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The Validity of iWills

Posted in Estate Planning, General Interest, In the News, Wills

A recent decision in Queensland, Australia determines whether a Will typed into the Notes Application of an iPhone stands as a valid Last Will and Testament.

According to an article in the National Law Review, the deceased, Karter Yu, used his iPhone,  and specifically the Notes Application, to draft a Will shortly before facing an intense personal crisis.

Despite the fact that the Will was not witnessed (a legal requirement under local laws), the Court found that the Note was nonetheless created by the testator, and that there was a clear intention of the Note being legal and operative.  Furthermore, the Court found that the Note had the testator’s signature (I assume electronically), and that it was time and date stamped by his iPhone.  The title to the Note was ‘Last Will and Testament’

Therefore, the Will was found to be valid and probate was granted.  It seems however that the Court considered special factors in this scenario, and generally did not intend to open up the floodgates to allow people to prepare a do-it-yourself Will on a smartphone.

A decision such as the one in Australia, is not the only scenario where Courts have upheld Wills as valid, despite lacking the formal requirements.  In fact, a 2011 Hull & Hull LLP blog recounts the case of the Saskatchewan farmer who in 1948 carved his Will into the bumper of his tractor that he was pinned under.  The farmer wrote with his small knife, “In case I die in this mess, I leave all to the wife.  Cecil Geo Harris”.  The tractor Will was found to be a valid holograph Will.

In Ontario, the Succession Law Reform Act governs the requirements of a valid Will.  Although a holograph Will does allow for some laxity with respect to these formal requirements, it is always suggested that individuals meet with professional estate planners to prepare valid Wills.  It is not recommended that testators rely on their iPhone, or their tractor bumper, in drawing their final wishes.

Noah Weisberg

Will Challenge Case Management & Summary Judgment

Posted in General Interest, Litigation, Wills

As an Estates lawyer, not only is it important to understand the law surrounding Will challenges, but also the procedure involved in litigating such a dispute.  The recent Case Conference Memorandum No. 1 of D.M. Brown J. in the Estate of Lorraine Coombs, 2014 ONSC 2154 is helpful in explaining the impact of case management and summary judgment in this type of litigation.

In the Coombs Estate, litigation was commenced by two of the Deceased’s children seeking relief that the Will be set aside on the basis of lack of testamentary capacity, lack of understanding of the Will’s contents, and undue influence.  It was also alleged that certain joint bank accounts were held by way of resulting trust for the benefit of the Estate on the basis of the hugely influential Supreme Court of Canada decision in Pecore v. Pecore, 2007 SCC 17.

The size of the Estate was approximately $750,000, which Justice D.M. Brown identified as a ‘modest estate’.

Despite an order for directions from the Court requiring the parties to complete examinations for discovery and undertakings by a certain date, the parties failed to meet this deadline.  In addition to the order for directions, two separate motions were commenced to preserve the funds in the joint account until the trial of the Will challenge, as well as a motion seeking summary judgment.

At the time of scheduling these two motions, Justice D.M. Brown brought the proceeding under case management in accordance with his Standard Case Management Directions.

At the case management conference, amongst other things, deadlines were imposed for the production of medical records, the completion of undertakings, written interrogations of up to 30 questions (in place of full examinations for discovery), as well as the scheduling of the motion to preserve the joint assets.

What I found to be the most informative part of the Memorandum was Justice D.M. Brown’s refusal to give out a date for the hearing of the summary judgment motion.  His Honour relied on paragraph 73 of Hryniak v. Mauldin, 2014 SCC 7 which states that summary judgment may not always be proportionate.  If, for example, an early date is available for a short trial, a motion for summary judgment may not be proportionate.

Given the modest size of the Estate, and that credibility issues will be relevant (requiring the use of viva voce evidence) his Honour indicated that bringing a summary judgment motion in a modest estate will challenge “would be to countenance a grossly disproportionate way to attempt to dispose of a proceeding”.

Therefore, Justice D.M. Brown concluded that “the most proportionate way to dispose of such a proceeding is to limit pre-hearing discovery and to direct a short hybrid trial”.

Noah Weisberg

‘Tis the Season of Giving

Posted in Charities, Estate Planning

As the holidays quickly approach, Canadians begin to turn their minds to everything the holiday season brings – parties, food and drink, and quality time with others. During the holidays, people also think about charity- giving their time and money to the cause or causes they hold dear.

As the year draws to a close, 2014 can be remembered as a year that brought charitable giving to the forefront of our minds via social media initiatives such as the ALS ice bucket challenge and the Governor General’s Dare2Give campaign.

The end of the year can also be a time to consider what kind of charitable legacy you want to leave. If you decide to give to charity during your lifetime, tax implications are an important consideration. For example, donating securities to a charity accredited by the Canada Revenue Agency allows you to receive a charitable tax receipt for the full value of the gifted security, exempting it from capital gains.

Tax considerations should also be considered if you decide to donate to charity upon passing. One such consideration may be deciding whether to give the gift outright, or to designate a charity as a beneficiary of a registered plan.

Changes to testamentary taxes in the 2014 Federal Budget will also have an impact on this type of giving. Presently, when a charitable gift is made by will, it is deemed to have been made prior to death which is advantageous in terms of charitable tax credits that can offset tax liability arising from the deemed disposition of one’s capital assets before death. However, the changes, which are to be implemented in 2016, dictate that testamentary charitable gifts are deemed to be made at the time the gift is transferred out of the estate.

The tax implications of decision-making can be complex, especially with the addition of new legislation. It is therefore recommended that you speak with an estate planning professional and get set for 2015!

Thank you for reading,

Suzana Popovic-Montag

Hull on Estates #400 – Releases and the distribution of an estate

Posted in Hull on Estates, Hull on Estates, PODCASTS / AUDIO, PODCASTS / TRANSCRIBED, Show Notes

Listen to Hull on Estates #400 – Releases and the distribution of an estate

Today on Hull on Estates, Paul Trudelle and Stuart Clark discuss the recent article “Release Me: An analysis of the law surrounding the use of releases in the estate and trust context” by Arieh Bloom published in the Estates, Trusts and Pensions Journal. Specifically, they discuss whether an Estate Trustee can require a beneficiary to execute a release before seeing to the distribution of an estate.

If you have any questions, please email us at hull.lawyers@gmail.com or leave a comment on our blog page.

Click here for more information on Paul Trudelle.

Click here for more information on Stuart Clark. 

A Cautionary Tale on Separating Legal Costs

Posted in Ethical Issues, Executors and Trustees, Trustees

The recent decision in Georganes v. Bludd 2014 ONSC 4655 (CanLII) addresses the issue of the entitlement of an Estate Trustee (in defending litigation) to have their legal fees paid by the Estate, despite having a personal interest in the litigation.

The background litigation involved the ownership of real property in Georgetown, Ontario.  Pursuant to section 9 of the Estate Administration Act, both the Estate Trustees, and the Applicant, claimed a 20% interest in the home when it vested to the beneficiaries of the Estate three years after the passing of the Deceased.

Upon settling this litigation, the Applicant, who was separately represented from the Estate Trustees and paid her own legal fees, understood that the Estate Trustees caused the Estate to pay legal fees of over $50,000 incurred by them to the law firm that also represented the Estate.  The payment of legal fees was done without prior approval of the Court or the consent of the other beneficiaries.

What makes this case interesting is that in defending the litigation as Estate Trustees (and subsequently having their legal fees paid from the Estate), they were also protecting their personal interests.

In reaching the decision, Justice Price relied on the decision of D.M. Brown J., in Hosein v. Hosein, 2010 (ONSC) 3679 who states that unless there is some very unusual facts, it is improper for an Estate Trustee to use Estate funds to pay the legal costs of defending their personal interest in proceeds of the Estate.

Justice Price therefore states that “where an estate trustee incurs legal fees to protect both his own personal interest in an asset and the estate’s interest, he has a duty to separate the legal costs incurred in each”.  As the Estate Trustees in Georganes failed to do this, the Court reviewed the ledger of the law firm (that represented both the Estate and the Estate Trustees) and determined an amount attributable to costs in a personal capacity to reimburse the Estate.

This decision provides a helpful reminder to lawyers to ensure that when they represent a client who is an Estate Trustee and has a personal interest in the Estate, that their dockets with respect to each role remain separate.  Should a costs order be made, having split dockets will save significant time and headache.

Noah Weisberg

Take Stock – Stock Options and Your Estate Plan

Posted in Estate Planning

Because stock options tie employee compensation to overall corporate performance they are being used as long-term employee incentive vehicles with ever increasing frequency. A stock option is essentially an agreement entered into between an employer and an employee, whereby the employee will have an option to buy the employer’s corporate shares at a price that proves to be significantly discounted when the corporation is performing well. As a result, stock options can often amount to a significant asset in one’s overall estate.

Many people never consider stock options and their treatment on death when structuring their estate plan.

Most of the tax rules governing employee stock options are found in section 7 of the Income Tax Act (Canada). A STEP Canada/CRA Roundtable conducted this year provides a brief overview of CRA’s technical interpretation of section 7 and the treatment of stock options at death (see, Question #16).

At the Roundtable, the CRA indicated that where an employee has died and the employee owned unexercised stock options prior to his/her death, he/she is generally considered to have received an ‘employment benefit’ in the year of  his/her death. That employment benefit is equal to the value of the stock options immediately after death, less any amount paid by the employee to acquire the options, and therefore must be included in the deceased’s final tax return.

In some instances, however, the terms of the stock option may impose a time limitation for the exercise of the stock option after the deceased employee’s death.  In this scenario, tax relief may be available if the stock option is exercised, expires, or is otherwise disposed of within the first taxation year of the deceased taxpayer’s estate and the value of the stock option has declined since the employee’s death, such that the benefit realized by the deceased’s estate is less than the employment benefit deemed to have been received by the deceased taxpayer.

However, sometimes the terms of the owned unexercised stock option provide that the stock options are automatically cancelled in the event of the employee’s death. In that case, the value of the options immediately after death will be nil.

It is important to look at the terms of your stock option agreement in order to understand how those terms will affect your overall estate plan.

Thanks for reading,

Ian Hull

The Legacy of Alfred Nobel

Posted in General Interest, Wills

This week, the Nobel Peace Prize was awarded to its youngest ever recipient, seventeen-year-old Malala Yousafzai.  Many people know that the Nobel Prizes are named after their founder, Alfred Nobel, who died in 1896.  Fewer are familiar with the story behind the creation of the prestigious awards that almost never came into existence.

Earlier this year, I read a novel by Harry Karlinsky about the creation of the Nobel Prizes as a term of the Last Will and Testament of the late Alfred Nobel.  Nobel, who earned his fortune through the invention of dynamite, left the residue of his Estate to a fund for the creation of the Prize in five different subject areas.  While Karlinsky’s book tells the story of a sixth, “Stonehenge Prize” for the individual able to uncover the mystery behind the creation of Stonehenge is fictitious, it also describes Nobel’s Will and how its terms gave rise to the Prizes named after the Swedish inventor and scholar.

Alfred Nobel’s Will directed that the residue of his Estate, in an amount equivalent to approximately 268 million American dollars today, be invested in securities and constitute the Nobel Foundation.  With respect to the recipients of the Prizes, Nobel’s Will directed as follows:

One part to the person who shall have made the most important discovery or invention within the field of physics; one part to the person who shall have made the most important chemical discovery or improvement; one part to the person who shall have made the most important discovery within the domain of physiology or medicine; one part to the person who shall have produced in the field of literature the most outstanding work in an ideal direction; and one part to the person who shall have done the most or the best work for fraternity between nations, for the abolition or reduction of standing armies and for the holding and promotion of peace congresses.

The Will that created the Nobel Prizes was, apparently, challenged by two of Nobel’s nephews, who sought shares in their uncle’s estate.  The challenge of the Will was supported by King Oscar II of Sweden, who considered it unpatriotic that Nobel leave the majority of his Estate to international recipients of his awards.  Further complications in administering the Nobel Prizes arose when Nobel’s Estate Trustees struggled to obtain the agreement of institutions to assist in administering the Prizes.  Despite such issues, Nobel’s testamentary wishes were eventually realized.

The story of Alfred Nobel and his Prizes emphasizes the potential of a Last Will and Testament in creating an enduring legacy for many years after the death of its testator.

Have a great weekend.

Nick Esterbauer

POA Abuse Affects All Ages

Posted in In the News, Power of Attorney

When one thinks about the abuse and misuse of Powers of Attorney (“POAs“), the scenario that typically comes to mind involves an older, incapable adult falling victim to younger neighbours or family members.  However, a recent story in the news highlights that POA abuse can affect individuals of all ages and levels of mental capacity.

The parents of the Columbus Blue Jackets’ Jack Johnson have incurred, on his behalf, debts in excess of ten million dollars.  The hockey player currently earns five million dollars each season.  Because of the extent of his indebtedness, Johnson has recently had to file for bankruptcy.

Johnson apparently signed a POA in favour of his parents in 2011.  Johnson’s parents then borrowed approximately fifteen million dollars in the defenseman’s name, consisting primarily of high-interest loans.  Johnson’s family had received poor advice from a financial planner who had suggested that they borrow money against their son’s future earning potential.

Since the dispute with his parents with respect to the misuse of his POA, Johnson has cut off all ties with his parents.

When executing a POA, it is important that any attorneys for property and/or personal care are individuals who can be trusted and will act only in the grantor’s best wishes.  The grantor, if capable, should be consulted on all transactions being made on his or her behalf.

Thank you for reading.

Nick Esterbauer

The Single Person’s Estate Plan

Posted in Beneficiary Designations, Estate Planning

Landmark events are a common occasion for people to turn their minds to making or altering their estate plans. For many, such a trigger may be marriage, having children or entering into a second or subsequent relationship of some permanence. For more and more people, however, these events are either happening later in life, or are not happening at all.

Some may never have married while others may be widowed, separated, or divorced without children. Either way, this does not mean that estate planning can be overlooked or ignored. There are a variety of considerations that still need to be taken into account.

In Ontario, if one passes away without a will, the laws of intestacy dictate who inherits that individual’s assets. These rules are governed by Part II of the Succession Law Reform Act. Where a person dies intestate and leaves no spouse or issue, their property is distributed in the following order: parents, brothers and sisters, nephews and nieces, and finally, next of kin. Where a person dies intestate with none of the mentioned relations surviving, their property escheats to (i.e. becomes the property of) the Crown.

Depending on the person, the rules of intestacy cannot be assumed to adequately reflect an individual’s wishes. Without a spouse or children of their own, the individual likely formed bonds in the community that are not reflected by the rules of intestacy. For example, close friends or the children of close friends may be a more practical choice.

Single persons may also have preferred charities or other social or community activities they belong to that they wish to benefit that will only benefit under a will.

Thank-you for reading,

Suzana Popovic-Montag

Maintaining Adequate Insurance Coverage

Posted in Elder Law Insurance Issues, RRSPs/Insurance Policies, Support After Death

A recent study by the Bank of Montreal Insurance Company reveals that Canadians, on average, believe that they require life insurance coverage in the amount of at least $265,607.00 to satisfy their debts, funeral expenses, and to fund financial support for dependants after their death.  Our of all provinces, residents of Ontario feel that they need the most coverage, with projected expenses averaging $418,879.00, over one and a half times the federal average.

The study linked greater perceived needs with participants who were married or in a common law relationship.  However, the impact of children on perceived needs was surprisingly not clarified by the results of the study.  Individuals who are single and do not have children, on average, responded in belief that they require less insurance coverage than those who do have children.

In addition to life insurance, which can assist in the payment of post-death expenses and debts, as well as the provision of support for dependants, many Canadians now choose to obtain critical illness and disability insurance, to secure non-employment income in the event that they are no longer able to work.  Because of advances in medical understanding and technology, Canadians are now more likely to survive a critical illness, but may not be capable of returning to full-time employment.  In fact, Statistics Canada reports that individuals who are diagnosed with a chronic condition can expect to live an average of ten years after diagnosis.

However, according to the BMO study, only 16% of Canadians have life, critical illness, and disability insurance coverage.  The most commonly-cited reason for not purchasing all three types of insurance is the additional expense that such coverage represents while a person is living and healthy.  Others who do not have coverage state that they are currently, and expect to remain, in good health.  However, should these same individuals suffer the development of a critical illness or disability, obtaining adequate insurance to cover their increasing needs may no longer represent an affordable option.  Further, in circumstances where life insurance is not considered until a person is experiencing decline in health, it will come at a much greater cost.  When creating or updating an estate or incapacity plan, it may be a good idea to also consider the potential of insurance to compliment existing plans to secure for one’s own future, as well as that of dependants.

Thank you for reading.

Nick Esterbauer

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