Tag: fiduciary

15 May

Alberta’s Approach to Digital Assets

Nick Esterbauer Estate Planning, Executors and Trustees, Power of Attorney, Trustees Tags: , , , , , , , , , , , , , , , , , , , 0 Comments

Our firm has previously blogged and podcasted at length about digital assets and estate planning, and the issue of fiduciary access to digital assets during incapacity and after death.

While digital assets constitute “property” in the sense appearing within provincial legislation, the rights of fiduciaries in respect of these assets are less clear than those relating to tangible assets.  For example, in Ontario, the Substitute Decisions Act, 1992, and Estates Administration Act provide that attorneys or guardians of property and estate trustees, respectively, are authorized to manage the property of an incapable person or estate, but these pieces of legislation do not explicitly refer to digital assets.

As we have previously reported, although the Uniform Law Conference of Canada introduced the Uniform Access to Digital Assets by Fiduciaries Act in August 2016, the uniform legislation has yet to be adopted by the provinces of Canada.  However, recent legislative amendment in one of Ontario’s neighbours to the west has recently enhanced the ability of estate trustees to access and administer digital assets.

In Alberta, legislation has been updated to clarify that the authority of an estate trustee extends to digital assets.  Alberta’s Estate Administration Act makes specific reference to “online accounts” within the context of an estate trustee’s duty to identify estate assets and liabilities, providing clarification that digital assets are intended to be included within the scope of estate assets that a trustee is authorized to administer.

In other Canadian provinces, fiduciaries continue to face barriers in attempting to access digital assets.  Until the law is updated to reflect the prevalence of technology and value, whether financial or sentimental, of information stored electronically, it may be prudent for drafting solicitors whose clients possess such assets to include specific provisions within Powers of Attorney for Property and Wills to clarify the authority of fiduciaries to deal with digital assets.

Thank you for reading.

Nick Esterbauer

 

Other blog posts that may be of interest:

27 Nov

Are personal support workers and caregivers fiduciaries?

Doreen So Elder Law, Estate & Trust, Ethical Issues, Executors and Trustees, General Interest, In the News, Litigation Tags: , , , , , , , , 0 Comments

In a recent decision of the Superior Court, Justice Mew found that,

“In appropriate circumstances, I conclude that the relationship between an elderly resident of a retirement home and a personal support worker can also be a fiduciary one”.

Hoyle (Estate) v. Gibson-Heath, 2017 ONSC 4481, is a civil proceeding that was commenced after Ms. Gibson-Heath, a personal support worker, was criminally convicted of stealing $229,000.00 from Clifford Hoyle, an elderly resident of the retirement home where Ms. Gibson-Heath worked.  Ms. Gibson-Heath was sentenced to 18 months of imprisonment and a restitution order was made for her to pay the shortfall between the full amount stolen and any amounts recovered by the Crown.

At the time of the proceeding before Justice Mew, Ms. Gibson-Heath was a discharged bankrupt and the Estate Trustees of the Estate of Clifford Hoyle were seeking an order that the restitution order survives Ms. Gibson-Heath’s bankruptcy and a civil judgment in the amount of the shortfall amongst other relief.  Justice Mew determined that the restitution order survives Ms. Gibson-Heath’s bankruptcy pursuant to section 178(1)(a) of the Bankruptcy and Insolvency Act but he also went further to consider whether section 178(1)(d) would also apply as it relates to  “any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others”.

Justice Mew’s analysis can be found at paragraphs 16 to 19 of his reasons.  Of note, his Honour commented as follows,

“Ms. Gibson-Heath’s role was to look after Mr. Hoyle.  To act in his best interests.  As an elderly gentleman, who was already in the early stages of dementia when he started to reside at Fairfield Manor East at the end of 2006, Mr. Hoyle was undoubtedly vulnerable to any abuse of the trust that he placed in those who cared for him.”

Ms. Gibson-Heath did not respond to this proceeding and Justice Mew also found that this was an appropriate case for substantial indemnity costs due to Ms. Gibson-Heath’s fraudulent conduct (click here for the costs decision).

Thanks for reading!

Doreen So

#1429918

 

29 Aug

Can a Fiduciary Overcome Poor Record-Keeping?

David M Smith Estate & Trust, General Interest, Guardianship, Passing of Accounts, Uncategorized Tags: , 0 Comments

The duties of a fiduciary must be performed diligently, with honesty and integrity and in good faith, for the benefit of the recipient.  Whether a fiduciary can prove that he or she has complied with these duties will depend to a great extent on the ability of the fiduciary to account.  While the duty to account is not debatable, the Court may consider the specific circumstances of the fiduciary when evaluating whether their actions are appropriate.

In Christmas Estate v Tuck [1995] OJ No 3836, the executor disputed numerous cheques for the benefit of the attorney for property and other cash gifts that she was unable to substantiate with receipts or vouchers. The Court held that it would be inappropriate to impose strict accounting requirements where the parties had a “close family relationship”, in this case, mother and daughter.

The Court further declined to draw a negative inference when the attorney was unable to produce records to account for all transactions: the grantee had helped the grantor “in a multitude of ways” and, accordingly, the burden of strict accounting practices was inappropriate.

In Laird v Mulholland [1998] OJ No 855, the Court noted that the overall credibility of an attorney for property is an important factor in determining whether that attorney’s informal accounts are satisfactory. The Court was unable to conclude that the attorney had acted dishonestly with a view to misappropriating the grantor’s assets, notwithstanding that his “record-keeping practices [left] much to be desired.

The Court pointed to the “abundant evidence” that the Attorney had performed “a multitude of services” which were entirely for the benefit of the grantor. The Court held that the fiduciary had acted “honestly and reasonably in all the circumstances” and should therefore be “relieved from personal liability.”

Thanks for reading,

David Morgan Smith

 

07 Apr

Why should we care about fiduciary access to digital assets?

Nick Esterbauer Estate & Trust, General Interest, Power of Attorney, Wills Tags: , , , , , , , 0 Comments

My other two blog posts this week have focused on the utility of model legislation that has been introduced in Canada and the United States to address the issue of fiduciary access to digital assets, and some of the primary differences between the uniform acts of these two jurisdictions.

Today, I take the opportunity to highlight the prevalence of digital assets through the use of some interesting (and somewhat surprising) statistics:

  • 99% of North Americans use at least one personal online tool;
  • A 2013 study by McAfee suggests that Canadians value their digital assets at an average of more than $32,000.00.  Since 2013, the prevalence of digital assets has increased significantly;
  • Worldwide, Bitcoins are valued at almost $22 billion, with over $2 million in Bitcoins exchanged every day;
  • As many of our readers already know, many Canadians (estimated to be more than 60%) do not have a Last Will and Testament.  Of those who do have a Will, 57% of North Americans aged 45 and older have not included provisions that address access to digital assets as part of their formal estate plan.  Such provisions may be required in order for an estate trustee to gain access to digital assets, absent the enactment of legislation permitting same or a court order granting access.

Our blog has previously covered some of the common issues resulting from the inattention to digital estate planning, which can arise regardless of the financial value of the assets in dispute.

Have a great weekend,

Nick Esterbauer

 

Other blog posts that you may enjoy reading:

04 Apr

What are other jurisdictions doing to facilitate access to digital assets?

Nick Esterbauer Uncategorized Tags: , , , , , , , , , , , , 0 Comments

Later this week, House Bill 432 will come into effect in Ohio to update state estate and trust administration law.  One of the most notable updates is the adoption of the Revised Uniform Fiduciary Access to Digital Assets Act, along with corresponding updates to Ohio’s Power of Attorney Act.

The American Revised Uniform Fiduciary Access to Digital Assets Act is intended to formalize the authority of attorneys for property and estate trustees to obtain access to digital assets for deceased or incapable users.  Prior to its implementation in American states (and in other jurisdictions in which comparable legislation has not yet been introduced), the intervention of the courts has often been required to grant fiduciaries with access to information and assets stored electronically.  There continues to be some debate as to whether an attorney for property or estate trustee, authorized to administer tangible property, also has the authority to manage digital assets without legislation and/or terms of the Power of Attorney or Will explicitly extending this authority.

Interestingly, the Revised Uniform Act has been endorsed by Google and by Facebook, both platforms on which a great deal of the world’s digital assets are stored.  In 2016, 13 states introduced the Revised Uniform Fiduciary Access to Digital Assets Act.  With the introduction or enactment of the Revised Act in another 24 states since the beginning of 2017 alone, it is clear that state legislatures and online service providers alike agree that amendments to the law in recognition of the growth of technology is required to clarify the state of the law of digital assets and fiduciaries.

The Uniform Law Conference of Canada introduced the Uniform Access to Digital Assets by Fiduciaries Act (2016) this past summer.  While the uniform acts of Canada and the United States share a number of similarities, there are several important distinctions, which will be highlighted in Thursday’s blog post.

Thank you for reading,

Nick Esterbauer

Other blog posts that may be of interest:

17 May

Estate Trustees’ Standard of Care

Ian Hull Executors and Trustees Tags: , , , , , , , , , , , , 0 Comments

A recent decision of the Ontario Superior Court of Justice, The Estate of Ingrid Loveman, Deceased, 2016 ONSC 2687, considered a passing of accounts, and specifically considered whether the Estate Trustees in this case, among other things, met the requisite standard of care in administering the Estate.

Tblog photo - estate of ingrid lovemanhe Court briefly reviewed the case law with respect to the standard of care of Estate Trustees, noting that an estate trustee is a fiduciary to the beneficiaries of an estate, must exercise the degree of diligence that a person of prudence would exercise in the conduct of his or her own affairs, and may not prefer his or her own interests over the interests of beneficiaries.

Pursuant to the Deceased’s Last Will and Testament dated July 12, 2006 (the “Will”), two of her seven children, Peter and Heidi, were named as Estate Trustees. The Will provided, in part, that a house (the “House”) was to be retained for six months, at which time Peter had six months to exercise an option to purchase it for 70% of its fair market value as of the date of death. Should he exercise that option, the proceeds were to be divided into six equal shares, with each of four of the Deceased’s children (David, Heidi, Douglas, and Dirk) receiving one share, and the two remaining shares to be equally divided amongst her four grandchildren, and kept in trust.

Peter exercised the option to purchase the House within the twelve month time period. However, he only gave notice of his decision to purchase it; he did not actually act on the decision, nor complete the transaction within the time limit. He claimed that he delayed the purchase as he did not have access to the funds required in a way that was most economical for him. However, the Court found that postponing the sale in this manner was convenient to Peter, but not to the Estate nor to the beneficiaries, and he therefore breached his fiduciary duty.

There was also a delay in obtaining probate, which the Court concluded was likely due to Peter delaying the application until he deemed it necessary, being when he decided to exercise his option to purchase the House. The Court found that Peter accordingly placed his interests before those of the Estate and the beneficiaries. Furthermore, the Court found that, had the Estate Trustees adhered to the time frames stipulated by the Will, it is likely that litigation involving a claim by one of the Deceased’s grandchildren would have been avoided.

Although the Estate Trustees in this case did not act in a malicious or egregious manner, the mere fact that there was a delay related to the preference of an Estate Trustee was sufficient for the Court to find that Peter had breached his fiduciary duty. Fiduciaries are required to act with utmost good faith. This is an extremely high standard, and therefore, the interests of beneficiaries should never be anything but a trustees’ first and foremost priority.

Thanks for reading.

Ian Hull

04 Mar

How can access to digital assets and accounts be facilitated?

Nick Esterbauer Estate & Trust, Estate Planning, Wills Tags: , , , , , , , , 1 Comment

A Bill known as Senate File 2112 that was recently passed by the Iowa legislature has the potential to enhance the access of fiduciaries to digital assets.  As it currently stands in Iowa, many other states, and Canadian provinces including Ontario, the law has not been formally amended to reflect technological advancement and the prevalence of digital assets in estate administration.  This represents a major problem in situations where an individual has not considered his or her digital assets when creating or updating an estate plan.  The result is most often that digital assets and online accounts are inaccessible or accessible only after a Court Order is obtained, a process that may add significant time and cost to an otherwise simple estate administration.

fridaySenate File 2112 provides that fiduciaries, which class is explicitly stated to include estate trustees, guardians, and those authorized to act under a power of attorney, may access digital information on behalf of an incapable or
deceased person who has authorized them to do so.

In circumstances where there is no written direction granting access of the fiduciary to the user’s information, an estate trustee is permitted to access a deceased person’s digital assets upon providing the following to the custodian of the assets:

  1. A written request for disclosure;
  2. A certified copy of the death certificate;
  3. A certified copy of probate, an affidavit made pursuant to the Bill, or a file-stamped copy of the court order authorizing the fiduciary to administer the estate; and
  4. If requested by the custodian of the assets, any of the following:
    • A username or other unique account identifier to identify the user’s account;
    • Evidence linking the account to the user;
    • An affidavit stating that the disclosure of the digital assets is reasonably necessary for administration of the estate; and/or
    • A finding by the court that either (1) the user had a specific account with the custodian of the assets, or (2) disclosure of the digital assets is reasonably necessary for administration of the estate.

The provisions of the bill are intended to apply unless the power that it provides is restricted by Court Order or limited within the document appointing the fiduciary.

Until similar legislation is enacted in Ontario, drafting solicitors should remember to canvass the important issue of digital assets and accounts when assisting clients in creating or updating estate plans to prevent inaccessibility during incapacity and/or following death.

Have a great weekend.

Nick Esterbauer

13 Jan

Structuring Trustee Arrangements

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

One of the articles included in the Toronto Lawyers Association’s Newsstand this week discusses the concepts of Private Trust Companies (PTCs) and Private Trust Foundations (PTFs) in the British Crown dependency of Guernsey. While there are significant differences between these types of structures and trust companies in Canada, it is interesting to consider ways in which trustee arrangements are structured in other jurisdictions.

PTCs, similar to corporate trustees in Canada, are often used by high net worth families to consolidate various family interests into a private structure that is customized to fit their particular needs. PTCs can offer many benefits, including in-house specialized knowledge and expertise, continuity, and flexibility. In Guernsey, PTCs are structured in a two-layered manner. The PTC itself is a limited company established for the sole purpose of acting as a trustee. The shares of the PTC must then be “orphaned”, by having a non-charitable purpose trust hold the shares of the PTC.

PTFs, on the other hand, are differently structured. A foundation can be established for the sole purpose of acting as a trustee. As a legal entity the foundation can then act and exercise all the powers and obligations of a trustee in the same way as any corporate trustee, such as a PTC. However, since the foundation has no members or shareholders, it is already “orphaned” and there is no need to set up a holding vehicle, as is required for the PTC. A crucial difference between PTCs and PTFs is that, the law in Guernsey which applies to fiduciaries, does not necessarily apply to PTFs, as long as the PTF is not paid for its services. Of course, if the PTF is paid for its services, it will be deemed to be carrying on business and will fall under the Fiduciaries Law. In Guernsey, PTFs may be seen as a simpler alternative to PTCs.

In Canada, trust companies are similar in concept to PTCs, but are structured differently, as the “orphan” layer of the PTC is not necessary. Trust companies are regulated federally by the Trust and Loan Companies Act, SC 1991, c 24 and in Ontario by the Loan and Trust Corporations Act, RSO 1990, c L.25. Many of the large banks have a subsidiary trust company through which they operate in the capacity of a corporate trustee. Trust companies in Canada are fiduciaries and are paid for their services as trustees. This is an important element of trust companies, and the non-fiduciary nature of PTFs would likely be incompatible with trustee obligations in Canada.

As with PTCs and PTFs, Canadian trust companies are often used in place of an individual trustee where a trust or estate is particularly complex. For example, corporate trustees may be useful where a trust, whether inter vivos or testamentary, is intended to exist over the course of many generations. Trust companies can provide continuity of administration, and avoid issues restricted to the lifetime of an individual trustee.

Furthermore, given the increase in non-traditional family structures, such as second marriages and blended families, estates can be very complex and can involve many beneficiaries. It may be overwhelming for an individual to manage the complex structures that may be created to account for the different interests in a family. It may also be difficult for an estate trustee to remain neutral and objective if there are conflicts or issues that arise with respect to the family structure and distribution of assets.

Thanks for reading.

Suzana Popovic-Montag

03 Sep

Caregivers & Fiduciary Obligations

Noah Weisberg Capacity, Estate & Trust, Health / Medical, Joint Accounts, Litigation Tags: , , , , , , , , , , , 0 Comments

Reeves v. Dean, a recent decision of the Supreme Court of British Columbia (BCSC), acts as a helpful reminder that a fiduciary relationship may arise between a caregiver and their client.

The plaintiff was 50 years old and suffered from developmental delays making her unable to independently manage her finances.  The defendant was the plaintiff’s caregiver pursuant to a contract of services between the defendant and the Provincial Government.  The plaintiff sought damages based on, amongst other things, breach of fiduciary duty arising from the misappropriation of monies arising from a joint account between the plaintiff and defendant.

The decision of Ben-Israel v. Vitacare Medical Products Inc. (ON SC) provides a helpful summary of the traditional categories of relationship in which a fiduciary duty exists: agent to principal; lawyer to client; trustee to beneficiary; business partner to partner; and, director to corporation.  In addition, as set out in the Supreme Court of Canada decision in Lac Minerals v. International Resources, relationships in which a fiduciary obligation have been imposed appear to possess three general characteristics:

  1. The fiduciary has scope for the exercise of some discretion or power;
  2. The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests; and
  3. The beneficiary is peculiarly vulnerable to, or at the mercy of, the fiduciary holding the discretion or power.

Of the three characteristics, the BCSC found that it was the vulnerability of the client that was essential to a finding of a fiduciary relationship.  As such, since the plaintiff was in a position of disadvantage regarding the administration of the joint account monies, and consequently placed her trust in the defendant, a fiduciary relationship was found to exist between the plaintiff and defendant.

Therefore, the plaintiff was entitled to rely on the remedies available for breach of fiduciary duty including constructive trust, accounting for profits, and equitable compensation to restore to the plaintiff what was lost.

Noah Weisberg

12 Aug

Deductions from Compensation – Hull on Estates and Succession Planning Podcast #125

Hull & Hull LLP Hull on Estate and Succession Planning, Passing of Accounts, Podcasts Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , 0 Comments

Listen to Deductions from Compensation.

This week on Hull on Estates and Succession Planning, Ian and Suzana finish up the discussion on the question of accounting by reviewing deductions from compensation and briefly sum up the procedure of the passing of accounts.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.

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