It is the start of a new year and a new decade. Many of us recently enjoyed some holidays and had much to eat and drink. Many of us are also feeling the lingering effects of this merriment. I figured that an uplifting, feel good read would be a nice way to start 2020. I was thus delighted to learn about Eva Gordon, and her estate.
Ms. Gordon passed away at the age of 105. She grew up on an orchard in Oregon, never graduated from college, and worked as a trading assistant at an investment firm in Seattle. In 1964, she married her husband, who was a stockbroker. They did not have any children together. Neither Ms. Gordon or her husband came from money, and they lived a modest life. Ms. Gordon’s godson, who was the Estate Trustee, joked that if Ms. Gordon and her husband went out for lunch or dinner, then they would make sure to bring their Applebee’s coupon.
From the salary that Ms. Gordon received from her employer, she purchased partial shares in numerous stocks, including oil and utility companies, and was an early investor in Nordstrom, Microsoft, and Starbucks. Unlike many at that time, Ms. Gordon held onto these valuable stocks. As a result of this shrewd investing, Ms. Gordon’s wealth increased considerably over the latter years of her life.
Instead of wasting away her money, in her Will, Ms. Gordon decided to bequeath $10 million to various community colleges, with about 17 colleges each receiving cheques for $550,000. Interestingly, no stipulations were put into place as to how the money was to be spent by the colleges. The colleges could do with the money as they wished. For many of them, it was one of the largest donations they had ever received.
For an interesting perspective on the impact of donations to modest, as opposed to elite, institutions, you should listen to Malcolm Gladwell’s Revisionist History podcast (episode 6).
If you find this blog interesting, please consider these other related blogs:
Listen to Delegation in Investment Accounts
This week on Hull on Estate and Succession Planning, Ian and Suzana discuss delegation issues that arise when dealing with Investment Accounts and address a listeners question about the family cottage.
Listen to The Investment Accounts.
This week on Hull on Estates and Succession Planning, Ian and Suzana conduct a quick lesson on capital encroachment and discuss the role of investment accounts in the passing of accounts.
Listen to The Capital Account
This week on Hull on Estate and Succession Planning, Ian and Suzana talk about taking capital out of an account and what to consider along the way.
In my blog yesterday, I introduced the prudent investor rule as the standard of care for trustees when investing assets that are held in a trust. Today, I will address how a trustee’s investment performance may be assessed.
Prior to July 1999, trustees were required to make investments pursuant to the “statutory legal list” provided for in the Trustee Act. This had the effect of holding trustees accountable for each particular investment, rather then the investment portfolio as a whole. The principle was further illuminated by the anti-netting rule, which stated that a trustee, who committed a breach of trust, was not entitled to set off a gain in one transaction against a loss in another. However, through recent amendments to the Trustee Act, the statutory legal list was repealed and replaced with the Prudent Investor Rule.
The Prudent Investor Rule reflects the modern portfolio approach to investments, the emphasis being on the prudence of the portfolio as a whole as opposed to each particular component. This theory is captured in Section 27(5) of the Trustee Act. Section 27(5) requires “a trustee to consider … the role that each investment plays within the overall trust portfolio”. Furthermore, under section 27(6) “a trustee is required to diversify the investments of the trust property. It appears that under the modern portfolio approach, a trustee would not be breaching the standard of care, should he or she invest a substantial amount of trust assets into a single security. As described above, section 27(6) requires that the trustee consider diversifying the portfolio, which is necessary if the Prudent Investor Rule is to be followed. To conclude my topic, tomorrow I will consider the liability of a trustee with respect to the investment of trust assets.
Thanks for reading,
Not all Wills provide for an outright distribution to the beneficiaries. In some cases, the assets of an estate are held in trust over a period of time for the benefit of one or more beneficiaries, sometimes in succession. When a trustee administers a trust, he or she is entrusted to act for the benefit of others. As such, our common law and statutes impose standards that trustees must comply with when dealing with trust property.
With the recent plummet in the stock market, I believe many trustees are considering how the stock market losses have affected the trust investments and what action they should take in the circumstances.
Section 27 of the Trustee Act addresses the standard of care for trustees when investing assets held in a trust. Section 27(1) states, “in investing trust property, a trustee must exercise the care, skill, diligence and judgment that a prudent investor would exercise in making investments”. Section 27(2) states that “a trustee may invest trust property in any form of property in which a prudent investor might invest”.
Section 27(1) and (2) outlines the prudent investor rule. When investing trust assets, a trustee must comply with the prudent investor rule to protect himself or herself from liability. Section 28 of the Trustee Act, emphasizes this point as it states that a Trustee will not be liable for losses arising from investments if the standard of the prudent investor is met. Nevertheless, the issue remains how does a trustee meet the “prudent investor” standard? In keeping with this theme, tomorrow I will address how a trustee’s investment performance may be assessed.
Thanks for reading, and have a great day!
Listen to Estate Assets
This week on Hull on Estates, Natalia Angelini and Sean Graham discuss issues that surround estate assets. The value of some assets are not always determined by their financial value and the value of other assets may change dramatically over time.
The recent decision of the Ontario Superior Court of Justice in the matter of Hutchison v. Hutchison  O.J. No. 3231 (W.A. Jenkins J.) provides an illustration of the court considering the concepts of undue influence and testamentary capacity.
The plaintiffs in this case were three of the four children of the deceased. The defendants were the youngest child, and the child’s wife.
The evidence as considered by the court seriously called into question the capacity of the deceased. By 1996, the deceased was showing early signs of dementia. In 1998, he was found in his car, parked on a railway track. He was disoriented, and was taken to hospital. He was diagnosed as suffering from dementia. While in the hospital, he wandered away, and had to be returned by the police.
Following his diagnosis, he was released from the hospital and lived with the defendants at his home until his death in February, 2002 at the age of 86.
Shortly after his assessment in 1998, the deceased transferred his home to his youngest son. He also transferred his investment account. He then made a new Will wherein he bequeathed the whole of his estate to his youngest son. (In a prior Will, executed in 1992, he divided his estate equally amongst his four children.)
Continuing with our review of the Duct Tape Marketing Podcast of September 12, 2006, Debbie Weil reminds us that there truly is a ROB (Return on Blogs).
In her view, there are three central aspects of what you can expect to get out of blogging in a corporate environment. The first is buzz. This is the word-of-mouth that gets created about your product or service.
The second is "brand". In Debbie’s view, blogging can truly enhance your brand. If blogging is done properly, it really does make you or your company more authentic, more transparent, and as a result, more appealing.
The third aspect that Debbie describes is the "blooper effect". She indicates that if you have the open channel, established by having a blog, and something goes wrong in the process of providing your service or product, you have an avenue to publish a response and to address the issue directly.
This podcast certainly gave us both true inspiration as we have worked hard to provide a regular blog and certainly from ours and Debbie Weil’s perspective, it appears to be a venture that is financially worthwhile.
All the best,
Suzana and Ian.