A recent decision by the Ontario Superior Court of Justice addresses the issue of whether the owner of a life insurance policy, who is mentally competent but physically disabled, can validly instruct another to change a beneficiary designation on a life insurance policy.
In Hanson Estate, the owner of a life insurance policy, after being diagnosed with multiple sclerosis, sought to change the beneficiary designation of the policy. Although the owner was mentally competent, as a result of the debilitating disease, the owner was physically incapable of altering the beneficiary designation. As such, the owner’s attorney for property was directed to make the amendment (by the owner).
In reaching her decision, the Honourable Madam Justice H.M. Pierce first considered s 7(2) of the Substitute Decisions Act, which states that an attorney may “…do on the grantor’s behalf anything in respect of property that the grantor could do if capable, except make a will”. The Judge dismissed the applicability of the SDA on the basis that the attorney was “…not acting as a substitute decision-maker pursuant to the power of attorney”.
Instead, the Judge turned her analysis to s 171(1) of the Insurance Act (which deals with beneficiary designation under a contract of life insurance) and considered in what circumstances a declaration is “signed by the insured”.
Consideration turned to Lord Denning’s decision in London City Council v Agricultural Food Products,  2 Q.B. 218 (UK C.A.), which states that “…there are some cases where a man is allowed to sign by the hand of another who writes his name for him. Such a signature is called a signature by procuration, by proxy, ‘per pro’, or more shortly ‘p.p.’ All of these expressions are derived from the Latin per procurationem…he can get someone else to write his name for him; but the one who does the writing should add the letters ‘p.p.’ to show that it is done by proxy, followed by the initials so as to indicate who he is”.
Consideration also turned to Justice Cullitty’s decision in Banton v Banton which states that “…[a]n attorney for a donor who has mental capacity to deal with property is merely an agent notwithstanding the fact that that the power may be conferred in general terms…[a]s an agent, such an attorney owes fiduciary duties to the donor but these are pale in comparison with those of an attorney holding a continuing power of attorney when the donor has lost capacity to manage property”.
Justice Pierce held that given the attorney advised the insurer that he changed the policy designation as agent for the owner by procuration, the amended beneficiary designation was deemed valid.
Cornelius Gurlitt passed away in May 2014, aged 81, and is well known amongst the art community for his vast collection of famous works of art ranging from Chagall to Picasso. A recent article in the Guardian highlights the storied controversy surrounding Gurlitt’s estate and the steps taken to comply with his Will.
Much of Gurlitt’s famed art collection was passed down to him by his parents and grandparents who allegedly obtained much of the artwork by Nazi theft during World War II. In 2012, during a tax investigation, German customs officials discovered over 1,000 pieces of art worth an estimated 1 billion euros.
According to the Wall Street Journal, while on his deathbed, Gurlitt apparently signed a Will bequeathing his estate (including the artwork) to a small museum in Bern, Switzerland, the Kunstmuseum Bern, on the condition that the museum take steps to determine which works had been stolen by the Nazis and to return those pieces of art to their rightful heirs. Apparently the choice of a foreign institution was made on the basis that Gurlitt felt the German government had treated him unjustly.
It appears that in the event the museum declined the collection, it would pass to Gurlitt’s distant relatives. Concern arose that in the event these relatives beneficially received the artwork, it would be difficult to ensure they complied with Gurlitt’s instructions for restitution. As such, pundits urged the museum to take on the task to ensure that the research into the artwork was done professionally and responsibly.
The museum has since accepted the artwork, with sorrow, and is showcasing Gurlitt’s pieces in conjunction with a second museum in Bonn, Germany, the Budeskunsthalle. Although the showcasing in Bonn seems contrary to Gurlitt’s request for a foreign museum, the museum is nonetheless following Gurlitt’s most prominent wish to ensure stolen artwork is returned.
Proceedings were commenced by the distant relatives to challenge the Last Will on the basis that Gurlitt was not of sound mind when drafting the Will. A successful Will challenge would result in the artwork passing to them. The proceeding was dismissed by a German Judge, while an appeal remains pending.
I find Estates intertwined with famed art to be an enjoyable topic to research and read, as per my prior blog about the 2015 movie, Woman in Gold. Perhaps though, it’s just an excuse to admire such beautiful artwork, with Gurlitt’s collection being one of the best.
For my ‘Thursday Throwback’ post, I turn to an important 1981 decision from the High Court of Justice considering section 72 of the Ontario Succession Law Reform Act.
In Moores v. Hughes, an application was brought by a divorced wife for dependant support pursuant to Part V of the SLRA.
As a result of certain debts owing at the time of the Deceased’s passing, his net estate amounted to $40,000. However, as there were assets that passed outside of the Deceased’s Estate in the approximate amount of $365,000, comprised primarily of insurance policies, a joint bank account and a pension plan, a thorough analysis of section 72 of the SLRA, was undertaken. A helpful Hull & Hull LLP podcast on section 72 assets can be found here.
Often referred to as the ‘claw back’ provision, section 72 deems certain transactions to be included as testamentary dispositions as of the date of death and included in the value of an estate and available to be charged for payment for dependant support purposes. As the addition of section 72 had only recently been enacted, Justice Robins stated that the, “…section makes a significant change in the law as it stood before the enactment of the Succession Law Reform Act…Manifestly, the section was intended to ensure that the maintenance of a dependant is not jeopardized by arrangements made, intentionally or otherwise, by a person obligated to provide support in the eventuality of his death”.
Based on the Court’s interpretation of the (then) newly enacted section 72, the insurance policy, joint bank account, and pension plan, were all included in the estate and thus made available for dependant support.
Despite this interpretation, there remains estate planning techniques available to ensure that certain jointly held life insurance policies fall outside of the claw back provision of the SLRA, as addressed in the Ontario Court of Appeal decision in Madoire-Ogilvie (Litigation Guardian of) v. Ogilvie Estate.
The appointment of an estate trustee, although an honourable duty, carries with it onerous obligations and responsibilities. Often, family executors are not familiar with the administration process and require some sort of assistance in administering the estate. Interestingly, I came across a new service, Easy Estate Closure, which seeks to connect family executors with estate experts to help finalize the administration of the estate.
According to its website, Easy Estate Closure provides a streamlined and efficient service that suits the specific needs of an executor. The procedure is as follows:
- The executor contacts Easy Estate Closure to explain their estate needs/challenges, and a free assessment is provided on what the executor is required to do.
- If the executor decides that they need help to complete those requirements, Easy Estate Closure then reaches out to their database of estate experts to see who is available to complete the tasks and at what price.
- Easy Estate Closure then presents the executor with a list of experts who have agreed to assist, along with price quotes, hourly rates, past client feedback ratings, and other information as needed (for example, languages spoken, meeting location and time preferences).
- The executor then chooses which expert they want to connect with, and Easy Estate Closure facilitates those introductions and the direct relationship between the executor and expert commences.
- Easy Estate Closure maintains communication with the executors throughout the process in order to receive feedback on the expert with whom they are working.
- Once the expert completes the work, the executor pays them directly according to the initially presented quote rates.
- Easy Estate Closure does not charge a fee to the executor.
It is always interesting to follow the technological innovation in the estates community.
Digital assets and passwords for on-line accounts are an important consideration in estate planning. A recent CBC article, found here referencing a situation experienced by a woman named Peggy, highlights the difficulties that may arise in failing to include such assets and information in an estate plan.
Peggy was the sole estate trustee and beneficiary of her husband’s estate. Although Peggy knew her husband’s log-in code to his iPad, she did not know the Apple ID password, which is required to download apps from the App Store. As such, Peggy was unable to re-download her card game app once it stopped working.
Although Peggy could have created a new Apple ID (username and password), it meant that she would have had to re-purchase everything under her husband’s account. As such, to avoid this, Peggy contacted Apple in order to obtain the Apple ID password. Although Apple had initially requested that Peggy provide the Will and death certificate, they later required a Court order before releasing such information.
The good news is that Apple is currently assisting Peggy and is no longer requiring her to obtain a Court order. However, the process has taken many months, and understandably caused Peggy considerable frustration as she considered this to be a simple problem. She just wanted to play her digital card game.
As no such digital asset law exists yet in Ontario, corporations such as Apple, Facebook, and Gmail, are left to their own devices when addressing digital asset ownership and succession.
At this point in time, I have no hesitation in saying that almost all of us have Apple (or Android) products, and rely on Facebook and Gmail accounts. The importance of addressing such assets in an estate plan is therefore clear. Although there are a myriad of products which can assist in managing associated passwords, this is just one step in preparing a thorough estate plan. An experienced lawyer can assist to ensure that all types of digital assets are addressed, that a testator’s instructions are clear and definitive, and proper wording is included in a Will.
Adult children of aging parents are often faced with important responsibilities. Ensuring that parents are adequately cared for is a task that many children lovingly undertake. As highlighted in this article in Forbes, key substitute decision planning ensures that the transition from independence to dependence, proceeds as smoothly as possible. Such steps should be taken immediately, and prior to the onset of dementia, or other incapacitating disorders, to ensure that one’s ability to provide instructions is unequivocal.
A power of attorney is a legal document that gives someone else the right to act on the grantor’s behalf. With the onset of incapacity, not only may the understanding of finances become increasingly difficult, but vulnerability to financial predators may increase. In fact, it is estimated that approximately 10% of the 1.5 million seniors in Ontario experience elder abuse. As such, allowing an incapacitated parent to maintain the authority to sign cheques and manage finances may be dangerous.
To preserve some degree of control, it is often the case that bank accounts are transferred into joint ownership between an adult child and their parent. This is a common practical step taken to ensure that the child who provides care to their parent has sufficient access to their parent’s funds to satisfy expenses arising. However, given the seminal decision in Pecore v. Pecore (SCC), at the time the bank account is transferred into joint ownership, careful notes must be taken to ensure that the evidence of testamentary intention regarding the account is clarified.
Meeting with an experienced lawyer that can explain the types of powers of attorneys, and the associated responsibilities, ensures the adult child has the appropriate powers to assist their parent. As well, the taking of detailed notes by a lawyer or financial institution is a prudent step to avoid possible estate disputes at a later date. While often we focus our efforts on estate planning, substitute decision planning is equally important.
The Rules of Civil Procedure are quite clear as to when a lawyer may answer questions on behalf of their client during an examination for discovery. The Rules though, appear to be less clear with respect to cross-examinations on affidavits, and as such, attention must be turned to case law.
According to Rule 31.08 of the Rules of Civil Procedure, questions on an oral examination for discovery, “…shall be answered by the person being examined but, where there is no objection, the questions may be answered by his or her lawyer”. Simply put, if the examining party objects to an answer being given by the deponent’s lawyer, the examined party must answer the question and not their lawyer.
The rationale for this can be found in the Divisional Court decision of The Polish Alliance of Canada v. Polish Association of Toronto, where Justice Lauwers (quoting the Law of Civil Procedure in Ontario) states that: “…counsel for the party being examined should not interfere with the examination; the examiner is entitled to the evidence of the witnesses and not to that of counsel”.
Justice Lauwers provides further rationale (quoting Witnesses): “The primary reason for prohibiting communication between counsel and witness while testifying at trial is to prevent counsel from telling the witness what he or she should say. The same concern exists during a discovery, and consequently, the same basic restriction against counsel/witness communication should be in place”.
Therefore, whether it be an examination for discovery or a cross-examination on an affidavit, a lawyer may answer questions on behalf of the deponent, only if the examining party does not object. There is no distinction between the two forms of examinations.
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.
As claims commenced by way of action are becoming more prevalent in the estates bar, it is important to understand the different rules, and obligations, imposed on counsel depending on whether a claim is commenced by statement of claim (action) or notice of application (application). One such difference is the use of discovery plans. The recent decision of Teti v. Mueller Water Products addresses the obligations surrounding discovery plans used in actions.
According to Rule 29.1.03 of the Rules of Civil Procedure, where a party to an action intends to obtain evidence by the discovery of documents, examination for discovery, inspection of property, medical examinations, or examinations for discovery by written questions, the “…parties to the action shall agree to a discovery plan”.
In Teti, the parties were unable to agree on a discovery plan relatively early in the litigation. As such, a motion was brought by the plaintiff for a discovery plan. Master Dash dismissed the plaintiff’s motion to impose a discovery plan on the basis that the Rules impose an obligation on the parties to reach an agreement.
Although Master Dash acknowledged that case law supports the Court’s intervention in exceptional circumstances to the discovery process, and the Rules of Civil Procedure provide for broad powers to make orders and impose terms, Master Dash required the parties to make further efforts to create their own discovery plan, including the requirement to mediate before he would consider imposing a court ordered discovery plan.
Such a decision seems to accord with Justice Brown’s 3Cs: cooperation, communication, and common sense. Parties must work together in good faith, before recourse to the Court.