Alberta recently passed legislation which will allow for the use of Henson trusts in estate planning in the province. Although Henson trusts are commonly used in Ontario, prior to this new legislation, the law in Alberta provided that the value of an individual’s interest in a trust was to be included in calculating his or her assets for the purpose of determining eligibility under Alberta’s Assured Income for the Severely Handicapped (“AISH”) program, thus preventing the effective use of Henson trusts.
A Henson trust is a type of trust often used here in Ontario in situations where a beneficiary is a recipient of The Ontario Disability Support Program (“ODSP”). An individual’s eligibility for ODSP is determined based on his or her income and assets. The Henson trust has emerged as a strategy to provide for a disabled beneficiary without compromising his or her eligibility to receive ODSP benefits.
The regulations to the Ontario Disability Support Program Act, 1997, S.O. 1997, c. 25, Sched. B provide that if a person has a beneficial interest in a trust that is derived from an inheritance or proceeds of a life insurance policy, provided that it does not exceed $100,000.00, this interest will not be included in calculating his or her assets. On the other hand, a Henson trust is not restricted as to size, as it is set up to be fully discretionary, such that the beneficiary does not have a vested interest in the trust.
A Henson trust would usually be set up such that the beneficiary who is a recipient of ODSP is the subject of the trustee’s absolute discretion to make distributions to him or her. Upon the beneficiary’s death, there will typically be a gift-over to a person or entity other than the disabled beneficiary. As the disabled beneficiary is not entitled to any assets from the trust (given the trustee’s absolute discretion), it is not considered to be an asset of his or hers. The trustee of a Henson trust should still be mindful in making discretionary distributions to the disabled beneficiary, so as not to exceed the maximum annual income receivable by them, and possibly risk disentitling the beneficiary to ODSP benefits.
As discussed in this article, Alberta recently passed An Act to Strengthen Financial Security for Persons with Disabilities (SA 2018, c 12), which provides that a person’s interest in a trust is not to be included in the calculation of that person’s assets for the purpose of AISH, and repeals the section of the regulations which previously allowed for the inclusion of a trust interest in this calculation. As noted in the article, this will now allow for the use of Henson trusts in Alberta, and provide more flexibility in estate planning where a disabled beneficiary is receiving government support.
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The Substitute Decisions Act, 1992, S.O. 1992, c. 30 (the “SDA”), governs, among other things, the appointment of guardians for incapable persons. There are two types of guardians: a guardian for property and a guardian for personal care.
Sections 22(1) and 55(1) of the SDA provide that the Court may, on any person’s application, appoint a guardian of property or of the person, for a person who is incapable of managing property or personal care if, as a result of the said incapacity, it is necessary for decisions to be made on his or her behalf.
In order to appoint a guardian for someone, the Court will need to make a finding of incapacity for that person. This is an important hurdle, and the Court will generally need to see evidence that the person in question has been assessed as incapable of managing property and/or personal care prior to making a finding that he or she is incapable.
Depending on the circumstances, a person may submit to a capacity assessment voluntarily. However, according to section 78(1) of the SDA, if a person refuses to be assessed, an assessor shall not perform the assessment. Section 79 of the SDA allows the Court to order that a person be assessed, provided that the Court is satisfied that there are reasonable grounds to believe the person is incapable. Additionally, to obtain a Court Order for an assessment, there must be a proceeding under the SDA, in which the person’s capacity is in issue. The Ontario Court of Appeal in Neill v Pellolio, 2001 ONCA 6452 held that there is no stand-alone relief available for an Order for a capacity assessment in the absence of an application brought under the SDA. Accordingly, obtaining a finding of incapacity from the Court may not be a simple endeavour.
The SDA also has in place measures to protect an individual’s decision-making rights from undue restriction. Sections 22(3) and 55(2) state that the Court shall not appoint a guardian if it is satisfied that the need for decisions to be made will be met by an alternative course of action that does not require the Court to find the person incapable, and is less restrictive of the person’s decision-making rights than the appointment of a guardian.
Accordingly, for example, if a person has already granted a power of attorney, allowing the named attorney to act would constitute a less restrictive course of action which also does not require the Court to make a finding of incapacity in order for decisions to be made for an incapable person. Furthermore, if a person is incapable of managing their property or personal care, but remains capable of granting a power of attorney, that would likely also constitute a less restrictive course of action, and would allow that person to exercise their decision-making rights.
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It is with great pleasure to announce that myself, Ian Hull, and Lionel Tupman will be co-chairing a professional development program on Essential Evidence for Estate Litigators through the OBA.
The program has been created specifically for estate litigators and will run over three evenings on April 5, May 17, and June 6, 2018.
Details of the program can be found by clicking here.
This program is a must for anyone who litigates in the area of estates, wills, and trusts!
In Ontario, if there is a claim to be made or continued by a deceased person or their estate, any such claim must be brought by the executor or administrator of his or her estate. If there is no executor or administrator, under Rule 9.02 of the Rules of Civil Procedure, RRO 1990, Reg 194, the court may appoint a litigation administrator, who will represent the estate for the purpose of the proceeding. A beneficiary or other person may also represent the interests of an estate, under Rule 10.02, where it appears that an estate has an interest in a matter in question in a proceeding.
In British Columbia, section 151 of the Wills, Estates and Succession Act, SBC 2009, c. 13 (“WESA”) provides an alternative way of pursuing a claim by an estate. Section 151 states that a beneficiary of an estate may, with leave of the court, commence proceedings in the name and on behalf of the personal representative of a deceased person, either to recover property or enforce a right, duty or obligation owed to the deceased person that could be recovered or enforced by the personal representative, or to obtain damages for breach of a right, duty or obligation owed to the deceased person. Section 151(3) outlines the circumstances in which the court may grant leave in this regard:
(3) The court may grant leave under this section if
(a) the court determines the beneficiary or intestate successor seeking leave
(i) has made reasonable efforts to cause the personal representative to commence or defend the proceeding,
(ii) has given notice of the application for leave to
(A) the personal representative,
(B) any other beneficiaries or intestate successors, and
(C) any additional person the court directs that notice is to be given, and
(iii) is acting in good faith, and
(b) it appears to the court that it is necessary or expedient for the protection of the estate or the interests of a beneficiary or an intestate successor for the proceeding to be brought or defended
In a document produced by the Government of British Columbia entitled “The Wills, Estates and Succession Act Explained” (“WESA Explained”), section 151 is described as overcoming a gap in the law. Previously, if a beneficiary wished for an action to be brought on behalf of an estate, and the personal representative refused to do so, the beneficiary’s sole recourse would be to apply for removal of the personal representative.
However, removal may not always be necessary or convenient. As described in WESA Explained, such a situation could arise in the event that the personal representative’s main concern (as is often the case with executors, generally) is to preserve and distribute the estate. The personal representative is therefore likely more risk adverse and conservative in assessing the potential success of pursuing an action. The beneficiary may have differing views on the merits of the claim, and in his or her assessment of the risk and return.
Section 151 of WESA differs from the process for litigation administrators and representation orders in Ontario in that s. 151 allows the executor and beneficiary appointed to bring a claim on behalf of the estate to co-exist simultaneously.
The concept of s. 151 is similar to a derivative action, in which a shareholder or other person is permitted to bring an action on behalf of a corporation, where the corporation refuses to do so.
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Likely to be of a surprise to most readers, Canada has a law on the books governing, among other things, policy and financing with respect to the disposal of nuclear waste. The purpose of the federal Nuclear Fuel Waste Act (the “NFWA”) is to “provide a framework to enable the Governor in Council to make […] a decision on the management of nuclear fuel waste that is based on a comprehensive, integrated, and economically sound approach for Canada.”
The intersection of trust law with the NFWA occurs with respect to how the purpose and the goals of the act are to be financed. Section 9 of the NFWA provides that every “nuclear energy corporation” must maintain a trust fund with a duly incorporated financial institution, the purposes of which are described in greater detail below. The following entities are defined as a “nuclear energy corporation” under the NFWA:
- Ontario Power Generation;
- New-Brunswick Power Corporation; and
- Atomic Energy of Canada Limited.
When the NFWA came into effect, each nuclear energy corporation was required to make a substantial initial deposit into its respective trust fund, and each must make a minimum annual deposit of a prescribed amount to the capital of the trust. To provide some context, the largest trust fund is that maintained by Ontario Power Generation. At its inception, OPG was required to make an initial contribution of $500,000,000.00 to its fund, and its minimum annual levy is $100,000,000.00.
The NFWA provides that the corporations may only make withdrawals from their respective funds for the purposes of implementing a plan selected by the Governor in Council to “[avoid or minimize] significant socio-economic effects on a community’s way of life or on its social, cultural or economic aspirations.” In layman’s terms, the nuclear energy corporations must use the capital of their respective trusts exclusively for the purposes of ensuring the nuclear waste is managed and disposed of in an efficient and comprehensive manner while minimizing the social impact.
Control and management of all aspects of nuclear power generation is top of mind in the wake of the Fukushima nuclear disaster in 2011. We may all hope the capital of the trusts established under the NFWA continue to be used for their intended purpose rather than to fund clean-up efforts in the event of a similar tragedy. However, consider that the most recent financial statements for all of the aforementioned trust funds list a total combined balance of approximately $4 billion. Now consider that some have estimated the total cost of cleaning up and containing the waste and fallout from the Fukushima disaster as exceeding $626 billion. A drop in the proverbial bucket, to be sure. Indeed, the magnitude of the Fukushima incident likely far surpassed any reasonable expectations, though it gives us pause to consider whether we are giving nuclear power the deference it deserves.
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Let’s acknowledge one thing from the start – no one looks forward to preparing a will. We may have the best of intentions, but death is something that few want to consider.
For this reason, there is often delay and procrastination in creating an up-to-date will – and tremendous relief when you finally get it done. You walk out of the lawyer’s office, breathe a sigh, and thank the heavens you don’t have to go through that again, at least for a very long time.
But, if like most people, you have the dual intention of ensuring your assets go to your intended beneficiaries, and ensuring the estate settlement process is straightforward and as easy as possible on your family, then you’ve still got some work to do to finish the job.
It’s not a lot of effort, but there are some essential steps to ensuring your wishes are carried out easily and as you intended. Here are three to consider:
- Store your will safely – and where people can find it: We get it – you may not want your house cleaner to review the contents of your new will. But hiding it in a place that no one can find isn’t the answer. Courts need the original copy of your will for a smooth probate process, so don’t make it hard to locate. Whether it’s stored at your lawyer’s office, or registered with the court, or stored in a filing cabinet at home, make sure that you and your loved ones remember where it is and know how to access it. We explored this issue in more detail here:
- Make a list of your assets: Don’t assume that your family knows what you own. Most of us have assets scattered through numerous accounts and institutions, and property (such as cars, art, and jewelry) could be in more than one location. You may also have assets that you inherited from others. So make it easy for your executor – keep an up-to-date list of your assets (including account numbers, user names and passwords for virtual assets, and insurance policy numbers) with your will.
- Talk to your family: Ideally, before you drafted your will, you talked to all family members with any expectation of inheritance and told them your estate intentions. This gives you the opportunity to listen to any concerns and to explain why you’re planning to distribute your assets in a certain way. But even if you didn’t talk to family members before drafting your will, it’s not too late. To minimize the chances of an estate dispute, let family members know what’s in your will. In many cases, just letting people know the reasons behind your estate decisions is enough to cut off potential disputes before they happen.
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Today on Hull on Estates, Paul Trudelle and Noah Weisberg discuss the use of discretionary trusts in the context of the payment of child support as raised in the decision of Borges v. Santos
Should you have any questions, please email us at email@example.com or leave a comment on our blog.
In this day and age the priorities for one’s home are changing. Generally, people want to live a happier, healthier and “greener” lifestyle.
I recently came across the blog “Rethink. Reclaim. Remain.” written by Sam and Ryan McLaughlin, who are attempting to do just that. The parents of two, with one more on the way, are renovating their home while keeping three things in mind: “living happily, healthily, and considerately on this planet.”
One problem faced by many young families is how to fit everyone under one roof. The McLaughlin family sought to create the space they needed to accompany their growing family by building an addition to their current home using environmentally friendly and reclaimed materials.
The blog examines how to prioritize not only your time, but your resources. The McLaughlin’s wanted their home to reflect the ideas of sustainable living. To achieve this, they plan to repurpose and reuse viable components and materials. Their design plans incorporate both natural and reclaimed materials into the flooring, structure, finishes and furniture of the new addition. This includes reclaimed factory decking, exposed spruce joists, and reclaimed steel beams.
The environmental movement has seen a surge in recent years. The trend towards “going green” has spread from redesigning office spaces into remodeling homes. The McLaughlin’s blog is one family’s journey to transform their current home into an eco-friendly forever home.
Like every home renovation show on HGTV, not everything goes according to plan. The blog highlights some of the do’s and don’ts for Do It Yourself (DIY) home renovations and when it might be time to call in the contractors.
For those of you who are interested, I highly recommend reading the McLaughlin’s blog and checking out their renovation plans.
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I recently came across this article on the Financial Times Adviser discussing estate litigation in the UK in general, and, in particular, a situation relating to the estate of Tracey Leaning. I thought the article was interesting as it touched upon a couple of topics that raised some thought-provoking points for me.
To briefly summarize, Ms. Leaning died in 2015 leaving a Will which provided that her entire estate was to be transferred to her partner, Richard, on the condition that he look after her three dogs. However, she had also made a prior Will leaving her entire estate to four charities. Somehow, the charities learned that, while they had previously been included as beneficiaries of Ms. Leaning’s estate, her last Will did not gift anything to them. They wrote to Richard to advise him that they intended to challenge the later Will. According to the article, it is not clear whether any proceedings have yet been commenced by the charities.
The first thing I wanted to touch on was the “pet trust” aspect of this situation. This topic was recently discussed in a paper by Jenny Pho of Dale & Lessmann LLP for the Law Society of Upper Canada’s Practice Gems: Probate Essentials program on September 29, 2017. The arrangement made by Ms. Leaning appears to be in the form of a cash legacy to a pet guardian, namely Richard, together with the condition precedent that Richard take care of her dogs. Generally this option for leaving money for the care of one’s pets would only be recommended if the testator trusts the chosen pet guardian to properly care for the pets, as once the funds have been bequeathed to the pet guardian, the testator loses control over how the funds can be used.
In this particular situation, Ms. Leaning not only left a specific legacy to Richard, but rather her entire estate. It is likely that, in doing so, she did not intend that her entire estate be used solely for the care of her dogs, but rather, she put her trust in Richard to care for the dogs generally, using funds from her estate as needed. According to the article, Ms. Leaning’s later Will had been prepared by Ms. Leaning herself, without seeking legal advice. However, had she not had a trusted individual to care for the dogs, the pet trust arrangements would likely have been much more complicated, and may have required legal advice in order to properly implement.
Secondly, I also found one of the alleged bases for the charities’ challenge to Ms. Leaning’s will interesting. As noted above, Ms. Leaning had allegedly prepared her later Will herself, without seeking legal advice. Additionally, the signature page of the Will, which had been stapled to the remaining pages, had apparently become detached, leading to questions as to whether there had been any additional pages that were missing at the time of Ms. Leaning’s death. If such a situation arose in Ontario, it’s not clear what the ultimate outcome would be. If the court could not determine how the Will should be interpreted based on the available pages of the Will itself, it could also consider indirect extrinsic circumstances that were known to the testator at the time the Will was made. However, as it is ultimately a question of interpretation, it would likely be up to the court to decide whether, taking all the facts into consideration, it is satisfied that the Will is complete and should govern the distribution of Ms. Leaning’s estate.
Had Ms. Leaning sought legal advice and assistance with respect to the preparation of her Will, this question would likely have been avoided by the standard use of simple page numbering to indicate that all pages are present and accounted for.
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We all love a good story. Places like Hollywood were built on that premise. And while there are thousands of great stories built around things like love, war, superheroes, and disasters, there are a surprising number of great stories built around an area you likely would never have considered for bedtime reading: estate planning.
Yes, you read that right. When you think about it, it’s not that surprising. When it comes to leading families, estate planning involves the planning and allocation of enormous wealth, and, in many cases, successful businesses.
Add in the human dynamic – from greed, jealousy, incompetence, and hatred to caring, generosity, kindness, and love – and there are many interesting stories out there.
And they don’t all end well. Take International Management Group (IMG) and Mark McCormack. Starting in 1960, McCormack built his sports agency into a powerhouse, representing the world’s top golfers – Arnold Palmer, Jack Nicklaus, Tiger Woods – as well as top players from many other sports.
Just as IMG had set up financing for a huge expansion in 2003, Mark McCormack died suddenly of a heart attack at age 72. Even though his sons were involved in the business, and his second wife inherited the shares, there was no true succession planning in place. Sadly, with a huge leadership vacuum and high debt, his widow was forced to sell to a buyout firm and the family lost a business more than 40 years in the making.
Contrast that with the story of Milton Hershey, of the chocolate bar fame. At age 61, and in good health, he transferred virtually all his wealth and company shares into a trust for the benefit of a school for underprivileged children. More than 70 years after his death, his company has expanded worldwide, the trust still owns the company, and his humanitarian vision for business and community is thriving.
Motivate your planning – read some stories
Creaghan McConnell Group – a firm of professionals in Toronto who help leading Canadian families and their advisors find and design their future ownership and financial security strategies – have written up these family stories and others on their website. The stories aren’t long, but they’re a fascinating read, and provide insights into how good planning can make a huge difference to future generations: http://www.cmgpartners.ca/cmg-insights-grid/
Thank you for reading.