In today’s podcast, Noah Weisberg and Sayuri Kagami discuss the problems caused by a beneficiary under a Will witnessing its execution in the context of the recent Saskatchewan decision of Mahin v Kolosnjaji, 2019 SKQB 32.
Should you have any questions, please email us at firstname.lastname@example.org or leave a comment on our blog.
One of the consequences of having to probate a Will (now referred to in Ontario as applying for a Certificate of Appointment of Estate Trustee) is that the Will, along with the assets covered by the Will, are made public.
I was intrigued to read about the estate of the billionaire co-founder of Microsoft, Paul Allen. In addition to Allen’s Last Will being made public, multiple news articles have published a list of some of the amazing properties owned by him, including a:
- condominium in Portland, Oregon ($700,000 to &850,000)
- 20-acre property in Santa Fee purchased from Georgia O’Keefe’s estate ($15 million)
- 2,066-acre ranch in Utah ($25 million)
- Silicon Valley 22,005 square foot house ($30 million)
- New York City penthouse on 4 East 66th Street ($50 million)
- double property in Idaho totalling 3,600 acres ($50 million)
- 3 acre compound on the Big Island in Hawaii ($50 million)
- 18 bedroom mansion in the South of France ($100 million)
- 387 acre camp in Lopez Island, Washington ($150 million)
- 8 acres of land on Mercer Island, Washington ($130 million)
- 400 foot Octopus Yacht (up to $130 million)
While I have no intention to address the efficacy of Allen’s estate plan, I thought the publicity of his estate provides a reminder that careful estate planning can ensure that privacy is maintained, and the payment of probate tax be avoided. In Ontario, there are numerous options available including preparing a secondary (or tertiary) Will, placing assets in joint ownership with the right of survivorship, or simply gifting assets prior to death. This is by no means an exhaustive list, and each option carries certain advantages and disadvantages.
While I expect that few people have the impressive catalogue of properties that Allen had, it should by no means preclude careful estate planning.
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The recent decision of Fletcher’s Fields Limited v Estate of Samuel Harrison Ball, 2018 ONSC 2433 considered whether an appointment of trust funds for a particular purpose created an interest in land.
Fletcher’s Fields is a not-for-profit Ontario corporation which owns land that is predominantly used as a sports facility for rugby football union (the “Land”). Mr. Jenkins was the trustee of the estate of Samuel Harrison Ball. He was also a lawyer, and over the years had been actively involved with Fletcher’s Fields, as General Counsel, and as a member of the board of directors. In Jenkins’ role as trustee of Mr. Ball’s estate, he had the power to appoint money forming part of the estate as he saw fit.
In 1994, Jenkins exercised his power to provide Fletcher’s Fields with $100,000.00 pursuant to a “Deed of Appointment”. The Deed of Appointment provided that (a) the money must be used solely for the purpose of improving the sports facility on the Land; (b) the trustee had the right to revoke any or all of the money if the Land was not kept in good condition suitable for playing the sport; and (c) if revoked, Fletcher’s Fields was required to transfer the fund to the trustee, with interest.
In 2015, a new board of directors for Fletcher’s Fields was elected, which did not include Jenkins. It seems that Jenkins may not have been pleased with this development. The following year, Fletcher’s Fields discovered that a notice had been registered on title to the Land by Jenkins, under s. 71 of the Land Titles Act, R.S.O. 1990, c. L.5. It appears that the notice had been registered after Jenkins had ceased to be a member of the board.
Fletcher’s Fields took the position that the funds provided pursuant to the Deed of Appointment were a gift or, alternatively, trust funds. Jenkins took the position that the Deed of Appointment was not a trust, but rather that it was a loan that was to be repaid if certain conditions crystallized. He characterized it as an equitable mortgage.
The Court noted that the terms of the Deed of Appointment were key to determining whether or not an interest in land had been created. There was no indication of an express intent to create an interest in the Land, or provide that failure to repay the funds would result in a charge over the Land. Without such an express intent, the notice should not remain on title to the land. The Court also held that the parties’ conduct supported the position that there was never any intention to create an interest in the Land.
The Court ordered that the notice that had been registered by Jenkins on title to the Land be removed. The result of this case seems correct, as one would expect that an interest in land should not be created unilaterally and without notice. There are significant differences between types of financial arrangements such as loans, mortgages, gifts, and appointments of trust funds. It is reassuring that the Court in this situation upheld the integrity of the parties’ intentions in crafting their financial arrangement and did not impose a charge-type interest in the Land where none existed.
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While direct donations of cash or securities are still king when it comes to charitable giving in Canada, there are many other ways to donate. If you’re considering a larger gift, it pays to look at some alternatives.
A little bit of planning and a look at different options ensures that charitable gifts are made in the most tax- effective manner possible, are directed to the charities you most want to support, and are best suited to your financial situation and needs.
Here are some options to consider.
A charitable gift made in your will can be claimed against up to 100% of your net income on your final two lifetime tax returns. If the bequest is too large to claim on the final return, the surplus can be carried back to the previous tax year. There are several types of bequests possible:
- Specific bequests: an amount or specific piece of property paid out before any residual gifts
- Residual bequests: a share or percentage of the residue of estate
- Contingent bequest: the naming of an alternate charitable beneficiary in case the terms of an original bequest can’t be met
- Bequest subject to a trust: a trust established at death that typically provides lifetime income to one or more named beneficiaries, and a future gift to one or more charities.
Bequests can be tricky if not executed properly. This article provides details on the key pitfalls to avoid:
There are several ways that you can make a substantial but affordable gift using life insurance.
- Buy a new life insurance policy and name your charity as the owner and beneficiary. The premiums you pay qualify for a charitable tax receipt.
- Donate an existing policy to a charity. You’ll receive a charitable tax receipt for the fair market value of your life insurance policy.
- Name a charity as the beneficiary of an existing policy. Your estate will receive a charitable tax receipt when the proceeds are paid to the charity.
Private charitable foundation
A private charitable foundation is a trust or corporation that you establish and operate for charitable purposes. It’s a permanent institution – carrying your name or legacy, or that of a loved one – through which charitable work may be funded. Because of the costs of establishing and operating a foundation, you likely need initial funding of several hundred thousand dollars to make the structure worthwhile.
Private charitable foundations can be complex structures to establish and administer, so make sure you rely on professional advice for your foundation’s creation and operation.
Donor-advised funds are a flexible and cost-effective alternative to establishing a private charitable foundation.
You start by donating a lump sum amount – typically $10,000 or more – to a charitable gift fund administered by either a charity or a financial institution. Like a private charitable foundation, you receive a tax credit for the full amount donated, up to 75% of your net income for the year. Any excess amounts can be carried forward for up to five years to generate tax credits in those years. Each year, you direct to what charities you want grant money given and in what amounts.
Here’s a detailed comparison of private charitable foundations versus donor-advised funds:
There are a number of other planned giving options as well, from beneficiary designations of an RRSP or RRIF, to charitable remainder trusts, to charitable gift annuities.
But if you weigh all your options, and decide to make a simple direct gift, the Canada Revenue Agency’s charitable donation tax credit calculator is a great way to get an estimate of the tax impact of your donation:
Thanks for reading,
The equitable doctrine of undue influence is one way in which inter vivos transfers or the terms of a testator’s Will can be challenged. The Court has the ability to set aside a gift or transfer if it concludes that influence was being exerted on the grantor. Undue influence can be difficult to prove, and the onus is on the challenger of the transaction to prove that the grantor or testator was unduly influenced.
However, in certain circumstances, the Court may conclude that a presumption of undue influence arises. In the recent decision of Morreale v Romanino, 2017 ONCA 359, the Ontario Court of Appeal further clarified the test to be met in order to trigger the presumption of undue influence.
But First, Some Background
Mr. and Mrs. Ruccia had two children, Giustina (the “Appellant”) and Elisabeth (the “Respondent”). The Appellant’s husband had a falling out with Mr. Ruccia, and they remained estranged until Mr. Ruccia’s death. In contrast, the Respondent lived with her parents for her entire life and contributed to their care as they became older.
Upon their deaths in 2009, the Appellant discovered that her parents had made an inter vivos gift of their most significant capital asset to the Respondent, being the equity in the home that they had lived in with the Respondent and her husband. The evidence showed that the same solicitor acted on the sale of the parents’ property and subsequently acted for the Respondent and her husband with respect to the purchase of a new home.
The Appellant commenced a legal proceeding, alleging that the parents were unduly influenced into gifting their equity in the home to the Respondent. At trial, the Appellant’s action was dismissed.
After reviewing the relevant legal principles, the trial judge concluded that the Respondent’s relationship with her parents did have the capacity to create undue influence, but found that the presumption of undue influence did not arise because it was impossible to find “any specific act of coercion or domination.” In any event, the trial judge concluded that if the presumption did arise, the presumption was rebutted.
The Presumption of Undue Influence
In Geffen v Goodman, the Supreme Court of Canada set out the test to be met in order for a plaintiff to establish a presumption of undue influence. The first enquiry is “whether the potential for domination inheres in the nature of the relationship itself.” If such a relationship exists, the next enquiry is an examination of the nature of the transaction.
On appeal, the Appellant submitted that the trial judge erred in law by concluding that the presumption did not arise because there was no “specific act of domination or coercion.” Justice Gillese, writing for a unanimous Court of Appeal, agreed with this submission and distinguished between the presumption of undue influence and actual undue influence.
Justice Gillese held that the test “requires the trial judge to consider the whole of the relationship between the parties to see if there is the potential for domination, rather than looking for a specific act of coercion or domination.”
However, the Court of Appeal concluded that the trial judge had carefully examined the family dynamic, including Mr. Ruccia’s strong-willed personality, his relationship with the Appellant and her husband, and his control over financial decisions.
In the circumstances, although the Ruccias and the Respondent were in a relationship of dependence, the Court of Appeal held that the trial judge had not erred in concluding the presumption of undue influence did not arise.
Thank you for reading,
Umair Abdul Qadir
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In the recent decision of McKendry v McKendry, the British Columbia Court of Appeal considered the elements of a valid inter vivos transfer of property, particularly the timing of intention to make a gift. The central issue in the case was whether a written deed of gift under seal was necessary to complete a gift where legal title had previously been transferred into joint ownership.
Mary, a widow, had several adult children. In 2006, Mary’s son, John, moved into her house. He lived with her until her death in 2012. In 2008, Mary transferred legal title to the house to joint tenancy with John. At the time of the 2008 transfer, Mary did not intend to make a gift of the beneficial interest in the house to John; rather, she intended for John to hold the beneficial interest of the house in trust for her estate to be allocated among him and his siblings according to her will.
In 2010, Mary changed her mind in respect to the disposition of the house. Instead of a trust, she decided to leave the property to John outright as surviving joint tenant. She told her lawyer she understood the house would be John’s absolutely on her death and that he was not obligated to share it with his siblings. About a month later, Mary met with her lawyer to sign a new will. It included a provision stating:
I […] confirm that I wish to cancel any trust agreements or other documents imposing an obligation on my son to share the property I own at [the house] with my other children. I want my home to be my son’s property on my death absolutely – no strings attached. I have made this decision after much consideration and I fully understand that this gives my son the majority of my assets. My house constitutes the majority of my assets.
After Mary’s death, three of her daughters commenced two actions against John: one seeking a declaration that he held the house in trust for the estate and the other seeking a variation of Mary’s will.
The Trial Judge found that Mary did not intend to make a gift of the beneficial interest in the house to John when she transferred legal title to him in 2008. The Judge further found that Mary’s intention changed in 2010, when she decided to make a gift of the house to John. She held the transfer, made in 2008 “is not sufficient to perfect a gift of the survivorship interest in [the house] to John, because (as I have found) Mary did not intend at that time to make such a gift to John.” Further, when Mary did form the intention to make a gift of the house to John, Mary made no further steps to perfect the gift. In the absence of a written deed of gift under seal, the Judge held there was no legally binding gift.
The Court of Appeal overturned the trial decision. The Court reviewed the requirements for a valid inter vivos gift: “the donor must have intended to make a gift and must have delivered the subject matter to the donee. The intention of the donor at the time of the transfer is the governing consideration. In addition, the donor must have done everything necessary, according to the nature of the property, to transfer it to the donee and render the settlement legally binding on him or her.”
The court held that in 2008, Mary transferred only legal title to John (as joint tenant) and retained the entire beneficial interest for herself and her estate. In 2010, however, Mary renounced her beneficial interest in the right of survivorship in John’s favour. “In doing so, she clearly intended to make an immediate inter vivos gift of that incident of the joint tenancy to John.” Because she had already transferred legal title to John, she did everything necessary in 2010 to perfect the gift of the beneficial interest, bearing in mind the nature of the interest. The legal title would not have been affected by a deed of gift under seal, given her clear written intention. Mary’s intention was recorded in writing and no other act of delivery was required.
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Dividing one’s personal property upon death can be a contentious matter. If an item of personal property is not specifically gifted to an individual, there is a chance that the beneficiaries may find themselves litigating.
A specific bequest can provide clarity. Pursuant to Black’s Law Dictionary, a specific bequest is “a legacy of a specified property or chattel to a particular person that is detailed in a will.” We have previously blogged on the use of specific bequests.
Another way to give personal property is through the use of a memorandum attached to the will. This memorandum may be updated to list all of the personal property being gifted, and can either be binding (assuming certain requirements are met) or precatory. We have previously blogged on the use of a memorandum to give personal property.
The use of a specific bequest or a memorandum may help to avoid battles over personal property. If personal property is not given to an individual through a specific bequest, an individual may receive items through a percentage division of either such property (e.g. “to be equally split between my two sons”), or the residue.
One possible issue with giving a percentage division of property or leaving residue to the beneficiaries, is that they may fight over specific items. This is what is happening with the Estate of Audrey Hepburn. In Audrey Hepburn’s will, she left a storage locker as part of the inheritance for her two sons. The locker was filled with various items including fashion accessories, posters, awards, scripts, and pictures, and was to be shared equally. Her two sons are now in dispute over who gets to keep what items in the locker. If Hepburn were to have specified the items to be given, it is possible that this inheritance dispute could have been avoided.
While specific bequests and memoranda are helpful in certain circumstances, it is important to consider the potential value of the bequest before gifting it. Valuations are important in order to ensure that the property being gifted is truly representative of the testator’s intention in leaving the property. For example, an individual may decide to leave each of her sons a separate painting. Without a valuation, this seems like an equitable arrangement. With a valuation, however, it may be that one painting is worth $300.00, and the other is worth $3,000.00. Equalizing the value of personal property may be an important consideration in making a specific bequest in order to avoid potential litigation.
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The expanded powers given to the Court on a motion for summary judgment challenge the Motions Judge to balance procedural expediency against the right to a trial. In Cranston v. Cranston, the Ontario Superior Court of Justice (Divisional Court) granted an appeal of summary judgment which found an advance of funds from a mother to her son to have been a gift rather than a loan.
The case highlights the difficulty in avoiding a trial where "the central issue is whether an oral, undocumented transaction constituted a gift or a loan." Although reported in the Estates and Trusts Reports, both the donor and the recipient of the funds were living and able to give viva voce evidence at trial. While the Motions Judge exercised her power under the new Rule 20.04(2.1) to weigh evidence and draw inferences, the Divisional Court concluded that the absence of viva voce evidence was fatal:
"In Healey v Lakeridge at paragraphs 28 to 32, Perell J. addressed the importance of considering whether the powers under r. 20.04(2.1) should, in the interests of justice, only be exercised at a trial. He suggested that this question is important to address directly because some issues “cannot be truthfully, fairly, and justly resolved without the forensic machinery of a trial.” An action that turns on credibility as much as this case does falls, in our view, into that category."
David Morgan Smith – Click here for more information on David Smith.
This question surfaces quite regularly in the context of estate administration. Did the deceased advance funds to an individual with the intention that they be repaid, or was the advance a gift?
This very question is the subject of the recent, instructive ruling of Justice Brown in Colangelo v. Amore, 2010 ONSC 5657 (CanLII). In this action, Justice Brown was not dealing with an estate matter, but a series of transactions whereby the Plaintiff provided cheques and bank transfers totalling $16,000 to the Defendant, his erstwhile girlfriend. When they later broke up, the Plaintiff claimed repayment.
In determining whether the advances were gifts or loans, Brown J. considered the evidence before him, and the law relating to inter vivos gifts. Brown J. noted that where there is no element of indebtedness, and no presumption of advancement arises, once the transfer is proved, the burden falls on the recipient to show that the money is not repayable. The standard of proof is the general balance of probabilities applicable to all civil cases.
To show a gift, the recipient must establish:
i. an intention to donate;
ii. a sufficient act of delivery, and
iii. acceptance of the gift.
In the case before him, there was clear delivery and acceptance, and the issue became, as usual, whether there was sufficient evidence to prove intention to donate.
As to donative intent, the recipient must show that the donor intended to part with the property and did not intend to reserve the ultimate right of disposal. The evidence should be inconsistent with any other intention or purpose other than to divest himself of the property.
Intention may be inferred from the donor’s acts, and various extrinsic factors, such as the nature of the relationship, the size of the “gift”, and the importance of the “gift” in relation to the donor’s overall property.
In finding that the advances were loans and not gifts, Brown J. reviewed a number of relevant factors. He concluded by citing the words of Ritchie D.C.J. in Simmins v. Clarke (1983), 40 Nfld. & P.E.I.R. 446 (Nfld. Dist. Ct.): “Persons who obtain substantial sums of money from friends should be careful to ensure that if there is no intention to repay the money that this is evidenced satisfactorily so that there can be no doubt. Public policy demands that such casual passing of monies should be repayable unless there is satisfactory evidence to show that it was not intended by both parties to be repaid.”
Thank you for reading,
Paul E. Trudelle – Click here for more information on Paul Trudelle.
Normally, it is the estate trustee who has the authority to deal with the disposition of the deceased’s remains. A deceased’s stated wishes with respect to disposition, including donation, are seen as merely precatory.
However, Ontario’s Trillium Gift of Life Network Actvaries this usual authority, in a number of respects.
Firstly, a deceased’s consent to organ donation is “binding and is full authority for the use of the body…”.
Secondly, where the deceased has not specifically consented to a donation, the Act allows specified persons to consent to the donation of the person’s own body or body parts upon death. A spouse or other family members, in a specific order, are authorized to consent to such a donation if the deceased has not consented during his or her lifetime. One of the persons authorized to consent to the donation is “the person lawfully in possession of the body”. This appears to be a reference to the estate trustee. However, the estate trustee’s authority to consent is low on the list, after the spouse, children, parents, siblings and other next of kin.
The consent of a spouse or other person listed in the legislation is “binding and full authority” for the use of the body. The legislation therefore appears to make a limited exception to the common law authority of the estate trustee.
Consent is not to be given if it is believed that the deceased would have objected during his or her lifetime, or if the deceased did not consent, if someone higher on the hierarchical list would object.
Have a great weekend.