It is not uncommon for the lawyer who drafted a testator’s will or codicil to subsequently be retained by the Estate Trustees after the testator’s death to assist with the administration of the estate. The rationale behind the drafting lawyer being retained to assist with the administration of the estate appears fairly self-evident, for as the drafting lawyer likely has an intimate knowledge of the testator’s estate plan and assets they may be in a better position than most to assist with the administration of the estate.
While retaining the drafting lawyer to assist with the administration of the estate is fairly uncontroversial in most situations, circumstances could become more complicated if there has been a challenge to the validity of the testamentary document prepared by the drafting lawyer. If a proceeding has been commenced challenging the validity of the testamentary document, there is an extremely high likelihood that the drafting lawyer’s notes and records will be produced as evidence, and that the drafting lawyer will be called as a non-party witness as part of the discovery process. If the matter should proceed all the way to trial, there is also an extremely high likelihood that the drafting lawyer would be called as a witness at trial. As the drafting lawyer would personally have a role to play in any court process challenging the validity of the will, questions emerge regarding whether it would be proper for the drafting lawyer to continue to represent any party in the will challenge, or would doing so place the drafting lawyer in a conflict of interest?
Rule 3.4-1 of the Law Society of Ontario’s Rules of Professional Conduct provides that a lawyer shall not act or continue to act where there is a conflict of interest. In the case of a drafting lawyer representing a party in a will challenge for a will that they prepared, an argument could be raised that the drafting lawyer is in an inherent position of conflict, as the drafting lawyer may be unable to look out for the best interests of their client while at the same time looking out for their own interests when being called as a witness or producing their file. There is also the potentially awkward situation of the drafting lawyer having to call themselves as a witness, and the associated logistical quagmire of how the lawyer would put questions to themselves.
The issue of whether a drafting lawyer would be in a conflict of interest in representing a party in a will challenge was dealt with in Dale v. Prentice, 2015 ONSC 1611. In such a decision, the party challenging the validity of the will brought a motion to remove the drafting lawyer as the lawyer of record for the propounder of the will, alleging they were in a conflict of interest. The court ultimately agreed that the drafting lawyer was in a conflict of interest, and ordered that the drafting lawyer be removed as the lawyer of record. In coming to such a conclusion, the court states:
“There is a significant likelihood of a real conflict arising. Counsel for the estate is propounding a Will prepared by his office. The preparation and execution of Wills are legal services, reserved to those who are properly licensed to practise law. Counsel’s ability to objectively and independently assess the evidence will necessarily be affected by his interest in having his firm’s legal services found to have been properly provided.” [emphasis added]
Decisions such as Dale v. Prentice suggest that a lawyer may be unable to represent any party in a will challenge for a will that was prepared by their office as they may be in a conflict of interest. Should the circumstance arise where the drafting lawyer is retained to assist with the administration of the estate, and subsequent to being retained someone challenges the validity of the Will, it may be in the best interest of all parties for the drafting lawyer to indicate that they are no longer able to act in the matter due to the potential conflict, and suggest to their clients that they retain a new lawyer to represent them in the will challenge.
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In today’s podcast, Noah Weisberg and Sayuri Kagami discuss the problems caused by a beneficiary under a Will witnessing its execution in the context of the recent Saskatchewan decision of Mahin v Kolosnjaji, 2019 SKQB 32.
Should you have any questions, please email us at email@example.com or leave a comment on our blog.
Sometimes a Will may include an “option to purchase” clause. Basically, this type of clause will provide that a particular person shall have the option to purchase a particular asset of the estate, for a particular price. Usually the option will end after a certain period of time, to allow the estate to continue being administered, depending on whether the person decides to exercise the option. Typically, options to purchase will play out in a fairly straightforward way—either the option is exercised, or it expires. However, in the recent decision in Crawford v Culbert et al, 2019 ONSC 1048, the chain of events was not quite so simple.
Hannah died in February 2018, and was survived by her four children: a son, Terry, and three daughters, Tammy, Tracey, and Tina.
At the time of Hannah’s death, the four siblings were not specifically aware of the contents of Hannah’s Will. A few days after Hannah died, they located an unexecuted document that appeared to be a Will, which Tina read out loud. The Will contained a provision that Terry would have a first option to purchase a farm property owned by Hannah’s estate, for $200,000.00, and that he had a period of 30 days “from the date that express written notice” of the option is given to him. At that time, it was unclear whether the Will had been executed.
The next day, the three sisters obtained a notarial copy of the executed Will from the law firm that had prepared it, but did not provide or show a copy to Terry. Some text messages were exchanged between Terry and Tammy about a month later, in which Terry commented that he did not intend to purchase the property. A short while after that, all four of the siblings met at the office of the lawyer who drafted the Will. It was at this time that Terry learned that Hannah’s Will was in the same form as the unexecuted document the siblings had located following her death. Twenty days later, Terry advised the lawyer that he intended to exercise the option to purchase. Both Tracey and Tammy took the position that Terry was out of time to exercise the option.
The court considered what constituted “express written notice” as required by Hannah’s Will. It easily concluded that Tina’s reading of the unexecuted Will did not constitute express written notice. The court also found that the earliest date that the 30 day period could have commenced was the day that all four siblings attended at the lawyer’s office, and Terry learned that the Will had been executed. Additionally, the court found that nothing Terry said or did prior to the date of the lawyer’s meeting could be considered an effective waiver of his entitlement to the option.
This decision may serve as a reminder to anyone who encounters an option to purchase that being crafty to try to circumvent the option is unlikely to be successful.
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One of the most gifted items this past holiday season were apparently the home DNA tests which can reveal your genetic ancestry or even if you are predisposed to certain health conditions. As anyone who has taken one of these tests (myself included) can tell you, the test results also contain a long list of other individuals who have also taken the test who you are related to, allowing you to reconnect with long lost relatives.
While my own test results did not reveal any family secrets, the same cannot be said for other individuals who have taken the test, as there have been a growing number of articles recently about how home DNA tests have revealed family secrets which otherwise may never have come to light. Although not all of these secrets are necessarily negative, such as finding a long-lost sibling, others, such as finding out that the individual who you believed to be your father was not in fact your biological father, could be life changing. For the latter, the phenomena is apparently common enough that the Atlantic has reported that self-help groups have formed around the issue, such as the Facebook group “DNA NPE Friends”, with “NPE” standing for “Not Parent Expected”.
In reading through these stories I couldn’t help but wonder if having such a result could impact your potential entitlements as a beneficiary of an estate. What happens if, for example, the individual who you previously believed to be your biological father but the test reveals was not in fact your father should die intestate, or should leave a class gift to his “children” in his Will without specifically naming the children. Could finding out that you were not actually biologically related to your “father” result in you no longer being entitled to receive a benefit as a beneficiary? Could you potentially be disinherited as a beneficiary of an estate by voluntarily taking a home DNA test if your right to the gift is founded upon you being related to the deceased individual?
Who is legally considered an individual’s “parent” in Ontario is established by the Children’s Law Reform Act (the “CLRA“). Section 7(1) of the CLRA provides that, subject to certain exceptions, the person “whose sperm resulted in the conception of a child” is the parent of a child. Section 7(2) of the CLRA further provides for a series of presumptions regarding the identity of the individual’s “whose sperm resulted in the conception of a child“, including, for example, that there is a presumption that such an individual is the birth parent’s spouse at the time the child is born, or the individual in question certified the child’s birth as a parent of the child in accordance with the Vital Statistics Act (i.e. signed the birth certificate). To the extent that there are any questions about parentage, section 13(1) of the CLRA provides that any interested individual may apply to the court at any time after a child is born for a declaration that a person is or is not the legal parent of the child.
In applying these presumptions to our previous questions about the home DNA test, if, for example, the individual who you previously believed was your biological father was your birth mother’s “spouse” at the time you were born, or signed the birth certificate, it would appear that, subject to there being a declaration under section 13(1) of the CLRA to the contrary, there would continue to be a presumption at law that the individual who you previously believed to be your biological father would continue to be your legal “parent” in accordance with the CLRA. To this respect, in the absence of a formal declaration under section 13(1) of the CLRA that the individual was no longer your legal “parent”, there would appear to be an argument in favour of the position that the individual who you previously believed to be your biological father would continue to be your legal “parent”, and that you should continue to receive any benefits which may come to you as a “child” on the death of your “father”, whether on an intestacy or a class bequest to his “children” in his Will.
This presumption, of course, is subject to the ability of any interested person (i.e. the Estate Trustee or one of the other beneficiaries) to seek a formal declaration under section 13(1) of the CLRA that you were not in fact a “child” of the individual you believed to be your biological father. If such a formal declaration is ultimately made by the court, you would cease to be the legal “child” of the individual who you previously believed to be your biological father, and would likely lose any corresponding bequests which may have been made to you on an intestacy or as a member of the class “children” in the Will.
The use of DNA tests to establish the potential beneficiaries of an estate is not a new phenomenon (see: Proulx v. Kelly). What is new, however, are people voluntarily taking such tests en masse in a public forum, potentially voluntarily raising questions about their rights to receive an interest in an estate when such questions would not have existed otherwise.
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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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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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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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When a marriage breaks down, spouses often have an overwhelming amount of issues to consider. For many, all they want to do is figure out how to split up the assets (and kids) and move on with their lives. Sometimes, spouses will separate without formally divorcing. Although life after marriage may be the key consideration for most, separated spouses should also take time to consider what happens on their death and whether or not they want their spouse to share in their estate.
Draft a Will
The most obvious way of ensuring that your separated spouse doesn’t benefit from your death is to draft a Will. By setting out one’s intended disposition of assets, a testator will avoid the provisions of Part II of the Succession Law Reform Act, which provides for a share of the Estate to pass to the legally married spouse of a person who dies intestate. But remember, including a provision in the will that the spouse is to be excluded from inheriting is not sufficient to keep a surviving spouse from inheriting on an intestacy (see our recent blog on this topic here).
Of course, if property rights between the spouses have not been settled following separation, the surviving spouse may still be at liberty to elect in favour of equalization of net family property pursuant to the Family Law Act.
Separation Agreements and Release of Intestacy Rights
If the parties have consulted lawyers and formally settled all of the issues surrounding their marriage, they are likely to have entered into a separation agreement. Often, parties to such agreements will walk away thinking that they have fully separated out their lives and settled all issues arising as a result of marriage, cohabitation, or the breakdown of the relationship. However, solicitors drafting such agreements should be careful to properly release each spouse’s interest in the estate of the other, in case of an intestacy. In particular, while no one likes to think of it, cases have occurred where a spouse dies only days after entering into a separation agreement and before they have had the opportunity to draft a Will.
In order to properly release a spouse’s intestate interests in the other spouse’s estate, there must be a specific release of such rights using clear, direct and cogent words (see the leading case in Ontario of Re Winter,  DLR 134 (Ont H Ct)). In Re Winter, the wife released the husband as follows:
The wife of the second part covenants and agrees and does hereby release the husband of the first part from all claims present, past or future against the husband for maintenance, alimony or separation allowance and acknowledges that she has no further claims against the husband nor against the estate of the husband of the first part.
The Court found that although there was a release against the husband’s estate, the release only dealt with claims for “maintenance, alimony or separation allowance” and was not sufficiently clear and cogent for the wife to have released her intestacy rights against the husband’s estate. As a result, the wife inherited on the husband’s intestacy (a result likely to have displeased the other intestate heirs and the husband, had he been alive).
Change Your Beneficiary Designations
Finally, in addition to thinking of the potential intestacy rights of a surviving spouse, don’t forget assets passing outside of the estate. Make sure to have all beneficiary designations on insurance policies, registered accounts (RRSPs and TFSAs), and pensions updated following separation.
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People change their mind all of the time. When someone changes their mind about the terms of their Will however, things can become more complicated. Going to a lawyer to formally make a change to the Will may seem daunting. If the change to the Will is relatively minor, an individual may be tempted to forgo meeting with a lawyer to draw up a new Will or Codicil, and simply make the change to the Will themselves by crossing out or inserting new language by hand on the face of the old Will. But would such handwritten changes be valid?
Although the advice to any individual thinking of changing their Will would always be to speak with a lawyer about the matter, people do not always adhere to such advice. If someone has made handwritten changes to their Will after the document was originally signed, such changes can under certain circumstances alter the terms of the Will.
Section 18(1) of the Succession Law Reform Act (the “SLRA“) provides that unless any alteration to a Will is made in accordance with the requirements of section 18(2) of the SLRA, such alterations have no effect upon the provisions of the Will itself unless such an alteration has had the effect that you can no longer read the original wording of the Will. Section 18(2) of the SLRA further provides:
“An alteration that is made in a will after the will has been made is validly made when the signature of the testator and subscription of witnesses to the signature of the testator to the alteration, or, in the case of a will that was made under section 5 or 6, the signature of the testator, are or is made,
(a) in the margin or in some other part of the will opposite or near to the alteration; or
(b) at the end of or opposite to a memorandum referring to the alteration and written in some part of the will.”
As a result of section 18(1) and 18(2) of the SLRA, any handwritten change to a Will does not validly alter the terms of the Will unless the testator and two witnesses sign in the margins of the Will near the alteration (subject to certain exceptions listed). If the handwritten change is not accompanied by such signatures it is not a valid alteration and has no impact upon the original terms of the Will, unless the handwritten change has had the effect of “obliterating” the original language of the Will by making it no longer readable.
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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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