It’s 8:30 am, you’ve just entered your office, and you get a call from the common-law spouse of one of your long-term clients. It’s bad news – your client is in palliative care and has a will from 2001 that he urgently needs to update. Time is of the essence.
You and your assistant can squeeze in time late in the day to see the client at the hospital. But you know it’s a tricky situation that’s fraught with potential problems. Here are a few steps to consider that could protect you and your client before you head bedside.
- Make sure you have the expertise they need: On the initial call, be sure to ask specific questions about what the client needs done. If there are trusts or other complex arrangements involved, assess whether you have the expertise to assist. If death is imminent, the last thing your client can waste is time in trying to line up another lawyer. So do your due diligence up front.
- Assess capacity: Capacity issues could be front and centre for clients who are close to death. If possible, contact an attending doctor, explain the legal test for capacity and ask them to confirm his or her opinion in writing as soon as possible, even on an interim basis by email.
Learn more about capacity issues here: https://estatelawcanada.blogspot.ca/2010/12/when-is-doctors-opinion-on-capacity.html
- Talk one-to-one: You need, and must insist on, time alone with your client, both to do your own capacity assessment and to minimize any unsubstantiated allegations of undue influence. If the situation is at all suspicious, you have a duty to inquire to satisfy yourself that the client is fully acting on their own accord. This is especially important if the client has had multiple marriages or common-law partners, or has been estranged from family members. If you are not satisfied, you may choose to decline to act.
- Take notes and/or video: Your notes could potentially be used as evidence in a will challenge or solicitor’s negligence action, so be sure to set out the basis for your opinion on issues such as capacity and undue influence, rather than simply stating a conclusion. Consider having a junior lawyer attend with you, to provide a more complete base of evidence. Videotaping the interview may also be helpful, as it can provide important evidence if the will is ever challenged.
Finally, if you have older clients who have indicated a need to revise their will, be proactive. Send them this link and encourage them to act now to avoid the potential drama and perils of a deathbed will: http://globalnews.ca/news/1105176/the-mortality-of-deathbed-wills/
Thanks for reading,
At the recent Six-Minute Estates Lawyer, several areas of interest were discussed. One that served as a helpful reminder to me was the presentation on the estate administration tax-avoidance strategy of using primary and secondary wills. Many tips are contained in the paper presented by Kathleen Robichaud. Here are eight of them:
- Checklist – develop a thorough intake process and form, so you can ensure a detailed meeting with your client takes place that will give you the information needed to make recommendations best suited to your client’s needs;
- Revocation clause – ensure each will has one that takes the other will into account, so each will won’t revoke the other;
- Estate trustee – using the same estate trustee (and same alternate) for both wills may reduce the risk of drafting errors and usually simplifies the administration (although for a second will regarding outside Ontario assets, it is ideal to have the estate trustee and assets both in the same jurisdiction);
- Debts and Taxes – it is of particular importance to delineate how debts are to be paid in both wills, especially if you have difference beneficiaries and/or estate trustees in each of the wills;
- Know which assets require probate – sounds trite, but when in doubt only include assets in the secondary will that you are certain do not require probate (e.g. real property (subject to exceptions), bank accounts with large balances, RRSPs left to the estate, shares of publicly traded companies, an interest in a privately held partnership and investment accounts generally require probate);
- Define the assets carefully – otherwise you may have a partial intestacy that could defeat the testator’s wishes;
- Out of jurisdiction assets – when dealing with out of jurisdiction assets, consider that a second, third or even fourth will may be appropriate for varying reasons (e.g. because of difference succession rules or difference taxation rules); and
- Beneficiaries – listing the correct beneficiaries for the right assets, and matching the right set of beneficiaries with the corresponding will, can avoid drafting errors that may otherwise result in both wills having to be probated and/or rectification orders being needed.
Thanks for reading and enjoy the long weekend!
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An estate trustee must ensure that the deceased’s debts have been discharged prior to making any distributions. This is usually done by advertising for creditors in a newspaper. With today’s emphasis on technology, however, is advertising in a newspaper still the most efficient way to reach potential creditors?
The Standard Practice
An estate trustee will usually not be personally responsible for paying the deceased’s debts, as debts are paid from estate assets. The estate trustee may be found personally responsible for debts, however, if they begin to distribute the estate prior to paying the deceased’s debts.
An estate trustee may avoid personal liability for failing to pay a debt of the estate if they advertise for creditors. Section 53(1) of the Trustee Act provides personal protection for an estate trustee who advertises for creditors prior to distributing the estate assets.
The standard practice for advertising for creditors is to advertise in a newspaper three consecutive weeks in a location where the deceased lived and worked, and then wait at least one month from when the advertisement was first published to begin administration of the estate. The newspaper publisher will then usually send an Affidavit certifying that the estate trustee has properly provided notice to creditors. The Affidavit can be filed with the court as proof that the estate trustee has taken the proper precautions to advertise for creditors.
Does the Standard Practice Need an Update?
While the newspaper may be the most common means of advertising for creditors, is it the most efficient way to reach a creditor?
It is worth considering advertising for creditors online. Advertising through an online service may be more cost effective than in a newspaper. We have previously blogged on a service that provides online advertisements for creditors, and provides affidavits in support of the estate trustee’s advertisement. Using a service to publish notice to creditors has the potential to reach a larger majority of individuals, in a more cost-effective manner. Furthermore, the internet has the ability to provide information to creditors that may be located outside of the deceased’s jurisdiction, allowing for the advertisement to reach more individuals as compared to a newspaper advertisement that is generally confined to one jurisdiction.
As the Trustee Act does not specify the proper form of advertising for creditors, there is the potential for online services or cellphone applications to provide advertisements for creditors in a more efficient and effective way.
Thanks for reading,
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At the recent 19th Annual Estates and Trusts Summit, Jordan Atin, counsel to Hull & Hull LLP, gave a very useful talk about how to change trustees. Jordan explained the significant difference between an executor and a trustee. He also emphasized the importance of the trust instrument as a tool to avoid running into trouble when a trustee wishes to retire.
Trustee or Executor?
In a will, a testator often appoints the same one or two individuals to act as both executor and trustee. What’s the difference? An executor is the personal representative of the testator; he or she stands in the shoes of the testator and exercises the testator’s rights and fulfills the testator’s obligations. The role of the executor is often a simple one: to settle debts and administer the property of the estate. Once those tasks are finished, the role of the executor is finished. On the other hand, a trustee of a testamentary trust holds the trust property for another, pursuant to s. 43(2) of the Trustee Act. In McLean, Re, the court explained the difference: once a testamentary trust begins, the executor`s duty is complete. The duties of a trustee often last for a longer period than those of the executor.
Why does this distinction matter? Once an executor takes steps to administer the estate, he or she may not retire from the position without a court order. A trustee, on the other hand, may resign pursuant to sections 2 and 3 of the Trustee Act. Someone may also resign as trustee while continuing to act as an executor.
Remember the Trust Instrument
If there are three or more trustees, one trustee may retire without the appointment of a replacement trustee. Where there are one or two trustees, a trustee can retire pursuant to section 3 of the Trustee Act. The rules in the Trustee Act are complex, and an application to court may still be necessary, if there is any disagreement about whether the conditions listed in section 3 apply to the facts at hand.
Accordingly, Jordan emphasizes the importance of considering replacement of trustees when drafting the trust instrument. Section 67 of the Trustee Act states that the powers bestowed by the Act are in addition to and subject to the terms of the trust document. Thus, a drafting solicitor may opt out of sections 2 and 3 of the Trustee Act. The document itself should be the first place co-trustees and beneficiaries look in replacing a trustee. By providing a clear procedure for the removal and replacement of trustees in the trust document, potential confusion and uncertainty about whether section 2, 3, or 5 of the Trustee Act should be used can be avoided.
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There are a number of limited grants that are important to consider for succession planning purposes. We have previously blogged about a type of limited grant, a durante minore aetate, which grants administration duties to a guardian if a minor is named as executor of an estate. Other types of limited grants include administration durante absentia and grants to attorneys, both of which deal with administrators located outside of the jurisdiction.
A grant of administration durante absentia is a grant necessary where the person entitled to a certificate of appointment is absent from the jurisdiction. The grant will be effective until the entitled individual returns to the jurisdiction. Today, these grants are made by passing over the absent individual and by appointing a person who the court sees as appropriate in the circumstances. The grant may last for longer than the named individual’s absence from jurisdiction.
A grant of administration durante absentia is usually made by the next of kin pursuant to section 13 of the Estates Act which states:
- Where application is made for letters of administration by a person not entitled to the same as next of kin of the deceased, an order shall be made requiring the next of kin, or others having or pretending interest in the property of the deceased, resident in Ontario, to show cause why the administration should not be granted to the person applying therefor; and if neither the next of kin nor any person of the kindred of the deceased resides in Ontario, a copy of the order shall be served or published in the manner prescribed by the rules of court.
This provision is further governed by Section 14 of the Estates Act which states:
- (1) If the next of kin, usually residing in Ontario and regularly entitled to administer, is absent from Ontario, the court having jurisdiction may grant a temporary administration to the applicant, or to such other person as the court thinks fit, for a limited time, or subject to be revoked upon the return of such next of kin to Ontario
(2) The administrator so appointed shall give such security as the court may direct, and has all the rights and powers of a general administrator, and is subject to the immediate control of the court. R.S.O. 1990, c. E.21, s. 14 (2).
Furthermore, a grant to an attorney may be made if the person solely entitled to a grant as estate trustee with or without a will is out of the jurisdiction. Pursuant to section 5 of the Estates Act, letters of administration, except by resealing, can be granted only to a resident of Ontario. However, the case of Armstrong Estate, Re, 2010 ONSC 2275, held that if a non-resident is applying for a Certificate of Appointment of Estate Trustee with a Will, and the applicant has the consent of a majority of the persons resident in Ontario who are otherwise entitled to apply, and where security is in place, the grant may be issued to the non-resident.
Thank you for reading,
A recent article in The Lawyers’ Weekly addressed the stigma of bankruptcy, which may prevent some estate trustees of insolvent estates from pursuing a formal declaration of bankruptcy. Many associate bankruptcy with mismanagement and failure. The author suggests that the perceived dishonour of bankruptcy may even prevent lawyers from presenting bankruptcy as an option to clients. Even the most responsible among us, however, might die at an unexpected time, owing debts we had planned to discharge. Lawyers can help dispel the stigma by canvassing the benefits of bankruptcy with their clients.
It is important to keep in mind that insolvency and bankruptcy are related but discrete concepts. An “insolvent” estate is one in which the estate assets are insufficient to satisfy its debts. The administration of an insolvent estate is governed by the Trustee Act and the Estates Act. A “bankrupt” estate is one that has been formally declared bankrupt. The administration of a bankrupt estate is primarily governed by the Bankruptcy and Insolvency Act.
An estate trustee is responsible for settling an insolvent estate’s debts. In contrast, a licensed trustee in bankruptcy takes control of a bankrupt estate, pursuant to the Bankruptcy and Insolvency Act. This might be a major benefit to an estate trustee with little or no experience in administering an estate or settling debts.
A second benefit is that declaring bankruptcy removes the potential for the estate trustee to be held personally liable to a creditor. If the estate is bankrupt, the estate trustee is no longer responsible for discharging the estate’s debts and cannot be held liable.
We have written about insolvent and bankrupt estates many times on this blog, covering topics such as: the matrimonial home and bankruptcy; personal liability of the estate trustee; considerations in declaring an insolvent estate bankrupt; family law equalization claims and bankruptcy; children’s money and parents’ creditors; and RRSPs and bankruptcy.
Thank-you for reading.
Pursuant to section 4 of the Limitations Act, generally, a claim should be started by an individual within two years of the claim being discovered. Section 5 of the Limitations Act, defines discovery as “the day on which a reasonable person with the abilities and in the circumstance of the person with the claim first ought to have known of the matters referred to.”
These provisions raise an interesting estates question: What if an individual was unaware that they were named as a beneficiary of an estate? Would the Limitations Act apply in these circumstances, even though the beneficiary was unaware of their claim?
The doctrine of fraudulent concealment may operate to provide for an equitable tolling of the limitation period. Simply put, this means that discoverability is a factor in considering fraudulent concealment for estates purposes. The doctrine will suspend the running of the limitation clock until the reasonable party can reasonably discover the cause of action.
As stated in Roulsten v McKenny et al, 2016 ONSC 2377 para 41, and as established in Giroux Estate v Trillium Health Centre, 2005 CanLII 1488 (ON CA), “the purpose underlying the doctrine of fraudulent concealment is to prevent defendants who stand in a special relationship with a party from using a limitation provision as an instrument of fraud”. A special relationship can be defined as one in which the plaintiff may rely on the defendant’s word and defendant ought to reasonably foresee that the plaintiff would rely on his representation.
As defined in the case of KM v HM,  3 SCR 6, at para 65, “‘Fraud’, for the purposes of fraudulent concealment, is defined as “conduct which having regard to some special relationship between the two parties concerned, is an unconscionable thing for one to do towards the other.”
As established through the existing jurisprudence, in order to make out the doctrine of fraudulent concealment, there are three necessary elements:
- the defendant and the plaintiff are engaged in a special relationship with one another;
- the defendant’s conduct is unconscionable; and
- the defendant conceals the plaintiff’s right of action
As stated above, if an individual was unaware that they were the beneficiary of an estate, and a named estate trustee actively concealed the fact, it is possible that the remedy of fraudulent concealment provision would apply. It appears the provision will not apply if you knew or ought to have known that you were a beneficiary of an estate.
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Last week, Suzana Popovic-Montag blogged about the conflict that can arise between life-tenants and remaindermen with regard to the payment of expenses associated with real estate.
Another potential dispute between life-tenants and remaindermen is whether a trustee must retain a piece of property or sell the property and invest the proceeds in something else. This is particularly the case where the property in question is losing value to the detriment of the remaindermen.
At law, there is an implied duty to sell personal property that is wasting. In other words, if the will does not require the trustees to retain a piece of personal property (e.g. the testator’s car), then trustees have a duty to sell property that will lose value over time or that is invested in unauthorized investments. Proceeds of sale must then be invested in authorized investments.
The foregoing duty is known as the Rule in Howe v Earl of Dartmouth. Howe v Earl of Dartmouth (1802) 7 Ves 137 is an old English case, but the rule was confirmed by the Supreme Court of Canada in Lottman v Stanford,  1 SCR 1065, 6 ETR 34 at para 10:
The rule in Howe v. Lord Dartmouth…is a rule requiring the trustee of an estate settled in succession to deal even-handedly between the life tenant and the remaindermen. It operates to compel, where its operation is not excluded by the testator, a conversion of wasting or unproductive personalty and the investment of the proceeds of such conversion in trustee investments. By this means the life tenant is assured of an income from the assets of the estate and the capital of the estate is preserved for the remainder interests upon the demise of the life tenant.
The rule applies only to testamentary trusts; it is not applicable to inter-vivos trusts. Moreover, this rule does not apply to real property. The rule does, though, apply to mortgages on real property, as mortgages are personalty.
The purpose of the rule is to maintain fairness between the life-tenant and the remaindermen on the basis that trustees have a duty to act impartially or to hold an even hand.
As noted above, a contrary provision in the will can override the application of the rule. When considering leaving consecutive interests in a piece of property, a testator should be very clear about their intentions in order to avoid estate litigation.
Thank you for reading.
One of the primary duties of an Estate Trustee is to ascertain the assets of the estate. Sometimes, at the time of death, property of another person may be left at the deceased’s place of residence or otherwise in their possession. This property, unsurprisingly, can be assumed to be the deceased’s. However, if property entitlement is in dispute, when and how does a claimant to property go about inspecting the property?
Rule 32.01(1) of the Rules of Civil Procedure provides:
The court may make an order for the inspection of real or personal property where it appears to be necessary for the proper determination of an issue in a proceeding.
In Catto v Catto, 2016 ONSC 3025, the Court considered this Rule in the context of an application seeking the opinion, advice and direction of the Court relating to various issues in the administration of an estate.
The Deceased had died suddenly and without a will. He and his brother had been collecting hockey cards for over twenty years. His brother claimed to have left his part of the collection with the Deceased when he ran out of storage room in his own home. A list indicating the ownership of the cards went missing when the cards were left in the possession of the Deceased. The Deceased’s wife, Ms. McKay, knew the Deceased collected hockey cards but did not know that the cards may belong to anyone other than her late husband. Affidavits were filed detailing the storage of all the collected cards at the Deceased house. Evidence was also provided supporting the two brother’s long history of collecting hockey cards together. The Court found the Deceased’s brother was entitled to inspect the cards at a time and location mutually agreeable to the parties. It also found that if the list could not be located, the parties could randomly divide the cards as they might agree or the Court would make a determination.
This case also raises a worthwhile point to remember. It might seem that an obvious solution would have been to allow the Deceased’s brother to simply take what he thought was his. In the facts of this case, Ms. McKay was the sole beneficiary of the Estate, and presumably, if there were no creditors or dependants, she could have easily done so without attracting liability. However, had there been concerns with respect to creditors, beneficiaries, or dependents, as estate trustee, she could have potentially incurred liability for making a distribution.
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Debt owing by an individual does not terminate upon death. The estate trustee is therefore obliged to satisfy any outstanding debts owing from the assets of the estate even after an individual has passed away. I recently came across a new service which assists estate trustees in locating any such debts in order to satisfy them.
Generally speaking, an estate trustee is not personally liable for debts owed by the deceased. However, if debts remain and the estate trustee distributes the assets of the estate, they may be personally liable to satisfy them. In order to avoid personal liability, estate trustees advertise for creditors in accordance with section 53 of the Trustees Act, often referred to as Notice to Creditors. According to this section, an estate trustee will not be personally liable for claims by creditors should they place a ‘notice’ specifying a period of time in which claims by creditors must be made. It is important to note that a Notice to Creditors does not prevent creditors from tracing distributable assets to beneficiaries.
The Trustee Act does not specifically provide how such a ‘notice’ must be posted. However, it has become common practice to advertise multiple times in a local newspaper where the deceased domiciled, and wait at least 30 days before taking steps to administer the estate.
A new service, NoticeConnect, publishes these notices to creditors online. According to the creators of the site, “…publishing notices with NoticeConnect is superior to print advertising because the notice will be found by any creditor conducting a basic Google search and because the ad is promoted across multiple internet platforms with larger potential audiences than print newspapers”.
Furthermore, proceeding online “…is an economical option for the many solicitors and estate trustees who are not publishing Notice to Creditors because of prohibitively high costs, exposing themselves to potential liability”.
Full details of the service provided by NoticeConnect can be found on their website.