Tag: gifts

10 Aug

Gifts and the Importance of Timing

Hull & Hull LLP Beneficiary Designations, Estate & Trust, Estate Planning, Trustees, Uncategorized, Wills Tags: 0 Comments

In order for a gift to be valid, there must be delivery. The issue of the timing of the delivery of a gift was explored in the recent Quebec decision of Estate of Tilden, 2018 QCCS 2971 (CanLII).

There, the Liquidator (a role similar to that of an estate trustee) of the Estate of Robert Tilden claimed that a gift made by the deceased was not perfected by delivery prior to the death of the deceased, and therefore lapsed, and must be returned to the estate.

The facts of the case are quite bizarre. The deceased was involved in a family law proceeding. He did not attend at a family law mediation. A legal assistant called the respondent, the deceased’s cousin and best friend, to ask about the deceased’s whereabouts. Late on September 17, 2015, the respondent drove to the deceased’s cottage to look for him. The deceased was not there. The cottage was clean and nothing appeared out of the ordinary. The respondent returned home, stopping to pick up his mail on the way. In his mail, he found a letter from the deceased. The letter indicated that the deceased had left two boxes for the respondent in the basement of the deceased’s cottage. The respondent returned to the cottage, and in the boxes he found hashish and over $600,000 in cash.

While the respondent was at the cottage, a neighbour arrived, also looking for the deceased. The respondent said that the deceased was not there, and the neighbour left. The respondent then put the cash in his car and left.

The next day, the respondent found a letter with the cash. In the letter, the deceased said that some of the cash was to be delivered to another friend, and that the rest was for the respondent.

That same day, another relative received a letter containing a cheque in the amount of approximately $230,000. The relative was concerned about the deceased, and phoned the police. The police attended at the cottage and found the deceased dead in a sleeping area above the garage. They also found letters in the kitchen setting out how the deceased wanted his estate divided. The respondent gave evidence that he did not notice these letters on both occasions when he was at the cottage.

The cause of death was determined to be suicide, and the date of death was determined to be September 17, 2015: the same day that the respondent picked up the cash.

The respondent asked the court to conclude that the deceased died AFTER the cash was picked up, and therefore there was a valid gift of the cash. He argued that the court should presume that the deceased waited until the respondent left the cottage with the box of money before taking his life.

The court refused to make such a finding. The court held that such a presumption was too much of a stretch, based on the facts as known. The court’s reasoning included consideration of the following:

  1. It is not “clear and obvious” that the deceased planned to wait for the respondent to take the box of money before committing suicide;
  2. The deceased would have had no way of knowing that the respondent would go to his cottage immediately upon receiving the letter, to pick up the gift;
  3. In the deceased’s “letter of wishes” left the cottage to the respondent. Therefore, the deceased could have expected the respondent to search the cottage after he had died;
  4. A presumption that the deceased waited for the respondent to pick up the gift before he committed suicide presumed that the deceased knew that the gift had to be completed between two living persons. If the deceased knew this, he wouldn’t have hid from the respondent, but would have given him the cash;
  5. If the deceased was hiding from the respondent when he first attended at the cottage, he wouldn’t have seen that the respondent left without the box of money, and wouldn’t have known that the respondent would return shortly thereafter;
  6. It did not make sense that the deceased waited for “delivery” of the gift to the respondent, but not to the other friend who was to receive part of the cash;
  7. The deceased left other property to the respondent in his valid will. The court queried why the deceased would do this with other property, but not with the cash.

The court concluded that the gift of the money was likely meant to be found after the deceased died, but was to be treated as a “secret”. However, in the circumstances, the gift failed. The respondent was ordered to repay the gift of cash made to him. However, as some consolation, no costs were awarded against the respondent.

For another discussion of a case involving an incomplete gift, see our blog, here.

 

Thanks for reading. Have a great weekend.

Paul Trudelle

05 Apr

Cheques and Balances: the Enforceability of Promises to Gift

Garrett Horrocks Capacity, Estate & Trust, General Interest, Public Policy Tags: , , , , 0 Comments
The delivery of “signed, blank cheques cannot amount to a complete gift”, as the drawer retains an interest in the amount of the cheque until it is cashed.

In November 2017, my colleague, Sayuri Kagami, blogged about the Ontario Court of Appeal’s decision in Teixeira v Markgraf Estate, which considered the validity of a gift in the form of a cheque cashed after the death of the payor.  Today’s blog discusses similar facts in the court’s decision in Rubner v Bistricer. That is, whether pre-signed blank cheques cashed after the payor is declared incapable of managing property constitute either an enforceable promise to gift or, in the alternative, a valid inter vivos gift.

In the late 1960s, the patriarch of the Rubner family, Karl, purchased a 10% stake in a real estate development in Oakville known as the Lower Fourth Joint Venture.  Karl kept legal title to this interest in the name of his wife, Eda, with the intention that their three children, Marvin, Joseph, and Brenda, each receive beneficial ownership of a one-third share in the Lower Fourth interest.

Brenda subsequently renounced her share in the Lower Fourth interest to avoid triggering certain tax consequences.  Accordingly, her share reverted back to Eda, who then set up an account into which the income generated by Brenda’s former share would be deposited.  Notwithstanding that she had disclaimed her share, however, Brenda nonetheless wanted to retain the income that her share generated.  In 2014, Eda agreed to sign several blank cheques for the benefit of Brenda and her husband, allowing them to collect the income from Brenda’s former share without incurring the tax liability.

In November 2016, Eda was assessed as being incapable of managing property.  Shortly thereafter, Brenda’s husband filled in and deposited two of the blank cheques previously signed by Eda in order to prevent Brenda’s brothers from using those funds to pay for Eda’s expenses.

Brenda’s brothers subsequently commenced an application seeking, amongst other relief, a declaration that the funds withdrawn by Brenda after Eda became incapable were held on a resulting or constructive trust for Eda’s benefit.  Brenda took the position that Eda had intended that these funds be considered gifts for Brenda’s benefit. She claimed that at a family meeting in 2012 or 2013, Eda had specifically agreed to gift to Brenda all future income generated by Brenda’s former share in Lower Fourth.

The court was tasked with considering whether a purported promise of future gifts could constitute valid inter vivos gifts.  In order to establish a valid inter vivos gift, the recipient must show:

  • An intention to make a gift on the part of the donor, without consideration or expectation of remuneration;
  • An acceptance of the gift by the donee, and
  • A sufficient act of delivery or transfer of the property to complete the transaction.

The court held that the first step and third steps in this analysis could not be satisfied once Eda had been declared incapable of managing her property.  Eda was deemed to have been unable to formulate the necessary intention to make a gift with respect to the blank cheques.  Moreover, the court held that the delivery of “signed, blank cheques cannot amount to a complete gift”, as the drawer retains an interest in the amount of the cheque until it is cashed.  Once Eda became incapable of managing her property, the gift could no longer be perfected.  The blank cheques that were cashed after Eda was assessed as incapable of managing her property were held to be invalid, and Brenda was ordered to repay the amounts withdrawn.

Thanks for reading.

Garrett Horrocks

28 Nov

Hull on Estates #534 – Gifts and Cheques

76admin Hull on Estate and Succession Planning, Hull on Estates, Podcasts, PODCASTS / TRANSCRIBED, Show Notes, Show Notes, Uncategorized Tags: , , , , , , , 0 Comments

Today on Hull on Estates, Jonathon Kappy and Doreen So discuss the issue of gifts that are made by way of a cheque in the context of the Court of Appeal’s decision in Teixeira v. Markgraf Estate

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.

Click here for more information on Doreen So.

 

06 Nov

Teixeira v Markgraf Estate: Can you cash a gifted cheque after the cheque writer dies?

Sayuri Kagami General Interest Tags: , , 0 Comments

You receive a cheque from a loved one who wishes to provide you with a gift. Days later, before you’re able to cash the cheque, your loved one dies. Are you still able to claim your gift? A recent decision of the Court of Appeal for Ontario indicates that in this type of situation, the gift will fail for lack of delivery.

In Teixeira v. Markgraf Estate, the applicant, Mr. Teixeira, brought a claim against the estate of his neighbour Maria Markgraf for payment of a cheque she wrote to him six days before her death. For years, Mr. Teixeira provided support and assistance to his neighbour without any thought of compensation. Shortly before her death, Ms. Markgraf provided a $100,000.00 bequest to Mr. Teixeira in her Will and also wrote him a cheque for $100,000.00. When Mr. Teixeira brought the cheque to Ms. Markgraf’s bank, he was turned away and told the bank would need to make further inquiries. The bank did not tell Mr. Teixera that Ms. Markgraf’s account held insufficient funds to cover the cheque (although she had sufficient funds in her other accounts). Days later, Ms. Markgraf died and the bank, being informed of her death, froze her accounts. Mr. Teixeira unsuccessfully attempted to deposit the cheque at his own financial institution the next day.

The Court of Appeal held that the cheque was subject to the law of gifts and the three elements of a valid gift needed to be met:

  1. an intention to make a gift on the part of the donor, without consideration or expectation of remuneration;
  2. an acceptance of the gift by the donee; and
  3. a sufficient act of delivery or transfer of the property to complete the transaction.
Delivery of cheque is not delivery of gift
The cheque itself was not a transfer of property, but rather a direction by Ms. Markgraf to her bank to pay $100,000.00 to Mr. Teixeira.

While the first two elements of the test were met, the Court of Appeal grappled with the issue of whether the delivery of the cheque itself was sufficient to constitute delivery of the gift. We’ve previously blogged on the issues that can arise with delivery of inter vivos gifts.

In this case, the Court found that receipt of the cheque did not constitute delivery. The cheque itself was not a transfer of property, but rather a direction by Ms. Markgraf to her bank to pay $100,000.00 to Mr. Teixeira. At any time prior to the cheque being cashed, Ms. Markgraf was able to revoke her direction to the bank. As she retained control over the property to be gifted, the gift was not completed.

Once it received notice of Ms. Markgraf’s death, the bank, pursuant to s. 167 the Bills of Exchange Act, lost all authority to make payment of the cheque and Mr. Teixeira could not oblige the estate to honour the gift. Mr. Teixeira was therefore out of luck in bringing his claim.

Lesson learned: when you receive a gift of cash by way of cheque, cash it ASAP.

On Thursday, I’ll look at when equity might step in to perfect a gift that would otherwise fail (an argument unsuccessfully brought by Mr. Teixeira).

Thanks for reading!

Sayuri Kagami

20 Apr

When There Just Isn’t Enough to Go Around: Abatement and Ademption

Hull & Hull LLP Estate & Trust, Estate Planning Tags: , , , , , , , , , , , 0 Comments

In a perfect situation, a deceased person’s estate would correspond exactly with the gifts as set out in his or her last will and testament. However, it is sometimes the case that the assets of an estate are insufficient to pay all of a testator’s debts, as well as all gifts set out in his or her will, or where the object of a specific bequest no longer exists at the time of the testator’s death.

In the former situation, the principle of abatement would apply to the distribution of the estate to beneficiaries, meaning that the gifts set out in the testator’s will are reduced rateably and in order depending on the type of bequest. If the estate has insufficient assets to pay the testator’s debts, it would be insolvent and the legacies described in the testator’s will would be unable to be paid. If there are assets leftover after payment of debts, but they are not sufficient to fully satisfy all gifts, then some or all of the gifts will abate.

If the testator’s will does not specifically provide for the order in which gifts are to abate, the order of abatement of bequests is as follows:

  1. Residuary personalty.
  2. Residuary real property.
  3. General legacies, including pecuniary bequests from the residue.
  4. Demonstrative legacies, meaning bequests from the proceeds of a specific asset or fund not forming part of the residue.
  5. Specific bequests of personalty.
  6. Specific devises of real property.

The abatement of gifts in each category will occur in equal proportions so that no single beneficiary will be made to bear the full burden of the abatement.

Ademption occurs when a specific legacy in a testator’s will cannot be satisfied due to the lack of existence of the property that was the subject of the bequest. When a specific gift adeems, it fails, and the beneficiary will not receive the gift.

In Ontario, there are a number of statutory provisions that affect the doctrine of ademption, including ss. 20 and 22 of the Succession Law Reform Act, R.S.O. 1990, c. S.26 that permits a will to operate on substituted property, and s. 36 of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 (the “SDA”) which provides that ademption does not apply to property disposed of by a guardian under the SDA.

Thanks for reading,

Rebecca Rauws

Other blog posts you may enjoy:

13 Apr

Object Lessons from Karen Von Hahn’s New Memoir

Doreen So Continuing Legal Education, Estate & Trust, Estate Planning, Executors and Trustees, General Interest, Guardianship, In the News, Power of Attorney, Wills Tags: , , , , , , , 0 Comments

Today’s blog was inspired by Karen Von Hahn’s article in The Globe and Mail about the memoir that she wrote on the subject of her late mother.  What Remains: Object Lessons of Love and Loss appears to be a collection of chapters in which each chapter is focused on a different thing or object that reminded the author of her mother.  According to Von Hahn, she used items, like her mother’s silver satin sofas and a pack of cigarettes, “as a starting point, lens and metaphor to talk about who she was”.  Perhaps poignantly, Von Hahn wrote that “the first line of the book is that the last word my mother ever said to me was ‘pearls’”.

Given the importance that we may attach to our things (and the importance that our loved ones may correlatively attach to our things), those who are thinking about their estate plans may wish to include specific provisions in their Will with respect to the disposition of personal possessions on death.

In doing so, an attorney for property or a guardian of property will also be prohibited from getting rid of these specific items during the testator’s lifetime, if he/she knows that these items are subject to a specific testamentary gift in accordance with section 35.1 of the Substitute Decisions Act, 1992.  That being said, section 35.1 of the Act also allows for the disposition of a specific testamentary gift if it is necessary to comply with the guardian’s duties, or if it is gifted to the person who would be entitled to it under the Will within the purview of an optional expenditure under section 37.   Accordingly, specificity is key in this regard and it would appear that care should be given to describing the item with as many details as possible.

As Von Hahn wrote in her article,

“Like it or not, we read every book by its cover, and judge everyone we meet by their shoes. Which is why we live our lives engaged in a deep and meaningful relationship with both our possessions, and also those of whom we love.”

On that note, happy long weekend everyone!

Doreen So

10 Apr

What is a Disclaimer?

Ian Hull Beneficiary Designations, Estate & Trust, Estate Planning, Executors and Trustees, General Interest, Trustees, Wills Tags: , , , , , , , 0 Comments

Receiving an inheritance under a will is a gift, and there is no obligation, as a beneficiary, to accept it. It is possible for a beneficiary to waive their right, or “disclaim” their interest, to a gift under a will.

As established in Biderman v Canada, 2000 CanLii 14987 (FCA):

A disclaimer is the act by which a person refuses to accept an estate which has been conveyed or an interest which has been bequeathed to him or her. Such disclaimer can be made at any time before the beneficiary has derived benefits from the assets. It requires no particular form and may even be evidenced by conduct.

Furthermore, Biderman v Canada establishes that “there is no entitlement to an estate until it is opened since a testamentary gift can always be revoked until death. Once made, the disclaimer is retroactive to the date of death of the deceased.”

There is no prescribed form for drafting or implementing a disclaimer of inheritance. Generally, the waiver should be a written agreement, acknowledging the waiver of inheritance (preferably drafted by a lawyer). The disclaiming agreement should be signed by the beneficiary, and witnessed.

It is also important to ensure that the beneficiary waiving their right to inheritance was not improperly or unduly influenced to do.

The disclaimer, once signed, does not need to be filed with the court. It is important that the lawyer who acts for the estate or the estate trustee keeps the waiver.

If an inheritance is disclaimed, the gift will be deemed void and fall into the residue of the estate, which will then be distributed according to the deceased’s will, or pursuant to the intestacy provisions of the Succession Law Reform Act. When disclaiming a gift, the beneficiary does not have any control over who receives their part of the inheritance.

A beneficiary can not disclaim part of a gift; once you disclaim part of your interest in an inheritance, you disclaim all of it. In Re Skinner, 1970 CanLii 360, the Ontario Supreme Court established that “the law is clear that, where there is a single undivided gift, the donee must take the whole or disclaim the whole: he cannot disclaim part.”

Thanks for reading,

Ian M. Hull

Other Articles You Might Be Interested In
I Don’t Want That Gift! 

Hull on Estates #379 – Disclaimers of gifts under will

Testamentary Gifts of Personal Property: Avoiding “Sticky” Situations

09 Feb

Dividing Your Estate Equally

Hull & Hull LLP Estate & Trust, Estate Planning, General Interest, Litigation, Uncategorized, Wills Tags: , , , , , , , , , , 0 Comments

It is often the case that a testator may wish to make a significant inter vivos gift to one or more of their children. He or she may intend that such a gift is to be taken as either an advancement or in addition to a later inheritance. If, in preparing a Will and/or estate plan for a testator, a solicitor becomes aware of prior inter vivos gifts to the testator’s children, the solicitor should inquire further into the testator’s intention in this regard in the context of the estate plan.

Sometimes the dynamics in a family are such that any inequality as between siblings can become a serious issue, potentially leading to estate litigation following a testator’s death. If a testator is aware of this possibility, the testator should be alerted to the possible financial consequences of such a dispute. Of course, there is no way to guarantee that estate litigation will be avoided, but there are steps that can be taken in an estate plan to try to make the administration and distribution of an estate as smooth as possible.

One simple way of at least addressing the issue is to include a clear statement of the testator’s intentions in the Will, such as an indication that any gifts given during the testator’s lifetime are to be considered an advance, or should be given in addition to the child’s entitlement under the Will. Unfortunately, this will not necessarily avoid a fight amongst siblings if any of the children who have not received inter vivos gifts are not happy with the outcome, or if the child who did receive a gift expected to also receive an equal share of the parent’s estate.

An option for ensuring a truly equal distribution is a hotchpot clause. This is also an option if the testator does, in fact, intend that inter vivos gifts were to be given as an advancement on the child’s future inheritance, as is often the case.

A “hotchpot” clause will operate to take into account the value of gifts given during the testator’s lifetime in calculating the division of the estate, with any gifts previously given being subtracted from the portion given to the child in question. Effectively, the value of any substantial inter vivos gifts will be clawed back into the estate for the purpose of determining the value of the estate and the ultimate entitlement of the child or children who received such gifts. The end result of a hotchpot calculation will be that each child will receive from their parent, either inter vivos or from the estate, a share of exactly equal value. Hotchpot can be in relation to inter vivos gifts given, or to the forgiveness of outstanding loans given during the testator’s lifetime.

The concept of hotchpot is based on the equitable doctrine of ademption by advancement, also known as the presumption against double portions. This principle presumes that a parent intends equality between his children, such that if he or she leaves the residue to his or her children equally, but also made an inter vivos gift or advancement to one of the children, the rule will apply to bring the gift into hotchpot so that the intention of equality will not be altered.

Hotchpot, or ademption by advancement, also applies in the case of an intestacy. Section 25 of the Estates Administration Act, R.S.O. 1990, c. E.22, provides that if the child on an intestacy has been advanced assets, with such advancement being expressed by the deceased or acknowledged by the child in writing, the value of the advancement will be considered, for the purposes of s. 25, to be part of the estate to be distributed.

Accordingly, the default position when it comes to inter vivos gifts to a testator’s children will likely be equality, and as a consequence, some form of hotchpot calculation. Chances are that parents usually do intend to divide their estate equally amongst their children, so this rule will probably operate in line with the testator’s intentions in most cases. If a testator does wish to treat their children unequally, the estate plan must be carefully prepared with a view towards all possible consequences.

Thanks for reading,

Rebecca Rauws

Other blog posts you might enjoy:

A Reminder Regarding the Costs of Estate Litigation

Talking About Death with Family

Loan or Gift?

22 Dec

Revocation by Divorce

Lisa-Renee Beneficiary Designations, Estate & Trust, Estate Planning, General Interest, Uncategorized, Wills Tags: , , , , , , 0 Comments

Earlier this week, we discussed the effect a well drafted separation agreement has on an individual’s estate plan.  But what effect does a divorce have?

In most instances, going through a divorce can be stressful and contentious.  As a result, necessary changes to an individual’s estate plan may be overlooked.  Fortunately, section 17(2) of the Succession Law Reform Act provides divorced couples with some piece of mind:

“Except when a contrary intention appears by the will, where, after the testator makes a will, his or her marriage is terminated by a judgment absolute of divorce or is declared a nullity,

(a) a devise orWills bequest of a beneficial interest in property to his or her former spouse;

(b) an appointment of his or her former spouse as executor or trustee; and

(c) the conferring of a general or special power of appointment on his or her former spouse,

are revoked and the will shall be construed as if the former spouse had predeceased the testator.”

While the SLRA provides a divorced spouse’s estate with some protection against honouring unintended gifts after divorce, the termination of a marriage is nonetheless a good time for divorced persons to review their estate plans, especially as joint bank accounts and beneficiary designations do not have the benefit of the remedial provisions of the aforementioned statute.

You may also be interested in:

Estate Planning After Your Second Marriage
The Positive Side of the Second Marriage
Thanks for reading!

Lisa Haseley

14 Nov

How Generous may an Attorney for Property Be?

Ian Hull Charities, Power of Attorney, Wills Tags: , , , 0 Comments

Section 31 of the Substitute Decisions Act (“SDA”) states that an attorney for property “has power to do on the incapable person’s behalf anything in respect of property that the person could do if capable, except make a will.”  An attorney for property also has the power to make gifts and loans to the grantor’s family and friends, as well as charitable gifts (SDA s37(3)).

Gifting as an Attorney for Property
“In addition to the prohibition against making a will, an attorney for property has an obligation to find and read the grantor’s will (SDA s33.1). “

There are strict limits, however, to how generous an attorney may be. The SDA includes guiding principles with respect to making gifts: the attorney cannot deplete the grantor’s property to the extent that there may not be enough to satisfy the needs of the grantor him or herself, during the grantor’s lifetime. The gifts or loans must also only be made if the attorney has a reason to believe, based on any expression the grantor might have made while capable, that the grantor would have made these gifts  or loans if capable. Charitable gifts have further restrictions.

In addition to the prohibition against making a will, an attorney for property has an obligation to find and read the grantor’s will (SDA s33.1). Unless necessary to perform one’s duties to the incapable person, the attorney must not dispose of property subject to a specific testamentary gift, although this prohibition does not apply to a testamentary gift of money (SDA s35.1). The court highlighted the importance of the will in Weinstein v. Weinstein (Litigation Guardian of), stating obiter that s 33.1 of the SDA is “indicative of the importance the legislators attach, appropriately, to the will of an incapable person, in view of the permanent character of the will if the incapable person does not regain capacity.” Taken together, these provisions can be read to support the proposition that an attorney does not have the authority to dispose of assets in a way that undermines the grantor’s estates plan.

The case law on the subject of an attorney’s ability to make gifts is limited. Moreover, the cases largely deal with relatively small gifts. While not directly related to the issue of gifts made by an attorney on behalf of a grantor, the court in Banton v Banton held that it is improper for an attorney to deprive the grantor of his or her testamentary freedom by making inter vivos transfers. The attorneys in this case made a large transfer to a trust to protect the grantor from a predatory marriage, which is both allowed and an appropriate action for an attorney to take. However, the secondary beneficiaries of the trust were the grantor’s children, which the court held functioned as a will substitute, which is an inappropriate use of the power of attorney.

In summary, gifting must be done carefully and in a manner that would survive judicial scrutiny. An attorney should not make gifts if they represent so large a proportion of the estate that the attorney has substituted the testamentary intentions of the grantor with their own discretion. An attorney should also not make any gifts if the grantor was not in the habit of making gifts to friends and family or had expressed a contrary intention while capable.

Thanks for reading,

Ian M. Hull

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