When a grantor gives powers to an attorney to manage the grantor’s property, it allows the attorney to assist the grantor in managing property, and in fact to take over management of property altogether if the grantor does not monitor the situation.  Often the very goal of the grantor is to allow someone else to completely take over management of one’s property due to age, potential incapacity or other reasons, so the grantor has no intention to monitor.

This is often a reasonable choice, and the law holds attorneys to a high standard to protect grantors.  However, the potential for abuse is immense.  Abuse can be willful or simply negligent, but in either case the damage can be devastating and irreversible.  In many cases attorneys who stray from their duties are never made to account, although they have that obligation.  Often they live with the grantor and have little or no oversight.  The legal fees in securing justice are generally high, and the chances of recovering on a judgment can be low.  In the result, legal proceedings might be impractical, however blatant abuse may be in a given case.

The best defence against this problem is awareness, so these varied results from a quick internet search are somewhat encouraging: a Florida law firm website; an excellent Vancouver Sun article; a synopsis of a TV news story; the New York Attorney General’s website; a news report of a Philadelphia trial; and a news release from Prince Edward Island’s provincial government commenting on the problem for World Elder Abuse Day.

This is the tip of a very large iceberg: by all indications lawyers, financial institutions, governments and of course the public will be wrestling with a growing problem for years to come.  

Thanks for reading.

Sean Graham

Estate Planning Law Firms.com quotes the Attorney General as saying the following:

“The perpetrators of this fraud deceived seniors into using their hard-earned retirement nest eggs to buy unneeded annuities that actually undermined their financial security. Living trust mills such as this one violate not only the law, but the trust of their elderly victims.”

What surprised me was the apparent scope of the alleged organization being sued by the Attorney General: between 250 and 300 sales agents and another 80 telemarketers were involved, allegedly soliciting elderly consumers through mailings, seminars, telemarketing, presentations at senior centers and other means, marketing their services as a way to avoid probate and estate taxes, then eventually convincing seniors to buy annuities that were, according to the Attorney General, not in their best interest.

Without commenting on this particular case, there does seem to have been a disturbing and growing trend in recent years of attempts to deprive the elderly of the considerable wealth concentrated in their hands.  

One more reason, if any were needed, to take great care in choosing investment and estate planning advisors.

Thanks for reading.

Sean Graham

In Ogilvie Estate, the deceased was the father of six children (three of them minors) by five different women. Dependant support claims were made on behalf of two of the minor children. It was agreed that the deceased had failed to provide adequately for his minor children.

The issue before the court was whether a joint life insurance policy, issued to both the deceased and his spouse, could be included as part of the deceased’s estate under section 72(1) of the SLRA. The deceased and his spouse were both the owners and beneficiaries of the policy, which provided that the survivor of the two would receive the face amount of the policy on the death of the other. It was undisputed that the spouse had made the majority of the payments under the policy.

The applications judge held that the policy could be included as part of the estate. On appeal, a majority of the Divisional Court reversed this decision. The majority held that a jointly owned policy cannot be included as part of an estate merely because the deceased is one of the owners of the policy. The Court recognized that s. 72 of the SLRA was designed to counter the intentional depletion of an estate at the expense of dependants. However, there are transactions that “would be considered the normal personal commerce of an individual” and not necessarily undertaken to disenfranchise a dependant. In the case at hand, the majority ultimately decided that the contractual rights of the spouse to the joint policy trumped the needs of the deceased’s dependants.

Have a great day!
Bianca

This encouraging news raises the possibility that we may be closer to a cure for this terrible disease, or at least treatments to slow the onset. Families struggling daily against the ravages of dementia can now see some light at the end of a very long tunnel.

Capacity law could be greatly affected as well. Current assessments to determine capacity, such as the capacity to manage property or the capacity to execute a Will, mix elements of science (such as cat scans) with the experience and judgment of the capacity assessor. Different assessors come to different conclusions in close cases.

As science can better identify and isolate genetic causes of dementia, we can expect more accurate tests. We might even see partial or comprehensive cures for dementia diseases. If so, patients who have lost capacity might recover it. Someone unable to sign a binding Will in 2006 could theoretically regain that ability in 2008.

This opens a Pandora’s box of fascinating questions. For example, if John Doe loses capacity in 2005 and regains it in 2010, who’s to say if he would name the same beneficiaries in 2011 as in 2004? Conceivably his personality may be significantly different after recovering capacity than it was before he lost it.

A beneficiary’s joy at recovering a loved one could be tempered by losing an inheritance.

Thanks for reading.

Sean Graham

At trial, the Court accepted the argument advanced by the aunt’s estate that she did not know and approve of the transactions, that the attorney had acted at his own behest, and that the joint transfers should effectively be set aside. The effect was to benefit the sole beneficiary under the aunt’s last will with the assets which would otherwise have passed by right of survivorship to her husband and his estate.

This case gives rise to some interesting issues, the foremost being to what extent an attorney acting for a grantor may be precluded from transferring assets into joint ownership. A key factor in this case was the fact that the attorney for property knew of the testamentary intentions of the grantor and surmised that the transferring of the assets into joint tenancy was consistent with those testamentary intentions. The attorney’s evidence that the joint accounts were appropriate was corroborated by the terms of the aunt’s will throughout the period that the transfers were made, together with the bank’s documentation opening the joint account which was signed by her and witnessed by a bank employee.

Perhaps the most curious aspect of this case is the fact that, had the aunt survived her husband (as was expected, he being in very ill health during the period in question), the transfer of the assets into joint ownership would have been of no consequence.

Stay tuned for the decision of the Divisional Court on appeal!

Have a great day, David

READ THE TRANSCRIBED PODCAST HERE

During Hull of Estate and Succession Planning Episode 32, we continued to discuss the Elder Law Conference with an emphasis on what the Canadian Centre for Elder Law Studies is currently working on, highlighing their past work and discussing its mission of enriching and informing the elderly in the law.

READ THE TRANSCRIBED PODCAST HERE

During Hull on Estate and Succession Planning Episode 31, we discussed the various aspects of the Canadian Conference on the Elderly presented by the Canadian Centre for Elder Law including how the Courts are dealing with elder law and elder law situations.

The authors of the study comprehensively set out arguments for and against legalizing viatical settlements (see pages 22 to 30 of the report).

In conclusion, at page 49 of the study, the authors note that the study paper has set out the legal background to a project on viatical settlements and that it has shown that there are a number of issues for further consideration. It is clear to us that, upon review of the comprehensive study on this topic, and given the market forces, it is likely that we will hear much more about viatical settlements in the insurance industry as the growth in the elder population continues.

We hope that this review of this interesting topic has been helpful. Ian and I are going to take a bit of a summer break and we have asked our fellow firm members to join the blogosphere. Next week, our partner, David Smith, will be blogging but we will be back after that.

We hope you're enjoying the summer!

All the best, Suzana and Ian. --------

Firstly, the holder of a life insurance policy initiates the transaction by filling out and submitting an application and providing any required supporting documentation to an interested company. The policyholder, him or herself, is typically referred to as the "viator" and the company is typically referred to as a "viatical settlement provider" or "VSP" (see page 3 of the report). To even be considered for a viatical settlement, a viator must have diminished life expectancy.

Secondly, the viator must submit medical and insurance records to the VSP for evaluation.

Thirdly, the VSP reviews the information and essentially determines whether or not the viator is eligible for a viatical settlement. This third step is, of course, a combination of insurance underwriting and medical analysis. In the U.S. experience, both whole life and term life insurance policies are acceptable, as are group life insurance policies. The expectation is that the policy is in good standing and that it not restrict assignment. Furthermore, it is expected that the policy has been in full force for at least two years.

Fifthly, the viator accepts the offer and completes the necessary contracts with the VSP. Sixthly, the transaction is completed by conveyance of the entitlement to receive the death benefit to the VSP and payment to the viator of the agreed upon compensation. From a business standpoint, interestingly, the VSP will typically assign the viatical settlement to another party through the services of a viatical settlement broker. Rather than holding on to the viators' policies until payment of the death benefit, VSPs will often assign the policy.

At page 5 of the report, the study notes that in many cases there is a process of fractionalization, whereby the policy is split into fractional interests for resale as an investment vehicle. In our next blog, we will look at the law in Canada in regard to viatical settlements.

All the best, Suzana and Ian. --------

The study goes on to examine the current law in Canada and looks at leading policy arguments for and against removing the legal barriers to viatical settlements in Canada. The study also examines in detail the leading Canadian model for law reform drafted in 2001 by Ontario's Financial Services Commission. The last two parts of the study include a review of several issues for reform and a conclusion to the study paper.

The origins of the project arose out of the Program Committee of the British Columbia Law Institute, whereby they identified examining the possibility of legalizing and regulating viatical settlements as an innovative area for legal reform.

After having reviewed the study paper on viatical settlements, it is clear that, while this is an innovative area of legal reform, certainly in the United States, the concept of viatical settlements is a growing trend and one that will no doubt be considered over the next few years as the increase in population puts pressure on the market forces.

Given that viatical settlements are rare in Canada, the study paper looked at the elements of a typical viatical settlement from the United States as providing the reference point. Again, while there are different approaches in the United States, the study notes (at page 3) that one commentator who recently reviewed the American market concluded that the typical viatical settlement contains six steps.

We will look at the six steps in our next blog.

All the best, Suzana and Ian. --------

In the executive summary, the study paper defines a viatical settlement as a transaction in which an insured person with diminished life expectancy transfers the entitlement to receive the death benefit under the policy of insurance to another person. This other person agrees immediately to pay the insured person an amount that is less than the face value of the death benefit and undertakes to pay the premiums for the insurance policy as they come due. A

s is noted in the executive summary, in most Canadian jurisdictions, legislation directed at trafficking in insurance policies (which has its origins in the Depression), renders viatical settlements illegal. There is a small viatical settlement industry based in some of the provinces that lack this legislation. However, in the U.S., the viatical settlement industry has been very active and has, for example, focused on AIDS patients and others suffering from terminal diseases. As such, the viatical settlement industry has expanded considerably.

The aim of the study paper produced by the Canadian Centre for Elder Law Studies was to provide the groundwork for law reform in this area. More on the details of the study in our next blog.

All the best, Suzana and Ian. --------

READ THE TRANSCRIBED PODCAST

During our podcast, we discussed the following legal issues:

(i) constructive trusts;

(ii) specific devices and bequests;

(iii) life insurance;

(iv) the description of beneficiaries;

(v) trusts/life interests;

(vi) the selection and powers of trustees, including the power to encroach; and

(vii) ademption. --------