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

• Print
• Comments
• Trackbacks

What he doth, he doth by rule of thumb, and not by art.

             Sir William Hope.  Page 157 of The Compleat Fencing-Master, 1692

And therein lies the earliest known citation of the phrase 'rule of thumb', defined by Wikipedia as a 'principle with broad application that is not intended to be strictly accurate for every situation'.

There are, interestingly, numerous conflicting accounts regarding the origin of the phrase:

• Although it has been said to derive from the belief that English law in the late 1700s allowed a man to beat his wife with a switch as long as it was no thicker than his thumb, the 'rule of thumb' has actually never been the law in England and this theory has been fully discredited as nothing more than rumour and hoax.  Even The Bias-Free Word Finder, regarded as the bible of politically correct language, considers this origin implausible.
• In the days before thermometers, brewmasters were said to have often gauged the temperature of a batch of wort by dipping a thumb in the brew.
• The Encyclopedia of Word and Phrase Origins indicates that the phrase stems from the ancient use of the last phalange of the thumb of an average adult male as a measuring device for roughly one inch.

Now put that ruler away and get back to work.

David M. Smith

• Print
• Comments
• Trackbacks

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.

/mem

• Print
• Comments
• Trackbacks

Listen to Tips and Trips in Drafting.

This week on Hull on Estates, Suzana and Ian discuss tips and traps in the drafting of wills.

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 Estate blog.

Tips and Traps in Drafting - Hull on Estates Podcast #95

Posted on January 30^th, 2008 by Hull & Hull LLP

Suzana Popovic-Montag:  Hi and welcome to Hull on Estates. You’re listening to Episode #95 of our podcast on Tuesday, January 29^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 there.  I’m Suzana Popovic-Montag and welcome to another episode of Hull on Estates.

Ian Hull:  Hi, and I’m Ian Hull, and glad to be here on Hull on Estates.

Suzana Popovic-Montag:  If you’d like to be heard on Hull on Estates, we’ve now started a mechanism whereby we can have people call in and leave comments so that we can get some interaction on our podcast.  And you can do this by calling area code 206-350-6636.

Ian Hull:  So that number is shown in the show notes.  And along with that is our email address at: hull.lawyers@gmail.com.

Suzana Popovic-Montag:  And, of course, you can also visit us at our blog at: estatelaw.hullandhull.com.

Ian Hull:  Okay, Suzana.  Well, it’s good to be back on Hull on Estates.  We continue to enjoy doing our weekly podcast on Hull on Estates and Succession Planning.  And we thought today we might talk a little bit about some tips and traps from the drafting standpoint.

Suzana Popovic-Montag:  And just in terms of a little bit of a background there, Ian, of course, as solicitors, we’re drafting these Wills in situations where we’re trying to anticipate all kinds of possibilities.  And one of the things that we’ve certainly seen from our perspective is occasions where a Will is drafted with no residue clause.  Or actually the residue is given away more than once in a Will document.

Ian Hull:  And I, you know, when drafting Wills and Powers of Attorney, obviously all we can do is our best.  And one of the best ways to do our best is to have someone look at the document, a new set of eyes, #1.  And #2 is to have someone sort of look at the document, not from a typo standpoint, but from a core issue standpoint.  And I know it sounds sort of crazy, but we see enough of these problems with the gifting of the residue, if there’s a problem with the gifting of the residue from a drafting standpoint.  I’ve also created a little mini-checklist.  I always like to get someone in my office to read the Will before it goes out to make sure that I haven’t messed up.  But I also have a checklist.  And one of the things on the checklist is, as I say, re-read residue clause.  And, as I say, it sounds a little bit crazy but you have tremendous consequences if you don’t draw this part of it properly.  So that’s just one of my tricks.

Suzana Popovic-Montag:  It’s a great suggestion, Ian.  And with word processing the way it is these days, I mean we can see how it may be that by cutting and pasting, it may turn out that there is a second residue clause somehow that slipped up into a Will.  And so a second set of eyes is worth a whole bunch of prevention there.

Ian Hull:  In an interesting problem that we ran into just recently on a residue clause problem was that, because of word processing, the line for the residue, that one single line that said “rest and residue to my X” or whoever the person is, fell off the page.  And it didn’t land back on the next page.  So because of a glitch with the word processing, it was missed on the final version.  So, anyway, these are all sort of things to watch out for.

Suzana Popovic-Montag:  Another thing that I sort of watch out for, Ian, in drafting these Wills, and even as you say, Powers of Attorney, is dealing for all kinds of possible potentialities.  And so the possibilities that if you give a certain asset away, you want to consider how it’s going to be paid for, or what other things might be associated with that asset.  And just as an example, if you’re going to give away shares that have a certain adjusted cost basis, but then on the date of death there’s a huge deemed disposition capital gains tax associated with that, but you don’t provide for the payment of that tax, how will that be treated?

Ian Hull:  Well, that’s a great idea.  And these uncertainties can often be easily drafted around, and can properly be put into.  I also noticed one right now because we’re experiencing potentially and actual volatile market conditions.  And there’s always some need to be carefully drafting your investment clause.  And you have the choice, of course, of drafting it within the confines of the Trustee Act and the parameters of it.  Or expressly saying the Trustee Act doesn’t apply.  But recently I’ve met with a couple of consultants who have added another layer of service which I think is a fascinating idea, and that is, with trustees, to encourage them to maybe seek some consultation as to where to put the investment funds, whether its short-term or long-term, long-term obviously in a trust.  And these consultants will come in and look at the portfolio, analyze it and determine where best to place the portfolio.  And the interesting thing about these consultants is, is that they don’t actually take a fee.  They don’t want the ongoing work per se.  They just want the opportunity to consult and take a one-off fee of that sense.  And what I’ve found in some of my Wills is that where I’ve got clients who are concerned about how the investment portfolio is going to be managed, and say it’s obviously in a trust situation, or how it’s even going to be liquidated.  That’s one way to encourage your client in a preparatory way, to say to the beneficiaries, before you do anything to set up these trusts, I encourage you to do X,Y and Z.  And this is a layer of protection on the investment side that makes some sense in this volatile market, but also makes sense in a calmer market.

Suzana Popovic-Montag:  Just to follow-up, Ian, in terms of another example of a Will that deals with an asset without necessarily considering how it’s going to be paid for at the end of the day.  We often times see the provision of house trusts, where a spouse, a surviving spouse is given a life interest in a house and then on his or her death, the property is to be sold and the proceeds of sale distributed amongst other beneficiaries.  And we’ve seen occasions where the costs of maintaining that house in the meantime have not been accounted for and provided in the Will.  And so the question then is, you know, who is responsible for those kinds of expenses?  And particularly when they become capital expenses, or very large in quantum, then in those situations, it really becomes an issue as to who’s responsible to pay for that.  So just another thing that I certainly like to keep in mind and part of my own checklist in drawing Wills includes that particular question, you know, whose going to fund these expenses associated with these kinds of trust arrangements?

Ian Hull:  So I want to turn to one issue on the drafting side that can be…it’s a bit of a technical point, but one that you and I actually were looking at a trust this morning on, trying to determine whether or not the class closed.  And if it was drafted a little differently, it might have been easier to determine that.  What am I getting at in that kind of scenario?

Suzana Popovic-Montag:  Well, I think what you’re suggesting, Ian, there is a situation where you give a gift and it says that the gift is going to be distributable when the youngest child, for instance, attains the age of 25.  And so the question is, well, when do you determine child?  When does that class close?  Is it, you know, the children who are born as of the date of the death of that individual?  Or ones who are born afterwards?  And so until you can determine when the class closes, you can’t really determine who the gift over beneficiaries, or who the other beneficiaries are going to be.

Ian Hull:  So I think, just from a drafting standpoint, if there are classes that you need to close, so to speak, it’s fairly easy to do that by adding language such as, “who are alive at the date of my death” or some precision on the class closing issue, so that we can make sure that there is no question later on as to how many generations down the road we have to wait for, to determine the class closing.  And a classic class closing language is well and considers…oh this is good, I’m getting phone calls during the podcast…A good classic class closing as well is on life interests.  And does it close on the date of death of the life tenant?  Or does it close on the date of death of the last grandchild born or to die?  and all that sort of thing.  So you just…it seems to me you want to be very careful about that drafting aspect.

Suzana Popovic-Montag:  And sort of as an adjunct to that thought, I think also we try to keep in mind that beneficiaries may not necessarily die in the order that we might expect them to.  And so, to the extent that we can build in a little bit of flexibility for that, I think that’s something that I certainly try to keep in mind in my drafting.

Ian Hull:  Alright.  I also see from time to time problems with the gift over and the drafting with the gift over clause.  Suzana, what are your thoughts on that sort of scenario?

Suzana Popovic-Montag:  In these situations, Ian, and I think what you’re talking about is a case where you’ve got a distribution that’s made to, for instance, children when they turn, you know, 18, they’ll get a third of their entitlement; when they’re 21, they’ll get a second…

Ian Hull:  Right.

Suzana Popovic-Montag: …third of their entitlement and then at 30, or whatever the age might be, they’ll get the rest of it.  And in those situations, we try to keep in mind the fact that again, back to the order of death of beneficiaries, someone may die before they’re fully vested and fully entitled to their gift under the Will.  And so what happens in those situations?

Ian Hull:  So I think we have to be mindful, of course, of the classic rule of Saunders and Voce, which is an 1841 decision that would permit, if it’s not set up properly and not drafted properly, the beneficiaries to call on the gift if a gift over has not been drafted in accordance with proper drafting principles.  And the main thing, of course, is that you want to make sure that you’ve gifted over to the next series of generations leaving the contingent beneficiaries there as potential beneficiaries.  And if you haven’t, then when these beneficiaries turn 18, they can call on the gift if there is no gift over per se.

Suzana Popovic-Montag:  Talk about a frustration of testamentary intention in that case!

Ian Hull:  That’s right.  And so, it’s just something to keep in mind in terms of the overall drafting.  Now I think the last thing I just want to point out, and one of my pet peeves is that I think clients tend to get stuck on the whole question of appointing guardians of property for their children, and it becomes a bit of a distraction in the process of the Will drafting.  And often what I’m doing now with my clients is saying, especially when I have young clients coming in to see me, I just say to them look, get over it, let’s do a Will, let’s not do the guardianship appointment, that’s fine for now, but let’s do the Will.  Because 99% of the rest of it needs to be done, and a fixation over who should be the best person to look after your children is something that gets overrated and we don’t want to forget that under the Children’s Law Reform Act, it is only ultimately a 90 day appointment.

Suzana Popovic-Montag:  Well, thank you, Ian, for that tie-up to our podcast.  I think that basically brings us to the end of our discussion this week and I want to thank all of our listeners for having joined us today.  I’m Suzana Popovic-Montag.

Ian Hull:  And I’m Ian Hull.  And we look forward to hearing from our listeners.  Again, don’t forget, our call-in number, 206-350-6636.  And email at: hull.lawyers@gmail.com and then of course, our daily blog you can get to easily at: estatelaw.hullandhull.com as well.

Suzana Popovic-Montag:  Thanks very much, Ian.

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