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.
Have a great weekend.
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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According to the Legislative Assembly of Ontario, Bill 120: Estate Administration Tax Fairness Act, 2015, was brought before the Legislature seeking amendments to the Estate Administration Tax Act, 1998 (“EATA“).
The EATA was only recently amended, and entered into force on January 1, 2015. Substantive changes were made at that time. These changes have been the subject of Hull & Hull LLP blogs and podcasts, including such topics as: general changes to the EATA; frequently asked questions; the effect of the EATA on insurance policy proceeds; and, how to file the estate information return.
Bill 120 sought amendments to the EATA with respect to the following areas:
Value of the Estate – In determining the value of the estate, the current procedure is to deduct any encumbrances on real property to the total estate value. The Bill sought to amend the definition of ‘value of the estate’ by deducting not only the value of any encumbrance on any such property, but also any amounts bequeathed or devised for a charitable purpose.
Estate Administration Tax – Currently, the amount of tax payable upon the issuance of an estate certificate is $5.00 for each $1,000 (or part thereof) for the first $50,000 of the value of the estate, and $15.00 for each $1,000 (or part thereof) of the value of the estate that exceeds $50,000. Decreases to the amount of tax payable were proposed such that any estate valued at less than $50,000 would pay nil tax, with increased taxes owing for estates valued more than $50,000, with the maximum of tax payable to be capped at $3,250.
Disclosure to the Minister of Finance – Bill 120 also sought to limit the information given to the Minister of Finance and along with certain continuing obligations imposed therein.
The Second Reading of Bill 120 was held on September 24, 2015, at which time the motion was declared lost, and the Second Reading negatived.
Many third parties such as banking institutions and the Land Registry Office require probate as proof of authority to act as estate trustee. Unfortunately, the process of probate brings with it the widely unpopular Estate Administration Tax which is calculated on the value of the assets of the estate. As a result, estate planning methods that seek to remove assets from an estate and transfer them directly to a beneficiary are becoming increasingly popular. These include the transfers of title of real property into joint tenancies with rights of survivorship, adding joint account holders to bank accounts, designating beneficiaries in insurance policies, lifetime gifting and the use of multiple wills.
The challenge that some of these techniques brings is that when used in a way that does not ensure an equal distribution of assets among beneficiaries or when the intentions of the testator are later brought into question, they all too often become land mines associated with an increased likelihood of estate litigation.
The question becomes: what is probate and the resulting Estate Administration Tax really costing us? When avoiding probate at all costs begins to encourage risky behaviours that would not have otherwise been taken, we need to start to consider whether certain safeguards need to be implemented.
In looking to the rest of Canada, we can see in both Alberta and Quebec two alternative models. In Alberta, the probate process has created an upper limit or maximum fee that can be payable. This is currently set at $400.00 for estates of $250,000.00 or more. In this way, the incentive to attempt to distribute assets outside of the will has been largely removed.
In Quebec, they have gone even a step further. There is a flat fee for the probate of any estate, regardless of its value, which is currently set at $105.00. However, if the testator has obtained a notarial will, there is no fee at all as notarial wills are not subject to probate. The will is immediately valid upon the death of the testator and is in and of itself valid proof of the authority of the liquidator (i.e. estate trustee) to act.
Aside from the removal of incentives, there are other precautionary measures that can be taken. For instance, public legal education on the effects of lifetime transfers, joint accounts and joint tenancy could be beneficial. These estate planning tools can be effectively and safely used provided that the testator and any joint tenants or account holders have an accurate understanding of the consequences that can arise as a result of these types of transfers.
Furthermore, obtaining proper and independent legal advice beforehand is always recommended. The law with respect to joint assets is still evolving and can give rise to complex issues that can have significant ramifications for the testator, estate and the beneficiaries.
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The term "probate" recurs throughout estates practice as a noun, verb and adjective. The most common context refers to the process of getting a court to provide some sort of official certification or recognition that a testatmentary instrument is the Last Will of a deceased. In Ontario, the probate process results in the issuance of a Certificate of Appointment of Estate Trustee With a Will (or Without a Will).
Under the modern Rules of Civil Procedure, the procedure resulting in the issuance of a Certificate of Appointment rarely requires that a judge review the application, or even the alleged Will. By Rule 74.14, an application need be referred to a Judge only where, in the opinion of the Registrar, the application and the accompanying materials are not complete or contain information on which the Registrar has a doubt. This results in an efficient administrative process, but any interested party can challenge the validity of a such a probated Will, and the fact that a Will has been "probated" has no probative value when it comes to proving the Will in solemn form, as it is called.
A judgment upholding the validity of a Will does not necessarily "probate" that Will. Parties to the proceeding may not want a Certificate of Appointment to be issued, and so they will not request that a Certificate of Appointment be issued as part of the Judgment. This might be the case where the Will is a "corporate" or "secondary" will, and is restricted to assets that can pass outside of probate (often to avoid estates administration tax).
Have a great weekend,
Christopher M.B. Graham – Click here for more information on Chris Graham.
My blog posts this week have been inspired by a Globe and Mail article that a summer student handed to me about the late Gail Posner’s trust provisions for her dogs, Conchita, April Maria and Lucia.
In yesterday’s blog I noted that while Wills are an opportunity for individuals to provide for their loved ones, there is no guarantee that our stated wishes for our beloved companion animals will be sacrosanct. For example, the late Leona Helmsley’s $12-million trust for her dog Trouble was reduced to $2-million by a Manhattan Judge on the ground that the deceased lacked capacity with regard to her Will and the Trust Agreement.
In the Globe and Mail article that inspired my posts this week, Barry Seltzer noted that Canadian legislatures may wish to consider “ante-mortem” probate as a way to ensure capacity does not become an issue in these cases. Ante-mortem probate is a technique used in certain states, including Arkansas, North Dakota, and Ohio, to validate a will while the person is still alive so that it cannot be contested once the person passes away.
In some cases, the wishes of a testator regarding his pets are contrary to public policy and, thus, are held to be void. For example, some pet owners have included clauses in their wills directing that their pets be euthanized upon their death (perhaps because they feel that their animals will be distraught without them).
In one such case a testator (Mr. Clive Wishart) directed that the Royal Canadian Mounted Police (“RCMP”) shoot four of his horses. The RCMP refused and the matter was brought to a New Brunswick Court where it was held that the direction to shoot “four healthy animals” was contrary to public policy because doing so would serve “no useful purpose” and “would be a waste of resources and estate assets even if carried out humanely.”
For those of you interested in reviewing the case, the citation is: Wishart Estate (Re),  N.B.J. No. 547.
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Kathryn Pilkington – Click here for more information on Kathryn Pilkington.