will benefit as a result. Occasionally, the principles of testamentary freedom and intention and the laws of intestacy intersect in peculiar ways. This intersection came to a head in the Eissmann v Kunz (2018 ONSC 3650) decision.
In Kunz, the testator, Siegfried Kunz, died leaving no fewer than four testamentary documents purporting to be wills, briefly summarized as follows:
- A will drawn in 1967, which divided Mr. Kunz’s estate between his wife and their daughter, Petra;
- A will drawn in 1982 in Mr. Kunz’s handwriting, which stated that the “beneficiary after [his] death is Petra”;
- A will drawn in 2000, again in Mr. Kunz’s handwriting, which purported to modify the 1967 will and listed a number of specific legacies to various beneficiaries. Mr. Kunz appears to have later written over the original bequests to increase the amount of each. Petra was once again listed as the sole residuary beneficiary; and
- A will drawn in 2009, also in Mr. Kunz’s handwriting, which provided that Petra would “not receive a single Euro of out [the] Estate.” In the margin of the 2009 will, Mr. Kunz expressly indicated that the 2009 will was to be an “amendment” to the 2000 will.
The Court was first tasked with determining which will was to govern. The Court concluded that the 2000 will was a valid holograph will, though noted that the subsequent handwritten amendments were of no force and effect as they did not comply with the formal requirements for valid alterations under the SLRA. The Court concluded that the 2009 will operated instead as a codicil to the 2000 will as it did not dispose of any property on its face and, therefore, could not function as a standalone will.
The interplay between the 2000 will and the 2009 codicil is such that a conflict arose with respect to the disposition of the residue of Mr. Kunz’s estate. The 2000 will names Petra as the sole residuary beneficiary. The 2009 will revokes Petra’s interest entirely. The 2009 codicil therefore created a partial intestacy with respect to the residue of Mr. Kunz’s estate, and the Court looked to the SLRA to determine who would inherit.
The hierarchy of beneficiaries on an intestacy is set out in Part II of the SLRA. Mr. Kunz died leaving no surviving spouse, and so the next intestate beneficiaries were to be his children, that is, Petra. In an ironic twist of fate, the Court concluded that Petra was solely entitled to all of the residue of Mr. Kunz’s estate, notwithstanding that he had intended to expressly disinherit her under the 2009 codicil. The Court declined to give effect to Mr. Kunz’s apparent intention to exclude Petra.
Simple estate planning steps, such as the appointment of an alternate beneficiary under the 2009 will, could have prevented this great irony. Ensure the effects of your testamentary dispositions are properly understood by taking time to review your will with a lawyer.
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Although rare, disputes over the final resting place of a deceased are not unheard of. Such a dispute was the subject matter of Mason v. Mason, a decision of the Court of Appeal of New Brunswick.
There, the deceased died at the age of 53. He was survived by his mother, and his wife of 13 months. At first, the relationship between the mother and the wife appeared to be harmonious. The mother wanted the son’s cremated remains buried next to his father, and the deceased’s wife agreed. Later, however, the wife had a change of heart, as she came to believe that her husband did not have a good relationship with his father. She asked the cemetery to agree to disinter the remains and have them buried in another cemetery. As the original plot was owned by the mother, the cemetery required the consent of the mother. The mother refused to consent.
The wife then applied for and obtained letters of administration. This would normally cloak her with the authority to dispose of the body. The wife then applied to court to exercise this right. The court refused to assist her.
The applications judge held that the administrator had the right to determine the proper burial or disposal of the remains. However, this right was limited to carrying out those actions. The applications judge concluded that the remains were properly dealt with, with the agreement of the mother and the wife. At the time, there was no administrator, and therefore the next of kin could determine the disposition of the body, which they did.
The wife argued that as administrator, she had an ongoing right to determine the burial place. Support for this proposition was found in the Saskatchewan case of Waldman v. Melville. There, the deceased’s sister wished to disinter the deceased, over the objection of the executor. The court held that “The rights of the executor continue after the burial of the body, otherwise it would be an empty right … and those who oppose the executor could disinter the body as soon as it was buried.”
The applications judge distinguished the Melville decision. The rights of an administrator appointed months after burial did not entitle the administrator to disrupt burial arrangements agreed to by the person in her capacity as spouse.
The Court of Appeal upheld the applications judge’s decision. They went on to hold that once the body was properly discharged, it could not be moved, under s. 15 of the Cemetery Corporations Act, without the written consent of the Medical Health Officer or the order of a judge. The Court of Appeal stated that the powers conferred on the court by s. 15 of the Cemetery Companies Act were discretionary in nature. A judge to whom an application is made under that section is required to consider and weigh all the circumstances and make the order he or she considers appropriate. In this case, the court found no valid reason for moving the body.
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When a person dies, loved ones generally attend to the burial and memorial preparations without any thought as to who this responsibility falls upon and who has ultimate decision-making power. Where a dispute arises as to the how to say one’s final goodbyes, however, the courts are ready to provide an answer.
Courts have long held that the right to determine how a body is disposed of falls upon the estate trustee of the deceased’s estate. This right arises because the estate trustee is under a duty to ensure the deceased’s body is disposed of in a manner suitable to the estate left behind by the deceased. With this duty comes the corresponding right to possess the body for the purposes of burial. This right comes in priority of the right of spouses, children and other loved ones to decide how to dispose of the body.
For anyone who is in the process of preparing their wills, they hopefully give some thought and consideration as to the suitability of their chosen estate trustee. Ideally, they’ll ensure that their estate trustee is someone:
- likely to outlive the testator;
- willing to take on the task of administering an estate; and
- who will diligently bring all assets into the estate and attend to their distribution.
Testators may want to give some consideration for how the estate trustee will dispose of their body after death as well. This is particularly so as the disposition of one’s body is not something that one can validly provide for in a will (Williams v Williams (1882) 20 Ch D 659 (Eng Ch Div)). Hence, once deceased, testators are in the hands of the estate trustee, so to speak. Where a testator has any concerns that loved ones might fight over burial plans, then some further thought should be given to choosing an estate trustee who will act in accordance with the wishes of the testator.
Unfortunately, disputes over the burial of remains do come up. We’ve blogged on a few of these cases in the past, including the case of legendary soul singer, James Brown and the case of Leo Johnston, a slain RCPM officer in Alberta.
For anyone concerned about it, they may take some small amount of comfort in knowing that once in the ground, courts will be extremely cautious in disturbing a deceased’s (hopefully) final resting place (see, for example, Mason v Mason, 2017 NBQB 132).
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As the holiday season comes to a close, many of us will take stock of the time enjoyed with friends, family, and loved ones, and look forward to the prospect of a new year. Unfortunately, as members of the estates bar, we are occasionally called on to review circumstances in which no family members or loved ones are around for the purposes of a deceased individual’s estate planning decisions. More specifically, we are often asked to consider the proper legal procedures when an individual passes away having named an estate trustee who is incapable of acting, and where the individual died leaving no spouse, children, or next-of-kin in Ontario.
In the foregoing circumstances, Ontario’s Crown Administration of Estates Act gives the Office of the Public Guardian and Trustee (the “PGT”) the appropriate authority to step in to the shoes of an estate trustee and administer the estate, if necessary and subject to certain statutory guidelines. Section 1 of the Act allows the Superior Court of Justice to issue to the PGT “letters of administration or letters probate”, thereby giving it the authority to administer an estate, provided the following conditions are satisfied:
- The deceased person died in Ontario, or was a resident of Ontario but died elsewhere;
- The person died intestate (that is, without a validly executed will), or died leaving a will that does not name an executor or estate trustee who is willing and able to administer the estate; and
- The Deceased had no known next-of-kin of the age of majority residing in Ontario who are willing to administer the estate.
Certain additional policy considerations not listed in the Act have also been adopted to govern whether the PGT will agree to administer an estate. Notably, the PGT will generally only act as an estate trustee of last resort. Before agreeing to act, the PGT will typically take steps to locate another interested party who may wish to be appointed, for example, any of the deceased person’s next-of-kin from out of province. Moreover, the PGT will only step in to administer estates that will hold a value of at least $10,000 after all debts of the estate have been paid. By its own estimates, at any given time the PGT is actively administering more than 1,400 estates. Accordingly, these additional policy considerations ensure that the appropriate resources can be directed to the estates that the office has agreed to administer.
Thanks for reading. Happy New Year!
It’s 8:30 am, you’ve just entered your office, and you get a call from the common-law spouse of one of your long-term clients. It’s bad news – your client is in palliative care and has a will from 2001 that he urgently needs to update. Time is of the essence.
You and your assistant can squeeze in time late in the day to see the client at the hospital. But you know it’s a tricky situation that’s fraught with potential problems. Here are a few steps to consider that could protect you and your client before you head bedside.
- Make sure you have the expertise they need: On the initial call, be sure to ask specific questions about what the client needs done. If there are trusts or other complex arrangements involved, assess whether you have the expertise to assist. If death is imminent, the last thing your client can waste is time in trying to line up another lawyer. So do your due diligence up front.
- Assess capacity: Capacity issues could be front and centre for clients who are close to death. If possible, contact an attending doctor, explain the legal test for capacity and ask them to confirm his or her opinion in writing as soon as possible, even on an interim basis by email.
Learn more about capacity issues here: https://estatelawcanada.blogspot.ca/2010/12/when-is-doctors-opinion-on-capacity.html
- Talk one-to-one: You need, and must insist on, time alone with your client, both to do your own capacity assessment and to minimize any unsubstantiated allegations of undue influence. If the situation is at all suspicious, you have a duty to inquire to satisfy yourself that the client is fully acting on their own accord. This is especially important if the client has had multiple marriages or common-law partners, or has been estranged from family members. If you are not satisfied, you may choose to decline to act.
- Take notes and/or video: Your notes could potentially be used as evidence in a will challenge or solicitor’s negligence action, so be sure to set out the basis for your opinion on issues such as capacity and undue influence, rather than simply stating a conclusion. Consider having a junior lawyer attend with you, to provide a more complete base of evidence. Videotaping the interview may also be helpful, as it can provide important evidence if the will is ever challenged.
Finally, if you have older clients who have indicated a need to revise their will, be proactive. Send them this link and encourage them to act now to avoid the potential drama and perils of a deathbed will: http://globalnews.ca/news/1105176/the-mortality-of-deathbed-wills/
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At the recent Six-Minute Estates Lawyer, several areas of interest were discussed. One that served as a helpful reminder to me was the presentation on the estate administration tax-avoidance strategy of using primary and secondary wills. Many tips are contained in the paper presented by Kathleen Robichaud. Here are eight of them:
- Checklist – develop a thorough intake process and form, so you can ensure a detailed meeting with your client takes place that will give you the information needed to make recommendations best suited to your client’s needs;
- Revocation clause – ensure each will has one that takes the other will into account, so each will won’t revoke the other;
- Estate trustee – using the same estate trustee (and same alternate) for both wills may reduce the risk of drafting errors and usually simplifies the administration (although for a second will regarding outside Ontario assets, it is ideal to have the estate trustee and assets both in the same jurisdiction);
- Debts and Taxes – it is of particular importance to delineate how debts are to be paid in both wills, especially if you have difference beneficiaries and/or estate trustees in each of the wills;
- Know which assets require probate – sounds trite, but when in doubt only include assets in the secondary will that you are certain do not require probate (e.g. real property (subject to exceptions), bank accounts with large balances, RRSPs left to the estate, shares of publicly traded companies, an interest in a privately held partnership and investment accounts generally require probate);
- Define the assets carefully – otherwise you may have a partial intestacy that could defeat the testator’s wishes;
- Out of jurisdiction assets – when dealing with out of jurisdiction assets, consider that a second, third or even fourth will may be appropriate for varying reasons (e.g. because of difference succession rules or difference taxation rules); and
- Beneficiaries – listing the correct beneficiaries for the right assets, and matching the right set of beneficiaries with the corresponding will, can avoid drafting errors that may otherwise result in both wills having to be probated and/or rectification orders being needed.
Thanks for reading and enjoy the long weekend!
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When dealing with the administration of an estate, there is the possibility that a bequest will be left to a minor, resulting in the need for it to be held in trust until the minor reaches the age of majority. It is also possible to have a situation where the executor named in a will is a minor at the date of death of the testator, pursuant to section 26 of the Estates Act. This will result in a Certificate of Appointment of Estate Trustee being issued to the guardian of the named executor, until he or she turns 18. The guardian acting as executor is called durante minore aetate, which translates to “during the minority”.
Pursuant to section 26 of the Estates Act:
(1) Where a minor is sole executor, administration with the will annexed shall be granted to the guardian of the minor or to such other person as the court thinks fit, until the minor has attained the full age of eighteen years, at which time, and not before, probate of the will may be granted to the minor
(2) The person to whom such administration is granted has the same powers as an administrator has by virtue of an administration granted to an administrator during minority of the next of kin.
The powers of durante minore aetate to act in the place of a minor are not limited. As per Re Cope, (1880), 16 Ch. D. 49 (Eng Ch Div) at 52:
The limit to his administration is no doubt the minority of the person, but there is no other limit. He is an ordinary administrator: he is appointed for the very purpose of getting in the estate, paying the debts, and selling the estate in the usual way; and the property vests in him.
In Monsell v Armstrong, (1872) LR 14 Eq 423 at 426, the court held there is “no distinction between a common administrator durante minore aetate as regards the exercise of a power of sale.” Along with the power of sale, it seems too that an administrator for the use and benefit of a minor may also assent to a legacy and may be sued for the debts of the deceased.
An application for a certificate of appointment for the use and benefit of a minor should be in Form 74.4, 74.4.1, 74.5, or 74.5.1 (forms can be found here) and should include an explanation stating that the executor named in the will is not the applicant due to the minority of the named executor. Once the application is filed, the matter will be referred to a judge. If the judge orders a certificate of appointment of estate trustee with a will, it will include the phrase “Right of (name of minor executor) to be appointed estate trustee on attaining 18 years of age is reserved.”
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Last week, Suzana Popovic-Montag blogged about the conflict that can arise between life-tenants and remaindermen with regard to the payment of expenses associated with real estate.
Another potential dispute between life-tenants and remaindermen is whether a trustee must retain a piece of property or sell the property and invest the proceeds in something else. This is particularly the case where the property in question is losing value to the detriment of the remaindermen.
At law, there is an implied duty to sell personal property that is wasting. In other words, if the will does not require the trustees to retain a piece of personal property (e.g. the testator’s car), then trustees have a duty to sell property that will lose value over time or that is invested in unauthorized investments. Proceeds of sale must then be invested in authorized investments.
The foregoing duty is known as the Rule in Howe v Earl of Dartmouth. Howe v Earl of Dartmouth (1802) 7 Ves 137 is an old English case, but the rule was confirmed by the Supreme Court of Canada in Lottman v Stanford,  1 SCR 1065, 6 ETR 34 at para 10:
The rule in Howe v. Lord Dartmouth…is a rule requiring the trustee of an estate settled in succession to deal even-handedly between the life tenant and the remaindermen. It operates to compel, where its operation is not excluded by the testator, a conversion of wasting or unproductive personalty and the investment of the proceeds of such conversion in trustee investments. By this means the life tenant is assured of an income from the assets of the estate and the capital of the estate is preserved for the remainder interests upon the demise of the life tenant.
The rule applies only to testamentary trusts; it is not applicable to inter-vivos trusts. Moreover, this rule does not apply to real property. The rule does, though, apply to mortgages on real property, as mortgages are personalty.
The purpose of the rule is to maintain fairness between the life-tenant and the remaindermen on the basis that trustees have a duty to act impartially or to hold an even hand.
As noted above, a contrary provision in the will can override the application of the rule. When considering leaving consecutive interests in a piece of property, a testator should be very clear about their intentions in order to avoid estate litigation.
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Our blog has previously discussed Graduated Rate Estates (“GRE”) and changes to the Income Tax Act, which now limit the benefit of graduated rates of taxation for up to 36 months from the date of death if the estate qualifies as a testamentary trust, and is designated as a GRE in its first taxation year.
Changes to the tax benefits of testamentary trusts raise a number of planning considerations that should be considered when making an estate plan. First, when drafting a testamentary trust, a key consideration should be whether it would be beneficial to the estate and its beneficiaries to delay the distribution of the estate for up to three years to potentially maximize the progressive taxation rates of all income in the trust.
If a testamentary trust is established with a view to take advantage of the new tax regime, then another important consideration is the extent of discretion that a testator wishes to grant to his or her Estate Trustee. Since an estate must maintain its status as a GRE, a testator may wish to clearly direct his or her Estate Trustee to take steps necessary to use or manage the estate assets in a manner that is consistent with the GRE requirements set out in section 248(1) of the Income Tax Act. Alternatively, the testator may wish to authorize his or her Estate Trustee to determine whether it is necessary or beneficial to preserve the estate’s status as a GRE in light of circumstances that may arise post-mortem.
All estate planning considerations that are intended to take advantage of changes to the Income Tax Act should be discussed with a tax professional throughout the estate planning process.
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A recent decision of the Ontario Superior Court of Justice highlights the real or perceived conflicts of interest that can arise when a guardian for property wears more than one fiduciary hat.
In Taticek v Zeisig, 2016 ONSC 772, Ronald and Peter were appointed as joint guardians for property and personal care for Annemarie in 2012. Annemarie, Ronald and Peter, along with Annemarie’s daughter Sonya, owned a farm property in joint tenancy (the “Farm”). The Honourable Justice Annis had approved the original guardianship order, which included a plan for the management of the Farm.
Ronald and Peter brought an Application to pass their accounts in March 2014, in accordance with Justice Annis’s Order. The Public Guardian and Trustee (“PGT”) objected to the accounts, but subsequently withdrew the objections and initially supported the sale of the Farm.
Ronald passed away on April 23, 2014, with his interest in the Farm passing by right of survivorship to the other joint tenants. The other guardian, Peter, was the sole Estate Trustee for Ronald’s Estate. Peter was also the sole trustee of a family trust (the “Family Trust”), which was settled for the benefit of Ronald’s children.
The Family Trust wanted to purchase Annemarie’s one-third interest in the Farm, and Peter brought an Application to amend the management plan to allow for the joint tenancy in the Farm to be severed. The PGT opposed the Application, and Peter brought a Motion for an Order approving the amended management plan.
On the Motion, Peter argued that he was acting in Annemarie’s best interest, and was not in a conflict of interest because her share of the Farm would be sold at fair market value and the proceeds of sale would be placed in an investment account.
In highlighting deficiencies in the amended management plan, the PGT noted three potential conflicts of interest:
- Peter had to determine whether Annemarie had to reimburse loans from Ronald, and the amended plan lacked details about Peter’s obligations to the Family Trust.
- In determining whether the Farm was to be sold to the Family Trust or to a third party, Peter would potentially continue to personally benefit if the one-third share of the Farm was purchased by the Family Trust.
- Peter’s obligation to maximize the value of Annemarie’s share of the Farm in his capacity as her guardian for property was in conflict with his duty to purchase her share at the lowest possible price on behalf of the Family Trust.
Ultimately, the Honourable Justice Patrick Smith refused to grant Orders dismissing Peter’s Application and appointing the PGT as Annemarie’s guardian for property on the Motion, holding that the PGT’s concerns could be addressed with additional information and an amended management plan. Justice Smith also held that the evidence established that Peter was acting in Annemarie’s best interest.
The Court granted leave for Peter to provide additional details and an amended management plan within 60 days of the judgment, with the matter being returnable before Justice Smith on short notice if the PGT continued to oppose the Application.
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Umair Abdul Qadir