Tag: fiduciary obligations

07 Feb

Hull on Esates #505 – Purchase of Estate Assets by an Estate Trustee

76admin Archived BLOG POSTS - Hull on Estates, Ethical Issues, Hull on Estate and Succession Planning, Hull on Estates, Podcasts, PODCASTS / TRANSCRIBED, Show Notes, Show Notes Tags: , , , , , , 0 Comments

This week on Hull on Estates, Jonathon Kappy and Rebecca Rauws discuss the purchase of estate assets by an estate trustee, and some steps that should be taken in the event of a purchase to ensure compliance with fiduciary obligations.

Should you have any questions, please email us at webmaster@hullandhull.com or leave a comment on our blog.

Click here for more information on Jonathon Kappy.

30 Mar

Does Crowdfunding Establish a Trust?

Suzana Popovic-Montag Estate & Trust, Trustees Tags: , , , , , , , , , , , 0 Comments

In 2014, a Toronto-based company successfully raised $1,235,389 (USD) of its $48,000 goal on Indiegogo for its wireless speaker system promising better-than-stereo sound. More recently, the website Gofundme provided the platform which allowed the parents to a 4 year old girl to raise $2,026,470 (USD) to help their child receive a potentially life-saving therapy trial.

Hardly a week goes by without a story on the success of yet another crowdfunding campaign. In what began as an alternative financing model, modern crowdfunding as it exists today has grown to become an extremely successful and potentially lucrative fundraising source. As a result, the legal question that has been raised is whether funds raised by means of crowdfunding constitute a trust, with all of the rights and obligations that this may entail.

The definition of a trust according to Black’s Law Dictionary is, “An equitable or beneficial right or title to land or other property, held for the beneficiary by another person, in whom resides the legal title or ownership.” At first glance, this is precisely what many crowdfunding campaigns seek to do. The funds raised are often held by a third party for the benefit of another. However, determining who occupies which role within the trust relationship can be difficult to navigate.

There are four parties in most crowdfunding campaigns: the donors, the website provider, the campaign creator, and the beneficiaries. As a result, it is not entirely clear whether it is the website provider or campaign creator that acts as trustee and, if it is the website provider, whether they hold these funds in trust for the campaign creator or the purported beneficiary of the campaign. As each crowdfunding campaign can vary significantly with respect to its set-up and intended purpose, determining whether a trust relationship is present is an exercise to be undertaken on a case by case basis.

For instance, some crowdfunding campaigns offer rewards in exchange for meeting a minimum donation level. In this sense, it could be argued that these rewards constitute consideration and the relationship becomes contractual in nature. In other campaigns, the funds are raised for a charitable purpose and as such, may be qualified as charitable trusts. On the other hand, campaigns established by friends and family that purport to raise funds for their loved ones, seek to provide a benefit to a private individual, as opposed to a general purpose. It is often these cases that lead to questions surrounding whether a trust has been established, or, in the alternative, whether a gift has been made.

According to this paper by Professor Oosterhoff, the law has generally provided that funds raised for a specified object give rise to a trust. Accordingly, Oosterhoff’s answer is that it depends on what the intentions of the donor were. He suggests that we need to look specifically at whether the donors intended to establish a trust or whether their relationship to the other parties can be characterized as one of contract or agency.

If a trust is established, the person(s) receiving the initial funds (whether it is the campaign creator or website provider) may find themselves in a fiduciary relationship. Trust law creates a higher standard of care and imposes and bestows rights and obligations upon both the trustee and beneficiaries. As a result, those engaged with crowdfunding campaigns, in any capacity, should be alert to this possibility and act accordingly.

Thank you for reading.

Suzana Popovic-Montag

 

14 Dec

Fiduciary Duties of Joint Account Holders

Ian Hull Joint Accounts Tags: , , , , , , 0 Comments

In a recent judgment, the Ontario Superior Court of Justice considered whether joint account holders owe a fiduciary duty with respect to the management and operation of a joint account.

The facts of MacKay Estate v MacKay, 2015 ONSC 7429 are not unusual. Dawn MacKay (“Dawn”) was married to Tom MacKay (“Tom”) one of Annie MacKay’s (“Annie”) three sons. Annie and Dawn had a very close relationship. In early 1999, Annie made a Power of Attorney for Property in favour of Tom. Shortly thereafter, Annie, with Tom’s assistance, named Dawn as joint bank account holder. At trial, Dawn advised that she and Annie had agreed that Dawn would assist Annie with her banking and her care, as well as provide companionship, in exchange for compensation. There were no specific terms agreed to at the time.

Around 2003, Dawn began making transfers from the joint account to herself. She stated that the transfers were in the nature of compensation and were loosely based around payment of $250.00 per week for services provided. After Dawn and Tom separated in 2008, Tom commenced an action as Annie’s litigation guardian seeking an accounting, payment of monies found due, damages for breach of trust, and punitive damages. After Annie died in 2010, in 2012, Tom, as Estate Trustee, continued the action on behalf of Annie’s estate.

The main issues considered by the court were (1) whether Dawn, as a joint account holder, owed a fiduciary duty to Annie in the management and operation of the joint bank account; (2) whether Dawn breached her fiduciary duty by making payments to herself from the account; and (3) whether Dawn was liable to repay the amount of the payments made.

To determine whether there was a fiduciary relationship, the court followed the guide from Frame v Smith, [1987] 2 SCR 99, to consider whether:

i. the fiduciary has scope for the exercise of some discretion or power;
ii. the fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests; and
iii. the beneficiary is vulnerable to or at the mercy of the fiduciary holding the discretion or power.

Based on these indicia, the court found that Dawn did owe a fiduciary duty to Annie and that Dawn had acted as a trustee de son tort. The court also found that in making the payments to herself out of the joint bank account, Dawn had not breached her fiduciary duty and that, in fact, the payments were reasonable in the circumstances.

Although this case seems to establish that it is possible for a joint bank account holder to owe a fiduciary duty, it is not entirely clear from the decision whether this finding will apply only in the context of a non-contributing individual who is added to a pre-existing account in order to assist the account holder, or whether this may apply to all those who hold bank accounts jointly.

Thanks for reading.

Ian Hull

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