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

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Does the Court have jurisdiction to set aside a Family Law Act election, or is such an election irrevocable?

This question was recently considered in the Ontario Superior Court of Justice decision of Iasenza v. Iasenza Estate 2007 CanLII 23351.

As background, Ontario’s Family Law Act (“FLA”) allows a surviving spouse to elect to either receive benefit under the deceased’s will (or on an intestacy if there is no will), or receive an equalization of net family property under the FLA. Normally, the surviving spouse seeks information regarding each of the options, and then elects for the greater benefit.

However, information regarding the values of each option is not always forthcoming in a timely fashion. The election must be filed within 6 months of the date of death, or the surviving spouse is deemed to elect to take under the will or on an intestacy.

The Court held that it did have discretion to set aside an election made in favour of an equalization. However, the Court noted that the discretion will be exercised sparingly and only in “restrictive circumstances where the interests of justice require it and where the balance of the interests of effected parties clearly warrants it.”

In considering whether to exercise its discretion, the Court will consider:

a.                  Was the election filed as a result of a material mistake of fact or law made in good faith?

b.                  Was there any responsibility or culpability on the part of the effected parties in relation to the election?

c.                  Was the notice of intent to seek revocation of the election given in a timely way, and in particular, how long after the 6 month filing period was notice given?

d.                  Has the estate been distributed or would interested parties otherwise be adversely effected?

e.                  Does the election result in an injustice to the surviving spouse in all of the circumstances?

On the particular facts of Iasenza, the Court decided to exercise its discretion and set aside the election filed by the surviving spouse. As a result, the spouse was entitled to receive 1/3 of the estate under the will, whereas she would have received nothing under the election.

Thanks for reading.

Paul Trudelle

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As we all know, it is not uncommon for any investor to occasionally experience a substantial decrease in the value of one of the stocks in his or her portfolio.  But what if the investor is a trustee?   

In light of the recent amendments to the Trustee Act which appear to embrace the modern portfolio theory, it will be interesting to see how the Court will utilize this theory to assess a trustee's investment performance. Section 28 of the Trustee Act adopts an approach that is consistent with the modern portfolio theory.  Under this section, a trustee is insulated from liability if “the conduct of the trustee, which led to the loss from the trust, conformed to a plan or strategy, for the investment of the trust property, comprising reasonable assessments of risk and return that a prudent investor could adopt under comparable circumstances”.

Under the “statutory legal list” approach, which I described yesterday, a trustee was limited to investing trust assets in authorized investments.   However, with the development of the prudent investor rule, trustees are provided with a broader range of investment choices, which will likely increase their responsibility in determining an acceptable standard of care.

Presuming that a trustee is found liable for breaching the standard of care, section 29 of the Trustee Act permits a court to assess “the overall performance of the investments” when it is assessing damages.  Based on the language of section 29, it appears that a trustee may be allowed to offset the loss of a bad investment against the gain of a good investment.

The trusts and estates bar will be watching with interest to see how the judicial consideration of the prudent investor rule evolves.

Happy Super Bowl Weekend!  Go Patriots!

Rick

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In my blog yesterday, I introduced the prudent investor rule as the standard of care for trustees when investing assets that are held in a trust. Today, I will address how a trustee’s investment performance may be assessed.

Prior to July 1999, trustees were required to make investments pursuant to the “statutory legal list” provided for in the Trustee Act. This had the effect of holding trustees accountable for each particular investment, rather then the investment portfolio as a whole. The principle was further illuminated by the anti-netting rule, which stated that a trustee, who committed a breach of trust, was not entitled to set off a gain in one transaction against a loss in another. However, through recent amendments to the Trustee Act, the statutory legal list was repealed and replaced with the Prudent Investor Rule.

The Prudent Investor Rule reflects the modern portfolio approach to investments, the emphasis being on the prudence of the portfolio as a whole as opposed to each particular component. This theory is captured in Section 27(5) of the Trustee Act. Section 27(5) requires “a trustee to consider … the role that each investment plays within the overall trust portfolio”. Furthermore, under section 27(6) “a trustee is required to diversify the investments of the trust property. It appears that under the modern portfolio approach, a trustee would not be breaching the standard of care, should he or she invest a substantial amount of trust assets into a single security. As described above, section 27(6) requires that the trustee consider diversifying the portfolio, which is necessary if the Prudent Investor Rule is to be followed. To conclude my topic, tomorrow I will consider the liability of a trustee with respect to the investment of trust assets.

Thanks for reading,

Rick

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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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Section 131 of the Courts of Justice Act establishes the authority for the Court to award costs. Section 131 states that the Court has absolute discretion in awarding costs, subject to the provisions of an Act or the rules of court. 

Before July 2005, the Rules of Civil Procedure provided some sense of certainty to the Court’s broad discretion in awarding costs as the Rules provided a costs grid. The costs grid suggested that costs were to be determined by an hourly rate multiplied by the time spent. In 2004, the Court of Appeal in Boucher v. Public Accountants Council set forth the general principle as to the fixing of costs pursuant to Rule 57.01 and the costs grid. With respect to costs, the Court stated that the overall “objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant”. Subsequently, in July 2005, the Rules were amended. 

The amendment to the Rules abolished the costs grid and expanded on the list of factors, set out in Rule 57.01, which the Court may consider before making a cost award. Rule 57.01 was now expanded to include the principle of full indemnity and the reasonable expectations of an unsuccessful party to pay a cost award.

The principle of the reasonable expectations of an unsuccessful party to pay a cost award appears to provide the parties with some flexibility in obtaining the maximum cost award by permitting the successful party to establish the reasonable expectations of the unsuccessful party.  

Thanks for reading, and have a great day!

Rick

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Hello, my name is David M. Smith and I am a partner (and now one of the resident bloggers) at Hull & Hull LLP. The focus of this week's blogs will be on beneficiary designations. While the natural tendency is to focus on the assets of the estate, we know that the reality is that, quite often, those assets which pass outside of the estate by way of beneficiary designation will exceed the value of the estate assets.

Indeed, an increasingly common estate planning tool is to hold as many assets as possible outside of the estate, primarily as a legitimate means of avoiding estate administration tax (more commonly known as probate fees) and, in certain cases, protection from creditors.

The most common example of such assets that come to mind are Life Insurance, Registered Retirement Saving Plans ("RRSP") or Registered Retirement Income Funds ("RRIF"). Similarly, (and an issue to be considered in future blogs), assets that are jointly held (unless impressed with a trust for the estate) will pass to the surviving joint owner by right of survivorship.

The making and revoking of beneficiary designations are not always simple matters and, regrettably, litigation may ensue where there is uncertainty. Recent caselaw has raised some interesting twists on this developing area of estate litigation.

In Ontario, the provisions of Part III of the Succession Law Reform Act relating to the making of a beneficiary designation are contained in section 51 which reads as follows (within underlining added for emphasis):

s. 51(1) A participant may designate a person to receive a benefit payable under a plan on the participant's death,

(a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction; or (b) by will, and may revoke the designation by either of these methods.

s. 51(2) A designation in a will is effective only if it relates expressly to a plan, either generally or specifically.

A "plan" is defined for the purpose of Part III to mean a myriad of financial vehicles but generally relates to Pension Plans, RRSPs and RRIFs. The SLRA does not govern beneficiary designations under all pension plans.

The SLRA excludes plans such as RRSPs issued under Part V of the Insurance Act.

An "instrument" is not defined in the Act. The Act does not require that revocation by instrument follow any particular form or formality (Burgess v. Burgess Estate (2000) 52 O.R. (3d) 61.) Accordingly, it is not necessary for a beneficiary designation to be witnessed by two persons as is the case with a Will.

We will consider the revocation of beneficiary designations in tommorrow's blog.

Have a great day, David. --------

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In Cummings v. Cummings, the Court of Appeal affirmed the decision made by the application judge at first instance.

In coming to this conclusion, the Court of Appeal was strongly influenced by the concepts set out in the decision of the Supreme Court of Canada in Tataryn v. Tataryn Estate ([1994] 2 S.C.R. 807 (S.C.C.)).

The decision in the Tataryn case held that moral considerations were applicable to a determination as to the amount of a dependant's support award in the context of the British Columbia statute (The Wills Variation Act, R.S.B.C. 1979, c. 435).

Until the Cummings v. Cummings decision, the approach to quantifying dependant's relief claims in Ontario was to essentially ignore the Tataryn moral considerations approach. This was as a result of the fact that the Tataryn decision was an appeal from the British Columbia Court of Appeal and was in respect to section 2(1) of the Wills Variation Act, which included substantially different wording than that of the SLRA. The Wills Variation Act assists dependants where there is a will which does not "in the Court's opinion, make adequate provision for the proper maintenance and support of the testator's wife, husband or children".

It is this language that has allowed the British Columbia Courts to approach the whole question of quantifying dependant's relief on a very different basis and on a moral conviction approach. The language in the Wills Variation Act is broadly drafted and essentially allows the Court to do what it thinks is adequate, just and equitable in the circumstances.

With the Cummings v. Cummings decision essentially embracing the decision of Tataryn, a very different approach must be considered in respect of quantifying dependant's relief claims in Ontario.

We hope this case gives you an idea of the application of the basics legal definitions and terms.

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