Toronto Estate Lawyer : Hull & Hull Law Firm : Trust Mediation and Succession Planning : Serving Ontario, Ottawa, Mississauga, Hamilton

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A new Ontario decision, Re Mcmichael Estate confirms the need for estate trustees to seek relief in the jurisdiction where the testator resided at the time of their death.

The background to the case is as follows. The wife died in Toronto. She was predeceased by her husband who died in Orangeville. The wife was appointed as executor of her husband’s estate and if she was unable to act, the husband named the applicants as the alternate executors. The husband’s Will was never probated. The applicants were appointed estate trustees pursuant to a certificate issued by the Toronto Estates office. The estate trustees for the wife’s estate attempted to file an application record with the Toronto estates office but it was rejected on the grounds that some of the relief was being sought in the wrong jurisdiction. The Toronto estates office sought directions from the court with respect to this jurisdiction issue.

The application sought a variety of relief with respect to the wife’s estate but also sought an order declaring the husband’s Will as valid and that the applicants were the personal representatives of the husband’s estate. The named Respondents in the application all resided in Toronto.

The endorsement of Justice Brown found that in their application, the applicants were seeking a court order certifying their appointment as estate trustees with a will of the estate of the husband without using the form prescribed in Rule 74.04 of the Rules of Civil Procedure.  An application seeking an order certifying the applicants as estate trustee had to be filed in the office for the county or district in which the testator had at the time of death a fixed place of abode as required by s. 7(1) of the Estates Act and Rule 13.1.01 (1) of the Rules of Civil Procedure. After the application had been commenced, it would be open to the applicants to move to transfer the probate proceeding to Toronto or consolidate the application with the other application filed in Toronto.

 

Thanks for reading,
 

Diane Vieira

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A person with more than one set of distinct interests or roles in the same estate may have a conflict of interest.  This can create all sorts of problems and issues in an estate administration and is a driving concept in much estate litigation.

Say Joe Smith is the executor of an estate but also received gifts from his mother the testator during her lifetime.  One of these gifts, say, came in the form of a transfer of a bank account into joint ownership between the two of them. 

Wearing his executor's hat (to use some traditional vernacular), Joe may have a duty to determine whether the bank account transfer was not a gift at all and actually subject to a resulting trust in which case the estate might have a claim to the asset.  Joe may need to do so because, as executor, his duty is to identify estate assets and bring them into the estate. 

However, wearing his hat as a recipient of the bank account, Joe is unlikely to want to give the bank account back to the estate. 

In short, Joe may have a conflict of interest.

In such circumstances, Joe may need two lawyers, one to advise him as estate trustee, the other to protect him personally.  Sometimes an executor’s conflict is such that he cannot continue to act as estate trustee. 

While this example may be simple enough, there is a tremendous range of conflicts that can creep into estate matters.

Thanks for reading.

Sean Graham

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It’s just about tax time, so I thought I would briefly discuss the taxation of executor compensation.

The basic premise is that executor compensation is taxable in the hands of the recipient. It is either income from an office or employment (if the executor is not in the business of being an executor) or income from a business (if the executor is in the business of being an executor, or if such a function is in the executor’s usual course of business). Various consequences flow from the distinction, such as allowable deductions, and withholding requirements for EI and CPP.

CRA takes this obligation to report executor compensation quite seriously. An example of the lengths to which CRA will go is found in the decision of Oolup v. The Queen. There, Ms. Oolup, the executor held a joint account with her grandmother, the deceased. She was advised by her lawyer that upon the death of the deceased, the joint account became hers, by right of survivorship. However, for “reasons of family harmony”, she decided to keep only $10,000 from the joint account, and divided the rest with the deceased’s next of kin.

CRA took the position that the $10,000 was executor compensation, and was therefore taxable, and they assessed Ms. Oolup accordingly. To get to this point, they argued that the joint account was held on a resulting trust for the estate. The CRA argued that the presumption of resulting trust applied, and was not rebutted. Accordingly, they asserted that Ms. Oolup received the $10,000 from the estate, as executor compensation.

Luckily for Ms. Oolup, she was able to rebut the presumption, and the court found that the joint account funds became her property upon the death of the deceased. She received the money by right of survivorship. Therefore, her keeping $10,000 was not receipt of compensation by her, and was not to be included in her income.

Thank you for reading,

Paul Trudelle

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An interesting excerpt from Diane Francis’s new book Who Owns Canada Now? was published in Saturday’s National Post and touches in some detail on offshore trusts as a mechanism to avoid Canadian taxes.

Aside from briefly lamenting my non-mention in a book chronicling Canada’s wealthiest, I was struck by the contradiction in the apparent approaches of different wealthy Canadians to the opportunity to avoid taxes. According to Ms. Francis, one common tax avoidance mechanism involves settling assets in an offshore trust, apparently becoming a fairly common option for the wealthy. It seems to require spending six months of the year out of the country, something I doubt many Canadians would baulk at after the dreadful winter we’ve just suffered through.

What really struck me about the article were the quotes from wealthy Canadians who refuse to avail themselves of this option on the basis that as Canadian citizens who became wealthy in Canada, they should pay Canadian taxes and not shelter assets.

Here’s hoping I face this touchy dilemma myself – the sooner the better!

At any rate, an interesting article offering a good précis of both sides of the issue and much food for thought.

It will be even more interesting if these trusts begin to be litigated. Certainly English jurisprudence seems to deal with them often, if only because the Judicial Committee of the Privy Council continues to take appeal cases from the Courts of former British colonies.

Thanks for reading.

Sean Graham

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On December 20, 2006, the Ministry of Government Services Consumer Protection and Service Modernization Act, 2006 (Bill 152) received Royal Assent. The Act contained amendments to a number of statutes, including the Land Registration Reform Act, Land Titles Act and Registry Act, to address issues related to real estate fraud.

The Ministry recently released a Land Registration Bulletin (No. 2008-02, dated March 7, 2008), which provides information related to, among other things, new registration requirements for powers of attorney and any documents registered under the authority of a power of attorney.  These include the following:

·           A law statement will be necessary when an individual registers any document under the authority of a Power of Attorney. In these cases, a lawyer will be required to discuss the Power of Attorney with their clients and provide the requisite law statement.

·           A law statement will not be required in documents signed under the authority of a Power of Attorney given by a corporation or a bank. In those cases, the attorney will be required to make a statement that they are acting within the scope of the Power of Attorney.

·           The original signed and witnessed Power of Attorney must be scanned into the electronic registration of a Power of Attorney.

·           Most of the existing statements in an electronic Power of Attorney and Revocation of Power of Attorney document are being retired and replaced with new statements, which are particularized in the Bulletin.

Keep in mind that these changes take effect on April 7, 2008.

Have a good day,

Natalia

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"It's unacceptable to the average person that you can just turn up with a bunch of heavies and steal the coffin."

Coen brothers?  Nope.  No, not Tim Burton either.  In fact, this is a statement put forth by an MP in New Zealand after the third case of body snatching in less than a year. 

As reported in the BBC news yesterday, the body of a 76-yr old woman was hijacked right out of the back of the hearse by four carloads of people including her estranged daughter.  The bizarre, but not unprecedented, scene sparked a bitter family row over the deceased's last wishes with respect to her funeral arrangements.  The deceased had been married to a Maori man but separated from him in the 1970s.  Clashes over where people are buried are apparently not uncommon in Maori society, particularly in marriages of mixed descent (e.g. Maori and European).

Incredibly, a spokesman for police national headquarters said they had limited power to intervene: "Body snatching is not against the law" since, in contrast to Ontario, a body cannot be legally owned in New Zealand.  The recent cluster of body snatching cases may lead to an overhaul of New Zealand law regarding who owns a body.

David M. Smith

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Yesterday, we read about Franz Kafka's unfulfilled wishes with respect to his manuscripts, both published and unpublished, at the time of his death in 1924.  Flash forward eight decades or so.  Dmitri Nabokov, the 73 yr old sole surviving heir of Vladimir Nabokov, continues his 30-yr struggle with his father's deathbed request that his last unpublished work, The Original of Laura, be destroyed.  The stakes are high for Laura; at one point, Dmitri referred to it as "the most concentrated distillation of [my father's] creativity."  The task of burning the manuscript was originally entrusted to Vladimir's wife Vera, but when she died in 1991 she had not yet carried out her husband's last wish.

As discussed in the Business Standard, those in favour of heeding Nabokov's wishes are not willfully destructive.  It is understood that great writers might work through countless drafts before arriving at a final product that meets their approval.  On the other hand, there's the argument that writers (including Kafka) seldom can judge their own work.

The long twisted saga may find its fate as a cliffhanger of sorts.  In a dramatic verdict, Dmitri indicated late last month that he had indeed "decided to make a decision" about what to do, but that he would "neither disclose publicly either the decision or the deed."  Apparently (or should I say apparition-ly?), Dmitri reached his decision after an imagined ghostly conversation with his dead father.  Stay tuned for the future unveiling of either a box of Laura's ashes or what might be Nabokov's greatest literary work.

David M. Smith

 

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The meaning of life is that it stops.  --- Franz Kafka

If you are familiar with Kafka and his short literary works, you will know that he was a tortured literary genius who was unsure of his own talent to the point of torment.  In 1924, dying of tuberculosis, Kafka wrote to his friend of 20 years and fellow novelist, Max Brod.  Kafka had made a list of his three novels and a number of stories and gave strict instructions to Brod to destroy all his manuscripts 'unread and in their entirety' and to ensure that already published works would never be re-printed.  These instructions were not contained with a formal last will and testament, rather they were a penciled note found in a drawer after his death.

Kafka's lover, Dora Diamont, partially executed his wishes by stashing away letters and notebooks until they were seized by the Gestapo in 1933. Sidebar: These papers are the subject of an ongoing international search.  Brod, however, ignored his friend's wishes and instead oversaw the publication of the works in his possession.  Brod's defence was that if Kafka had really wanted the works destroyed, he would have appointed another, more ruthless executor. Kafka, had, according to Brod, trusted Brod to not burn his writings.

Interesting question, perhaps not in the legal sense, but in a moral and ethical sense: Is it possible that Kafka undermined his own intentions by the very nature of the relationship he had with his executor?

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The orderly administration of a parent's estate will often revolve around the family home.  All too often, the children of the deceased  parent will not see eye to eye on the best way to liquidate the home or whether the home should be liquidated at all.  The situation is often compounded when one of the children resided with the parent and may have developed an enhanced emotional attachment to the home. If the home is sold, it may become a challenge to empty out the contents in a timely fashion.

Such difficulties have led some commentators to espouse the viewpoint that a family member ought not to be an executor of an estate in which the family home is the most significant estate asset.  To my mind, such recommendation is a bit extreme:  each family is different and while there is no certainty as to how the children will interact with one another on the death of the surviving parent, it is worth noting that the vast majority of estate administrations are not referred to litigation counsel.

As noted in a recent article in the New York Times, the difficulties that may arise in the sale of the family home are often best resolved through the advice of a good listing agent and effective communication between the executor and his or her siblings. Such issues that may arise include: the appropriate list price, how to show the home to attract the most optimum sale price, and what upgrades (if any) to engage in and whether to use estate assets for this purpose.

David M. Smith

 

 

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I came across a really interesting blog (find it here)  the other day that considered an article published recently by Kristine S. Knaplund  (Professor of Law, Pepperdine School of Law), entitled The Evolution of Women’s Rights in Inheritance, 19 Hastings Women’s Law Journal 3 (2008).

The article describes how archived probate files in Los Angeles are a valuable source of information on the history of women’s inheritance rights. Issues such as whether women were routinely appointed as the executrix of their husband’s estate, and whether they were left the residue of an estate outright or with a life interest or by way of a trust, are considered.   The following is an excerpt from article:

“The probate files are a rich source of information about the lives of women and men in Los Angeles as it transitioned and grew into a major city. The availability of land and the use of promissory notes allowed the industrious the opportunity to save money and leave an estate to their families and friends. Ten women left estates over $10,000 in 1893 dollars, compared with twenty-two men. Of these, one woman began as a maid from Ireland who ended up being the richest woman dying in Los Angeles in 1893, with an estate of over $285,000.”

The article summarizes that Los Angeles in the 1890s was ahead of other parts of the country in women's rights. For example, men in Los Angeles routinely named their wives as executrix of the estate. Relatively few men tied up legacies to a wife or daughter in a trust or a life estate, choosing instead to give the beneficiary an outright interest in the property.  I would be interested to see how the history compared to women living at the same time in Ontario and the rest of Canada.

Sarah Hyndman Fitzpatrick

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Listen to Determining Value

This week on Hull and Estate and Succession Planning, Ian and Suzana talk about values and appraisals. They specifically look at some of the issues related to assigning value to assets such as jewellery, automobiles, antiques and artwork.

Comments? Send us an email at hullandhull@gmail.com, leave us a message on our blog or give us a call at 206-457-1985. Continue Reading...

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One final note of caution arises from the Rooney (2007), CarswellOnt 6560 decision – a decision of the Ontario Superior Court of Justice that I have referred to in my blogs earlier this week. This caution refers to the release that the Estate Trustee seeks from the beneficiaries.

In Rooney, the beneficiary was provided with a form of accounts, and was told that if she signed a release, she could receive a distribution from the estate. (The court was critical of this practice.) The beneficiary did so.

Later, the beneficiary sought to compel a passing of accounts. The court allowed the Application.

The trustee had asserted that because of the release, the beneficiary could not compel a passing. The court stated “It is not an answer to say that the beneficiary approved of the accounts and gave a release. One of the obligations of the solicitor acting for the trustee is to ensure that all beneficiaries have competent, independent advice in reviewing the accounts. There is no suggestion by the solicitor that he advised the [beneficiary] to obtain independent legal advice when reviewing the trustee's accounts which he had prepared.”

Additionally, the court noted that the account rendered by the solicitor to the estate was a blended account, and included both solicitor’s work and trustee work. “The solicitor was in the best position to know what charges related to which services. He was also in the best position to know what portions of his fee account should be paid by the trustee out of her compensation or by the estate. There is no evidence that he gave any advice about these distinctions to the beneficiary so that she could consider them.”

The court concluded by stating that “There is no evidence that the beneficiary executed the release knowing that double charges for the trustee's work had been made against the estate. There is no evidence that the beneficiary knew the solicitor charged the estate more for legal and trustee's services than would arguably be allowed on quantum meruit basis. In these circumstances, the release was not a fully informed one; it cannot be enforced against the beneficiary.”

What is an Estate Trustee to do to protect himself or herself? The Estate Trustee might send out accounts that are as complete and informative as possible, so that the release can truly said to be an informed one.   Solicitor’s accounts might be included, and these accounts could specify the nature of the services provided. Beneficiaries should be advised to obtain independent legal advice. 

In many cases, an Estate Trustee may wish to obtain a court passing in any event.

Thanks for reading.

Paul Trudelle

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 Yesterday, I referred to the Ontario Superior Court decision of Rooney Estate v. Stewart Estate (2007), CarswellOnt 6560, which addressed the distinction between the role of the Estate Trustee and the role of the estate solicitor.

One of the responsibilities of the Estate Trustee is to prepare a set of accounts for the approval of the beneficiaries or the court, as may be required.

The decision expands on this requirement. Citing an article prepared by Rodney Hull, Q.C. (“Fundamental Principles and Concepts Relating to Executors and Trustees’ Accounts” (1983), Estates and Trusts Quarterly 146), the duty of an Estate Trustee in keeping accounts is said to include the duty:

1.                  To keep clear and accurate accounts of the estate, rendered at appropriate intervals to the beneficiaries;

2.                  To keep the accounts distinct from other accounts;

3.                  To retain supporting documents for all accounts;

4.                  To produce to any beneficiary the accounts when requested. Income or revenue beneficiaries are entitled to have accounts at reasonable intervals; accounts must be presented to residuary beneficiaries when entitled to possession;

5.                  To make all beneficiaries fully aware of their rights;

6.                  To disclose any and all breaches of trust;

7.                  To allow all beneficiaries adequate time to investigate the accounts;

8.                  To ensure that all beneficiaries have competent, independent advice in reviewing the accounts; and

9.                  To notify all interested beneficiaries of any court audit.

In Rooney, the court held that a release signed by a beneficiary was not a bar to compelling a passing of accounts. The beneficiary was not advised to obtain independent legal advice when reviewing the trustee’s accounts, and the accounts did not disclose that there were double charges for the trustee’s work made against the estate, or that the solicitor charged more for legal and trustee’s services than would arguably be allowed on a quantum meruit basis. As such, there was a breach of one of the obligations associated with keeping accounts. Furthermore, the release was not a fully informed one. Accordingly, it was not enforceable as against the beneficiary.

Thank you for reading.

Paul Trudelle

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Not all Wills provide for an outright distribution to the beneficiaries. In some cases, the assets of an estate are held in trust over a period of time for the benefit of one or more beneficiaries, sometimes in succession.  When a trustee administers a trust, he or she is entrusted to act for the benefit of others. As such, our common law and statutes impose standards that trustees must comply with when dealing with trust property.

With the recent plummet in the stock market, I believe many trustees are considering how the stock market losses have affected the trust investments and what action they should take in the circumstances. 

Section 27 of the Trustee Act addresses the standard of care for trustees when investing assets held in a trust. Section 27(1) states, “in investing trust property, a trustee must exercise the care, skill, diligence and judgment that a prudent investor would exercise in making investments”. Section 27(2) states that “a trustee may invest trust property in any form of property in which a prudent investor might invest”.

Section 27(1) and (2) outlines the prudent investor rule. When investing trust assets, a trustee must comply with the prudent investor rule to protect himself or herself from liability.   Section 28 of the Trustee Act, emphasizes this point as it states that a Trustee will not be liable for losses arising from investments if the standard of the prudent investor is met. Nevertheless, the issue remains how does a trustee meet the “prudent investor” standard? In keeping with this theme, tomorrow I will address how a trustee’s investment performance may be assessed.

Thanks for reading, and have a great day!

Rick

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Listen to Initial Estate Meetings

This week on Hull on Estate and Succession Planning, Ian and Suzana discuss how important it is to be prepared for an initial meeting with an estate lawyer.

They have also been listening to and reading David Maister's new (audio)book Strategy and the Fat Smoker and continue their conversation on The Tipping Point by Malcolm Gladwell.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.

 

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Listen to Funeral Considerations

This week on Hull on Estate and Succession Planning, Ian and Suzana discuss the considerations and responsibilities of estate trustees at the time of a funeral.

They also introduce Malcolm Gladwell's book 'The Tipping Point' as a different way of understanding family behaviour at the time of death.

Continue Reading...

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Listen to The Process of Administering an Estate

This week on Hull on Estate and Succession Planning, Ian and Suzana  talk about the first, pre-probate stages of administering an estate.

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Listen to Executor Obligations

This week on Hull on Estate and Succession Planning, Ian and Suzana discuss what to anticipate as an executor and how to ensure that you are well prepared for your duties.

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At Wednesday’s year end dinner for the Ontario Bar Association Trusts and Estates section, we saw the presentation of the Hoffstein Book Prize.

This annual prize was established by Elena Hoffstein upon her receipt of the 2006 Award of Excellence in Trusts and Estates Law. The intention of the prize is to recognize outstanding contributions to the trusts and estates bar by a younger practitioner.

(Contrary to popular belief, the Hoffstein Book Prize is not a prize for writing a book: the prize IS a book.)

This year’s recipient of the Hoffstein book prize in was Jordan Atin, who in fact DID write a book. He is a co-author of The Family War. He is also a frequent speaker at CLE programs, writes extensively, is a contributor to the text Estate Litigation, and is involved in the OBA. Next year, Jordan is the Chair of the Trusts and Estates Section.

Jordan is Senior Associate Counsel at Hull and Hull. It is a privilege to work with him. He is a remarkable resource, and a wonderful person.

Congratulations Jordan.


Paul Trudelle

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In McMullen v. McMullen [2006] B.C.J. No 2900, an 86 year old widower commenced an application against two of his three daughters, who held his power of attorney. The application was to set aside the transfer of a 99% interest in the father’s condominium property to the husbands of his two daughters. The daughters, in turn, brought an application for an order requiring their father to submit to a psychiatric assessment.

According to the medical evidence before the court, the father had some medical problems, but no documented cognitive problems. At worst, he suffered from depression. However, the two daughters alleged that their father’s spending habits had changed and his investments had been depleted. The daughters claimed that their father was sending money to a new female acquaintance in the United States. The family contacted medical professionals and legal authorities with concerns that their father was being financially abused, but to no avail.

When the daughters confronted their father with respect to his worsening financial situation, he became angry and denied he was being financially exploited. He asked his one daughter to stop monitoring his bank account though she did not accede to his request, as she considered it her duty under the power of attorney. The two daughters then transferred the father’s condominium property to preserve his only remaining asset and provide for his future care.

However, the daughters did not immediately register the transfer of the condominium property, as they thought it would cause emotional distress. It was not until a year later that the daughters finally registered the transfer of the condominium without telling their father or providing consideration. The father commenced the application when he ultimately discovered the transfer.

The court allowed the application by the father and the condominium transfer was declared null and void. While the daughters acted in what they considered to be in their father’s best interests, there was nevertheless no evidence to show that the father was incapable of managing his financial affairs. The daughters had therefore breached their duties as attorneys by acting contrary to their father’s intentions. The court dismissed the daughters’ application, as the father was not required to submit to a psychiatric assessment where his mental capacity was not an issue.

The case holds that even when a family fears that an elderly parent is being financially exploited, but mental incompetency is not an issue, a power of attorney does not give the family carte blanche to do what they think is in the best interests of that parent. A power of attorney for property has its limits even in the most egregious situations.

Enjoy!

Justin de Vries

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Anyone can discount a commercial interest they own, trading money for convenience. There is always someone looking for a bargain.

In the United States, dozens of companies are offering to buy structured settlements and trusts. In fact, it is a huge business. Most U.S. states have passed laws requiring court approval of the sale of a structured settlement. However, in many instances, courts will approve sales of structured settlements and trusts for anyone claiming financial hardship.

I am not aware of any prohibition in Canadian law stopping such a discount trade in Canada. The owner of a trust can sell it, unless the trust contains a prohibition against its sale. As another example, one can sell his/her remainder interest in a trust, at a huge discount. It will be interesting to see if this type of discount trade catches on in Canada. If it does, regulation may become necessary to protect vulnerable beneficiaries of structured settlements or trusts. For example, court approval and/or full disclosure of potential consequences may be required. However, it seems unlikely that the government will seek to stop beneficiaries who are sui juris from selling their interest in structured settlements or trusts.

Have a great day!

Bianca

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Yesterday, we set out the first of a series of interpretation problems identified by Rodney Hull, Q.C. that often arise in Wills. Today, we set out another common provision that tends to cause difficulty …

(1) THE RULE IN SAUNDERS v. VAUTIER (1841), Cr. & Ph. 240.

(2) THE CLAUSE - “The residue of my estate to A upon attaining age twenty-five years”.

(3) THE FACTS - A is nineteen years of age on testator’s death. There is no gift over in the event that A dies before attaining the age of twenty-five years.

(4) THE QUESTION -

(a) Is the gift:

(i) vested in possession?

(ii) vested in interest?

(iii) vested subject to being divested? or

(iv) contingent?

(b) When can A call for the gift?

(5) WHERE TO START RESEARCH -

(i) Theobald on Wills - page 603 - paragraphs 43 - 29.

(ii) Feeney’s Canadian Law of Wills, paragraphs 17.54 - 17.55.

(iii) Sheard, Hull and Fitzpatrick, Canadian Forms of Wills, page 214.

Interpretation Applications can be quite expensive and time consuming. To the extent that they can be avoided, with diligent research and the ultimate consent of the beneficiaries, together with the consent of the Public Guardian and Trustee and the Children’s Lawyer, if necessary, this may not be a bad thing!

All the best – Suzana.

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Sometimes an estate trustee may get more than she bargained for.

A case in point may arise when an estate has entitlement to various pieces of artwork in an assortment of jurisdictions. How does the estate trustee locate the artwork? What constitute sufficient efforts to locate such assets? How is it valued?

All of these questions raise significant issues for the estate trustee. The advent of the internet has provided new tools to anyone making a global search for artwork. The Lost Art Internet Database is such an example. This website is a project of the German government’s central office for the recovery of lost art. Not surprisingly, a large share of such art was seized from Jewish owners by the Nazis.

In all likelihood, the estate trustee of the estate of the late Max Stern has had recourse to this website in an effort to locate lost assets to which the estate is entitled. As recently reported in the Toronto Star, the late Max Stern was the owner of an art gallery in Germany from 1913 until 1934 when he was forced to sell his holdings by the Third Reich. He escaped to Montreal in 1937 where he set up an art gallery. Upon his death in 1987, Stern named Concordia University, McGill University, and the Hebrew University of Jerusalem as the beneficiaries of his estate. The estate trustee, operating as the Max Stern Art Restitution Project, has since located many pieces originally stolen from Stern’s German gallery.

Until tomorrow,

David

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Listen to "The Estate Trustee During Litigation"

Read the transcribed version of "The Estate Trustee During Litigation"

During Hull on Estates episode #49, David and Jason discuss issues concerning the estate trustee during litigation (ETDL). They consider the circumstances that call for an ETDL, the technical procedure for appointing the ETDL and the powers and duties of the ETDL.

For more information on this topic, see:

• Salisbury v. Dell (1993 Ont. Gen Div);
• Jordan Atin's artice, The Estate Trustee During Litigation, in Estate Litigation, volume 2. 2nd ed. (Toronto: Thomson Carswell, 2000) at p.24-1; and
• Estates Act, R.S.O., c. E.21, as amended (s.28) 
  
   
  

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It is trite law that an executor’s duty is to bring in the assets of the estate and distribute to the beneficiaries. But what if the beneficiary of an estate cannot be found or has no interest in his inheritance? Reasonable steps must be taken to locate the beneficiary of an estate. But, in rare instances, a beneficiary may not be eager to be located or may disclaim his inheritance outright.

A case in point was recently reported by the BBC. A 1,000 acre estate in Cornwall, England (worth some five million pounds) is being administered by the Official Solicitor of the High Court, generating rental income of eighty-eight thousand pounds per year. John Paget Figg-Hoblyn inherited his father’s estate on his death in 1965 but, according to the BBC, has “not agreed to take up his inheritance.”

Apparently, he was finally located in 1994, living in a trailer park in California, but has once again since gone out of contact. The estate is apparently falling into disrepair.

As is often the case with estate issues reported in the mainstream media, key details are left unanswered. It appears that Mr. Figg-Hoblyn has not disclaimed his inheritance; rather, he just doesn’t want to be found!

However, we are reminded that the whole estate law regime is predicated on beneficiaries actually wanting to receive that to which they are entitled. I don’t know why Mr. Figg-Hoblyn does not want his inheritance but certainly no one can make him accept it. If his objective is to frustrate his father’s estate plan he appears to be succeeding….

Until tomorrow,

David

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A rather unique estate battle is unfolding in Maine and Connecticut as reported on February 26, 2007 by the Associated Press.

Olive Watson took the unusual step of legally adopting her same sex partner, Patricia Spado, some fifteen years ago as a means of ensuring for Spado’s financial security and presumably to guarantee the provisions of Watson’s last will (which entirely benefited Spado) against any challenge by her siblings.

Remarkably, the adoption was apparently legal in Maine notwithstanding that Spado was a year older than Watson and the two shared a conjugal relationship. Watson and Spado subsequently amicably ended their relationship in 1992 after fourteen years.

It gets even more interesting: Watson’s father was none other than the founder of the predecessor of IBM who, on his death in 1993, left a multimillion dollar trust fund for the benefit of his eighteen “grandchildren” unaware that his daughter had legally adopted Spado. A Judge in Connecticut has found that Spado cannot share in the trust (Grandfather Watson not having been aware of the adoption when he settled the trust) and Spado has appealed. The Trustees of the trust fund have apparently also commenced proceedings in Maine to seek to annul the adoption although that prospect appears unlikely as it requires proof of deception or fraud.

To my mind, the surprising element of this story is that Spado would even assert an entitlement as a “grandchild” when the purpose of the adoption was clearly to provide certainty of her entitlement to Olive Watson’s estate. It would be interesting to examine the legal requirements of adoption in Maine in more detail. Presumably the state legislature will pause to consider amendments in the glare of the spotlight of the American media….

Have a great weekend,

David

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As with any other type of litigation, documents obviously play a pivotal role in estate disputes. A claimant against an estate will often be reliant upon documents last seen in the possession of the deceased. But what if the documents so critical to the claimant’s case cannot be located in the estate residence?

Estate litigation is somewhat unique in that the custodian of the key documents in the case may be the party who has a great deal to gain from their loss or destruction. The ethical issues are front and centre and surely the advise of the estate solicitor to the estate trustee must be that he or she preserve all documents in the estate residence that could in any way have an impact upon a claimant’s case.

Sometimes, whether inadvertently or not, documents inexplicably go missing. The disappointed or suspicious claimant may avail himself of the legal doctrine or spoliation* which posits that an adverse inference will be drawn against a party who loses documents that were conclusively shown to have been in his custody.

Until tomorrow,

David M. Smith

*For a more detailed discussion on spoliation, see the article "Spoliation and Other Evidentiary Issues" on the Cassels Brock Blackwell LLP website.

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Listen to "Protecting Your Children's Inheritance"

Read the transcribed version of "Protecting Your Children's Inheritance"

During Hull on Estate and Succession Planning Podcast #49, Suzana Popovic-Montag and Jordan Atin discuss considerations and techniques to ensure the proper use of inheritances. Some of these techniques include staggered inheritances, incentive trusts and charitable foundations.

 

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Last week the Globe and Mail reported on a $1.5 billion lawsuit launched against Barry Sherman, the founder of Apotex, and a trust company. The case offers an opportunity to question the duties of disclosure to beneficiaries.

The claimants are the beneficiaries of their deceased father’s estate. Their father died in 1965 and his estate was administered by the trust company. In 1999, the claimants learned that the trust company had sold one of their father’s corporations to Mr. Sherman in the late 1960s. The claimants later learned that the sale included terms that they were to be given an opportunity to work at the company upon turning 21 and the option of purchasing 5% of the company after 2 years of employment. These terms were subject to some important conditions, including that the company remain under control by Mr. Sherman.

However, Mr. Sherman sold the company in 1972 for a sizable profit.

The claimants now allege that Mr. Sherman and the trust company are liable for not advising them of the terms of the agreement, among other things.

An interesting catch is that the trust company passed its accounts in 1993 and no objections were raised at that time.

At issue in this case will be the trust company’s obligations to disclose all details about its dealings with estate assets, even when the information has not been requested, either at the time or when the accounts are passed.

Thanks for reading.

Jason Allan

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Listen to "The Use of Contempt Procedures in Estate Matters"

Read the transcribed version of "The Use of Contempt Procedures in Estate Matters"

During Hull on Estates Episode #45, Sean Graham and Paul Trudelle discuss the use of contempt procedures in estate matters. They reviewed Rule 60.11 of the Rules of Civil Procedure and focused on the failure of Estate Trustees to produce accounts and the resort to the contempt mechanisms in order to compel their production.

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LISTEN HERE

READ THE TRANSCRIBED PODCAST

During Hull on Estates Episode #44, Jason Allan and David Smith discuss the duties and obligations of trustees with specific consideration to trustees of discretionary trusts. They discuss various claims available to beneficiaries against a trustee who is alleged to have acted improperly and the defences available to the trustee.

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Rose v. Rose is a recent Ontario case that deals with marriage breakdown, disillusioned children, and the finality of an irrevocable trust.

Brian and Janice were married and had two daughters. In 1992, Brian and Janice transferred a ski chalet and cottage into trust for the benefit of their daughters. Brian was the trustee for the trust. The trust was irrevocable. The family enjoyed the use of the chalet and cottage before and after the establishment of the trust.

Brian and Janice separated after the trust was established. Brian’s relationship with his daughters also deteriorated. The daughters ultimately became frustrated with their father as trustee and commenced an application to have him removed. They also sought an order winding up the trust and distributing the capital income to them.

For his part, Brian wanted to continue to use and enjoy the chalet and cottage despite the separation from his wife. However, the court held that the trust deed, the foundation document for the trust, could not be interpreted as authorizing Brian (or Janice for that matter) to use and enjoy the two properties without the consent of his two daughters. Furthermore, the court was not prepared rectify the trust deed to provide Brian with the use and enjoyment of the properties.

Brian also hoped to transfer the two properties back to him and his former wife. The court held that once the trust had been created, no such transfer could take place as Brian had failed to retain the power to revoke the trust.

However, the court did remove Brian as trustee. The court noted there was a great deal of hostility between Brian and his daughters. According to the court, it did not matter where the fault lay. The question to be asked when removing a trustee is whether it would be difficult for the trustee to act with impartiality, not whether in fact he would or would not do so. The court held that it would be impossible for Brian to act impartially in this situation.

Finally, the court held there was no basis for the claim by the daughters that they were entitled to call for the winding-up of the trust and for the distribution to them of the property of the trust.

Justin de Vries

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Today, I want to consider limitation periods in the context of a passing of accounts.

For lawyers, limitation periods are more of a curse than a blessing. While it provides a client with certainty, the conscientious lawyer is always nervous that a limitation period is approaching or has already passed. The first question a lawyer should ask a prospective client is when a claim or cause of action first arose.

Currently, I am embroiled in a complex estate passing of accounts. The issue of whether the beneficiaries of an estate are out of time in which to claim damages pursuant to section 49 of the Estates Act is very much in play.

A passing of accounts is essentially an estate audit. The executor is required to account for his/her actions to the beneficiaries. An executor will often be required to bring a court application to have the accounts approved. Beneficiaries can object to specific transactions and/or the compensation claimed by the executor. The beneficiaries can also seek damages against the executor on a passing of accounts as a result of misconduct, neglect or default. The issue is whether the two year limitation period set in the new Ontario Limitation Act, which came into force January 1, 2004, applies to a passing of accounts and a claim for damages.

 

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If a testator does not adequately shelter the bequests or insurance policy beneficiary designations to a disabled beneficiary, the disabled beneficiary may still have a way of sheltering the gift to him or her by taking advantage of what is known as a “disability expense trust”.

A disabled beneficiary, or member of a benefit unit, is entitled to put monies derived from an inheritance or the proceeds of a life insurance policy into a trust. These funds, up to a maximum value of $100,000, will not be considered assets for ODSP purposes.

This trust is distinct from a Henson Trust in that the funds may be received directly by the recipient and subsequently placed into the trust. Such a vehicle is available to shelter the funds were the testator failed to do so.

Any income earned on the funds and accrued will not be considered income to the disabled beneficiary if it the fund does not exceed $100,000.

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