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Listen to Deductions from Compensation.

This week on Hull on Estates and Succession Planning, Ian and Suzana finish up the discussion on the question of accounting by reviewing deductions from compensation and briefly sum up the procedure of the passing of accounts.

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.

Deductions from Compensation - Hull on Estate and Succession Planning Podcast #125

Posted on August 12, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #125 of our podcast on Tuesday, August 12^th, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada. From the offices of Hull Estate Mediation in Toronto, Ontario, Canada, here are Ian and Suzana.

 

Suzana Popovic-Montag: Hi there, Ian.

Ian Hull:  Hi, Suzana. How are you doing?

Suzana Popovic-Montag: I’m good thank you, how are you?

Ian Hull: Just great. We’re having some fun with this whole question of accounting, and I think I’ve done the numbers, and I think we’re almost done. But before we go through our podcast today, let’s remind everyone, please feel free to call in on our call-in number and our call-in number is of course, 206-457-1985.

Suzana Popovic-Montag: Or send us an e-mail at hullandhull@gmail.com or of course, you can visit our blog at estatelaw.hullandhull.com as well. 

Ian Hull: So before we launch into the substantive podcast today, I just wanted to do a couple of things. One, I want to deal with an e-mail that came in and another is I want to just welcome people to listen and look at the, last week we enjoyed Jordan Atin who is our associate counsel here, our Senior Associate Counsel, and he was on Canada AM for four days in a row talking about family feuds and the link to the webpage where CTV is still running the streaming is worth looking at, and we’ll make sure that’s in our show notes.  But Jordan had a great opportunity to talk about family feuds and sort of the issues that arise out of his book, “The Family War” which is co-written by Les Kotzer and of course, my good friend, Barry Fish.

Alright, so we were talking about some of the e-mails. And we had two e-mails last week come in. Both of them were semi-related and so I’m sort of going to merge the two of them together. And the question really comes down to this:  What are we talking about with The Shoebox Effect? And what we’ve been mentioning in the past and what we’re going to talk a little bit about today, because part of our wind-up is the importance of vouchers, is The Shoebox Effect is this. When you are a trustee, no matter what you think, no matter what you do, you will be someday possibly asked to show your receipts and that’s all I’m saying The Shoebox Effect is. Make sure you keep receipts, even if it’s in a shoebox. Your lawyer or your accountant can work on the presentation of it when you ultimately have to go to Court, but keep the receipts. So that was the two questions that came in, actually, both were from different parts of Canada but asking about the same question. So I’m not going to dwell on it other than that and say that when we’re winding up our comments on accounting, please, please, please keep your receipts if you’re a fiduciary.

Suzana Popovic-Montag: And just to add one thought to that, Ian, I would also suggest that it’s really helpful to make sure that you document as much as possible everything that you do as a trustee.  And when it comes to exercising your discretion, and if particularly the Will or the trust document allows you to have a broad discretion, to write down your thoughts or your reasoning or the underlying reasons that you decided to do something or not do something and include that in the shoebox that you end up bringing to a lawyer one day possibly.

Ian Hull: That’s a great suggestion and it comes down to, when we’re talking about getting paid for all of these efforts, the deductions from compensation that we briefly talked about in the last podcasts, what can you look to? So we talked about that you can get paid, say approximately 5% as a tariff, so to speak.  And we’ve talked about some of the things we’re going to knock you out from, but one of the easy deductions is the delineation between the executor’s work and lawyer’s work or accountant’s work. And that ties into your comment, Suzana, on docketing, keeping records beyond just the receipts that I talked about.

Suzana Popovic-Montag: And things for instance, like the preparation of tax returns, when fees are associated with that, depending on who’s preparing the tax returns and how much those fees are, that’s another thing that might possibly be a deduction from compensation if the trustee for instance is an accountant. And these are situations where a trustee is an accountant or a lawyer that you see most often, where these issues can arise.

Ian Hull: Alright, so another concern that we raise and probably the last deduction from compensation we’ll just mention now, is this whole idea of pre-taking compensation. Under Ontario legislation, if you’re a fiduciary or, as I say, a guardian under the Substitute Decisions Act, they actually allow you to pre-take your compensation, take before you’ve made your efforts. But we’ve talked about in the past the cases, and we’ve talked about them in the show notes as well, the case law that talks about Re: Knoch which we talked about in our previous podcast and others, and we want to be very, very careful about pre-taking, getting paid before you’ve done your work. So that’s an easy deduction.

Suzana Popovic-Montag: Ian, just a question that I find often gets asked is whether or not GST is actually payable on executor’s compensation. What are your thoughts about that?

Ian Hull: Well, that’s a great question and it’s a murky area of the law.  And what has happened in the past is you would typically have to look at it case by case. First and foremost, you have to look at the amount of the payment that the compensation is. If it is over $30,000 that you’re being paid in compensation, which could be the case because it’s typically a one-time payment, you may have to pay GST on that income as having rendered services. So it’s really case-by-case. Talk to your accountant, get good advice before you wrap up that issue, but that’s an excellent question and a really important heads-up for people who are accounting and doing compensation work.

Okay, I think we’ve pretty well covered off our accounting in the in-depth form and so we wanted to make sure that we stayed the course and came full circle to our sort of checklist that we’re trying to work through. And one of the things I will say is we’re hopefully going to be changing our format and trying to pick up a video feed for our podcasts which is in the process. Some technology glitches haven’t allowed for it to fall in just yet, but we’re going to be moving into some different topic areas. But one of the topic areas that we have to, I think, just sort of at least wrap up in a minimum way, is the process itself. We’ve talked about the passing of accounts process but let’s talk about the physical steps that are taken because many people don’t understand passing of accounts and what you can expect in the courtroom once we’ve got the Court format accounts.  And my introduction to this, by way of the fact that we’re going to be moving this into an audio, is that we’re going to have our own mini-series on this issue, where we’re really going to flush out these topics.  But I think its worthwhile talking about them briefly now, so that people understand what they’re going to get themselves into once they’ve got these beautifully created Court format accounts.

Suzana Popovic-Montag: And procedurally speaking, certainly here in Ontario, the Rules of Civil Procedure will govern what is included in an Application to pass the Court format accounts. And we started when, before we got into this discussion of how we would audit estate accounts or how to prepare a best kind of set of accounts in the circumstances, we talked about the fact that it’s all part of an application process.  And so there will be an actual Court date that’s assigned to the hearing for the return of the executor’s accounts, and you’ll serve a Notice of that application on all the beneficiaries together with, in many circumstances and many situations, a copy of the accounts as well. And the Rules themselves specifically provide what has to be in this Application record and I thought, Ian, it might be good to just sort of flush out some of those specific requirements.

Ian Hull: Alright. Well I think and it’s helpful because it’s not quite as daunting when you get the document itself thrown at you because, as I say, a lot of these accounts are passed in a non-contentious environment.  But it’s legal mumbo-jumbo to some people so you want to make sure you sort of know what you’re getting yourselves into when you get it. And the main document behind the accounts is the Affidavit verifying the accounts, they’re proving that you’re swearing to the truth of the accounts, and that’s the fiduciary sort of statement that says these accounts are true and accurate.

Suzana Popovic-Montag: And that Affidavit, as I say, is included in the record that is served upon everyone who has a financial interest in the estate. And financial interest in the estate I think we’ve talked about on previous podcasts, has a very broad meaning in the sense that even people with a contingent interest in an estate will be served with the accounts as well.

Ian Hull: And talking about service, we don’t want to forget that there may be government agencies that we have to serve, of course; the Office of the Children’s Lawyer should there be any minor child’s interests, or interests of those who are unborn and unascertained.  And without getting too technical about it, we just want to look at the trust document or the Will and see if there is a trust. And typically if there’s a trust, more often than not, almost certainly in fact, the Children’s Lawyer would be served, that’s the Office of the Children’s Lawyer.  And it’s different in each Ontario jurisdiction, but basically the lawyer in charge of minor interests. Another person to be concerned about serving is

Suzana Popovic-Montag: the Public Guardian and Trustee. That office would be served on behalf of any incapable beneficiaries of the estate. And so just like the Children’s Lawyer protects the minor, the unborn or the unascertained, the Public Guardian and Trustee here in Ontario will represent those incapable beneficiaries.

Ian Hull: So those are just things to keep a heads-up on so that you don’t get out of the box and miss a page of the application process by not putting important entities on notice. Obviously, we come back to our cardinal rule: Read the document, read the Will, read the trust and make sure you’ve served everyone named in that, but the Public Guardian and Trustee and the Office of the Children’s Lawyer, are two entities that aren’t necessarily named and quite often aren’t named, so just a heads-up. 

So I think that gives you sort of a sense of what the document itself, in a friendly environment will be, so I think we’ll wrap up today’s podcast and again reminding you, please feel free to e-mail at hullandhull, h u l l a n d h u l l @gmail.com.

Suzana Popovic-Montag: Or feel free to call and leave us an audio comment at 206-457-1985. Thanks very much, Ian.

Ian Hull: Thanks, Suzana.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag. 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 Hull On podcasts, or to leave a question or comment, please visit our website at www.hullestatemediation.com.

 

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

 

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Listen to Delegation in Investment Accounts

This week on Hull on Estate and Succession Planning, Ian and Suzana discuss delegation issues that arise when dealing with Investment Accounts and address a listeners question about the family cottage.

 

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.

 

Delegation in Investment Accounts - Hull on Estate and Succession Planning Podcast #119

Posted on July 1, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #119 of our podcast on Tuesday, July 1^st, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada. From the offices of Hull Estate Mediation in Toronto, Ontario, Canada, here are Ian and Suzana.

Suzana Popovic-Montag:   Hi there, Ian.

Ian Hull: Hi Suzana.

Suzana Popovic-Montag: How are you today?

Ian Hull: I am great.

Suzana Popovic-Montag: That’s good.

Ian Hull: I think this podcast will actually be lodged into the internet through the mysteries of digital technology on Canada Day.

Suzana Popovic-Montag: Happy Canada Day everyone.

Ian Hull: Yes, big day here in Canada, and a big day for us as we continue our march towards our 200^th podcast. That’s our next benchmark, I guess, in some ways. We’re now at 119.

Suzana Popovic-Montag: Just a quick reminder to anyone who’d like to call in and give us feedback, comments on the show, please feel free to call us at 206-457-1985.

Ian Hull: And feel free, of course, to e-mail us at hullandhull@gmail.com, or jump on our webpage at hullandhull.com and surf around, find our blog, find all of the backup information that we tend to be using for a lot of these podcasts.  And we’re hoping to put more on where this summer’s project is looking toward trying to get some more video on there and certainly keeping the white papers on the website as well. 

So, before we begin our further analysis of the ever-pressing issue of investment accounts, when you’re putting together Court format accounts, I just wanted to talk about an e-mail that we received last week on our discussion about the prudent investor rule. And we got a great e-mail, again this is tied into some specific advice they were seeking so I’m just sort of summarizing what was being asked of us.  And the focus of the question was, just how much of a balanced portfolio do you have to maintain or how important is diversity when you have the main asset of the estate being the family cottage? And remember, we talked about the unique quality of a family cottage as an illustration of the escape clause that the Act and the Courts have allowed trustees to maintain an asset that, on the face of it, looks like it isn’t prudently being invested in the sense that it may be a wasting asset or it may be costing more than it’s making. And this person e-mailed us asking us what happens if it’s a fairly modest estate and you have essentially the bulk of the estate is indeed the family cottage? 

So it’s a tough question and one that, as all lawyers have to say because we are right when we say it, it depends on the facts and it depends on the circumstances. We didn’t get into any more detail on what this specific question was, but I’m going to add one layer onto that and that is, is that let’s say it is a trust for a surviving widow.  So in this case, a happily married couple, they have Wills that say all to the other in trust, and on the death of the final last person standing, everything to the child or the children, in this case there’d be two kids. So in that kind of scenario we have a surviving spouse, she’s 84 years old, the trust is only, and when I say only it’s made up of $900,000, $800,000 of it is the family cottage and $100,000 of it is cash. Well, in that kind of scenario, if the surviving spouse needs the money, then in that kind of situation it may be that the Court would say, you know what, you do have an obligation to diversify. Notwithstanding the fact that the two children are probably chirping away saying don’t sell the cottage, mom, it may be that that situation where, as a fiduciary, you have to assess it as being a unique asset certainly, but when you need cash, you need cash. So, again, it would depend on the personal circumstances of the surviving spouse and if she had her own wealth she may say, don’t worry, keep it. So that scenario works well, I think, as an illustration, because if the surviving spouse has their own wealth, and chooses to say to the fiduciary, don’t sell, then you’ve got some comfort to hang onto, it’s completely undiversified portfolio. But, if the surviving spouse says, I need the dough, then you’re faced with a difficult decision. And the third question would be, what about the children of the children, i.e., the grandchildren?  And what would the representative, the legal representative of the grandchildren, say about that diversification question?

Suzana Popovic-Montag: And that also raises, of course, the issue of the even hand rule and how a trustee has to maintain an even hand between the income and the capital beneficiaries of the estate. And I know we’ve talked, Ian, on previous podcasts a little bit about that rule as well as how a trustee would go about exercising discretion in light of the fact that the surviving widow either does or does not have her own assets in her own estate.

Ian Hull: And there’s that other layer, of course, that we’ve talked about, is that we’re not actually as a fiduciary allowed to ask the surviving spouse typically what they have or don’t have. So you’re hoping there’s some co-operation and some discussion that is frank and maybe outside the boundaries of what we’re allowed to ask. But I have seen cases where you’ve got the even hand rule tugging away at you and then, and that being basically, look, we’ve got to balance these three generations.  That this is the trust, the trust says look after the income beneficiary, the surviving widow, look after the children and keep in mind the grandchildren. So, I’ve seen cases where government agencies that monitor the grandchildren’s interest have insisted that that is not a diversified portfolio and that you have to seriously consider, notwithstanding the provisions of the Act, seriously consider selling the cottage. So really, from our perspective, I think what’s important to keep in mind is, if you keep, if you really want to keep a special cottage issue, or a chalet, or some recreational property, unique characteristic property, in a trust after you die, you’d better think through what all of the competing interests are going to be, and think through what the Court’s going to say to you. Because you may end up forcing the sale of this cottage property inadvertently, because of these competing interests.

Suzana Popovic-Montag: It really does underscore the importance of planning with proper professionals before these kinds of situations can unfold, so that you can sort of not predict but certainly try to anticipate the issues that can arise and perhaps creatively plan around that so that at the end of the day, you do have someone upholding what you ultimately intended to be your intentions.

Ian Hull: So I think that, anyway, I really appreciated the input from our e-mail participant on that one.  But it’s a good dovetail into the next concept I think that’s worth flushing out, because at the end of the last podcast, Suzana, you talked about this mutual funds and delegation and the kind of twists and turns that come up in the investment account environment. Let’s talk for a few minutes, if we could, about this concept of delegation first of all, and then dovetail it into this investment account problems that get created.

Suzana Popovic-Montag: And generally speaking, what we start with is the fact that as fiduciaries, we are somewhat restricted in terms of the level and the extent of delegation that we can make in doing our fiduciary responsibilities.  And one of the things that, in particular as I was saying previously years ago was a big issue with mutual funds, to what extent trustees could hire mutual fund advisors to actually help them administer these pools of funds and these assets.

Ian Hull: So when we say delegation, I guess we’re saying that we can’t hand off even the littlest jobs of any responsibility as a fiduciary. For example, signing a cheque. There is some authority that says that as a fiduciary we can ask someone else to give a Power of Attorney and ask someone else to sign the cheques. So in this situation, where we’re talking about delegation, we would say, hey we’ve got, the fiduciary is actually out of town most of the time but we’re running a bank account here. That fiduciary can delegate the job of signing the cheques probably.  but what he can’t do is delegate the decision-making to sign the cheque. So every time, say there was an income payment that had to be made and the fiduciary was out of town and their lawyer, for example, was in charge of sort of making sure the cheques went out once a month. Every time a cheque is written and signed, it has to be on the express instructions of the fiduciary. Now the fact that the lawyer, under a Power of Attorney, may sign the cheque is probably okay, but that’s a good illustration of what we say delegating. As long as you don’t give up the mental and the judicious decision to have the cheque signed, although you’re passing on the actual mechanics of it, you probably haven’t breached the delegation rule. Again, twists and turns, depends on the facts, but that’s an illustration of this delegation. And your example is the perfect one, because with a mutual fund, that was sort of like the ultimate delegation from a fiduciary standpoint, where you were a fiduciary, you handed $100 to an investment advisor and that investment advisor turned that money over, bought into different funds.  In the old days, they’d buy a bit of IBM, a bit of Bell Canada and you’d give them direct instructions. Well, with a mutual fund, of course, you’re handing it over to a further person, that is the fund manager of the mutual fund. So you give it to your investment advisor, who then hands it off to a fund manager.  And until the Act was changed in Ontario, there was some concern that that was essentially over-delegating. You had pushed out the decision-making too far. And it’s a really important point when you come to the expectations of the investment account which we’ll talk about more in our next podcast, but an important step. 

So in summary, we’ve got the old fashioned broker-client relationship untouched, but then we twisted it, we pushed it one step further and now we have some statutory protection to allow this sub-delegation, so to speak.

Suzana Popovic-Montag: And just to close the loop on that as well, we always underscore the importance of actually reading the documents and here the trust instrument or the Will, because that can be something that’s specifically planned for and language can be put into these documents that can authorize things over and above what the statute or what the common law itself provides for. So just another thing that we try to keep in mind in these situations.

Ian Hull: Well that’s great, Suzana. Hopefully we’ve had a good discussion on the question of delegation and certainly answered the question that came in from the listener. So thanks very much Suzana.

Suzana Popovic-Montag: Thanks to you, Ian and thanks to everyone who has joined us.   Again, just a quick reminder of our call-in number for any questions or any comments that you might have on the show, 206-457-1985.

Ian Hull: And any direct feedback, go to our blog at estatelaw.hullandhull.com or our e-mail at hullandhull@gmail.com. Thanks so much.

Suzana Popovic-Montag: Thank you.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag. 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 Hull On podcasts, or to leave a question or comment, please visit our website at www.hullestatemediation.com.

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

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Listen to The Investment Accounts.

This week on Hull on Estates and Succession Planning, Ian and Suzana conduct a quick lesson on capital encroachment and discuss the role of investment accounts in the passing of accounts.

 

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 Accounting Procedure Available Under the Substitution Decisions Act.

This week on Hull on Estates, Rick and David discuss procedure under the Substitution Decisions Act and review executor and attorney obligations as well as specific procedures permitting someone to compel an accounting.

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.

Accounting Procedure Available Under the Substitute Decisions Act - Hull on Estates Podcast #98

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

 

David Smith: Hello, welcome to Hull on Estates. You’re listening to Episode #98 in our continuing podcast series on Tuesday, February 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: Hello Rick.

 

Rick Bickhram: Hi Dave. How are you doing today?

 

David Smith: You know, I’m doing well, Rick. And, you know, today we’ve decided… its David Smith here and I’m with Rick Bickhram of my office.  And we’ve decided today, Rick, that what we’re going to podcast on is a bit of a potpourri but the focus is really going to be on the accounting procedure available under the Substitute Decisions Act. And in particular, how the obligation to account as an attorney is the same as or is different from the obligation to account as an executor, for instance. And then we thought we’d talk about the specific procedures under the Substitute Decisions Act that permit someone to compel an accounting. So Rick, let’s talk about this whole idea of accounting generally. What is it about an attorney that opens them up to the whole concept of a duty to account?

 

Rick Bickhram: That’s a good question, Dave. My understanding is that an attorney, by virtue of the fact that you’re an attorney, there’s a fiduciary relationship. And that fiduciary relationship is established by the fact that the attorney has the power to do what the incapable person or on behalf of the incapable person, anything that the incapable person would have been able to do had he or she been capable.

 

David Smith: You know, and that’s right, Rick. And certainly, when we’re talking about the Substitute Decisions Act, intuitively we’re thinking about someone substituting their decision-making role for that of someone who can’t otherwise exercise it. Of course, the Substitute Decisions Act also applies to people who are perfectly capable, but who voluntarily surrender their decision-making ability to someone in more of a principal/ agent relationship. But you’re quite right, it’s a fiduciary relationship and it’s clearly a fiduciary relationship when the grantor of the Power of Attorney is incapable, isn’t it?

Rick Bickhram: Absolutely. And I think it’s also important to note that the fiduciary in the fiduciary relationship, whether it be voluntary or involuntary, the attorney or a guardian in the situation would have the ability to manage the grantor’s or incapable person’s finances.

 

David Smith: And that’s where the duty to account comes in, isn’t it, Rick?

 

Rick Bickhram: Absolutely, Dave.

 

David Smith: Rick, when we talk about the form of accounts, obviously it’s beyond the ambit of our discussion today to talk about the form of accounts and the whole process of a passing of accounts which is clearly a subject matter for another podcast. But I think continuing on with this idea of the concept of a duty to account, what ties into that and what we really want to explore to some extent today is, how do we compel an accounting? And what does the Substitute Decisions Act say to the duty of an attorney to account, and what remedies are available to someone who wants to compel an accounting?

 

Rick Bickhram: Well Dave, the authority to obtain an Order to compel an attorney to account can be found under Section 42 of the Substitute Decisions Act. Now under Section 42 of the Substitute Decisions Act, specifically sub-section 1, it states that the Court may, on an application, order that all or a specific part of the accounts of an attorney or guardian be passed. Going through this section, it lists the types of individuals who can bring this application to obtain this unique remedy.

 

David Smith: And who are those people, Rick?

 

Rick Bickhram: Under sub-section 4-- well, first of all, let me take a step back. Looking at sub-section 2, it states an attorney, the grantor or any of the persons listed in sub-section 4, may apply to pass the attorney’s accounts. From this, I gather that it means the attorney or the grantor of the Power of Attorney. Sub-section 4 states the grantor or incapable person’s guardian of the person or attorney for personal care. As we all know, a Power of Attorney can be given with respect to property and personal care. Section 42, sub-section 4, sub 1 states that it’s the guardian or attorney for the personal care that can proceed with the Court application to compel a passing of accounts.

 

David Smith: Okay, and that’s an interesting safeguard, isn’t it? Because, I mean, there’s a fair bit of case law dealing with situations where somebody appoints different people to be their attorneys for property and attorneys for personal care respectively. And quite often, there’s conflict between those two and the attorney for personal care who, for example, chooses a care facility for a senior grantor, may run into conflict with the person who’s paying the bills, namely the attorney for property. So intuitively, it makes some sense actually to give that attorney for personal care the power to say to the attorney for property, “Hey, attorney for property, I’m not satisfied that you’re doing everything you should or I want to see what you’re doing and make sure that the books are in order”. What about… what other people have the ability there?

 

Rick Bickhram: Under Section 42, sub-section 4, sub 2, a dependant of the grantor or incapable person. So the individual who grants the Power of Attorney or has been declared incapable, may move by way of a Court application to obtain a passing of accounts from the attorney or guardian. The third, I guess this is an entity, the Public Guardian and Trustee may move by way of an application to obtain a passing of accounts.

 

David Smith: Right and then the remaining 3, Rick, are the Children’s Lawyer, in the case of a minor who’s got an interest.  There’s obviously some standing there for them to do it. I think the next two are the most interesting. A judgment creditor of the grantor or incapable person. That’s a rarely used remedy in my experience, but it’s certainly interesting to think that somebody who is owed money by the grantor of the Power of Attorney or the incapable person can seek to compel an accounting, presumably as a way of seeking to recover monies to which they’re owed. So it’s very interesting that that person is given that remedy. And then, of course, the last one is any other person with leave of the Court. And I guess, you know, the interesting question there is, what is the test that the Court’s going to require before granting leave to someone? And certainly, in my experience, the Court is going to say to an applicant seeking leave, what is your reason for doing this? What is your standing before the Court to seek an accounting? Do you have any relationship to the person? Be you a blood relative or someone else with good cause to be concerned about the management of the person’s finances? And Rick, what do you think we’d need to do in terms of Affidavit evidence on that application, to convince a judge that our client should get leave?

 

Rick Bickhram: The person who is trying to obtain leave would have to demonstrate in his Affidavit that there was a relationship between himself and the incapable person or the grantor who’s granted the Power of Attorney in the situation. Also I would like to believe that the individual, the deponent here, who’s making this Affidavit, would probably want to establish some type of financial interest. Why is it that he’s seeking and why is that he is seeking a compelling of the accounts? What is his interest in this individual or this individual’s estate?

 

David Smith: Yeah, and you know, that’s a really interesting point, Rick, and something I wrestle with, with clients quite often in the sense that look, quite often, you’ll be dealing with a situation where you’ll have persons who have a financial interest on the death of the grantor. And the problem is this; if they go in front of the Court seeking leave to compel an accounting and say “My interest in this matter is that I have a financial interest on the death of the grantor, therefore in order to make sure that the amount I eventually inherit has not been improperly squandered before the death of the grantor, I want to monitor what’s being done with the money.” Of course, the problem with making that pitch is that the judge hearing this will be inclined to say, “Well, hold on a second. My job is not to protect the inheritance of the grantor for the benefit of the person who benefits under the estate. It’s to make sure the grantor is well looked after”. And the way I approach that is to say, “Certainly it’s relevant to say that you’ve got an expectation of an inheritance and that does give you some financial standing.” On the other hand, I think the Affidavit has to be crafted in such a way as to make it clear to the judge that the overriding, compelling basis by which the person is seeking leave to compel an accounting is to look out for the best interests of the grantor because the Court is not going to care one iota about preserving the inheritance of the grantor for the benefit of the person seeking leave, is it?

 

Rick Bickhram: And that makes complete sense, Dave. And if you think about it, I guess as an attorney or as a solicitor, I would be a little reluctant to go in front of the judge and explain to the judge that my client is, you know, pretty much monitoring his financial interest in the estate, especially being that the individual, the individual being the grantor or the incapable person, is still alive, it’s his money. And right now, the first concern should be his well-being.

 

David Smith: Right.  So fine line there. But, you know, something that needs to be mentioned because it does, as you stated at the outset there Rick, tie into what is the interest of the person seeking leave. And a complete stranger seeking to compel an accounting isn’t going to get anywhere if they can’t show a compelling relationship with the grantor. Now Rick, looking at the time, you know, we’re getting close to the end of the podcast.  Did, before we finish, want to touch on Section 39 of the Substitute Decisions Act. And this is a really interesting Section in my mind. It’s probably an underused Section for anyone engaged in capacity litigation. And what it is, is it’s a Section of the Act which provides directions from the Court and I’ll read it. It says, “If an incapable person has a guardian or an attorney under a continuing Power of Attorney, the Court may give directions on any question arising in the management of the property”. And that’s pretty broad language, isn’t it, Rick?

 

Rick Bickhram: Absolutely. And as I was reading through this section earlier today, I was thinking to myself, “What is the prospects or how likely is it that the individual would bring or ask for a remedy seeking the passing of accounts under this Section, you know, versus 42.” I understand that 42 specifically sets out a passing of accounts. But let’s say there are other Orders that they’re seeking. You would very well stick in Section 39 in there.

 

David Smith: That’s absolutely right, Rick. I think these two Sections can quite often be used together. And it’s an important tool for the litigator to keep in mind. If you look at the people who are eligible to apply under Section 39. Section 39, sub 3, similarly provides the Court with the power to grant leave to anyone to apply for directions. And the nice thing about Section 39 is you might have a situation where you don’t have a guardianship application; that’s to say that your client isn’t seeking guardianship of the incapable person, but is seeking more than merely an accounting. And Section 39 is this nice… it gives you this nice, intermediary approach between a full blown guardianship application on the one hand and an application for directions or to compel a passing of accounts rather. And it gives you that much more room and it’s nice, broad language. You know, you can be creative, you do some lateral thinking and really, you know, use that Section to your advantage. And remember, the Court is under a duty here to supervise the role of the attorney, the role of the guardian. It’s a powerful Section and the Court has a great deal of power under this Section and it should always be considered when looking at remedies available to the client who is seeking to look out for the concerns of an incapable grantor of a Power of Attorney.

 

Rick Bickhram: Great point, Dave. Well looking at the time, it looks like we are just about at the end of our podcast. It was great talking with you today, Dave.

 

David Smith: You know Rick, I enjoyed it too and we’ll look forward to the next opportunity to podcast. 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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In Monday's blog, I noted the increasing prevalence of new on-line businesses serving to assist estate trustees with the location of estate assets.  Of course, locating the asset is just the first step.  The estate trustee has to then manage the asset.  In most instances this involves liquidating the asset or distributing it in specie to the beneficiaries depending on the testator's intention.

Shares held by a deceased in a private company present a particular challenge to an estate trustee.  Should they be sold or should the estate trustee participate in the business as a going concern?.  This quandry, if the will gives no guidance, is compounded when the deceased holds the majority of shares and leaves a controlling interest in such a corporation.

While not always a simple question to answer, in such circumstances it seems self-evident (and just makes good business sense) for the estate trustee to be a director of the company. In such capacity, the executor is positioned to watch over the management of the business and protect this asset of the estate.  The issue was addressed in an oft-quoted excerpt from Lucking’s Will Trusts (Re) (1967) All E.R. 726, where the Court states:

“Now what steps, if any, does a reasonably prudent man who finds himself a majority shareholder in a private company take with regard to the management of the company’s affairs? He does not, I think, content himself with such information as to the management of the company’s affairs as he is entitled to as a shareholder, but ensures that he is represented on the board.”

Have a great day,

David 

 

 

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MacLeans magazine’s Mark Steyn is providing an acerbic day-by-day report on the trial of newspaper magnate Conrad Black in Chicago. The trial continues a pattern by the US government to lay criminal charges in cases of alleged corporate malfeasance more vigorously following the Enron scandal.

As the historic intergenerational wealth transfer currently underway gathers steam, a well-publicised case could easily drive greater government interest in prosecuting breach of trust accusations just as Enron did in the corporate realm. Virtually all lawyers practising in the area have seen serious misappropriation of property or abuse of the vulnerable by those in a position of trust. Is this criminal? If so, will the police and crown attorneys be willing to treat it as such?

The Canadian Criminal Code certainly indicates so: it includes provisions dealing with Theft by person required to account (section 330); Theft by person holding a power of attorney (section 331); Misappropriation of money held under a direction (section 332); Criminal breach of trust (section 336); Fraud (section 380); and Assaults (sections 264 to 266). These provisions could be invoked given the right circumstances in an Estate, elder abuse or capacity case.

The Police often perceive misappropriation by fiduciaries as a civil matter. On the other hand, they are increasingly aware of elder abuse or abuse of the incapable, and far more willing to intervene.

As high-profile cases involving misappropriation of funds or abuse of incapable persons receive greater media attention, look for the legal consequences to branch out from the civil context to involve criminal charges as well.

Thanks for reading.

Sean Graham

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In almost every case, the majority of the evidence will come from the allegedly abused child and, as such, the strength of that evidence can be problematic. In these types of situations, one must not forget the requirement of corroborative evidence pursuant to section 13 of the Estates Act R.S.O. 1990, c. E.23, which provides that:

13. In an action by or against the heirs, next-of-kin, executors, administrators or assigns of a deceased person, an opposite or interested party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence.

See also Schnurr B.A., "Estate Litigation - Requirement of Corroboration", 5 E.T.Q. 42.

Due to the evidentiary difficulties of these types of claims, one of the first steps that a claimant should consider taking is to obtain an expert's opinion.

The expert's opinion should contain evidence for the Court to consider with respect to such things as the recollections of the claimant, the details of abuse over the years and the results of both the mental and physical ramifications of that abuse.

In support of that opinion, corroborative evidence should be obtained from as many medical institutions as possible. Evidence from the medical records of the child would presumably refer to long-term psychiatric care and, in particular, some reference to the abuse over the years.

To further assist, every effort should be made to obtain supporting corroborative evidence from family, friends and neighbours. In my view, anyone who has even a brief recollection of instances, such as the police showing up at the house for no apparent reason, episodes of yelling and screaming, or witnessing the actual physical attacks, can make or break a case.

 It seems to me that, given the frailties of the evidence that must be led, one really must obtain a comprehensive and supportive expert's opinion, at a minimum.

Another precautionary consideration that should be reviewed with any child who is considering pursuing a claim for breach of fiduciary duty of parental obligations, is the nature of the evidence that must be led. In order to succeed, the child must be prepared to give full and frank disclosure of his/her physical and mental condition - and in many cases, this won't be easy.

All the best, Ian and Suzana.

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As to the question of fiduciary duty between parent and child, the Supreme Court of Canada in M.(K.) v. M.(H.) held that the relationship of parent and child is fiduciary in nature and that incest was a breach of the parent's fiduciary duty to protect the child's well being and health.

Limitation Periods

It is perhaps the most compelling defence available to counsel defending a parent in such cases that the claim has been brought outside of the conventionally recognized limitation periods.

A significant portion of the decision in M.(K.) v. M.(H.) was devoted to the question of the limitation defences raised by the parent.

In contrast, counsel for the child argued that incest was a separate and distinct tort which was not subject to any limitation period; that incest constituted a breach of fiduciary duty by a parent and is not subject to any limitation period; and if a limitation period applies, the cause of action does not accrue until it is reasonably discoverable. Furthermore, it was argued that the child was of unsound mind pursuant to section 47 of the Limitations Act; that the tort is continuous in nature and the limitation period does not begin to run until the child is no longer subjected to parental authority and conditioning; and that the equitable doctrine of fraudulent concealment operates to postpone the limitation period.

The limitation defence failed and the Supreme Court of Canada held that the tort claim, although subject to limitations legislation, does not accrue until the child is reasonably capable of discovering the wrongful nature of the parent's acts and the nexus between those acts and her injuries. Furthermore, that the discovery took place only when the child entered therapy and the lawsuit was commenced promptly thereafter.

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

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As is sometimes the case, an unequal distribution of an estate as between children can arise from a testator who has had a long history of mental illness, chronic alcoholism or other such personal reasons, which may affect the testator's state of mind over a period of many years.

For example, if a child who has been treated unequally grew up in a home where he or she suffered through instances of physical violence, as between the parents and him or herself, this may be the type of fact situation to consider when looking to pursue a claim for breach of fiduciary duty of parental obligations. Similarly, if the unequally treated child lived in a home that was constantly in turmoil, as a result of a chronically alcoholic parent, this situation should also be considered in the context of the fiduciary obligations of a parent.

In our view, one must find several compelling supporting facts to bolster any claim of breach of fiduciary duty or breach of parental obligation. Such facts should also be combined with a clear and identifiable estrangement as between parent and child.

Parental Obligations

In the decision of M. (K.) v. M. (H), the Supreme Court of Canada considered the whole concept of what is meant by the term "parental obligation".

The Court considered this issue in the context of a particularly gruesome and egregious set of facts.

In M.(K.) v. M.(H.), the Supreme Court of Canada examined the parent-child relationship in the circumstances of long-standing allegations of incest and abuse by a parent to a child.

In this case, the child was a victim of incest and abuse which began when she was eight years of age and continued until she was seventeen, when she finally left home. Over the years, after she had left home, she told some individuals, including her husband, of the abuse. The child also sought counselling for depression and marital problems, and saw various medical practitioners who assisted her from time to time.

At the trial, the child retained a psychiatrist who testified that while the child had briefly dealt with the issues of incest in her early adulthood, she did not have an emotional awareness of the situation and was not able to assess her situation rationally.

The child sued her father for damages arising from the incest or, in the alternative, for the infliction of mental distress. Further damages were claimed for breach of parent's fiduciary duty to care for and minister to his child.

Counsel for the child argued that the incest constituted not only the tort of assault and battery but also a breach of fiduciary relationship between parent and child.

In a future blog, we will address the question of the fiduciary duty between a parent and a child, and discuss what the Court held in this important case.

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