Issues involving estates with international aspects are on the rise. Technological advances over the last century have resulted in increased mobility and connectivity, such that people are now choosing to invest, live, work, study or retire abroad. As a result, it is becoming increasingly common for people to pass away with assets, such as bank accounts, investments or real estate, in foreign jurisdictions.
What happens when an individual dies with assets located in Ontario but is domiciled in another jurisdiction?
Attaining the authority to deal with assets located in Ontario can be puzzling for a foreign personal representative charged with the task of administering these assets.
Common law has traditionally distinguished between moveable property (personal property) and immoveable property (land or interests in land). Moveable assets are typically governed by the law where the deceased was domiciled, whereas immoveable assets are typically governed by the law where the land is situated.
However, in Ontario, a grant of probate is typically required in order for a personal representative to establish his or her authority to deal with assets located in Ontario. Banks and land titles offices generally require a grant of probate before they will release or transfer the assets. This position is the same whether or not a grant has been obtained from a court in some other jurisdiction.
It is possible to have a foreign grant recognized in Ontario, in lieu of obtaining probate in Ontario. Depending on the size of the worldwide estate, this may be the better option, as tax is typically levied on the value of the worldwide assets with a grant of probate in Ontario. If seeking recognition of a foreign grant in Ontario, estate administration tax will likely only be levied on the value of the assets in Ontario.
Where the original grant was made in a Province or Territory of Canada or a country that is a member of the Commonwealth, an Application may be made for Confirmation by Resealing of Appointment of Estate Trustee. The procedure is the same whether the deceased died with or without a Will. The requirements for a Confirmation by Resealing are set out in Rule 74.08 of the Ontario Rules of Civil Procedure (the “Rules”).
Where the original grant was made in a country that is not a member of the Commonwealth and the deceased died with a Will an Application may be made for a Certificate of Ancillary Appointment of Estate Trustee With a Will. The requirements for a Certificate of Ancillary Appointment are set out in Rule 74.09 of the Rules.
Where the original grant was obtained in foreign jurisdiction and the deceased died without a Will, an Application may be made for a Certificate of Appointment of Foreign Estate Trustee’s Nominee as Estate Trustee Without a Will. The requirements of this Application are set out in Rule 74.05.1 of the Rules.
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Given the intrigue and extensive coverage that the current US election has had north of the border, it is only fitting that we dedicate today’s Hull & Hull Blog to reviewing the position taken by Clinton and Trump with respect to changes to estate tax.
A recent article in Forbes explains that current US laws exempt estates worth $5.45 million or less from paying estate tax. Estates valued higher pay 40% tax.
Hillary Clinton seeks to increase the taxes owing by the wealthiest from 45% to 65% based on the value of the estate, apparently the highest it’s been since 1981. Specifically, estates over $10 million would be taxed at 50%, those over $50 million at 55%, and those exceeding $500 million (for a single person) at 65% As well, Clinton also seeks to lower the exemption for estates valued at $5.45 million to $3.5 million.
Trump, on the other hand, seeks to eliminate the estate tax altogether.
According to the Wall Street Journal, the Republicans see the tax as “a patently unfair confiscation of wealth that punishes family-owned business”, while the Democrats view it as “a levelling tool necessary to combat concentration of wealth”.
In Ontario, while there is no inheritance tax, estate administration tax is charged on the total value of a deceased’s estate. Subject to certain exceptions, this includes the following assets: real estate; bank accounts; investments; vehicles and vessels; all property held in another person’s name; and, all other property, wherever situated, including goods, intangible property, business interests, and insurance proceeds.
As discussed in prior Hull & Hull LLP blogs, new provisions came into force on January 1, 2015, which requires payment of $5.00 for each $1,000, or part thereof, for the first $50,000 and $15 for each $1,000, or part thereof, of the value of the estate exceeding $50,000. There is no estate administration tax payable if the value of the estate is $1,000 or less.
A recent decision of the Supreme Court of Nova Scotia considers the issue of which individuals may qualify as persons having an interest in an estate.
Kenny v. Kenny Estate, 2016 NSSC 214 (CanLII), featured a situation in which the deceased, a father of two, had executed a new will after his wife and son had died. The deceased’s last will and testament named his daughter as sole residuary beneficiary. His prior will named both children (or their surviving issue) as alternate beneficiaries in the event that his wife predeceased him. The granddaughter of the testator, being the daughter of the predeceasing son, sought to have the will proved in solemn form as a “person interested in the estate”.
The application was heard within the context of Nova Scotia’s Probate Act and the related procedure and regulations. The Probate Act refers to the requirement to prove a will in solemn form on application by an interested person seeking this relief.
In determining that the granddaughter qualified as an interested person and had standing to bring such an application, the Court considered the following facts:
- The granddaughter would have benefitted as an alternate residuary beneficiary under a prior will (as a result of her grandmother’s death and her father’s death before that of her grandfather);
- The inclusion of grandchildren as issue is consistent with the jurisprudence and
the definition of the word used in Nova Scotia’s Intestate Succession Act;
- The granddaughter was a lineal descendant of the testator, and, accordingly, qualified as his “issue”.
In Ontario, an “interested person” who objects to a will and seeks to have it proven in solemn form can, similarly, request this relief pursuant to Rule 75.01 of our Rules of Civil Procedure. However, the Ontario Court of Appeal recently confirmed that the right of an interested person to have a will proved in solemn form is not absolute. An interested person may request proof in solemn form but cannot require it, as it is in the discretion of the Court alone to determine whether the testamentary instrument ought to be proved and, if so, the manner in which this is to be done.
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In Ontario, it is trite law that an estate trustee of a testate estate derives his or her powers from the Will of the deceased. Accordingly, unlike an intestate estate, it is not always necessary for an estate trustee to obtain a Certificate of Appointment of Estate Trustee with a Will (“probate”) in order to administer an estate.
However, in certain matters it is necessary for an estate trustee to obtain probate before being able to represent the estate, regardless of whether there is a valid Will. The 2000 decision of Justice Haley in Carmichael Estate (re) succinctly sets out the three instances where probate is required:
- Third parties dealing with the executor may require probate in order to accept the authority of the Will. Justice Haley provides the example of a debtor who wishes to ensure that the proper person is being paid in order to satisfactorily discharge the debt.
- Proceedings where the executor represents the estate as plaintiff or as defendant. Here, Justice Haley notes that the Court will require probate in order to satisfy an evidentiary matter pursuant to section 49 of the Evidence Act.
- Where a foreign estate trustee intends to establish his rights in Ontario, letters probate must be resealed (referred to as ancillary letters probate).
In Re Carmichael Estate, the respondents sought to include a fourth category requiring probate – the removal of an executor under section 37(1) of the Trustee Act. The Court held, however, that an applicant is free to bring a removal application regardless of whether probate has been granted and whether the estate trustee has acted in the administration.
Re Carmichael Estate a decision well worth reading for all history buffs given Justice Haley’s excellent historical analysis of the English common law Courts relating to probate and estates from the 11th century onwards.
Most estate lawyers are already familiar with the Notice of Objection to the Issuance of a Certificate of Appointment of Estate Trustee, a document that operates to prevent a probate application from successfully being filed with the court. Fewer may be aware that there is another option for individuals who wish to remain updated of the status of the filing of a probate application or other proceeding commenced in respect of an estate but do not, necessarily, object to the appointment being sought and/or the administration of an estate in accordance with the last will and testament.
Rule 74.03 of the Rules of Civil Procedure describes a Request for Notice of Commencement of Proceeding. Such a document, in Form 74.3, may be filed by any individual who appears to have a financial interest in an estate and will allow him or her to receive notice of any proceeding that is made in respect of the estate, including the filing of a Notice of Objection or a probate application.
A Request for Notice of Commencement of Proceeding typically expires after three years (in which case a subsequent Request may be filed) and does not apply to proceedings that are initiated after a Certificate of Appointment has been issued.
Filing a Request for Notice may be a good option for beneficiaries who wish to be apprised of any developments in the early stages of the administration of an estate (at least in situations where probate or other court proceedings are required) without objecting to the issuance of a Certificate of Appointment. The ability to receive such updates may be especially beneficial in situations where there may is no communication with a named estate trustee or updates on the status of probate are not otherwise forthcoming.
In January 2016, a similar form in respect of applications to pass accounts was introduced through an amendment to the Rules of Civil Procedure. As previously discussed on our blog, a Request for Further Notice in Passing of Accounts allows an individual entitled to service of an application to pass accounts to receive notice of any further step in the application, without the need to file a Notice of Objection to Passing of Accounts, which had been previously required in order to retain the ability to respond to the proceeding at a later stage.
Forms like these allow for a class of participants in pre-probate proceedings and applications to pass accounts who may not want to become actively involved, but nevertheless wish to remain updated of any developments.
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This week on Hull on Estates, Natalia Angelini and Lisa Haseley discuss estate planning techniques for reducing probate fees and the pitfalls.
Should you have any questions, please email us at email@example.com or leave a comment on our blog.
Earlier this week, I blogged about the Ontario Court of Appeal decision in Neuberger v. York, 2016 ONCA 191, and the first lesson from this case. The second lesson from this case is that the doctrine of estoppel is not permitted to bar challenges to the validity of wills.
As a short recap of the facts from my prior blog, the late Chaim Neuberger was Edie’s father. Edie and, her sister, Myra, were the named Estate Trustees of the 2010 Wills. Between the death of Edie’s father on September 25, 2012, and the commencement of Edie’s challenge of the validity of the 2010 Wills on December 19, 2013, Edie was found by the lower court to have taken steps as an Estate Trustee. Such steps were, for example, the payment of taxes and the redemption of preference shares. This led the lower court to apply the doctrine of estoppel by representation to stop Edie from challenging the 2010 Wills (see Neuberger v. York, 2014 ONSC 6706).
On this point, the Court of Appeal disagreed. The Court of Appeal unanimously took the view that estoppel by representation and estoppel by convention do not lie to bar a challenge to the validity of a will (at paragraph 103).
The Hon. Justice Gillese found that the test for estoppel, as articulated by the Supreme Court of Canada in Canadian Superior Oil Ltd. v. Paddon-Hughes Development Co.,  S.C.R. 932, is not applicable in probate matters. Canadian Superior Oil was found to deal with promissory estoppel in the context of a private lease agreement between two individuals, which is “fundamentally different than is the question of the validity of a will” (at paragraphs 104 to 108).
As a matter of public policy, the Hon. Justice Gillese stated as follows (at paragraph 118):
“estoppel is animated by the goal of creating transactional certainty between private parties in civil disputes. A will, however, is more than a private document. As explained above, a dispute about a will’s validity engages interests that go beyond those of the parties to the dispute and extend to the testator and the public. Once a testamentary instrument is probated, it speaks to society at large. Probate is an in rem pronouncement that the instrument represents the testator’s true testamentary intentions and that the estate trustee has lawful authority to administer the estate. Because of this, the court has a responsibility to ensure that only wills that meet the hallmarks of validity are probated. It owes that duty to the testators, whose deaths preclude them from protecting their own interests, to those with a legitimate interest in the estate, and to the public at large. If the doctrine of estoppel were available to bar a party from having the validity of a will determined, the court’s ability to discharge that responsibility would be in jeopardy.”
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When Sir Christopher Lee died this past June 2015, he died leaving what is perhaps the greatest “baddie” resume of any actor in recent memory. From James Bond villain “Francisco Scaramanga” in The Man with the Golden Gun, to “Saruman” in the Lord of the Rings and Hobbit trilogies, and “Count Dooku” in the Star Wars prequel trilogy, if there was a bad guy in a film series it was more than likely played by Christopher Lee.
The Daily Mail recently reported about what they called the “riddle” of Christopher Lee’s estate, after probate documents which were filed in the United Kingdom indicated a net value for Mr. Lee’s estate of “nil”. How, the question followed, could an actor of such a high profile, who otherwise appeared to be living a “comfortable” lifestyle, die with no assets in his estate?
In reality the “riddle” of Mr. Lee’s estate is no mystery at all, as the article goes on to explain that the majority of Mr. Lee’s assets were located in the United States and as a result not subject to probate in the United Kingdom, and that he had structured his estate planning in such a way that the majority of his assets passed to his wife by right of survivorship upon his death. The only assets which were subject to probate in the United Kingdom was apparently £48,000.00 in cash. As Mr. Lee died with liabilities in the United Kingdom greater than this amount, the net effect was that a value of “nil” was indicated on the probate materials.
If Mr. Lee’s estate were to have been administered in Ontario, it is likely that a similar turn of events may have taken place. In Ontario, assets that pass by right of survivorship are said to pass “outside” of the estate, and as a result would not be subject to probate. In the event that a person dies domiciled outside of Ontario, but leaving assets in Ontario which require a Certificate of Appointment of Estate Trustee to be issued in Ontario to be administered, it is only the assets which are located in Ontario which would be subject to probate in Ontario. As a result, just because an individual dies with an estate value of “nil” being listed on the probate application, it does not necessarily mean that the individual died without a penny to their name.
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Certain types of assets, such as life insurance proceeds or RRSPs, may be designated to be paid out directly to a beneficiary upon the death of the owner. In such a case, the asset does not pass through the estate and Estate Administration Tax is not paid on the value of the asset. It is not strictly required that they be referred to in a will, as the beneficiary designation in the plan itself is sufficient to gift the asset on death. However, it is possible, as per section 51(1) of the Succession Law Reform Act, RSO 1990, c S.26 (“SLRA”), to refer to a plan in a will, either to confirm the designation in the plan itself, or to make the designation.
However, an issue may arise if there is a beneficiary designated in both the plan and the will, but the named beneficiary is not the same. It is then necessary to determine which designation will prevail.
Section 52(1) of the SLRA states that a “revocation in a will is effective to revoke a designation made by instrument only if the revocation relates expressly to the designation, either generally or specifically.” Accordingly, if there is a conflict between the will and the plan with respect to the designated beneficiary, as long as the will expressly refers to the plan designation, the will should govern the ultimate beneficiary of the plan. Moreover, it may be possible to determine which designation will prevail by looking at which was made most recently. As per section 52(2) of the SLRA, a later designation revokes an earlier designation, to the extent of any inconsistency.
There is also case law to support overriding a plan designation based on the clear intention of the testator. In McConomy-Wood v McConomy, 2009 CanLII 7174 (ONSC), the testator designated one of her three children, Lisa, as the beneficiary of her RRIF a few weeks prior to her death. However, throughout her life, it was the testator’s consistent intention, frequently expressed to her children, that they would all be treated equally and that all of her assets would be divided equally amongst the three of them.
The will did not expressly refer to the designation, but it named Lisa as the sole estate trustee to hold the assets of the estate in trust for all three siblings equally. The judge in McConomy-Wood v McConomy therefore found that the intention of the testator with respect to the RRIF designation was that her daughter hold the proceeds of the RRIF on the same terms as the estate.
The most prudent way of dealing with potential conflicts is to be aware of beneficiary designations in the plans themselves. If you choose to also refer to the designation in your will, take the time to verify who the named beneficiary is and to be consistent between the will and the plan, in order to avoid any conflicts or confusion.
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When a life insurance policy’s designated beneficiary is the estate of the policy-holder, the proceeds of the insurance policy will be paid into the deceased’s estate. Usually, the value of the life insurance proceeds are included in the value of the estate when applying for a Certificate of Appointment of Estate Trustee. But there may be a case for not including them.
The Ministry of Finance takes the position that the “total value of the estate is all of the assets owned by the deceased at the time of death, including…insurance, if proceeds pass through the estate, e.g., no named beneficiary other than ‘Estate’.” However, the Estate Administration Tax Act, 1998, S.O. 1998, c. 34 defines ‘value of the estate’ as “all the property that belonged to the deceased person at the time of his or her death”.
Therefore, some have suggested that there can be an argument made that, at the time of the deceased person’s death, they did not actually own the proceeds from the insurance policy. Rather, they owned the contract of insurance. The proceeds are only payable after death and therefore cannot be in the deceased person’s possession when they die. Whether this argument would succeed is uncertain, but it does raise an interesting question of a conflict between the clear wording of a statute and Ministry policy.
Considering that, as discussed in this Toronto Star article, Ontario has the highest estate tax in Canada, the issue of what is and is not to be included in someone’s estate for the purpose of determining the amount of estate administration tax is not insignificant. Currently, the rate of estate administration tax is $5 per $1,000 of the first $50,000 of an estate, and then increases to $15 for each $1,000 after that. Keeping an insurance policy outside of the estate could result in significant tax savings.
Of course, there are other ways to avoid including the value of insurance proceeds in your estate. This includes designating a beneficiary other than the estate. In that case the insurance proceeds would pass entirely outside of the estate and no estate administration tax is payable.
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