A recent decision of the Ontario Court of Appeal considered whether s. 7 of the Limitations Act, 2002 applies to extend the time within which an estate trustee can bring a claim that arose prior to a deceased person’s death.
Section 7 of the Limitations Act, 2002 provides as follows:
7 (1) The limitation period established by section 4 does not run during any time in which the person with the claim,
(a) is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition; and
(b) is not represented by a litigation guardian in relation to the claim.
(2) A person shall be presumed to have been capable of commencing a proceeding in respect of a claim at all times unless the contrary is proved. 2002, c. 24, Sched. B, s. 7 (2).
(3) If the running of a limitation period is postponed or suspended under this section and the period has less than six months to run when the postponement or suspension ends, the period is extended to include the day that is six months after the day on which the postponement or suspension ends.
In Lee v Ponte, 2018 ONCA 1021, the estate trustee of the deceased person commenced a claim more than 2 years after the date on which the limitation period began to run, as determined by the trial judge. As a result, the action was statute barred.
The estate trustee appealed, taking the position that section 7 of the Limitations Act, 2002 should be “liberally construed”. The estate trustee argued that a deceased person is incapable of commencing a proceeding because of “his or her physical, mental or psychological condition”. He also argued that policy reasons support allowing additional time for an estate trustee or litigation guardian to be appointed and take over the management of the affairs of the incapable/deceased person.
The Court of Appeal disagreed and did not allow the appeal. In its view, the “grammatical and ordinary sense of the words of s. 7 are simply not elastic enough to apply to a deceased person and to construe an estate trustee to be a litigation guardian.”
Although the outcome is not surprising, it does serve as a reminder that limitation periods can be unforgiving. Estate trustees would be well-advised to act swiftly in reviewing the affairs of a deceased person in order to determine whether any claims may have arisen prior to death, and whether the expiry of any limitation periods are looming.
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In today’s podcast, Paul and Garrett discuss the decision in Tiedemann v Tiedemann and revisit some legal principles from the Pecore decision that are often overlooked in light of the well-known analysis on the presumption of resulting trust.
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It is not uncommon for a trust or a Will to provide a trustee with broad and unfettered discretion in the administration of the trust or estate. We have previously blogged about the powers and duties of estate trustees, stating that it can be difficult to determine how such discretion should be exercised. Often, a trustee is given broad discretion to encroach on the capital of a trust or estate, for the benefit of a beneficiary. The issue then is: what factors can a trustee consider in determining whether to exercise their discretion to make a capital encroachment?
Broadly speaking, if a trustee is given unfettered discretion by a settlor or testator, the court will only intervene in the trustee’s decision-making if the trustee has exercised his or her discretion on the basis of mala fides, or bad faith. While there are a number of specific factors that a trustee may properly consider, for the purpose of this blog I will focus on one, namely the extent to which a trustee can consider a beneficiary’s income and/or assets.
Where a trustee is being asked to encroach on capital for the benefit of an income beneficiary, the trustee must consider the application of the even hand rule (briefly discussed in this blog). In doing so, a trustee may be tempted to consider the income beneficiary’s financial circumstances, as this information could illuminate how the trustee’s decision may affect the income beneficiary as compared to the capital beneficiary. However, the case law seems to indicate that this would not be a proper consideration.
In Re: Luke,  O.W.N. 25, the court considered whether the income beneficiary, who was also the trustee, should first look to her own financial resources before exercising her power to encroach on capital for her own benefit. The court determined that she did not have to first exhaust her own resources, as the testator had not expressed an intention in his Will that she do so. Similarly, in Hinton v. Canada Permanent Trust Company, (1979), 5 E.T.R. 117 (H.C.), a corporate trustee requested information from an income beneficiary as to the beneficiary’s own financial resources in the context of the trustee exercising its discretion to encroach on capital. Again, the court found that the testator had not indicated an intention in his Will that the income beneficiary’s income should be a factor in determining whether to encroach on capital, and the income beneficiary’s resources were, accordingly, not relevant.
The foregoing principle has been followed in a number of other decisions over the years, thus appearing to support the impropriety of considering a beneficiary’s personal financial resources as a factor in making capital encroachments, absent an intention by the testator in this regard.
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Although knowledge and understanding of the issue of elder abuse is growing, I don’t think we have yet arrived at a point where it is openly discussed among different groups of people, or where victims of abuse feel completely comfortable coming forward.
In New Brunswick, the Abuse and Neglect of Older Adults Research Team (ANOART) is conducting research into abuse of older adults, and specifically looking at how abuse affects older men and women differently. This article discusses ANOART’s work and an upcoming conference on this topic.
According to the ANOART, older men more often suffer abuse from their children, but older women are more likely to experience intimate partner violence. This specific type of abuse in relation to older women is not mentioned in discussions of elder abuse as often as other types of abuse, such as financial abuse, or general physical abuse. However, ANOART has found that intimate partner violence against women earlier in life does not stop later in life, but rather evolves.
Although the aggressor of intimate partner violence may be less physically capable of physical abuse as they age, the older woman who is being abused may still feel pressure not to speak out, as to do so may create tension or conflict within their family. Older women may also be financially dependent on their partner, which can be a significant barrier to reaching out.
Services for intimate partner violence are usually focused and targeted at younger women, leaving a gap when it comes to older women. ANOART is working to break the stigma surrounding intimate partner violence against older women, to spread information, and to raise awareness. The hope is that this will assist in reaching out to those who need help more effectively, and make it easier for olden women to seek help.
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Although there are certainly some benefits that may result from making ownership of a property or other asset joint with another individual (e.g. avoiding payment of estate administration tax in relation to that property upon the death of one of the joint owners), there can also be risks associated with jointly-held property.
In the recent British Columbia Supreme Court decision in Gully v Gully, 2018 BCSC 1590, a mother added her son as a joint tenant on real property that she owned (the “House”). Her decision to do so was based on estate planning advice that she had received. The mother did not tell her son that she had added him as a joint tenant, and the son did not contribute to the House in any way, either before or after it was transferred into joint tenancy. Contemporaneously with the registration of title to the House in joint tenancy, the mother also executed a last will and testament specifically setting out that in naming her son as a joint owner, she intended that the asset would belong to him upon her death.
A couple of years after the mother had added the son as a joint tenant on her House, the son and his software company consented to judgment in favour of a creditor in the amount of $800,000.00. At the time he consented to judgment, the son was still not aware that he was a joint owner of his mother’s House. The creditor subsequently registered a certificate of judgment on the son’s undivided half interest in the House.
The mother brought an application seeking a declaration that the son held his interest in the House on a resulting trust in her favour. The court stated that the proper evidence of a transferor’s intention is at the time of the transfer, because a transferor can change his or her mind subsequent to the transfer, but may not retract a gift once it has been made. In this case the court concluded that the mother did intend to gift an interest in the House to her son at the time the joint tenancy was registered on title, and that the son did not hold his interest on a resulting trust in favour of the mother.
Further, the court stated that even if it had found that the mother had not intended to gift the House to the son, the fact that the joint tenancy was registered on title to the House meant that the creditor could rely on title to enforce its judgment against the son’s interest in the House. Although the issue of whether or not a resulting trust arises in the circumstances may be relevant as between family members or beneficiaries of an estate, it is not applicable in the case of a third party creditor claiming against a registered interest in land. As a side note, the creditor in this case did advise the court that it did not intend to execute the judgment against the House while the mother was still living there.
Before making any changes to ownership of an asset, it is crucial to obtain comprehensive advice as to all of the possible consequences of doing so—both positive and negative. Communication regarding joint tenancy is also important. This will help ensure that all parties are aware of the assets in which they may have an interest and the nature of any such interest, so they are in a position to manage their affairs accordingly.
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Last year I blogged about some possible changes to the CRA’s Voluntary Disclosure Program (“VDP”). The new VDP rules came into effect March 1, 2018.
One of the concerns that had been raised in relation to the VDP changes in advance of them coming into effect, is that it seemed the CRA was attempting to make the VDP less accessible for taxpayers. For example, the changes created a “tiered” system for VDP applications, meaning that applications would fall under either the “general program” (for more minor non-compliance) and the “limited program” (for major non-compliance). Another example is the apparent elimination of the “No-Name” method for submitting disclosure (which allows the taxpayer to gain some understanding of how their situation may be treated by CRA in advance of officially submitting his or her application).
According to this article, in July and August 2018, the CRA responded to the first round of disclosure applications that had been filed under the new rules. The CRA’s approach in practice was troubling to the article’s authors.
In particular, the CRA appears to be taking the position that it will be rejecting VDP applications if the relevant tax returns aren’t enclosed. This seems to be contrary to the guidelines set out in CRA’s Information Circular IC00-1R6. While CRA takes the position that it will reject applications that do not enclose tax returns, the Information Circular seems to indicate that a taxpayer may submit additional information or documentation to complete the VDP application up to 90 days from the day that the CRA receives the application. The article’s authors are of the view that the language of the Information Circular in this regard would include the relevant tax returns, as these are clearly documents required to complete the disclosure. The position taken by CRA provided confirmation to the authors that CRA was seeking to make the VDP inaccessible for taxpayers.
As we previously set out in this blog, the VDP can be relevant to an Estate Trustee if the deceased was not in compliance with his or her obligations to the CRA, such as failure to file income tax returns, or reporting of inaccurate information. The VDP may allow an Estate Trustee to voluntarily disclose such non-compliance and avoid penalties. Unfortunately, with the new VDP rules in effect, and the apparent uncertainty regarding how the CRA will apply its guidelines, it may be tricky for Estate Trustees to make effective use of the VDP. It will be interesting to see how the new VDP rules develop, and any further feedback to their practical application.
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A recent decision from the Royal Court of Jersey was recently discussed here with respect to a beneficiary’s right to disclosure from a trust. This blog by lawyers from Ogier is an insightful read on this particular area of trust law.
According to the authors at Ogier, M v W Limited and Others was a case that considered a beneficiary’s broad request for documents, such as copies of all trust instruments, latest accounts, financial statements for the corporations owned by the trust, and details about all past distributions from the trust. While Court’s decision was grounded in an interpretation of the relevant Jersey legislation, some of its commentary remains instructive for those of us who practice outside of Jersey.
In M v W Limited and Others, the nature and immediacy of the beneficiary’s interest is salient to the inquiry. For example, a contingent beneficiary may not be entitled to as much disclosure as a beneficiary who is entitled to the assets of the trust at that point in time. By extension, it is also relevant to consider whether the disclosure at issue would negatively affect another class of beneficiaries as well as the proportionality of the request.
As for the law in Canada, I have blogged on a recent Supreme Court of Canada decision about a trustee’s duty to disclose the existence of a trust to the beneficiaries. Justice Brown for the majority in Valard Construction Ltd. v. Bird Construction Co., 2018 SCC 8, has stated the following at paragraph 19,
“In general, wherever “it could be said to be to the unreasonable disadvantage of the beneficiary not to be informed” of the trust’s existence,  the trustee’s fiduciary duty includes an obligation to disclose the existence of the trust.”
This notion of whether a beneficiary would be unreasonably disadvantaged by the non-disclosure is important to keep in mind because the right to disclosure is grounded in a beneficiary right to hold trustees accountable and to enforce the terms of the trust.
Practically speaking, issues of disclosure often leads to a request for the trustee to commence an application to pass accounts. While the trustee will have the benefit of a court order approving his/her administration for that period (if and when Judgment is obtained), an application to pass accounts must be served on all beneficiaries with a contingent or vested interest pursuant to Rule 74.18 of the Ontario Rules of Civil Procedure. In turn, these beneficiaries will have the right to object to the trustee’s accounts and seek relevant disclosure from the trustee in the course of this process.
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The Henson Trust has become fairly common estate planning tool for those looking to provide a bequest to someone who may be receiving government benefits such as ODSP without such an individual losing their qualification to the government benefits. At the core of the Henson Trust is the concept that the trust is wholly discretionary, with the assets that are placed in the trust not “vesting” in the beneficiary who is receiving the government benefits until the trustee has decided to make a distribution in their favour. This allows the trustee to ensure that the beneficiary does not receive a greater amount from the trust in a given time period than allowed under the government benefits, such that the beneficiary can continue to receive their government benefits as well as receive funds from the trust.
But what happens to any funds that may be left in the trust upon the death of the beneficiary for whom the Henson Trust was primarily established? Typically, the terms of the trust will provide for a “gift-over” of any residue to an alternate beneficiary. If the trust fails to provide for such a “gift-over” however, it could have significant repercussions to the primary beneficiary for whom the Henson Trust was established, and could result in the Henson Trust being declared void.
For a trust to exist it must have what are known as the “three certainties”. They are:
- Certainty of Intention – It must be clear that the settlor intended to create a trust;
- Certainty of Subject Matter – It must be clear what property is to form part of the trust; and
- Certainty of Objects – It must be clear who the potential beneficiaries of the trust are.
A trust that does not have the “three certainties” is an oxymoron, insofar as there can be no trust that offends the three certainties as the trust failed to be established. In the circumstance contemplated above, the lack of “gift-over” upon the primary beneficiary’s death would arguably equate to there being a lack of “certainty of objects”, insofar as it is not clear who all of the potential beneficiaries of the trust are. If it is found that the trust does offend the “certainty of objects” it would fail. Should the trust fail, the primary beneficiary for whom the Henson Trust was established would no longer have the funds which would have formed the Henson Trust available to top up the funds which they receive from their government benefits, with such funds likely now forming part of the residue or being distributed on a partial intestacy.
Although the historical application of the “three certainties” would result in the Henson Trust contemplated above having been declared void from the beginning, insofar as no trust that offends the three certainties can be found to exist, it should be noted that the court in Stoor v. Stoor Estate, 2014 ONSC 5684, went to great lengths to avoid such an outcome. In Stoor Estate, notwithstanding that the court found that the trust in question failed as a result of it offending the three certainties for a lack of “certainty of objects”, the court delayed the failure of the trust until after the primary beneficiary’s death believing that it was in keeping with the testator’s intentions.
There has been significant debate about whether the Stoor Estate decision was correctly decided, and what impact, if any, it should have upon the historical application of the “three certainties”. What is not in debate however is that it is important that when drafting a Henson Trust, or any trust for that matter, to ensure that you provide for a gift-over of the residue upon the primary beneficiary’s death. If you fail to provide for such a gift-over you run the risk that the trust will be declared void for offending the three certainties, thereby depriving the individual for whom you were establishing the Henson Trust the opportunity to receive such funds in addition to their government benefits.
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For all that is known about chef Anthony Bourdain’s colourful lifestyle, the estate plan he left behind is surprisingly comprehensive.
Bourdain’s Will leaves the residue of his estate to his minor daughter, Ariane. The residue has been valued at approximately $1.2 million, and consists of savings, cash, brokerage accounts, personal property, and intangible property including royalties and residuals. In the event that Bourdain survived his daughter, the residue was to pass to his daughter’s nanny.
Bourdain appointed his estranged wife as estate trustee. This makes sense given that Ariane is the daughter of the marriage and that the mother will likely have her daughter’s best interests in mind while the estate is administered. Bourdain was also mindful to include in his Will other assets – personal and household effects, including frequent flyer miles. Given the amount of travelling Bourdain did, it was shrewd of him to specifically include this in his Will.
A separate trust was also settled, apparently containing most of his wealth. Again, his estranged wife is named as trustee, with Ariane as beneficiary receiving money from the trust when she turns 25, 30, and 35. Presumably, Bourdain settled a trust to avoid the payment of taxes and the publicity associated with probate – another sign of a well thought out estate plan.
While so many celebrities succumb to poor estate planning, it is refreshing that in addition to teaching us about cooking, travelling, eating, and so much more, Bourdain also taught us about the importance of a thorough estate plan.
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A recent decision of the Hong Kong Court of Appeal addresses the importance of the solicitor’s role in preparing and attending to the execution of a Will, particularly in the context of a Will challenge. The decision is discussed in this article. Although the decision is from Hong Kong, the test applied in respect of testamentary capacity is, as it is in Canada, the classic criteria from Banks v Goodfellow. In this regard, I found it interesting to consider the Hong Kong Court’s decision.
In Ontario, when a Will has been duly executed, meaning that it has been executed in accordance with the requirements set out in the Succession Law Reform Act, R.S.O. 1990, c. S.26, there is a presumption that the Will is valid. However, where suspicious circumstances are shown to exist surrounding the preparation and execution of a Will, this presumption will be spent, and the propounder will be required to prove that the testator had the requisite testamentary capacity to execute the Will. We have previously blogged about which party must prove certain elements in a Will challenge.
According to the article, the same presumption arising from due execution appears to exist in Hong Kong. In the decision of Choy Po Chun & Anor v Au Wing Lun (CACV 177/2014), the Hong Kong Court of Appeal places some additional responsibility with respect to the “due execution” of Wills on solicitors preparing them. In particular, the Court of Appeal sets out that a solicitor should undertake proper groundwork and make proper enquiries, such as following a checklist from the British Medical Association regarding the assessment of mental capacity, and the “golden rule” that a Will for an elderly or ill testator should be witnessed or approved by a medical practitioner who has examined the testator.
In this decision, the Court of Appeal set aside the lower court’s decision that the Will in question was valid. As the solicitor had not taken the additional steps noted above (namely following the checklist and the “golden rule”), it could not be presumed that the Banks v Goodfellow criteria had been met, and therefore each element of the test should have been asked, and proven by the propounder of the Will.
In reviewing the guidelines set out by the Court of Appeal, as summarized in the article, it seems as though the solicitor is being asked to consider whether suspicious circumstances may appear to exist, and to take additional steps if that may be the case. In particular, the Court of Appeal suggests the following:
- Where Will instructions are given by the children of an elderly testator who is not in good health, the lawyer should meet with the testator personally to confirm instructions;
- In the case of an elderly or infirm testator, the solicitor should follow the checklist noted above; and
- The solicitor should follow the “golden rule” when preparing a will for an aged or seriously ill testator.
While this decision is not binding in Canada, it nevertheless raises some interesting points, which a prudent solicitor may wish to consider and implement in their practice. For instance, it may be advisable to confirm instructions directly with the testator if initially provided by another individual, and take steps to confirm whether a testator has the requisite capacity in circumstances where he or she may be elderly and/or in poor health.
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