·                    Wording of the document;

·                    The use of the property;

·                    The tax treatment of the property;

·                    Circumstantial evidence, like degree of friendship or closeness;

·                    Evidence of actual intention;

·                    Wording of the Will;

·                    Whether a power of attorney was granted, as this may show an appreciation of the distinction between granting the power and gifting the right of survivorship; and

·                    Intention subsequent to a transfer (this is not automatically excluded, but it must be relevant to the intention of the transferor at the time of the transfer, and the judge must assess the reliability of this evidence and determine what weight it should be given, guarding against evidence that is self-serving or that tends to reflect a change in intention).

Thanks for reading,

Natalia Angelini - Click here for more information on Natalia Angelini. 

The National Post recently reported on a man and a woman who had been living together for a number of years and had won $50,000 on a scratch-and-win ticket. The ticket had been purchased by the man. Notwithstanding the fact that the couple had previously shared winnings, the winnings were deposited into a joint account, and part of the winnings were used for a down payment on a property that they both owned, the court found that there was no prior agreement to share the winnings.

(In another recent Ontario case, the judge found that in absence of cogent evidence of a clear intent to share winnings, there will be no requirement to share.)

Had the couple been married, there would have been a presumption that the lottery winnings were joint.

In Ontario, s. 14 of the Family Law Act creates a presumption that in the case of married spouses, the fact that property is held in the names of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses intended to own the property as joint tenants, and money on deposit in the name of both spouses shall be deemed to be in the name of the spouses as joint tenants. The provision does not apply to common-law spouses.

What are the possible lessons from this?

1. If you are buying lottery tickets with someone else, be they a friend or unmarried spouse, have some agreement in place to share the winnings.
2. As Beyonce says, if you liked it, then you should have put a ring on it.

Thank you for reading.

Paul E. Trudelle - Click here for more information on Paul Trudelle.

In Pecore v. Pecore, the Supreme Court of Canada considered that, because it is common for elderly parents to hold accounts jointly with adult children for banking purposes, the starting presumption should be in favour of including the funds in the parent's estate. The adult child will then have the onus of proving that the parent intended to gift the funds to him or her.  The Court also addresses the evidence that may be used to defeat the presumption and prove that the parent intended to gift the funds in the account, including the following considerations: (i) whether the account documents show the parent's intent, (ii) who controlled and used the funds prior to the parent's death, (iii) whether the deceased parent had a power of attorney, and (iv) who paid the taxes on the account prior to the parent's death.  These considerations are fact-sensitive and that the trial judge is to consider the totality of the evidence and the weight to be placed on any particular factor. 

In Videchak v. Giarratano, a 2009 decision of Justice Matheson of the Ontario Superior Court, his Honour, applying Pecore, found that a joint bank account used to pay debts was impressed with a resulting trust for the benefit of the deceased parent.  In contrast, His Honour differentiated a jointly held GIC which was noted to be a savings vehicles and not for the payment of debts.  In the absence of a characteristic associated with such daily banking, the Court was of the view that the identification of the GIC as joint with right of survivorship was sufficiently determinative of the deceased's intention respecting that asset. As such, it passed to the joint account holders.

David M. Smith - Click here for more information on David Smith.
 

This week on Hull on Estates, Ian Hull and Suzana Popovic-Montag talk about how to manage an estate dispute as opposed to preventing it. They use an example of a joint account shared between 'Mom' and 'daughter' to examine the best way to approach posthumous problems and misunderstandings.

Feel free to send us an email at hull.lawyers@gmail.com or leave us a comment on the Hull on Estates blog.

Managing Estate Issues - Hull on Estates Podcast #140

Posted on December 9^th, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi and welcome to Hull on Estates. You’re listening to episode 140 of our podcast on Tuesday, December 9^th, 2008.

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.

Suzana Popovic-Montag: Hi and welcome to another episode of Hull on Estates. I’m Suzana Popovic-Montag.

Ian Hull: And I’m Ian Hull.

Suzana Popovic-Montag: And we’re very glad to be back on Hull on Estates. Just a quick reminder to our listeners that if you’d like to be heard on Hull on Estates, you can participate by leaving us a comment, e-mail us with any thoughts you may have at hull.lawyers@gmail.com.

Ian Hull: Or please visit our blog at estatelaw.hullandhull.com.

Suzana Popovic-Montag: How are you today, Ian?

Ian Hull: Terrific, thanks.

Suzana Popovic-Montag: That’s good.

Ian Hull: We thought we’d talk today about a very practical issue and that is, how to manage a problem as opposed to preventing. We spend a lot of time on Hull on Estates and on our companion podcast, Hull on Estates and Succession Planning, on talking about how to avoid problems, which is great, which we like to do and we encourage. But the reality is, problems do creep up, people don’t listen, people don’t understand, people don’t do what may be needed to be done or people simply just make an honest mistake and a problem gets created after death. So one of the illustrations we thought we’d talk about how we manage problems is in the context of a joint account. So let’s create this scenario, let’s make a very simple scenario and that is, we’ve got a dutiful daughter and a dutiful brother. One daughter, though, lives in the city with her Mom, looks after the Mom attentively, everyday and did so for 10 years. And then over the course of the 10 years, Mom wanted to give her more than her son, so she actually got some advice and did it during her lifetime. So she created joint accounts. And let’s use the illustration of a joint account with say $100,000 in it, and then another account which was not joint but was simply an outright gift. And it was smattered over the 10 years. So it happened once 8 years ago and another 6 years ago. So we’ve got these two different scenarios and the clients come to see us and they say well what can we do? And we look at the Pecori case and we sit back and we create a practical solution to that problem.

So we’ve got our first steps we would take. And the first step is that how do we prove that this is indeed a gift or a series of gifts? And secondly, how do we convince the other side? And let’s presume we’ve got a lawyer on the other side. 

Suzana Popovic-Montag: And the reason, of course, Ian, that we are concerned about how it is that we go about proving this is because as a result of the Pecori decision, we know that there is a presumption that there was not a gift being made but that the joint account would revert back to the mother’s estate in this case. And so we need to be able to demonstrate at the end of the day that this was the intention, that this was what was supposed to happen and I guess that’s where you’re sort of leading us to in terms of how we go about preventing these?

Ian Hull: Right. So, we’ve got a situation where we need to justify, because we’re acting for the dutiful daughter who got the money; we need to justify this. There are the non-litigation steps and the litigation steps. But the first non-litigation step I would typically take is to set out in a letter sort of a two-part letter. The first part is, okay, let’s acknowledge that these are the assets of the estate, these need to be administered, let’s set up a plan of action for them, and identify whatever is left in the estate; and secondly, put in the letter at the early stage full disclosure as to your position on the joint accounts. I find it’s better not to hide behind this issue as opposed to saying to the other side here is the estate assets, there’s $10 left, and the rest flowed outside of the estate and I’m not going to tell you about it. I find that early detection and early acceptance of the fact that you’re going to have potential conflict there is somehow best managed by setting out with particularity what the joint assets are or what assets you say flow outside of the estate.

Suzana Popovic-Montag: And we know, certainly from our experience, that a lot of people are hesitant to do that but the reality is if they don’t do it, they create an aura of mistrust right from the get go and its very, very hard to overcome that no matter how much you start disclosing afterwards.

Ian Hull: Absolutely. And I say to my clients look, be proud of the gift, don’t be ashamed of it. And if you’re ashamed of it, then you have something to hide.

Suzana Popovic-Montag: That’s a really good thought, Ian, and that’s a really good mindset because many times people are apologetic and they’re on the defensive already without anyone even making it necessarily an issue and so to think positive and work forward I think is great advice.

Ian Hull: Because after all, it is usually in the circumstances, it is clearly the intention of the mother to have gifted that money. And it wasn’t intended to be shared and you know, you want to be able to show the other side quickly and efficiently. Now that may not solve the problem, but if we start with that attitude and we start with the attitude of full disclosure, let’s talk a little bit about what that opening letter or that opening discussion with the other side might include.

And the first thing I like to include in it is the date the account was established. So I particularize that, I will get back-up if necessary. But I like to try to identify the date it’s established.   The second thing I like to do is I sit back and I say well look, if I’m on the other side of this, what is going to really bother me is the source of this money. Because this is, at this point in time with mother now dead, money that people will perceive to be family money, it’s part of the family. So with some particularity, I like to create the source of the money. If it’s just come out of a GIC that Mom rolled into you, or if it came out of the sale of the proceeds of the cottage or something like that, identify where it came from. Again, setting the tone for how the specific, exclusive account is set up. And I try to describe these as exclusive accounts as opposed to joint accounts, because once she’s dead, it’s no longer joint. It’s exclusive, it was exclusive during their lifetime and it is exclusive now. And when I say exclusive, of course, during the lifetime it was shared between the two as joint tenants but it was exclusive in the sense that no other family member had access to it or used that money. 

Now, another demonstration of how I like to set out early on some of my protection to the joint account case is I like to set out and say to my client, alright, how was the money indeed used during the lifetime? And in our earlier illustration, we talked about a joint account that was set up 8 years ago and then one that was set up 6 years ago. And just for the purposes of illustration, let’s say the 8 year ago one wasn’t joint, it was simply a gift because the daughter had taken her mother through a very tough time, she’d just had hip surgery and daughter basically quit her job and spent 6 months with Mom to rehabilitate. So Mom was at that point, 8 years ago, said geez, you know, I just want to give you something for this. I know you’ve lost a lot of salary and money and so here’s a $100,000. And it comes out of a GIC, goes into daughter’s name exclusively and then how does the daughter use that money during her lifetime is an important question, because the judge will want to know, and its an important thing to disclose early, and especially if the money was used exclusively for the daughter. For example, in that 8 year old account, the daughter used the money to send her kid to private school. And now there is only $30,000 left and the other child wants to split the $30,000 of course, but the daughter is saying well, first of all, it was set up a long time ago; second of all, I used it as though it was my own; third of all, I never even talked to Mom how I used it. I used it to my exclusive benefit. So its treated like a gift in that sense.

Suzana Popovic-Montag: So you’re suggesting, Ian, that its very different from a situation where the money would be used somehow for mother’s benefit going forward and the idea there being that of course it was always intended to be hers, it was just in someone else’s hands as trustee or whatever you want to describe the relationship.

Ian Hull: Absolutely. So the second illustration is more problematic. And that’s the joint account where it is set up with daughter and mother, with joint right of survivorship. And typically the bank document is all that has been established. We always tell people to do more but let’s say they haven’t. Again, it seems to me that two threshold questions are: source of the money, when it was opened, and then describe how the money was used. And if it was used exclusively for mother, or if it was used in part for Mom and part for daughter, I don’t know; depends on your facts and your circumstances. But if you can take those three steps along the way to establish your core position, the other side…I’m not saying people fold their tent, but the other side has to seriously consider whether or not they are going to pursue this because it’s sounding very gift-like.

Suzana Popovic-Montag: Now, Ian, from your experience, would you say that the inter vivos gifting tends to be easier to prove than the joint account gifting? Or not?

Ian Hull: I think its slightly easier, yeah, I think because you put it in your name alone, that helps. But, you know, I still think at the end of the day, its so much depends on how much, well without a note or some additional evidence, so much depends on what the intention was of the parties. And part, you really only have, because you aren’t typically planning for this fight, all you have to show the other side is how the money was used. And if it was just sitting there accumulating interest, never touched, that’s okay too, if you have a reason. And then your reason might be look, I took it, Mom gave it to me and I saw that as my retirement savings.

Suzana Popovic-Montag: Right.

Ian Hull: I don’t know, you always have separate facts and stuff. So anyway, I think that that’s just an illustration of how we like to sit down and begin the problem-solving process as opposed to the other end of the day when we would love to see all of the problems solved before they get to us, but that’s not always the case.

So there’s that three-part step: identify the source of the asset, second of all identify when the account was established, and third of all, identify how the money was used during lifetime, and it may go a long way to either resolving or at least crystallizing the issues quickly.

Suzana Popovic-Montag: Well I think that, Ian, brings us to a wrap for this week’s discussion. Thanks to everyone for listening and thank you, Ian, for joining me today.

Ian Hull: Thanks very much, Suzana.

Suzana Popovic-Montag: Just a quick reminder, of course, please feel free to send us an e-mail at hull.lawyers@gmail.com or visit our blog at estatelaw.hullandhull.com. Thanks very much.

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.

To listen to other podcasts, or to leave a question or comment, please visit our website at www.hullandhull.com.

Our theme music is Upper Structure by DJ AKid  and is courtesy of the Podsafe Music Network.

/mem

This week on Hull on Estates, Christopher Graham and Paul Trudelle discuss the recent decision in the case of Piszczek v. Zurawska that demonstrates the application of a resulting trust of joint accounts.

Comments? Send us an email at hull.lawyers@gmail.com, call us on the comment line at 206-350-6636, or leave us a comment on the Hull on Estates blog.

Piszczek v. Zurawska - Hull on Estates Podcast #131

Posted on October 7^th, 2008 by Hull & Hull LLP

Paul Trudelle: Hi and welcome to Hull on Estates. You’re listening to Episode 131 on Tuesday, October 7^th, 2008.

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.

Christopher Graham: Hi and welcome to another episode of Hull on Estates. I’m Chris Graham.

Paul Trudelle: And I’m Paul Trudelle.

Christopher Graham: If you want to be heard on Hull on Estates you can participate in our discussion by leaving a comment. Give us a call at 206-350-6636. The number is in the show notes along with our e-mail address, hull.lawyers@gmail.com, all lower case, or you can visit our blog at estatelaw.hullandhull.com, all lower case.

Paul Trudelle: Hi Chris, how are you today?

Christopher Graham: Fine thanks, Paul. How are you doing yourself?

Paul Trudelle: Very good, thanks. Today we thought we would talk about a recent decision out of the Ontario Superior Court of Justice, just as a reminder of the application of the resulting trust-type case that we see with joint accounts from time to time. I think it’s a useful discussion of the issues and a practical application of the case law, in particular the Picorry decision.

Christopher Graham: Yeah, this case is, it’s an illustrative case. I guess in a sense it’s timely, it’s been about a year since Picorry, plus a bit, but there aren’t very many decisions of this nature, I guess, because so many of these cases settle these days?

Paul Trudelle: That’s right. I think that’s fair to say. I think Picorry gave us quite a bit of guidance on this area of the law, but this case did go to Court. It went to Court and the judgment is the judgment of Langdon, Mr. Justice Langdon, on June 25, 2008. I think both of us are steering away from saying the name of the case, but it’s Piszczek and Zurawska. We’ll put a link to that in our show notes.

Christopher Graham: Yeah, I’ll take a wild guess here. Piszczek and Zurawska, and we’ll see if anybody actually knows the name of this one better than we do. Yeah, it’s an interesting case. It’s typical of a lot of estates litigation cases. There’s a long story, it’s a fascinating story. A World War II survivor came to Canada. He was married at the time. He came in 1950 from Poland. Worked hard as a custodian and he made friends with other Polish immigrants, took them into his house as boarders, they paid rent, he made really good friends with one of these boarders, and this boarder was apparently quite a good friend to him as well. He took care of the testator in the testator’s old age. The testator’s wife had died in 1972, so she wasn’t in the picture.  And gradually took more and more of an active hand in the testator’s life as his mind went.

Paul Trudelle:  Yeah, the deceased had two children from his marriage and he was a stepfather to his son’s wife from a prior marriage, so he did have three children, so to speak.  However, it appears that two of those children weren’t very close; the third would see the deceased from time to time but wasn’t particularly close. This one friend was very close and very active in caring for the deceased prior to his death as the deceased’s health failed.  And the Court paints a very nice picture of the gentleman in question, and it seems that he had this very close relationship, a very helpful relationship with this individual who was living with the deceased for a time, and later moved out but still was living close to the deceased and helped him with respect to taking care of his own property and maintenance around his house.

Christopher Graham: Yeah, that’s one of the interesting aspects of this case. The interloper, this man really did take care of the testator, by all accounts was a sincere and genuine friend, especially in the later stages of the testator’s life, and then the testator started to lose capacity. And when he lost capacity, this character got a Power of Attorney, or I guess he had it before capacity was lost.

Paul Trudelle: Yeah, he was the attorney under a Power of Attorney given while the deceased still had capacity. It wasn’t used until some point near the end of the deceased’s life when it appears that he did lose capacity. He was no longer able to take care of himself, he was put into a nursing home by his friend, using the Power of Attorney. The deceased at that point had a house and the house was sold by the attorney using the Power of Attorney. But I think it’s interesting to note, and the Court made extensive note of the fact that prior to selling the property, the deceased had a Will. The Will made a small bequest to this friend, left the balance of the estate essentially to the children of the deceased. However, after the deceased appeared to lose capacity, there was a request made by this individual that a lawyer come and see the deceased in order to make a new Will.  And the Court made extensive findings, or noted at great length, the discussion between the deceased and this lawyer at the time when this new Will was being planned.

Christopher Graham: Yeah, essentially the deceased, at the time he was taken to the lawyer or the lawyer met with him, he was about as out of it as, well, he couldn’t answer any single question about his assets.  He simply, apparently couldn’t respond, apparently had very little, if any, capacity at that point.

Paul Trudelle: And the lawyer noted that, and because of the lack of capacity, the lawyer wasn’t prepared to make a new Will. There was a suggestion that this new Will would have left the entire estate to the friend, however that never came to pass because the lawyer didn’t feel that the deceased had capacity. So following that, the deceased went into, or was in a nursing home at the time. The friend used the Power of Attorney to sell the house and then took the position that the deceased, prior to his death, wanted to give him a substantial gift, wanted to leave something to his family members.  So $100,000 was put into a separate account in the deceased’s own name in order to satisfy the bequests under the Will. The balance, which was about $100,000 was left in the joint account. After the deceased died, the friend took the position that he received the balance of that account by right of survivorship and that was a gift made to him during the deceased’s lifetime.

Christopher Graham: Yeah, and here’s where the presumption of resulting trust comes in, because the joint account had been opened during the deceased’s lifetime, well it would have to have been opened during the deceased’s lifetime, but it was, and the funds were transferred in. The presumption arises, and it was up to that man to rebut the presumption of a resulting trust, and he was unable to bring forward sufficient evidence or any evidence to rebut the presumption.

Paul Trudelle: Right, and the matter came before the Court by way of a passing of accounts. The residual beneficiaries of the estate challenged the accounts prepared by the friend, took the position that the joint account proceeds should have fallen into the estate and should have been divided up as residue, so that’s how the matter came before the Court. The Court looked at the presumption and the evidence that existed, in order to see whether that presumption was rebutted. One of the interesting things that I like to note is that there were banking documents here, when the joint account was set up there was a banking document signed that would show that the accounts were being held as joint accounts with right of survivorship. The Court didn’t waste too much time in concluding that those would be for the protection of the bank and that either of the deceased or his friend could access the money during the deceased’s lifetime.  But that wasn’t determinative of the question of whether there was a gift of those accounts and whether that rebutted the resulting trust presumption.

Christopher Graham: This is an excellent case to read and it’s one of those cases that doesn’t make law, but it ties together a few concepts that are already out there in a way to refresh, just refresh your memory of the core, but also other principles, like the principle of undue influence which also comes into play here.

Paul Trudelle: The Court didn’t find that there was any arm-twisting or anything like that, but it did find that the friend was taking care of or helping the deceased to such an extent that the presumption of undue influence arose, because the deceased was so reliant on the actions of the friend.  So the Court says that there was a presumption of undue influence as well. On the presumption of resulting trust and evidence to rebut that, the Court refers to Section 13 of the Evidence Act which states that in order to rebut that presumption there needs to be some independent corroborative evidence; felt that there was simply no such corroborative evidence presented by the friend in order to rebut the application of the presumption of resulting trust.

Christopher Graham: And that’s another interesting factor about this case because it seems that the Courts have been trending towards, with respect to the application of Section 13 requiring corroborative evidence, the bar seems to have gotten extremely low there, to the point where telephone conversations are held to be corroborative evidence where, we only know the telephone call happened, we don’t actually know what was said other than the word of the claimant against the estate. But in this case, there wasn’t any of that sort of very narrow evidence that a Court is willing to hang its hat on and say, okay, yes you have corroborated your claim against the estate.

Paul Trudelle: Right, and another minor point on evidence that may help, or show why the Court arrived at the conclusion that it did.  The friend took the position that the balance in the joint account was a gift to him, however there is some evidence that during the deceased’s lifetime, the friend had made, a gift was made to the daughter of the friend and that cheque was signed by the deceased.  And the Court felt that if, in fact, a gift of that bank account was intended to the friend, then it would be odd to see the lengths that the friend went to in order to ensure that the cheque was signed by the deceased.  And the Court felt that that didn’t help the friend’s case. It only seemed to support the conclusion that that account remained the property of the deceased throughout.

Christopher Graham: Paul, based on the fact that the deceased was, the meeting was arranged between the lawyer and the deceased, the lawyer who refused to do the Will, how important do you think that factor was, given the evidence?  The interview was great, the discovery notes are very powerful, at least to me they seem compelling. Do you think that was the major factor or was there one major factor, or was it a combination, based on the decision?

Paul Trudelle: I think there’s a number of factors. I think that’s an important one, the fact that it was the friend who set up this meeting, called in the lawyer to make the new Will, was instrumental in getting that done. The lawyer was cross-examined or examined for discovery before trial and gave evidence that he had no real discussion with the deceased with respect to the terms of this new Will that was being suggested, and there was never any suggestion by the deceased that he wanted any gift to be made. The fact that all of this was pulled together, or the meeting was set up by the friend, I think, was influential. 

So just to conclude, I think that it’s a very interesting case to look at, in that it reviews a very real fact situation. It applies the law from Picorry to that very real fact situation and the result being that the friend was required to turn over or disgorge the funds that he received in that joint account. 

Christopher Graham: Now it is an excellent case, you know, and as we were saying earlier, because so many of these cases settle, and don’t go the full nine yards, there probably won’t be too many more like this.  And this case really does apply Picorry; it discusses the principles. It’s one of those good all-round cases that’s really worth the time it takes to sit down and read it, give it a good thorough reading to see also how the laws of evidence are applied.

Paul Trudelle: Just before we leave the case, in the last line of the judgment, the Court awards costs to the children of the deceased on a substantial indemnity basis without any discussion. I think it’s important, though, to take that as a warning, that this type of case can result in costs on a substantial indemnity basis and that should be something that I think we consider when looking at the evidence that we have, whether we’re on one side of the case or the other, and in determining or deciding how far we’re going to go and what our approach is to resolving these types of cases.

Christopher Graham: Yeah, that’s a great point and that’s one more reason why so many of these cases are settling these days.

Paul Trudelle: Well thanks, Chris, for bringing that important decision to our attention and for discussing it with me today.

Christopher Graham: It was a pleasure, Paul, and I look forward to podcasting with you again soon.

Paul Trudelle: Yes, and we look forward to hearing from you, our listeners. You can send us an e-mail at hull.lawyers@gmail.com, or pick up the phone and leave us a message on our comment line at 206-350-6636. And be sure to visit our blog at estatelaw.hullandhull.com where you will find more information about the topics discussed today and other topics of interest to the estate bar and others interested in estate matters. We hope you enjoyed the show. I’m Paul Trudelle.

Christopher Graham: And I’m Chris Graham. 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.

To listen to other podcasts, or to leave a question or comment, please visit our website at www.hullandhull.com.

Our theme music is Upper Structure by DJ AKid  and is courtesy of the Podsafe Music Network.

/mem

This week on Hull on Estates, Craig Vander Zee and David Smith discuss conflicts of interest during Passing of Accounts trials and rules of professional conduct.

Comments? Send us an email at hull.lawyers@gmail.com, call us on the comment line at 206-350-6636, or leave us a comment on the Hull on Estates blog.

Passing of Accounts and a Joint Retainer - Hull on Estates Podcast #124

Posted on August 19^th, 2008 by Hull & Hull LLP

David Smith:  Hello and welcome to Hull on Estates. You’re listening to Episode #124 on Tuesday, August 19^th, 2008.

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.

David Smith: Good afternoon, Craig.

Craig Vander Zee: Good afternoon, Dave. How are you?

David Smith: I’m doing well, Craig. And Craig, today we thought we’d talk about conflicts of interest, and more specifically, Craig, what were you thinking we’d talk about?

Craig Vander Zee: Well I thought we would talk about the Olympics first, and how Canada, I believe, has got to be about 8 or 9 medals right now, so they’re just coming into their own.

David Smith: That’s right. We’re just behind Phelps.

Craig Vander Zee: But I guess you want to talk about the podcast and certainly that’s what we’re here to do.

David Smith: That’s right, that’s right, Craig. Alright, so in terms of conflicts of interest generally, the Rules of Professional Conduct, and specifically Rule 2.04 speak to this issue.  And I thought maybe you could sketch out in sort of general terms what we’ll talk about and then I’ll refer to the applicable Rule. 

Craig Vander Zee: Sure, Dave. What we thought we’d touch upon today is passings of accounts trials and conflicts that might arise at a trial or just prior to a trial, and really how to avoid them. So again, this is more specifically in the context of a passing of accounts hearing, that is, a trial if the hearing or trial ultimately becomes necessary. And really there’s two kinds of conflicts of interest generally speaking, from the standpoint of who you might be representing. It could be the case where there are multiple estate trustees, and as such, the belief certainly and the understanding and all the discussions would lead one to believe that there are no conflicts of interest as between the multiple estate trustees, that they’re on the same page with respect to all of the issues and the compensation. And the other potential set of clients you could have are beneficiaries which are objecting to the passing of accounts.

Dave Smith: Okay. And it’s beneficiaries that we’re really concerned with today.

Craig Vander Zee: From that standpoint, yeah, we’ll focus on that.

David Smith: Right. Okay.  Well, when we look at the applicable rule, Craig, it’s the Rule of Professional Conduct that talks about this. It basically talks in general terms about, you know, there’s a bit of lawyer language in there but in general terms, a lawyer can’t advise or represent more than one side of a dispute and cannot continue to act where there is likely to be a conflict of interest. And I guess the issue that’s sort of relevant to our issue which we might want to dive into is the whole issue of joint retainers and when can you, as a lawyer, act for more than one beneficiary of the estate having regard to our concern?

Craig Vander Zee: Well it’s really in a situation where you’re comfortable that they’re aligned on all of the issues and have the same thinking with respect to and the same positions with respect to all of those issues. But when we talk about a joint retainer, the retainer itself sounds like the piece of paper that you’re asking the clients to sign retaining you, and that certainly can be in the form of a letter or an agreement.  But even before I decide whether I’m going to accept multiple beneficiaries as clients, I want to explore with them all of these issues. I want to know the issues, identify the issues and then also see where their respective positions are. It could very well be that there’s really only one main consideration from all of the beneficiaries and that’s that there’s just excess compensation. It could just very well be that that’s really the fight. It’s not a fight that includes dozens or even several objections to the accounts themselves per se, it could just be a fight based on compensation. Well the fewer the issues that you’re dealing with at the trial, it would seem that it would be, frankly, narrowed in terms of the potential conflicts of interest.  So at the very beginning of the file, even though we’re talking about a trial or hearing, that is when I would want to speak to all of them at the same time and find out what their respective positions are going to be.  And then in the retainer document, I specifically include a provision that deals with the potential conflict of interest and advises them that while there is no conflict of interest at this time, should one arise, what the potential results could be of that; whether I might not be able to represent any of them, one of them. That will depend again on the very facts and the circumstances of the situation.

David Smith: Right and when we talk about joint retainers, I mean a stark illustration of a conflict would be a situation where you might learn in the course of representation that one of the beneficiaries is in debt to the estate, let’s say, and that might change their position. If that’s a situation that you become aware of as a lawyer, it’s my understanding from the Rule that you would be obligated to share that information with the other clients and if that conflict was such as to cause the clients to have a conflict which prevented you from acting, you would not be able to act for any of them?

Craig Vander Zee: Well, again, if there is a conflict, then you would want to make it exactly clear from the get-go as to what’s going to happen.  And usually, I would typically provide options as to whether there would be no possibility of being involved in the file or being partially involved in the file or representing one of the beneficiaries. It would depend on the fact circumstances. But again, right from the initial meeting, I would advise the beneficiaries that whatever one tells me cannot be held, is not confidential to the other beneficiaries.  Putting it perhaps another way, you don’t have a solicitor-client relationship with each one of them, you have it with all of them. And as such, you have to tell them up front, or at least I tell them up front, that what one shares with me is shared with all of them.  And where, sometimes at the beginning of a file everybody is on the same page, prior to a trial, circumstances could change. It may be that your clients don’t hold the same views as to settlement per se. Perhaps as you get close to trial, or even in trial, there are offers to settle which are going back and forth in respect of the issues and it may very well be that while the beneficiaries all agree on the issues and the extent of the issues, they may not all agree on the settlement aspect of all of it.

David Smith: And let me just interject, Craig. I would say that that creates the greatest likelihood for conflict, doesn’t it?

Craig Vander Zee: I would think in those circumstances, because certainly by the time you’re approaching a hearing in terms of a passing of accounts, you’ve already canvassed all the other issues.  And it would seem that the clients are all continuing on the same page or they haven’t, in which case you will have addressed that issue.

David Smith: And I guess the other issue too is, you know, settlement is always such a, especially in estate fights, it can be such a personal issue that clients feel about and some will feel that it’s a business decision and others will be driven more by emotion.  And getting them all to agree to give you the same instructions on settlement, that can be the biggest challenge when you’ve got a joint retainer.

Craig Vander Zee: Well, what you can do, and again it depends on the clients, and the circumstances, is ask the clients to put in writing what the parameters of settlement are. And then before, plenty of time before the hearing, go over those parameters with each of the beneficiaries so it’s clear what the range of settlement instructions are and get everybody’s comfort level. Ideally you’d like to be in a position to be able to approach this as early as possible so that if one of your beneficiaries needs independent legal advice, you know, that appears to be a conflict, you can refer them out for independent legal advice with respect to something and you might be able to deal with it in that fashion. If it turns out that it is a conflict, a conflict which absolutely has to be addressed by all the beneficiaries, well then there would be enough time to have that person represented separately at the hearing.

David Smith: Right. I want to explore this issue, Craig, a little more about getting instructions in writing. I think it’s an interesting point and I guess the thing that comes to mind is, in your practice, do you generally ask them all to sign one piece of paper with settlement parameters? Or do you get each of them to give you separate instructions that you then share with each other?

Craig Vander Zee: Well I think the mechanics is based on one’s own preference.  But certainly having all on the same page, I mean that metaphorically, not literally, it may very well be that you know, you send a letter with respect to instructions which are confirming and all the clients sign off on it.  Whether they sign the same page or not, they’re all agreeing to the same parameters.

David Smith: Okay, Craig, well this brings us to a good point, I think, to sum up the discussion and perhaps we can talk about the obligations generally.

Craig Vander Zee: Well again, Dave, I always canvass with multiple clients right from the get-go, sort of what the ground rules are. Again, that all information obtained from one is accessible and to be provided to the other so that there’s no issue of confidentiality as between the clients.  Again, and really at the utmost from my perspective, but what I didn’t mention earlier, is that all the clients must consent to the joint retainer. Obviously, if there’s dissention with respect to a joint retainer, then that would be a situation where I wouldn’t even embark upon a joint retainer. Again then, the retainer or letter agreement would confirm this, would confirm that they all wish me to act on their behalf.  And would also set out the consequences in the event that a conflict or a potential conflict seems to be arising as to what would be done.  And again, depending on the facts and the circumstances of the case, it could be that I no longer represent anyone, or with the consent of the parties, I continue to represent one of them. It just depends on the situation, but certainly I would not leave that unclear.  And if there was not consent amongst the multiple beneficiaries, then I would not proceed with one.

David Smith: Right. And that consent, Craig, just for clarification, would be that if there is knowledge of an existing conflict, you can still act for all of them as long as they all consent to act, notwithstanding the conflict?

Craig Vander Zee: And they’re all clear as to what that conflict is. And if there is a situation where maybe they’re not completely sure or don’t understand, then you can always refer them out to independent legal advice at that point in time, so that they can be clear in their own minds if they’re not already clear, as to how they wish to proceed.  But, you know, again, set the ground rules from the beginning, tell them of the obligations to disclose information and of any potential conflicts and if those potential conflicts appear to arise, you have to deal with it as soon as possible.

David Smith: Right and true in any case, but especially true, given our context in the passing of accounts.

Craig Vander Zee: In the passing of accounts and going from there.

David Smith: Right. Okay Craig, well this was a good discussion. Thanks very much.

Craig Vander Zee: And I guess we’re now on Day 12 of the Olympics, Dave.

David Smith: That’s right.

Craig Vander Zee: And I’m hoping that Canada’s got a few more medals.

David Smith: Let’s hope for the best! Take care.

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.

To listen to other podcasts, or to leave a question or comment, please visit our website at www.hullandhull.com.

Our theme music is Upper Structure by DJ AKid  and is courtesy of the Podsafe Music Network.

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The sister argued that her brother intended to gift to her the balance of the funds as he did not have a good relationship with his son. The son of the deceased, the sole beneficiary of his estate, contented the funds belonged to the deceased’s estate on the basis of a resulting trust. The court found as the deceased was the only contributor to the account, the sister had to rebut the presumption of a resulting trust and as she was neither his spouse nor his child, she derived no benefit from the presumption of advancement.

Referencing the Supreme Court of Canada decisions of Pecore v. Pecore and Madsen Estate v. Saylor, the court looked at the evidence to determine the deceased’s actual intention. The court found the testimony by the deceased’s lawyer and a bank employee indicated that the deceased was interested in providing his sister with the authority to manage his finances and had not intended to gift her funds.

Weighing the evidence, the court found on a balance of probabilities that the resulting trust had not been rebutted and the intention of the deceased was to have his sister assist with bill payments if he became incapable.

To learn more about joint accounts, listen to Episode HOESP #60  where Ian Hull and Suzana Popovic-Montag discuss Percore v Pecore or read the transcribed version.

Thanks for reading,

Diane Vieira

Sean Graham

Read the transcribed version of  "Joint Accounts"

During Hull on Estate and Succession Planning Podcast  Episode #60, Ian and Suzana discussed a recent case, Pecore v. Pecore, 2007 SCC 17, from the Supreme Court of Canada. This decision concerned the issue of jointly held accounts.

Ian and Suzana discussed the consequences of joint accounts for adult children, minor children and dependent adult children.

As many of the readers will know, joint accounts are a hotly debated topic in estate litigation. When an account is held jointly between two individuals, both hold an equal, undivided share. If one of the joint owners dies, the other is left with the entire interest in the account.

Previous decisions on the issue of joint accounts have varied but courts typically approached the issue by presuming that if the account was held jointly between a parent and a child, the parent intended to gift the money to the child (the presumption applied even if the child was an adult and financially independent). It was then up to the challenger to prove otherwise.

In Saylor and Pecore, the Supreme Court essentially reversed the presumption in the case of adult children.

The Supreme Court ruled that because it is very common for elderly parents to hold accounts jointly with adult children for banking purposes, the starting presumption should be in favour of including the funds in the parent's estate. The adult child will then have the onus of proving that the parent intended to gift the funds to him or her.

In the case of minor children, the old presumption of a gift will still apply, based on the assumption that parents intend to support their minor children.

While the clarity of a final ruling on how to approach joint accounts will likely be welcomed, there may remain some uncertain as to the evidence necessary to rebut the presumption. And hence, more litigation to come.

Have a nice weekend,
Jason Allan

In “Awaiting Certainty on Jointly Held Assets,” Christopher Guly considers the debate over how to adjudicate challenges to jointly held accounts. He examines two decisions of the Ontario Court of Appeal, Saylor v. Brooks and Pecore v. Pecore. Both were recently heard by the Supreme Court of Canada.

The facts in Saylor and Pecore are somewhat similar in that both involve challenges brought by beneficiaries to accounts that were jointly held between a Deceased and his daughter. In both cases, the beneficiaries argued that the Deceased did not intend for the surviving daughter to acquire the entire account and that the funds should be returned to the Deceased’s estate.

In considering the beneficiaries’ claims, the Court diverged from the historic reliance on presumptions. In the past, a transfer of money or property between strangers was presumed to be a loan, while a transfer between a father and his wife and/or children was a presumed gift. Of course, the presumptions only operated as starting points and were rebuttable.

In Saylor and Pecore, the Court ruled that it must first consider the totality of the evidence and determine the intention of the Deceased at the time the joint account was created. Only if intention cannot be clearly determined will the Court then turn to the presumptions.

Sounds simple? Well, as Guly points out by reference to discussions with practitioners, including Ian Hull, the decisions raise numerous concerns. Namely, what evidence do you use to prove intention? What if you do not have available evidence? How much evidence is necessary to avoid the presumption?

I will be interested in reading the Supreme Court’s answers to these difficult questions.

For more background information on legal issues surrounding joint accounts, check out Ian and Suzana’s previous blogs found in the "Joint Accounts" category on the blogpage.

Thanks for reading.

Jason