Compensation paid to guardians of property - Episode #147
Listen to Compensation paid to guardians of property
This week on Hull and Estates Jonathan Morse and Christopher Graham discuss the topic of guardianship and particularly the compensation that would be paid to the guardians of property.
They look at legislation, case law and practice notes for guardians and practitioners to keep in mind.
Feel free to send us an email at hull.lawyers@gmail.com or leave us a comment on the Hull on Estates blog
Compensation paid to guardians of property - Episode #147
Posted on January 27th, 2009 by Hull & Hull LLP
Chris Graham: Hello and welcome to Hull on Estates. You’re listening to episode #147 on January 27th, 2009.
Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada. Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and wills. Now, here are today’s hosts.
Jonathan Morse: Hi and welcome to another episode of Hull on Estates. I’m Jonathan Morse.
Chris Graham: And I’m Chris Graham.
Jonathan Morse: If you want to be heard on Hull on Estates, you can participate by leaving us a comment. E-mail us at hull.lawyers@gmail.com or you can visit our blog at estatelaw.hullandhull.com.
Chris Graham: And we have a very exciting and very important topic for you today. Let me just give you a teaser. Everybody knows that our population is slowing greying and as importantly the population that is getting oldest is also the part of the population that requires the most legal services right now. So Jonathan, what are we going to be talking about today?
Jonathan Morse: We’re going to talk, Chris, about guardianship and particularly the compensation that would be paid to guardians of property. And I can just tell you briefly to provide some structure to our talk this morning. We’re going to talk about the legislation, particularly the Substitute Decisions Act. We’re going to also look at some case law and as well as a third point, we’re going to discuss briefly some practice notes for guardians and practitioners to keep in mind.
Chris Graham: Yeah, we’ll try to keep the case law comment to a minimum. It’s the easiest way to kill minutes but it’s not always the most interesting thing to listen to.
So the basic statute as we know is the Substitute Decisions Act and in most situations, it treats attorneys for property similarly to a Court-appointed guardian of property and the relevant statute is Section 40, which enables a guardian of property or attorney under a continuing Power of Attorney, to take annual compensation in accordance with the prescribed fee scale.
Jonathan Morse: And the prescribed fee scale, if I’ll just take a moment, is under Ontario Reg. 26/95 and particularly under this Regulation, its Section 1. For the purposes of subsection 40(1) of the Act, the fee scale is 3% on capital and income receipts as well as 3% on capital and income disbursements. And as a third item, 3/5 of 1% on the annual average value of the assets as a care and management fee.
Chris Graham: Yeah, now before we get back to the SDA which modifies this a little, we should say what is a capital and what is an income receipt. The distinction between the two is often more than just an accounting distinction because as you will find out, the Courts are not limited to applying this in a slavish fashion, simply applying these percentages to the money coming in and the money going out. They may treat the capital and income headings quite differently in some situations.
Now let’s go back to the SDA. So the Reg lays out the basic percentages. But as the later Section 42 of the Substitute Decisions Act makes clear, this is merely a starting point. So you’ve got 3% on capital and income receipts as a starting point; 3% on capital and income disbursements as a starting point; and then .006 of assets under management as a starting point. And that takes us to Section 42. Can you talk about that briefly Jonathan?
Jonathan Morse: Sure. Section 42 is broken into several parts. Part 1 deals with passing of accounts and the Court may, on application, order that a specified part of the accounts of an attorney or guardian of property be passed. And of course this speaks to the need for keeping good records, which would be a practice point we’ll refer to later. Section 42(2) deals with an attorney’s accounts. An attorney, the grantor or any of the persons listed in subsection 4 may apply to pass attorney’s accounts. Subsection 3, particularly is relevant, and deals with the guardian’s accounts. And its says this subsection states that a guardian of property, the incapable person or any of the persons listed in subsection 4 may apply to pass the accounts of the guardian of property. And those people are the grantors or incapable person’s guardian of the person or attorney for personal care; a dependant of the grantor or incapable person; the Public Guardian and Trustee, the PGT; the Children’s Lawyer; or a judgment creditor of the grantor.
Chris Graham: Let me just jump in there. Notice that term “judgment creditor”. We’re not talking any alleged creditor; it must be a judgment creditor so even talking about a judgment creditor, you’re already up to a significant debt or otherwise they don’t go to the Court in the first place. Anyway, back to the list.
Jonathan Morse: And the last item on the list is under Section 42(4), is any other person with leave of the Court. So, of course, this opens it to a broad array of interested parties, potentially with an interest who have a right to apply for a passing of the accounts.
Chris Graham: Most significantly I would say to practitioners, as a practical matter a lot of people acting under Powers of Attorney or with a guardianship, are often dealing with family members, elderly family members who have maybe lost capacity to manage their property. These people pass away and then the question becomes does the attorney or the guardian have to pass their accounts? Or does an estate trustee? This came up in the conference this week actually. The question was does an estate trustee have the authority to compel the attorney for property or guardian, as the case may be, to pass their accounts? And there’s lots of law on this but it would probably be a rare scenario where a Court isn’t going to give leave for the estate trustee to compel, to bring the Application to compel them to pass their accounts. Which is another reason why compensation is important. It’s going to come up.
Jonathan Morse: I think we might, at this point, just refer to some, you know, specific cases that really provide a guide and an important guide to anyone who’s in the position of earning fees on property.
Chris Graham: Or advising.
Jonathan Morse: Or advising, absolutely. So the case law, in 2006 there was the Sandu case, that’s Sandu, Litigation Guardian of and Wellington Place. And the Court in this instance was asked to consider the apportionment of the guardian fees available for corporate and individual guardians. And…
Chris Graham: Okay, stop right here. Let’s give the cite.
Jonathan Morse: Sure. I’ll go back to Sandu, Litigation Guardian. The case reference please is [2006] O.J. 2448.
Chris Graham: Basically in the Sandu case it was the compensation for a guardian of property and personal care managing a very significant sum of money. But the fact that it’s a significant sum of money doesn’t detract from the analysis. The analysis is going to apply to any situation. So what did the Court say, Jonathan?
Jonathan Morse: And the Court particularly looked at, you know, a significant element of the analysis was that the percentages outlined in the Regulation that we talked about earlier in this podcast, they’re not set in stone and they are certainly subject to adjustment on a passing of accounts.
Chris Graham: Yeah, the Court uses them as a starting point, as I said earlier. This is the law here that supports that earlier assertion I made, it’s always nice to have law for your random assertions. And then you assess the totals based on subjective criteria which are…
Jonathan Morse: That’s right. And the five criteria: the size of the trust; the care and responsibility involved; the time occupied in performing the duties; the skill and ability shown and the success resulting from the administration. And those five factors particularly come from a case that’s actually an older case, come from 1905…
Chris Graham: Well we deal with really old cases in estates law…
Jonathan Morse: Re Toronto General Trusts and Central Ontario and I’ll give the citation for that. That’s 1905, 6 OWR 350 (HC).
Chris Graham: And on the estate trustee side, I mean, we all know that’s trite law but it does apply to attorneys and a guardian of property, the compensation issues. Okay, and that 1905 case is, it’s one of those old cases that’s trite law to trustees when you’re talking about compensation. But the importance of Sandu, among other cases out there by the way, is to reinforce the fact that these subjective criteria, the so-called five factors, do apply to calculating or determining guardians’ of property compensation and attorneys’ compensation. On that point, that brings us to Section 42(8) of the SDA which says that the Court may, and I’ll point out on its own initiative, so it doesn’t even have to be asked, adjust the guardian’s compensation in accordance with the value of the services performed. So that is the statutory authority and of course, that brings us back to a subjective analysis. So those percentages are a starting point. They’re by no means automatic. And I’m not going to say whether they are a starting point up or down. The guiding principle is uncertainty.
Jonathan Morse: That’s right. And just moving on to the third point that we raise in our outline, with respect to some practice notes. And I think that practitioners and guardians can take guidance from the five factors that we discussed in the 1905 case, and use those as a guide as to the steps that should likely be taken with respect to record keeping. You know, for example, the first item obviously speaks to the size of the trust and that would be fairly easy to document with supporting documentation. The care and responsibility involved…
Chris Graham: Yeah, let’s go through some specific examples though.
Jonathan Morse: Sure.
Chris Graham: I just, one thing that came up in the seminar, a seminar this week was the question well, someone gets appointed under Powers of Attorney or…does that give them the ability to…do they get 3% in period off the top? That’s actually an easy answer. Don’t assume they’re going to get 3% off the top just for taking over. They’re not toll collectors and the Court isn’t going to treat them like toll collectors. The Court is going to do whatever it thinks is best.
Jonathan Morse: That’s right. And, you know, certainly if the decision is looking at the overall amount and the amount of work put in and what’s reasonable. I mean I guess the Court really performs a smell test here and goes with a…
Chris Graham: Yeah, I mean the guiding principle you hear is you’re going to have to deal with this. If somebody thinks they’re going to get 3% for taking over and then, you know, three weeks later giving up their Powers of Attorney and getting another 3% on the way out, well they’re going to have a heck of a job convincing a Court that that’s appropriate under the circumstances.
Jonathan Morse: And just on some final comments with respect to practice notes, certainly the time occupied in performing the duties. So as far as a record-keeping exercise, certainly recording, you know, the date, the hours taken to or the time taken to manage certain tasks. Perhaps there were meetings at a bank, or investment counsel, advisors. All of those meetings and details of those meetings ought to be recorded. Skill and ability shown.
Chris Graham: Yeah, receipts, invoices…
Jonathan Morse: Absolutely, all of those.
Chris Graham: Everything. I mean it’s a hassle. The duties are actually quite onerous that these people have to…
Jonathan Morse: That’s right.
Chris Graham: These people think they’re taking care of mom and dad or, you know, a husband or my wife, or whatever. Yes you are, or your clients are. They’re providing invaluable services and society needs them to. For good or bad, there’s a bundle of obligations that comes with it and the best way for a general practitioner that doesn’t have a lot of time, the best way you can help them meet this record-keeping requirement is simply to tell them to write everything down and keep everything. I mean, this is not advice for a specific situation but these people often…we see it all the time…they did not know that they had to keep every receipt from every stick of gum they bought for the incapable. Well it’s a good idea to.
Jonathan Morse: That’s right. And just to close off, this role is really a fiduciary duty and the person who is the guardian needs to certainly act in the best interests of the person whose property is being managed. And making sure that all the expenses related to that property are for the benefit of the property and the person who owns the property and certainly not, you know, no self-interest with respect to spending for anything else other than for the safekeeping of that property.
Chris Graham: Well on that note, this is a fascinating topic that we could talk about this for hours but fortunately for you and unfortunately for you, we don’t have time. And we’re going to have to wrap it up now.
Jonathan Morse: So I think that brings us to the end of this week’s discussion. Thanks for listening and thanks for joining me today, Jonathan Morse.
Chris Graham: Yeah, it was a pleasure Jonathan. I’m Chris Graham. And this is our first podcast together.
Jonathan Morse: It is. And I look forward to many more.
Chris Graham: Yeah, yeah, it was fun. Well we look forward to hearing from our listeners. You send us an e-mail at hull.lawyers@gmail.com. And visit our amazing blog at estatelaw.hullandhull.com. You’ll find more information, interesting topics and discussion on today’s practice of estates law. There’s a great mix there, it’s updated every day, every weekday and you should definitely read it. We hope you enjoyed the show. Once again, I’m Chris Graham.
Jonathan Morse: And I’m Jonathan Morse. Until next week, so long.
This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.
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