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

• Print
• Comments
• Trackbacks

Listen to Accounting

This week on Hull on Estate and Succession Planning, Ian and Suzana discuss how to prepare for review by the beneficiaries of the estate by keeping all accounts in order.

To open this week's show, they remind listeners that they did this week's episode of Hull on Estates (#110). They also extend their congratulations to Terry Fallis for winning the Stephen Leacock Medal for his book, The Best Laid Plans.

If you have any comments that you would like to share, send us an email at hullandhull@gmail.com or leave us a message on our comment line: 206-457-1985. You can also find our blog at hullandhull.com.

Accounting - Hull on Estate and Succession Planning Podcast #112

Posted on May 13, 2008 by Hull & Hull LLP

 

Suzana Popovic-Montag:  Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #112 of our podcast on Tuesday, May 13^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.

 

Ian Hull: Hi, Suzana.

 

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

 

Ian Hull:  I’m great thanks.  This week is a big week.  We had the pleasure earlier this week to record Hull On Estates as well, so we did both of the firm podcasts, so to speak.  Before we get into our topic today, I just want to remind everyone that we welcome comments and that’s our call-in number at 206-457-1985.

 

Suzana Popovic-Montag:  And, of course, that number, if you didn’t catch it, will be in our show notes as well as our e-mail address which is:  hullandhull@gmail.com, if you prefer to send us a comment by e-mail. 

 

Ian Hull:  So we had some really interesting blogs last week and I noticed yesterday’s blog was particularly interesting.  When I say yesterday, when it goes into the Internet we won’t know what yesterday is, but I encourage you looking at our blog as well, because it’s at hullandhull.com.  But we had some interesting comments by Chris Graham last week and Diane Vieira this week as well. 

 

Alright, now before…oh yeah, also our last podcast that we did on Hull On Estates, we spent more time than I intend to today, but we would like to again note with great enthusiasm that Terry Fallis, our great friend at Inside PR, has won the Stephen Leacock Medal of Humour Award, which was given to him last week.  And is an incredible result for him because he self-published his book, “The Best Laid Plans”, and as a result of winning the award, he also had the book reviewed in The Globe and Mail which was very exciting for him.  So, it’s a tremendous honour for him, no doubt, but well deserved.  It’s a terrific book called, “The Best Laid Plans”, and we congratulate you, Terry.

 

Suzana Popovic-Montag:  That’s for sure.  Congratulations, Terry.  Your book is outstanding and it’s great to see good things happen to good people.

 

Ian Hull:  Okay, so let’s talk about accounting.  And it seems like a good segway because no doubt Terry is counting his money as it comes in with his self-published book.  But we finished off our last podcast and the work that we’re doing really focusing…we touched briefly on the whole question of accounting.  But certainly, and it’s one of these things with podcasting, every week that we do this you live on the experiences of the week before, and unfortunately for the clients that I’ve seen in the last week, there has been a myriad of messy accounting situations come into our office.  And, you know, you do feel very badly for some clients who do not understand some of the basic expectations of an accounting that come from your role as an estate trustee.

 

Suzana Popovic-Montag:  And generally speaking, what you’ll do as an estate trustee, of course, is to try to keep as detailed an accounting as possible so that you can, at the end of the day, indicate everything that’s come into the estate and everything that’s been paid out of the estate and to whom.  And as part of that whole process, you want to prepare this accounting for review ultimately by the beneficiaries of the estate.

 

Ian Hull:  And one of the things I like to do before we get into some of the formal steps, is the informal step of making sure my beneficiaries know what’s going on, on a fairly regular basis.  And I compare it to a stockbroker or an investment advisor who would be expected to give quarterly updates as to the status of their account with their client, but certainly would expect it to do an annual update.  And many financial planners will sort of identify annually that they have to at least once a year sit down with their client.  They will be in contact with them throughout the year, but once a year they make an effort to go and see them or meet with their financial advisor.  And that’s sort of a good benchmark if I’m an executor.  And that’s just business thinking, not necessarily fiduciary law.  There is not, sort of, something written in stone, but it’s a good informal benchmark.

 

Suzana Popovic-Montag:  And we certainly know from our experience, Ian, that it just helps if people are kept informed.  As soon as there’s a cloud of some secrecy or not being fully apprised of what’s going on, that just leads to uncertainty with respect to the whole process.  So it just makes sense to provide this information, provide it regularly and provide it completely.

 

Ian Hull:  So carrying on with this theme that should we have done that or should we be in a situation where it is not contentious, there are no beneficiaries that are upset with our work as executor, at the end of the process, and the end of the administration, you can typically write to the beneficiaries sending out your accounts, maybe in an informal form, and look to them to provide you with a release.  And that release, before you finally distribute all the money, in most cases, and, you know, this is a complicated area, but generally speaking, if you can get a release, that, in most cases, will end your involvement and it will wrap up your disclosure obligations on the estate.

 

Suzana Popovic-Montag:  And just to keep in mind that you can get a release in situations where all the beneficiaries are adults and have consented to the accounts.  If, though, you’ve got an incapable beneficiary or a minor beneficiary of an estate, it’s not as easy.

 

Ian Hull:  That’s for sure.  So, let’s talk about the more formal passing of accounts because, like you say, there are situations where, if you have a minor or you have an incapable beneficiary, you simply have to formally pass your accounts.  But there are also cases where the beneficiaries will not agree to sign a release and close things off for you, so you still need to go into the Court system to pass your accounts.

 

Suzana Popovic-Montag:  And the ultimate goal, just for a passing of accounts, is to provide the executor with a release from the Court now because the beneficiaries themselves may not be able to or will not consent.  And so it’s basically a stamp of approval by the Court saying that what you’ve done during the course of this administration has been proper.  And that really is important to close the loop in terms of the fiduciary responsibilities of a trustee at the end of a day.

 

Ian Hull:  That’s such a good point.  Because really, at the end of a day, all we’re trying to do is allow for either an informal (when you just look for a release and a letter), or a formal audit of your work.  And when you’re an estate trustee, your work really is, although we’ve talked a lot about the kinds of things like worry about burial arrangements, worry about all of this.  When it comes right down to it, your work is fundamentally based on how you handle the money; paying the bills, paying the beneficiaries and so forth.  So there is this need at the end of the process for an audit.  And whether it’s formal or informal, you want to make sure you’ve done one or the other, finally wrapped up by a blessing from Canada Customs and Revenue, who will give you what we call a Clearance Certificate.  But that’s a little different in the sense that you do that right at the end.  And so, let’s talk a little bit about the process, so people can get a sense of what you’re going to get into should you be forced to pass your accounts in the formal courtroom setting.

 

Suzana Popovic-Montag:  And if you’re actually doing a formal passing, we would certainly recommend the assistance of an accountant or an account preparer who is familiar with the process of preparing accounts in Court format, because those are very different.  And I know my clients are always surprised by the fact that they’re very different from the normal financial statements that accountants prepare for companies.  And it’s a very different process.  So to the extent that you can have that done properly, right from the get-go, I think it saves time and aggravation at the outset.

 

Ian Hull:  And if you want to get an example, and we say this to clients and they sort of glaze their eyes over it, and say, “yeah, yeah, yeah, we’ll talk to the accountant”.  But if you want to get an example of what these accounts look like, go to our webpage and there’s a Breakfast Series that we produced, and in that we talk about various passing of accounts.  And we have precedents in there of accounts that Suzana and I worked up as a format account to show people what these things actually look like, because it’s hard to describe the form of estate accounts until you see them.  But it is essentially a bank book ledger, a start to finish line-by-line listing of all of the financial transactions which then isn’t in the courtroom but then has to be backed up by receipts; no different than the real world when you’re running your own chequebook and you’re balancing your own chequebook.

 

Suzana Popovic-Montag:  And in terms of the actual application itself, that’s really a very formalized set of requirements that are set out here in Ontario in our Rules of Civil Procedure.  So there is, for instance, a Notice of Application that has to be issued by the Court that will refer to the accounts, will refer to the period of time during which the accounts are being passed and also set out what the claim for compensation by the estate trustee is for that period of time.

 

Ian Hull:  And in the materials, and they’ll always include as well a copy of the Will, or the trust or whatever instrument that you’re passing your accounts under in that sense, so you can understand or the Court more particularly can understand what should have been done at law.  For example, if it was set up in a trust arrangement where all of the estate passed to the wife and then on her death, it passed to the kids; that’s a classic spousal trust arrangement.  Well, you need to look at the Will, make sure that that was the case.  Maybe there were some specific bequests as well that needed to be paid and the trustee missed that; maybe there were $100 gifts to all the grandkids and they were never paid or something like that.  When you check the Will, you make sure that those gifts were paid.  Those are the sorts of inquiries that, you know, this doesn’t take training as a lawyer to look for, but, you know, these are kinds of inquiries that you could make at this initial stage.  So, we’re going to start, I think at this point we want to talk in our next podcast in a little bit more detail about what the process is, so that you can get a feel for it.  But, again, the application itself sets the stage, so to speak.

 

Suzana Popovic-Montag:  Well I think that, Ian, will wrap up this podcast for this week.  I want to thank everyone for having listened and remind our listeners that if they have any comments, that if they’d like to phone and give us their comments by voicemail, feel free to call us at 206-457-1985.

 

Ian Hull:  And generally speaking, of course, getting a hold of us, chasing us down with an e-mail, giving us some comments is welcomed and encouraged.  We’ve got a hullandhull@gmail.com address and obviously feel free to go to our webpage at hullandhull.com, which will guide you through a myriad of options.

 

Suzana Popovic-Montag:  Well, 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.

 

/mem

• Print
• Comments
• Trackbacks

Listen to Passing of Accounts

This week on Hull on Estates, Diane Vieira and Craig Vander Zee talk about how to avoid conflict during the passing of accounts.

Comments? Send us an email at hull.lawyers@gmail.com, call us on the comment line at 206-350-6636 or visit our blog at http://estatelaw.hullandhull.com.

• Print
• Comments
• Trackbacks

Anne Werker recently brought an interesting case to my attention. In Rooney Estate v. Stewart Estate[1], the solicitor who performed the executor’s duties attempted to rely on a release signed by a beneficiary in his response to an application that he pass accounts in his capacity as de facto trustee.

Pierce J. held that in order for a release to be enforced, the beneficiary who signs the release:

1.   must be “fully informed”;
2.   must have received competent legal advice in a review of the accounts;
3.   should understand how compensation has been charged; and
4.   should know what legal services have been provided and what the fees were.

Pierce J. also held that a distribution cannot be withheld pending the execution of a release. It is simply fiction for an executor to believe that he/she can refuse to distribute the estate until a signed release is in hand. A holdback must be reasonable and demonstrably justifiable in the circumstances (i.e. tax liability or the costs of a passing). 

However, in the end, some common sense must prevail. In a simple administration, it is unlikely that formal accounts will be prepared for passing either because no compensation is claimed or the costs of doing so are prohibitive. However, the executor will likely ask for a release on the distribution of the estate. In that case, transparency may be the answer. By communicating regularly with the beneficiaries, sending them pertinent information and updates, and/or preparing an informal accounting (including how compensation has been taken), a court may just be convinced that a signed release is good enough.

“TGIT”

Justin

• 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 Preparing for Trials in the Context of Contested Passing of Accounts

In this podcast, Craig Vander Zee and Paul Trudelle discuss trial preparation considerations in the context of a contested passing of accounts.

Preparing for Trials in the Context of Contested Passing of Accounts - Hull on Estates Podcast #88

Posted on December 4^th, 2007 by Hull & Hull LLP

 

Paul Trudelle:  Hi and welcome to Hull on Estates.  You’re listening to Episode #88 on Tuesday, December 4^th.

 

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.

 

Paul Trudelle:  Hi Craig, how are you today?

 

Craig Vander Zee:  Good Paul, yourself?

 

Paul Trudelle:  Very good, thanks.

 

Craig Vander Zee:  Have you done your holiday shopping yet?

 

Paul Trudelle:  No, not at all.  That’s, that’s what Christmas Eve is for.  We were talking before…

 

Craig Vander Zee:  I hope you’re…wife has different thoughts on that.

 

Paul Trudelle:  Yeah, well I hope so too, she won’t be listening to this one.  We were talking before we started recording today about passing of accounts and how it’s very common these days to see accounts being prepared and passed.  And that often is where things end.  With a proper passing, questions can be raised, objections raised and they can be dealt with there.  But sometimes, as we’ve talked about, a trial is necessary.  So we thought today we’d talk a bit about preparing for trials in the context of contested passings of accounts.

 

Craig Vander Zee:  Perhaps, you know, said a different way too, with the onset of contested passings, its very regular or common that they can be resolved to everyone’s satisfaction at a pre-trial stage.  But there are certain passings, perhaps because of the size of the estate, perhaps because of the involvement of the specific parties, perhaps because of the complexity of the estate and the issues that arise from that, a contested passing can only be dealt with by way of a trial.  And there’s a number of issues that we could all consider in preparing for trial.  And again, trial preparation doesn’t begin after the pre-trial conference and before trial.  It really begins when you meet with your client and you’re identifying the issues, you’re deciding how you’re going to prove your case and how you’re going to marshall the evidence.  Because how you go about that process will ultimately leave you in a position well prepared or not so well prepared, or perhaps not as well prepared as you wanted to be, prior to trial.  So, it’s important to be mindful of a trial and the preparation that you will need for that, as you’re dealing with each of the pre-trial stages.

 

Paul Trudelle:  I think that’s a very fair comment.  I think everything that we do along the road in handling a file can be considered trial preparation, from the initial file meeting to how you set up the discussions with your client, the obtaining of evidence, identifying issues, and I think that just the sheer scope of the issues that the Court can deal with on a passing, often give rise to contentious matters that can’t be dealt with simply by way of an accounting, and a trial is necessary.  But I think everything we should be doing should be with an eye towards trial, and at the same time, an eye towards avoiding that trial through obtaining proper answers through resolving the issues along the way.  But I think the backdrop has to be the trial preparation.

 

Craig Vander Zee:  Certainly, when you’re formulating your strategy, even on a preliminary basis, it’s got to be in one’s mindset.  And albeit that a trial strategy can’t really be finalized until you’ve had the ability to marshall all the evidence and have a thorough review and careful review of the evidence to know where your client stands particularly on all the issues, certainly the mind’s eye needs to be on the trial preparation when the strategy is formulated.

 

Paul Trudelle:  That’s right.  And I think the solicitor has to always be aware of what is he going or she going to be able to prove in Court and how are they going to prove that in Court, if it gets there.

 

Craig Vander Zee:  With all of that said, Paul, I think the first place to start with is the parties themselves.  Are all the parties who ought to be involved in the passing actually involved, and if so, whether any of the parties that are involved need representation that don’t already have it.  It could very well be the case that at the beginning of a contested passing, for example, there was no one with a disability.  But if the passing, because of discovery stages, takes quite some time, perhaps there’s a party now, a beneficiary of the estate, who’s become disabled or is no longer capable and in some way needs representation that didn’t have it prior to that. 

 

So there are a number of questions that you can ask in dealing with this issue, some of which are again, are any of the parties self-represented, and if so, have they been notified of all of the critical steps along the way.  Has anyone filed a Notice of No Objection, has anyone filed a Statement of Submission of Rights, and if so pursuant to the Rules of Civil Procedure, they’re entitled to notification of the time and date of the trial, even if they’ve submitted their rights.   Is a minor involved, and if so, is the Children’s Lawyer involved, and again, is there an adult who is disabled or perhaps is there a representation Order necessary pursuant to Rule 10 of the Rules of Civil Procedure.  So there are a bunch of questions you can ask dealing with the issue in respect of parties.

 

Paul Trudelle:  I think that net has to be cast as wide as possible from the outset.  There’s nothing more embarrassing than getting to Court only to have a judge say, what about beneficiary A or potential beneficiary B?  Where are they?  Why haven’t they been notified of this?  Is this person, or are there minor interests that should be identified and the Children’s Lawyer put on notice?  That sort of thing.  It’s best to get that dealt with from the earliest stage possible, and also be aware, as you said, that the status of parties may change as time goes on and it may be that the representation will have to change as a result of that.

 

Craig Vander Zee:  It could very well be that the Children’s Lawyer is representing a minor at the beginning of a contested passing and the minor becomes 18 years of age during it, and as such, the Children’s Lawyer may not have jurisdiction anymore to represent that minor and that minor would then become an unrepresented party unless they get their own representation.  So there are certainly are ways where representation issues can come into play.

 

Paul Trudelle:  Similarly, that child may become an adult, but adults may become incapable as time goes on, especially if it’s a long, drawn out piece of litigation, in which case, other representation may need to be brought in.  So assuming we have all of the proper parties at the table and everyone has filed their Notice of Objection or submitted their rights to Court or indicated they are not taking any part in the proceedings, once we’ve gone through the pre-trial steps and we want it to get to trial, we need to set it down for trial. 

 

The process for setting it down for trial is set out in the Rules.  It may also be covered by the Order giving directions that the parties obtain before the litigation is started.  Rule 48 deals with setting matters down for trial and what needs to be in the trial record and the parties setting it down for trial should have mind of that, so that the matter can be put onto a trial list and eventually, depending on your jurisdiction, called to trial.

 

Craig Vander Zee:  There are a couple of manners in which a trial may ultimately be scheduled and attended upon.  One of them is, of course as you’ve referred to, by way of Rule 48 of the Rules of Civil Procedure which is a formal service and filing of a trial record.  It could be, though, in a contested passing, if there’s been Orders for directions, or at the pre-trial conference, where there is an Order that the length of the trial is fixed and that the actual date itself is to be set by the Registrar on dates convenient to the parties, and as such, it may not be necessary with contested passings, that a formal Rule 48 process be in place.  But that could very well depend on the location Courthouse and practice of the judges in that area as to which method is preferred.

 

Paul Trudelle:  Right.  Every jurisdiction seems to have their own particular practise.  The order that I normally see, though, is a provision in the Order giving directions setting out how the matter is to be set down for trial, what is to be in the trial record.  The next thing we should talk about then in preparing for trial is getting your documents in order.  I was going to say that in passing of accounts matters, documents are of particular importance.  The accounting is an accounting issue.   It’s usually based on the vouchers that the parties will have to produce and therefore the documentary production is probably paramount when preparing for trial.

 

Craig Vander Zee:  It’s critical, Paul, I agree with you, that the documents need to be organized and need to be organized prior to trial.  The last thing that one wants to see is, you know, the weekend or a week or two weeks even before trial, and organizing the documents and there’s documents missing.  And there may be insufficient time to get copies, to go over copies with witnesses.  So it’s critical in doing trial preparation that the documents themselves be collected and organized far in advance of the trial. 

 

And with a contested passing, some of the documents that you’re going to want to include or have at your fingertips are the Notice of Application, even if the matter has gone by way of pleadings in a certain…like a Statement of Claim or Statement of Defence.  You still want the original Notice of Application.  The estate accounts obviously, Certificate of Appointment, any prior judgment related to the passing even if it’s two or three passings before.  It’s always important to have the record as to when the estate administration started and how many passings there have been.  It could very well be that one of the issues really arose during a prior passing period, and the accounts during that period had been passed. 

 

And so you’d want to be able to prove that to the judge and deal with that.  All Orders regarding the passing of accounts before the Court, all Notices of Objections, all pleadings again, Statements of Submission of Rights.  If the parties have consented or are providing any releases, it could be that some of the parties have consented to the accounts or have released the estate trustee, and any Affidavits of Service regarding any of the documents we have discussed here.  And again, of course, all the vouchers and the documents and the productions that the parties have produced, and being mindful again that production can happen by way of Affidavit of Documents.  It can also be ordered by the Court and it can also be dealt with by agreement of the parties.  So you really want to ensure that whatever the other side is to produce, it has been produced.  And if you’ve been required to produce something, that you do it, so that no adverse inference can be drawn at Court against you that you haven’t produced a document that you want to rely on but haven’t done so, perhaps merely by inadvertence.

 

Paul Trudelle:  Yeah.  And the shopping list that you ran through is very important and it’s something that the Court is going to want, the parties are going to want.  That can normally be put into a compendium or a joint document brief.  I don’t think there’s any issue with respect to the relevance or appropriateness of putting those documents that you’ve referred to before the Court.  And there’s other evidence that we’ll talk about it where it may be a little harder to get before the Court.  But I think the pleadings and the other notices and the position of the parties are all matters that should be before the Court, ideally put before the Court in an organized fashion as part of a joint document brief.  And that’s something that you should, as counsel, or you may want to address at the pre-trial, to make sure that someone is taking care of that and you’re not scrambling the weekend before trial to make sure the other side has done it or you’ve…if you’re objecting, or that you’ve done it as estate trustee.

 

Craig Vander Zee:  Again, you know, part of the manner in which you can succeed at trial is by staying organized and knowing that the judge is following along.  And so again, with the laundry list that I mentioned, leaving aside the documents to be produced and exchanged between the parties, really dealing with the other items which were more or less pleadings, or be classified as pleadings, if they’re set out and perhaps put in a compendium for the judge, then that’s simply going to help the judge along the way and help keep the judge focused on the issues.  One thing, too, with respect to documents, is bearing in mind issues of privilege.  If there are any issues of privilege, perhaps you want to challenge a document that’s listed in Schedule B of the Affidavit of Documents as being privileged, that challenge should take place prior to the commencement of trial.  It could be that counsel haven’t identified the documents in Schedule B and you have asked them to identify that by way of an undertaking and they haven’t done that.  You’d want the answer to that undertaking before trial. 

 

And then another issue that can come up, although not that commonly, but can come up is under Rule 30.09 of the Rules of Civil Procedure.  And that’s where you’ve taken a position that a document is privilege, but you decide that you want to waive that privilege and use it at trial, for whatever the reason might be.  Rule 30.09 says you have to waive that privilege at least 90 days before trial.  And in doing that, you also offer the other side the opportunity to either review the document or you provide a copy to them, so that there’s no surprise to them as to the documents you’re relying on at trial.

 

So while that is not a common situation, it’s one to certainly remember before trial.

 

Paul Trudelle:  Right, and I think the issue of privilege is of particular relevance in a passing of accounts where an estate trustee is relying on solicitor advice or obtaining information with respect to administering the estate and there’s an issue as to whether that document is privileged or whether the beneficiaries are entitled to review that.  I think that’s something that the parties should want to have addressed before it gets to Court and I think the judge would also want that as well.

 

Craig Vander Zee:  And then perhaps lastly today, Paul, we need to always be mindful of the originals in a file.  And certainly there’s issues as to the admissibility of documents, which we’ll talk about next day.  Because certainly the document itself, the contents of it are hearsay and cannot be submitted for the truth of the contents unless there’s an exception or it’s proved by a witness.  We’ll deal with that on a different day.  And the notices that can be used under the Evidence Act to deal with that and how counsel might agree upon the use of documents so as to avoid the time and cost associated with proving the authenticity and contents of documents.  But from the standpoint of the originals of the documents, it’s always important to know what the originals in fact are.  Have they all been reviewed?  And if you don’t have an original, perhaps through inadvertence or perhaps through longevity of administration of an estate, a document has accidentally been lost…the original, that is…there’s copies of it…it’s important to know how and why the originals are no longer available.  So that can be addressed with through the measures that we’re going to talk about next day and that I just mentioned briefly a minute ago. 

 

So again, know the originals, know which originals you have and which you don’t.  And it could very well be that there’s handwriting on the back of an original that wasn’t photocopied because only one side of the document was photocopied.  So it is important to have had the opportunity to go through the originals and get full value of the markings on the document.

 

Paul Trudelle:  I think that’s right.  And we were talking about trial preparation starting when the client first comes into your office.  I think trial preparation may start as soon as the estate trustee takes on the role of estate trustee and may want to ensure that originals are  kept with the…because of the possibility that this may end up in Court and originals will be required if it goes to trial.  That’s quite a bit of information for this podcast.  It may be that…well, we will have to continue this next time.  And that may not be until after, or into the new year.  So I’d like to wish our listeners a happy new year and happy holidays.

 

Craig Vander Zee:  I also would like to take this opportunity to wish you a happy holiday from a podcasting standpoint because I’ll see you tomorrow but... 

 

Paul Trudelle:  I’ll see you tomorrow as well.

 

Craig Vander Zee:  …I won’t see you from a podcasting standpoint until the new year, so I’ll look forward to that and all our podcasts of 2008.

 

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 Appointing, Changing or Removing Trustees.

This week on Hull on Estates, Craig Vander Zee and Paul Trudelle discuss the issues surrounding trustee appointments and changes.

Appointing, Changing or Removing Trustees - Hull on Estates Podcast #83

Posted on October 30^th, 2007 by Hull & Hull LLP

 

Paul Trudelle:  Hi and welcome to Hull on Estates.  You’re listening to Episode #83 on Tuesday, October 30^th, 2007.

 

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.

 

Craig Vander Zee:  Good morning Paul.

 

Paul Trudelle:  Good morning Craig.  How are you today?

 

Craig Vander Zee:  Good thanks.  I think this is our third podcast and I think in the first podcast, we had let everyone know that we find ourselves together not because I’m your first choice, I’m actually your second choice.  But that your first choice, Bianca, is away on maternity leave and we can happily report that she’s had a healthy, bouncing baby boy.

 

Paul Trudelle:  Yes, congratulations to you, Bianca and welcome to the new baby.

 

Craig Vander Zee:  Let’s hope that this podcast is listened to her son at some point but not as an aid to help him take one of his naps.

 

Paul Trudelle:  I think he should be listening and taking notes, Craig, okay.  When we were last together, before Bianca…I guess it was just around when Bianca had the baby…we were talking about the Trustee Act, trustees and removing and appointing new trustees.  We talked about the general concepts surrounding the removal and replacement of trustees.  Perhaps today we could talk a bit about the mechanics or the specifics of what needs to be done in order to appoint new trustees.

 

Craig Vander Zee:  I think, Paul, what you’re really referring to is really the structure of how a trustee might be changed or removed or replaced.  And when we last spoke, we really focused on the considerations that one might have when representing an individual who either wishes to be replaced as a trustee or conversely, is coming on as a succeeding trustee, what are the factors and considerations you might have.

 

Paul Trudelle:  That’s right and having discussed in our last podcast those factors, we now turn to what needs to be done in order to get a new trustee appointed or someone removed.

 

Craig Vander Zee:  Well, mechanically speaking, we mentioned last time that it can really be done by way of deed, that is the changing of a trustee by way of deed or by way of an application to the Court.  And we won’t get back into the sections of the Trustee Act that deal with either one but just to appreciate that in certain circumstances, a trustee may be able to be removed satisfactory to everyone and satisfactory to that trustee on the basis of a deed.  But generally speaking, it’s going to be dealt with by way of an application to the Court unless, of course, and this is the overriding and guiding principle, the trust document itself speaks to how transitions with the trustees are to be dealt with.

 

Paul Trudelle:  That’s right and I think a big factor is how co-operative the parties are, whether the matter is proceeding on consent, whether they’re going to be agreeing to the removal of the trustee. And if that’s the case, they can look to the trust document, they can look to the Trustee Act to see if it can be done without a Court application.  If it’s not going to be something that’s voluntary or it needs…someone is opposing to the removal or the replacement, then an application is going to be required.

 

Craig Vander Zee:  And when we talk about the mechanism in place or the structure in place, that is really perhaps a little bit more formal than what really takes place.  Really, when you’re considering how best to deal with the transition, that is, the removal and the replacement of a trustee, you want to consider all those considerations that we talked about before.  And with not getting into detail, the obvious ones again are the risk to all the parties, that is, is there potential liability to the departing trustee and the succeeding trustee, how do you deal with that potential risk, the accounting that might need to be provided by the departing trustee, and why that would be wanted by the succeeding trustee, whether a release is necessary, whether there’s an indemnification in the trust document perhaps, or whether that needs to be dealt with, and whether you need to have a judgment on a passing of accounts.  And quite apart from that, and those are all extremely factors, but equally important, if you have a dispute with respect to the transition, it may very well be that the application to change the trustee and have a succeeding trustee is challenged.  And it might lead to a settlement.  So then you also have to consider Minutes of Settlement, and what do you bring into that Minutes of Settlement.

 

Paul Trudelle:  Right and I think in going through and acting either for a departing trustee or a new trustee or even the beneficiaries under the trust, you want to make sure that all of those issues are addressed so that the liabilities are determined.  If you’re a departing trustee, you want to make sure that your liability doesn’t continue.  As a new trustee, you don’t want to pick up any responsibility for any acts of prior trustees.  An accounting should be there in order to ensure that the books are closed and opened on a fresh page with some clear determination as to what the liabilities of the trust are, what the assets of the trust are.  And all of those steps, I think, the overriding consideration for counsel for all the parties should be to ensure that everyone is protected, both the departing trustees and the new trustees.

 

Craig Vander Zee:  And you may actually find yourself in a situation where certain of these items, you know, a release or an indemnification or a passing of accounts, are actually required by one side.  So it may be that your client, as the trustee, may actually feel comfortable by dealing with it by way of a deed.  Or potentially a consent Order on an application for the change.  But certain aspects of the structure will be dictated by the succeeding trustee.  For example, if there…if one of the trustees is a corporate trustee, and they’re being replaced, well the corporate trustee will, if they are the departing trustee, they will often require a passing of accounts so that they know that they get the protection afforded by that Order of the Court with the passing.  Likewise, even if it’s an individual that’s leaving as the trustee and is being replaced by a corporate trustee, the replacement corporate trustee may require a passing of accounts, even if the departing trustee feels comfortable in the situation of leaving and that all the risks and everything are being looked after appropriately by a release.  They may demand it so that they know the starting numbers going forward and they have, by way of documents before the Court, an actual and formal listing of the assets and the receipts and disbursements in the past and any issues that may have arisen in the past, would have the opportunity to have been brought up through that process.  So some of this may be dictated by one of the parties, even though the other is completely happy to deal with it in perhaps a simpler fashion.

 

Paul Trudelle:  Right and I think just on that note, the simpler fashion may seem quicker and easier but I think it’s always in everyone’s best interests to have a passing of accounts and I think that would be recommended in most cases, in addition to the other things you mentioned about releases and indemnifications.

 

Craig Vander Zee:  Right and perhaps by way of an example, say there was a situation where a trustee wishes to retire and the administration of the trust has been simple, straightforward.  There’s not many assets, they may be significant but they’re easily dealt with and that the administration has been substantially completed and there’s more than two trustees.  And again, remembering that you can do certain changes with a trustee by way of a deed pursuant to Section 2 and 3, if there’s a certain number of trustees.  And all of the beneficiaries are adult and there’s no minors and there’s no outstanding liabilities.  That may seem like the dream situation and to couple that, make it even better, everybody has lawyered up and they each have independent legal advice.  In that kind of situation where the parties have determined that there aren’t any risks, that the only thing that they’re really dealing with is the cost of the proceedings through the Court, it may be, in that kind of situation, that a deed can be utilized couple with a release rather from all of the beneficiaries to deal with the removal of the trustee who wishes to retire.  It may not even involve a situation where someone’s actually replacing him or her. 

 

But conversely, you might have a very much more formalistic and complicated structure where somebody is being, contrary to their wishes, forced to being removed and replaced, perhaps for negligence, perhaps for improper conduct, self-dealing, whatever the alleged misconduct is.  That kind of situation is obviously going to be more difficult to deal with and will require the more formal structure that we were talking about.

 

Paul Trudelle:  Right and I think in those cases, you’d have the different steps and involved and it would be a much more complex process, and the parties would require much greater protection from the Court at the end of the day.

 

Craig Vander Zee:  And when we’re thinking of protection, just quickly, the trustee can look to the trust document.  Sometimes there’s indemnification provisions which will either attempt to exonerate conduct, certain kinds of conduct, perhaps of the trustee and everyone has to be careful as to whether that type of provision would be valid in the circumstances.  But certainly the trust document should be looked to.  But also the trust document may limit liability to certain criteria.  Perhaps just the value of the assets as of the date of the settling of the trust, rather than what the growth was or whatever the various limitations or restrictions on potential liability might be.  So look to the trust document first as to whether there is any release or indemnification type provisions in it.  And then, of course, you can go to the various protections afforded by statute.  And again, Section 35 of the Trustee Act may be able to be relied on by the trustee.  Then also whether a formal release and a formal indemnification that is written, given by the beneficiaries, is necessary in the situation.

 

Paul Trudelle:  Right.  I think that’s a fair analysis.  So in dealing with removing a trustee then, or stepping down as a trustee, it’s not enough just to say that I quit or that I don’t want the job any longer based on your paper and what we’ve discussed over the past couple of podcasts.  It appears that there’s a lot more to it than that and I think that when faced with that situation, where someone is retiring, either voluntarily or is being asked to step down, there’s a number of serious issues that need to be considered.

 

Craig Vander Zee:  And perhaps lastly where we might end off then, Paul, is just looking over the basic provisions that you might find in an Order further to an application to remove a trustee.  Some of the things that you would want to include are setting out in the Order the individual being removed and the capacity that that individual is being removed from.  You would also want to include in the provisions identification of the appointment of the substitute trustee or alternatively, where a replacement trustee is not coming on, confirming the remaining trustees that are already in existence, that they will continue…

 

Paul Trudelle:  That’s right.  I think it’s important that the Order say that the property vests in the trustees who are continuing, so they can fully deal with those assets and there’s no question as to their authority to deal with those assets.

 

Craig Vander Zee:  And further, typically unless the accounting has been provided prior to the application, the Order will also require that formal accounts be prepared in accordance with the Rules of Civil Procedure and that those accounts and an application to pass those accounts be filed with the Court, usually within a certain time period of the date of the Order.

 

Paul Trudelle:  That’s correct, yep.  You may wish to also address the issue of compensation of the new trustees who are coming in, particularly if it’s a corporate trustee.  They may want to have their compensation agreement attached to the Order and approved by the Court.

 

Craig Vander Zee:  Well, and it’s also a time perhaps for the replacement trustee to negotiation the compensation.  In the circumstance you were alluding to, Paul, I completely agree. It’s my experience that the corpo