A decision released earlier this week highlights the importance of a complete Management Plan supported by evidence when seeking one’s appointment as guardian of property.
Sometimes, the necessity of filing a Management Plan is viewed as a formality without proper attention to the details of the plan. However, the failure to file an appropriate Management Plan may prevent the appointment of a guardian of property, putting the administration of the incapable’s property in limbo.
In Connolly v Connolly and PGT, 2018 ONSC 5880 (CanLII), Justice Corthorn declined to approve of a Management Plan filed by the applicant and, accordingly, refused to appoint her as guardian of property. The Management Plan was rejected for the following reasons (among others):
- it did not address an anticipated increase in expenses over time (including when the applicant was no longer available to serve as the incapable’s caregiver and he may incur alternate housing costs);
- there was no first-hand evidence from BMO Nesbitt Burns or Henderson Structured Settlement with respect to the net settlement funds in excess of $1.4M and their payout and investment in a portfolio on the incapable’s behalf;
- the Court was concerned that stock market volatility could threaten to deplete the invested assets;
- the Public Guardian and Trustee had strongly recommended that the applicant post security, the expense of which was reflected as a deduction from the incapable’s assets (while not suggested that this was unreasonable, Justice Corthorn took issue with the absence of any case law or statutory provision cited by the applicant in support of the payment of the expense by the incapable rather than the applicant herself); and
- while the applicant had agreed to act as guardian without compensation, the plan did not contemplate how compensation would be funded if claimed by a potential successor guardian.
Notwithstanding that neither the incapable nor the Public Guardian and Trustee had opposed the Management Plan or the appointment of the applicant as guardian of property, Justice Corthorn found that the appointment of a guardian to manage over one million dollars in settlement funds was “contentious” and, accordingly, under Rule 39.01(5) of the Rules of Civil Procedure, direct evidence from a representative of the financial institution was required. In short, although the applicant was accepted as being a suitable candidate for appointment as guardian of property (and it was anticipated by the Court that she would ultimately be appointed), the Court was not satisfied on the evidence available that the management of the incapable’s property in accordance with the contents of the Management Plan was consistent with the man’s best interests.
While Justice Corthorn declared the individual respondent incapable and in need of assistance by a guardian of property, Her Honour adjourned the balance of the matter, suggesting that the applicant’s appointment as guardian of property could be revisited once additional evidence was filed in support of the contents of the Management Plan and/or the plan was further revised.
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The financial industry is relentless in encouraging Canadians to “plan for the unexpected” – and highlighting how anything can happen. You could lose your job, become disabled, lose your home to a fire, lose a loved one – the list of possible bad news seems endless.
The solutions that the industry is pushing – emergency funds, insurance, retirement savings – are all smart choices, and it’s important to have protections against bad news in place. But what about the good news? Do we need a plan of action when happy financial events occur?
The answer is absolutely. But luckily, your actions can take place after the good news. Unlike the bad news event, no advance planning is required.
Unexpected good financial news can come in many forms: an inheritance, large gift, work bonus or promotion, or a rapid rise in the value of shares that you own. And if you experience financial good fortune, it’s important to integrate the unexpected additional assets into your financial plan.
For example, with a more secure financial base, you may be more comfortable with investment risk, and more willing to adopt a more aggressive investment strategy to enhance your long-term returns. Conversely, if your savings are already aggressively invested to achieve your retirement goals, the additional wealth may allow you to structure a more moderate risk portfolio.
If you are currently retired, financial good fortune can also affect your retirement income strategy. If you draw on your new funds to meet your immediate cashflow needs, you’ll be able to withdraw less taxable income from your registered plans – and this could significantly lower the taxes you pay.
Of course, the most unexpected – and most unlikely – piece of good financial news is what nine Montreal co-workers received around Christmas: a $60 million lottery win, representing nearly $7 million each. The group seemed surprisingly tight-lipped in the press reports, not even disclosing where they worked. But you definitely get a sense that this is a savvy group who will plan well.
And while the article below contains advice for a lottery win, it really applies to any financial windfall.
Enough of the bad news – here’s to good financial fortune for you in 2018.
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This week on Hull on Estates, Ian and Noah discuss the importance of prudent investment by a trustee in light of the decision in Mowry v Groome.
Beginning April 10, 2017, the United States Department of Labour will implement what is being referred to as the “Fiduciary Rule“. The Fiduciary Rule will require American investment advisors to satisfy a higher standard of care when providing investment recommendations, putting clients’ interests above their own and providing complete disclosure with respect to fees and potential conflicts of interest.
The standard of fiduciary, premised on a role of trust and the duty to act in utmost good faith, is applied to guardians of property and the person, attorneys of property and personal care for incapable grantors, estate trustees, and other types of trustees. While commentary regarding the Fiduciary Rule recognizes that investment advisors should be (and often are) already guided by the best interests of investor clients, some who earn commission on the sale of certain products may be in a position of conflict. The Fiduciary Rule will prevent advisors from making certain recommendations if they are not in the client’s best interests. The new standard of care required of American investment advisors may to some extent fall short of that applied in respect of other traditional fiduciaries, and is subject to a number of exceptions.
Absent the implementation of the Fiduciary Rule or equivalent requirements in other jurisdictions, investment advisors are not typically treated as fiduciaries. Contracts may specifically state that advisors are not acting in a fiduciary role and that they do not absorb risk on their clients’ behalf related to investment advice that is followed. Typically, if something goes wrong and an investor wishes to pursue a claim against his or her advisor, the onus is on the investor to prove the fiduciary nature of the relationship. If the investor is able to prove that a fiduciary obligation existed (factors include the length of the relationship, the sophistication of the client, and the demonstrated reliance on the advice of the advisor), the advisor must then show that he or she has discharged the duty in good faith and with full disclosure.
Although the Fiduciary Rule is scheduled to come into effect on April 10 of this year, it is anticipated that the new Trump administration may delay the applicability of the Fiduciary Rule for the time being. Although there have been discussions with respect to raising the standard of care of investment advisors in Canada, where extensive regulations already apply, an equivalent to the U.S. Fiduciary Rule has not yet been introduced.
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Donald Trump is president-elect of the United States of America. While the political ramifications of the surprise result of this week’s election are not yet known, there is little doubt that, as it relates to Donald Trump personally at least, his world is about to change. Donald Trump prides himself on being a successful businessman, controlling, amongst other things, a vast hotel empire that bears his name. But who controls such assets on Mr. Trump’s behalf while he is president?
In the days following Justin Trudeau’s selection of his first cabinet in November 2015, I wrote a blog about the requirement that all of such cabinet members would need to place their investments into a blind trust. At its most simple, a blind trust can be thought of as an individual relinquishing control over their assets, and providing them to a trustee to manage on their behalf. The trustee has complete discretion over how to invest the individual’s assets, with the beneficiary being provided with no information regarding how the investments are being held, and the beneficiary having no say in how the funds are managed. As the beneficiary has no idea what their funds are invested in, the theory is that they would not be inclined to enact government policy which would favour their own investments, and they would be able to avoid a conflict of interest.
CNBC is reporting that Mr. Trump will be placing his business interests into a blind trust while president, handing over control to his three children. CNBC has noted that Mr. Trump’s circumstance is not typical to those of other politicians who place their assets in blind trusts, noting that Mr. Trump likely knows his own investments intimately as a result of their bearing his name, such that, even in a blind trust, he would likely be able to identify them. NPR has previously reported about such difficulties, noting that it would likely be impossible for Mr. Trump to place his most valuable asset, being his own “Trump” name and brand, into a blind trust.
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Finance Minister Bill Morneau is looking to hear from Canadians about whether Ottawa should continue the 70-year old Canada Savings Bonds program. According to the Globe and Mail, the value of the bonds has fallen dramatically from $55-billion in 1987 to $6-billion in 2015.
The official history of the Canada Savings Bond (the “Bond”) program began when the bonds were introduced as War Savings Certificates and Victory Bonds in order to fund Canada’s involvement in WWI and WWII. The Bond was launched with its current name in 1946 along with the original Payroll Program. The Bonds were purchased through payroll deductions, and up to 16,000 employers participated in this plan in 1946.
In 1998, a similar product known as the Canada Premium Bond was introduced with a higher interest rate, and the feature of being redeemable once a year.
In their present form, the Bonds are offered exclusively through the Payroll Savings Program, while the Canada Premium Bond is available through financial institutions, dealers and by phone.
The Bond is generally described as a safe and secure savings product. For more information about this Government of Canada program please visit www.csb.gc.ca
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When we think of assets, items such as real property, investments, bank accounts, and even jewellery and vehicles are what typically come to mind. Aside from cases where a client has an obviously valuable collection or rare painting, we may not immediately think of art as an asset. However, this may be changing as studies show that investment art is quickly becoming one of the fastest growing and dynamic markets in North America.
According to The Capgemini World Wealth Report of 2013, fine art made up 16.9% of high net worth individuals’ investments of passion, not far behind jewellery and watches. It is no longer uncommon to hear of art being sold in Canada for hundreds of thousands or even millions of dollars at high-end auction houses such as Sotheby’s. More than ever, art is being seen as providing a good source of return by investors. As the report points out, a well chosen piece of art can not only act as a hedge against inflation, but it also has the potential to outperform over the long term.
As a result, when dealing with estate assets where art is involved, it is important that the Estate Trustee manage investment art with the same level of care and attention that they would any other traditional asset. This may involve ongoing maintenance or ensuring proper insurance coverage is in place to protect against theft or damage. Together with obtaining a formal appraisal, these steps can help protect the Estate Trustee against liability while realizing the best possible return on the investment for the beneficiaries.
Obtaining an appraisal when administering estate assets that include investment art and in estate planning where art is to make up a significant portion of the estate, can be invaluable. For a testator, the formal appraisal can be of great assistance in determining the true value of an art asset. This will allow them to make a more informed decision as to the division of their assets. Appraisals are also a useful means for the Estate Trustee to avoid unpleasant surprises where the fair market value is later discovered to be significantly higher than the sale price, resulting in unanticipated taxes.
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