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Listen to  Passing of Accounts and a Joint Retainer

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

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

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

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

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

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.  Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and wills. Now, here are today’s hosts.

David Smith: Good afternoon, Craig.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

David Smith: That’s right.

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

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

This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

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

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

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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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This week on Hull on Estates and Succession Planning, Ian and Suzana discuss the question of compensation and complaints regarding compensation.

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 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 Compensation for work done by estate trustees and solicitors.

This week on Hull on Estates, Paul Trudelle and Diane Vieira discuss compensation for work done by estate trustees and estate solicitors.

Case citation:

Rooney Estate v. Stewart Estate 2007 WL3019262 (Ont. S.C.J.), 2007 CarswellOnt 650

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.

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Accounting Under the Powers of Attorney - Hull on Estates Podcast #113

Posted on June 3^rd, 2008 by Hull & Hull LLP

Paul Trudelle: Hi and welcome to Hull on Estates. You’re listening to Episode #113 on Tuesday, June 3, 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.

Diane Vieira: Hi Paul, how are you?

Paul Trudelle: Oh hi, Diane, very good, how are you today?

Diane Vieira: I’m good.

Paul Trudelle: We are podcasting together again and today we thought we’d talk about the issue of accounting under Powers of Attorney and the duty to account after the grantor of the Power of Attorney passed away.

Diane Vieira: So we’re going to discuss a 2008 Ontario decision, De Zorzi Estate v. Read.

Paul Trudelle: And we’ll have a link to that on our website. This is an interesting case that just came to our attention. It was released just recently, in March of 2008. Megan Connolly blogged on it earlier last week and we thought we’d go into a little more detail in our podcast today.

Diane Vieira: So this is a case which discusses the duty of an attorney to disclose financial records for the grantor of a Power of Attorney.

Paul Trudelle: Right, and it’s an interesting case because there, there was a Power of Attorney that was granted. The grantor passed away and the beneficiaries sought to get an accounting from the attorney after the death of the grantor.

Diane Vieira: Why don’t I just give a bit of the background to the case and the different parties?

Paul Trudelle: Sure, that’d be great.

Diane Vieira: The respondents in this case were the residual beneficiaries of the estate. And the other side was a person who was both attorney and estate trustee.

Paul Trudelle: I think that’s pretty important and we’ll talk a bit about how important that is down the road.

Diane Vieira: And the beneficiaries had the question with respect to what happened to some bank accounts, prior to the death of the grantor.

Paul Trudelle: Right, and that would be relevant because the question was, what assets fell within the estate at the time of death? So the actions of the Power of Attorney prior to that would be very relevant to the size and nature of the estate.

Diane Vieira: And in this case, the grantor, there was no question that she was competent and that she never became incapable and actually there was evidence before the Court that she was the one making the financial decisions prior to her death.

Paul Trudelle: Right, and I think that’s an important factor as well. This was not the case where there was an incapable grantor who wasn’t able to look after her affairs.  I think that would be a much easier case for getting disclosure in accounting down the road. But here she was capable throughout and was able to consent and in fact, directed the transactions and that was something that the attorney appears to have relied upon in trying to avoid an accounting.

Diane Vieira: Yeah, the attorney had argued that she doesn’t have to disclose this financial information. The only person she had to account to would have been the grantor who was capable.

Paul Trudelle: Right.

Diane Vieira: So the beneficiaries had a few questions with respect to the administration of the estate but the sticking point was these bank accounts as we discussed, which would require the attorney to provide disclosure of financial information predating the death of the grantor.

Paul Trudelle: That’s right. So the application was before the Court. The question was whether the attorney had to account to these beneficiaries. The attorney took the position that they didn’t have to account and the Court then considered whether the beneficiaries would have a right to compel an accounting. 

I think the important sections of the legislation which is the Substitute Decisions Act in Ontario, is Section 42. Section 42 provides for an attorney to pass their accounts and sets out or enumerates who can apply to have accounts passed. Clearly, the grantor, if alive and capable, can request that the accounts be passed. There’s a number of other parties that are listed as being able to compel an accounting: the grantor, the attorney themselves, the Public Guardian and Trustee and the Children’s Lawyer have an automatic right to apply for an accounting, a judgment creditor of the grantor or the incapable person.  And at the end of Section 42(4) there is a catch-all: any other person with leave of the Court, and that’s the key there. If you’re falling into that ‘any other person’ category, you have to apply to the Court to get leave to get permission from the Court to compel the passing. And the question here was whether beneficiaries of an estate fell within the ‘any other person’ category who could then apply to the Court to compel a passing.

Diane Vieira: That’s right. Justice Herman looked at case law but with reference to this Section. She did find the beneficiaries within the Court were allowed to ask for an accounting.

Paul Trudelle: Right, and I think the cases, the Court identified the unusual or probably it’s usual, it happens a lot, the factor is that here, the attorney under the Power of Attorney was the same person as the estate trustee. So whereas normally an estate trustee would step into the shoes of the grantor and be entitled to compel an accounting from an attorney, here that estate trustee was one and the same as the attorney.  And the Court felt that it wasn’t likely that that person would compel an accounting from themselves and, therefore, opened the door to allow the beneficiaries of the estate to ask for this accounting. 

So, having qualified as a person or other person entitled to apply for leave to pass the accounts, the Court then turned their mind to whether the beneficiaries should be granted leave in this case.  And the Court considered a number of factors and looked at the issue of whether the fact that the grantor was capable throughout had an impact on whether leave should be granted.

Diane Vieira: Well in the Stickles Estate v. Fuller, the Justice based her decision on Section 42(1) of the Act which provides that the Court can order the accounts of the attorney to be passed and it doesn’t depend on whether the grantor became incapable or not.

Paul Trudelle: Right, and I think there’s a very broad and clear requirement that attorneys keep their accounts and pass them or produce them when asked for.  And the fact that the person was capable is not going to be seen as something that negates the requirement to pass accounts. The Stickles case was one where the grantor was capable and yet the Court still required the passing. 

Another factor is, another issue that the Court looked at in this decision is, how far back you have to go when passing your accounts. In this case, there was a Power of Attorney granted in September of ‘04 before death, and the person died in December ‘04. The beneficiaries sought an accounting that went back well before that, back to January ’04.  And the Court found that the duty or requirement to pass accounts will only go back as far as the Power of Attorney itself. And in fact, the Court looked at other cases and those cases dealt with attorneyships that predated the Substitute Decisions Act and in those other cases, the obligation to account only went back as far as the passing or the effective date of the Substitute Decisions Act. So in most cases then, the duty to account will start from when the Power of Attorney is actually granted.

So just to wrap up then on this topic, first of all I’d like to refer you to a very helpful article by Kim Whaley in the 2008 issue of Deadbeat that discusses this case and a number of the cases that are referred to in the De Zorzi Estate decision.  And it summarizes the applicable law and concludes by saying that the case is very helpful in clarifying the law with respect to the duty to account. Generally speaking, there is a heavy onus on an attorney to keep records and to pass those accounts when required and it clarifies who can request the passing of accounts after the death of the grantor. And you may be required to account to beneficiaries of the estate, even though the grantor was capable while you were acting as attorney and even though you are the estate trustee for that person’s estate as well.

Diane Vieira: Thanks, Paul.

Paul Trudelle: Well thanks, Diane. And before we leave, we’d just like to refer you to our contact information.

Diane Vieira: You can reach us by e-mail at hull.lawyers@gmail.com or you can call us on our telephone line which is 206-350-6636.

Paul Trudelle: We also invite you to visit our webpage where we have daily blogs and links to our podcasts on Hull and Estates and also our podcasts on Hull and Estate and Succession Planning. That can be found at estatelaw.hullandhull.com.

This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

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

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

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The Formal Passing of Accounts - Hull on Estate and Succession Planning Podcast #113

Posted on May 20, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #113 of our podcast on Tuesday, May 20^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 am fantastic. Looking forward to lucky 113 on our podcast efforts.  And we finished off last week reminding our listeners to please feel free to contact us.  And the best way is to jump on our webpage at hullandhull.com and we have an easy navigation to our podcasts and our other sources we have on the webpage.

Suzana Popovic-Montag: And we had a couple of comments this week, Ian. People were looking for the article that we had referred to during our last podcast from The New York Times and I just want to remind people that they can actually find that link on our webpage under the News and Links icon at the very bottom of the page. We have started what we call sort of our recommended reading list, and it’s what I kind of call behind the doors, you know “the Oprah’s Book Club”. So there’s actually a link to the article there and so for anyone who’s interested, please feel free to go there.

Ian Hull: That’s great. And we’re going to try to build that link up a little bit. I had a great meeting the other day with one of Canada’s leading social media new members, and a great guy, Bob Berman, who is a lawyer up in Yorkville who does family law.  But he and I were talking about that and developing our own reading lists on our own webpages and he and I were sharing some books. Right now, I know, I’ve just finished “Blink” and “Tipping Point”, which were both excellent books and we’re going to put those on the link page.  And we’re also, I know, Suzana you and I are just starting through “Ground Swell”, which really now seems to be one of the “must reads” in the social media world in terms of getting a handle on marketing and working through the social media network. So that’s another great book.

Alright, we left off last week talking about accounting issues and I was speaking to a great friend of mine up in northern Ontario the other day, about this very topic.  And she’s a lawyer there and she said to me, “You know, Ian, one of the things that amazes me is that I’ve been doing this practice of law for many, many years, and I have never had to formally pass my accounts”. And we talked about yesterday, the last podcast, how we had talked a little bit about the informal expectations and the way you can resolve the question of your ongoing obligations to account as a trustee informally. We’ll give some more ideas on that as we work through, but the point sort of struck me that here’s a lawyer that’s been practicing for 20 years in a busy estates practice.  And most people just don’t force their hand of going to Court and having what is called essentially a Court audit, where the judge essentially has to go through line by line. Now having said that, in our practice, we see a lot of it, and it’s one of those things that this lawyer pointed out to me was that she wished that she had more or had seen a bit more of it because it is becoming more and more prevalent. One is, is that people are expecting this standard of good record keeping and if you don’t have it, they’re pushing you on to Court. And number 2 is, is that we can’t forget that where there are minor children’s interests or interests beyond the scope of able-bodied adults, we have to pass our accounts in any event. 

So we thought, Suzana and I thought it would be a good exercise to go through some of the details and specifics of what happens when one passes their accounts, when they have to actually draw that short straw and go to Court.

Suzana Popovic-Montag: And as we were discussing during our last podcast too, Ian, and I think that with the increasing size of estates that are out there now and this huge transfer of tremendous wealth, we are dealing with bigger estates and more at-risk, so to speak, when you are the executor of an estate, and different kinds of beneficiaries.  And so it’s not surprising that we will probably see more and more of the formal passing when a trustee ultimately says, “Well what’s the downside, why wouldn’t I get the Court, you know, seal of approval on my administration, why would I forego that opportunity if I don’t have to?”

Ian Hull: Well that’s for sure and so let’s talk a little bit about what the process is. Now, we’re going to talk a bit about some of the Ontario centric steps, but I know certainly across Canada and in most of the jurisdictions in the United States, the process is almost identical, in that you go to Court and you file what is called a Notice of Application to pass your accounts. It’s a formal bound copy of a couple of very important things. One are the accounts themselves that you want the Court to audit; the other is a copy of the Will or the trust that is involved, the kind of core document. And number 3 is you file what you hope to be the final Order, the final result you look to achieve.  So you give everybody sort of the information, you give them the basics of the documents that you need to work from and then you say this is where I want to land, I look forward to your comments, so to speak.

Suzana Popovic-Montag: And as part and parcel of that Notice of Application, it’s going to certainly quantify the period of time during which the accounts are being passed and it’s also going to refer to the compensation, specifically that the trustee is looking for, as well as the legal fees to which he or she is seeking, on basically on an unopposed basis. And then there is, certainly in Ontario, there is provision for the costs and what that amount would be for anyone who has actually reviewed the accounts.  It’s usually either half or three-quarters of the amount that the executor would otherwise be entitled to.

Ian Hull: So we have this application and the form of it is basically we’re going to the Court to say, “We want our accounts passed” and we say it in a more legalistic way, but that’s the long and the short of it. The second part of it, though, is in the Application material, is in the Affidavit of Verification. And this Affidavit, you have to, as the executor, swear to the truth and accuracy of the accounts attached.  So that someone, basically the information you’re putting to the Court, sticks to you from an evidentiary standpoint. The form of that Affidavit is, there’s sort of two approaches: One is a very straightforward, one sentence long that says, “I attach the accounts and I swear them to be true and accurate”; and the other is one where, if you’re looking and you’re seeing a fight on any of the issues, you may want to flush out your position a little bit in some of the facts.

Suzana Popovic-Montag: And that’s, I think, more the unusual circumstance but one that we certainly see and I think it ultimately helps a Court who is dealing with the situation know the facts up front and know what’s sort of coming down the pipes before the parties actually show up in Court to argue those issues.

Ian Hull: So this expanded Affidavit of Verification, the form of the first one is obviously simple enough to do.  Obviously you hope that the accounts are accurate and true, prepared typically by a third party, someone who has a specialty in estate format accounts, but the comprehensive Affidavit in support will typically tell the story. So, for example, say you have an estate that has a large amount of assets in it and you are looking for significant compensation. You may want to, in the Affidavit of Verification, set out some of the detail of your work. Sometimes, for example, the Court likes to see copies of your dockets that you kept track of your efforts over the years in administering the estate, so that they have a sense of the time. They also may want to put a sense of the complexity and the background in it. This is just one example of what you can do to expand your Affidavit to help tell a better story to the Court, and also, quite frankly, to sell it to the other side.

Suzana Popovic-Montag: And that’s particularly so, I think, when you’ve got beneficiaries of an estate who are not familial members. So when you have, you know, third parties who wouldn’t know necessarily the extent of the work that the executor is doing, like a charity for instance, or another beneficiary who is far removed from the process, and it can only help to have all that information put to them sooner rather than later.

Ian Hull:  So if you’ve got your package ready, another thing that you want to keep in mind is, I think, I always tell my clients, is that watch your timing. This process takes a lot of time.  In the grand scheme of things, it may not be a lot of time if you’ve administered an estate for many years, but in Ontario and in most other jurisdictions, there is a substantial amount of time that people have to respond. For example, when you send out your Notice of Application in Ontario, and you serve everyone who has an interest in these accounts, what we call a financial interest, they have at least 45 days to respond.  So you’re looking out, you prepare the materials, take some time, then once you serve it you’re still looking at another 45 days minimum to have the accounts audited by the Court.

Suzana Popovic-Montag: And if the beneficiaries actually reside outside of Ontario, you’re looking at 60 days as the minimum service requirement. And that basically gives the parties hopefully enough time to review the accounts, to seek advice if they need to do so, and at the end of the day, ultimately the expectation or the hope being by the trustee, that they will consent to the accounts.

Ian Hull: So we’ve got it out there, we know it’s going to take some time. In our next podcast, we’re really going to flush out what our, I mean, you can never say typical in our world, but what are traditionally the areas of objection. But the procedural step is once you serve the account on those with a financial interest is you will then…they have an opportunity to file what is called a Notice of Objection, so a complaint, formally with the Court. And this is done either typically not in Affidavit form, but it is filed through the form of the Court and there they set out the nature and extent of the objections. So in our next podcast, I think it would be helpful for us to just take a little bit of time drilling down on some of the, what we call the low-hanging fruit issues, the issues that are often criticized in a passing of accounts so that we can help get better prepared for that inevitable day and hopefully have done our work before, to sell the Volkswagen to the beneficiaries.

Suzana Popovic-Montag: Well, thanks very much, Ian.  I look forward to our next podcast, and I remind our listeners who are interested in providing us with some feedback on this or any other podcast, to feel free to visit our webpage at hullandhull.com and leave us a message.

Ian Hull: Thanks very much, 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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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.

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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

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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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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.

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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 corporate trustees will want to have their compensation agreement attached to the Order so that it’s clear at least what the terms of that compensation is.  But it may be very well different than what the previous trustees may have had.  And if there was a prior corporate trustee, that is, the departing corporate trustee, had different terms of compensation, it may be open, and again I say it may be open, for the succeeding corporate trustee or any succeeding trustee, to negotiate the terms of the compensation at that time.

Paul Trudelle:  I think that’s fair.

Craig Vander Zee:  And then I suppose lastly in the Order, Paul, we would want to consider is there anything else that we need that would be helpful to the succeeding trustee.  Perhaps it is a situation where someone is being removed for improper conduct.  And they either are refusing to or don’t have all the documents to provide a proper accounting.  You may very well in the Order also include directions from the Court that perhaps documents with the financial institutions be ordered to be turned over, not just to the succeeding trustee but maybe the beneficiaries. Maybe it’s important that the beneficiaries have those documents at the same time as the succeeding trustee.  There may be other directions that may be pertinent to the specific circumstance and so the Order can be used for that.  And then, of course, as with most applications of Court proceedings, you would address how costs are to be dealt with…

Paul Trudelle:  We mustn’t for forget costs.  Just on that point, the other day there was a matter before the Court and in addition to removing one of the trustees, directions were given to the new trustee as to how a certain property was to be marketed and sold because that was an issue that gave rise to complaints against the prior trustee.  So the new trustee, in addition to being appointed, sought specific directions with respect to how that asset was to be dealt with.  So I think there’s always an opportunity to deal with those types of questions as well.

Well thank you very much Craig.  I think that was quite helpful on the issue of changing trustees.

Craig Vander Zee:  And it was again a pleasure, Paul.

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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Transcription

The Removal of Estate Trustees - Hull on Estates Podcast #78

Posted on September 25^th, 2007 by Hull & Hull LLP

Paul Trudelle: Hi and welcome to Hull on Estates. You’re listening to Episode #78 on Tuesday, September 25^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.

Paul Trudelle: Hi Craig, how are you today?

Craig Vander Zee: Good, good Paul, thanks very much. How are you today?

Paul Trudelle: Very good. So we’re well into the end of September now and school is underway and we’re back at work, working hard. How are you settling in?

Craig Vander Zee: Good, I don’t think it’s so much of a question as me settling in, but the kids settling in. I think when we last did our podcast, the kids weren’t back in school. So we’ve had our parent-teacher curriculum night and everything seems to be okay. So…

Paul Trudelle: Very good, very good. So things are working out. And you’ve been working hard as well. I understand that you gave a talk yesterday to the OBA on the removal and changing estate trustees, is that correct?

Craig Vander Zee: Yes, actually it was a full day program run by the Ontario Bar Association Continuing Legal Education Program, which was specifically focused on the topic of Trusts, Trustees and Trusteeships. And I spoke on changing trustees.

Paul Trudelle: So you’re paper, I had a chance to look at that and it’s excellent and I highly recommend it. It talks about the voluntary and involuntary changes to trustees, negotiating the removal and the replacement. So I thought we’d spend some time today talking about that if we could.

Craig Vander Zee: Sure Paul.

Paul Trudelle: So in your paper, you talk about the specific mechanisms for actually removing an estate trustee, either voluntarily or involuntarily. And you talk about the sections of the Act that apply. Rather than get into the details of that today, I thought we would spend some time looking at the second part of your paper, which focuses on considerations to be taken into account when negotiating the removal of estate trustees.

Craig Vander Zee: And I think that that’s something which is certainly interesting to address because many times, if a trustee is wanting to retire or resign or perhaps the beneficiaries or co-trustees want to remove and replace that trustee for whatever reason, justified for conduct on the part of the outgoing trustee or not, thought is given to the actual mechanics of the actual removal and replacement. But not so much the other considerations that go into it. And I think that that’s a good place to start here today, Paul.

Paul Trudelle: Right. So if I do want to resign as an estate trustee, it’s just not enough for me to say I no longer want the job and I’m out. There’s much more to it than that and your paper addresses that and maybe we will another time. But with respect to considerations to be taken into account, what are some of the first things we should think about when talking to a client about removing an estate trustee or appointing a new estate trustee?

Craig Vander Zee: Well, first of all, you certainly have to have a copy of the trust instrument, whether that is a trust document itself or whether it’s a testamentary trust that’s set up by way of a Will. You need to have a copy of the trust document to know what the powers are, because it will be the terms and provisions of the trust instrument that at first instance prevail. It’s only if the trust document doesn’t deal with something or doesn’t deal with something completely that you’re looking at other ways of removing a trustee or replacing a trustee and dealing with these other considerations. So that’s first and foremost: you need to have a copy of the trust instrument.

Paul Trudelle: And my understanding is if you’re looking at a specific trust, they often have provisions for the removal or replacement of trustees built in there and that would be the place to start. That would override the provisions of the Trustee Act, I understand.

Craig Vander Zee: That’s right. I mean, the Trustee Act is, in this regard, in addition to, beyond and above if you will, the terms of the trust.  If the terms of the trust are absent of a certain issue, or don’t deal with a certain issue, then of course you look to the Act and you see how the removal is to take place.

Paul Trudelle: Yes, and in many cases when you’re dealing with a Will, my understanding or experience has been that that doesn’t specifically deal with the removal or replacement of trustees. It appoints a trustee, often it doesn’t go into the level of detail that’s required in order to deal with the replacement.

Craig Vander Zee: No, that’s right. I mean, sometimes it’s the reverse. You have a trustee who may the sole trustee or the last surviving trustee and in their Will, they provide for the appointment of someone to become the trustee of the trust when they pass away. So in some ways, it’s the reverse of what you were saying as to how the Will will operate. So that’s a very good point, Paul.

Paul Trudelle: So if I’m looking at the trust document then, whether it’s a trust deed or a Will, that will tell me or help me to determine what process is required for the removal or replacement of the trust, is that correct? And if it doesn’t tell me what the mechanism is, then I would resort back to the Trustee Act for that.

Craig Vander Zee: Well, that’s right. And one thing you have to keep in mind with a trust document. It may in fact provide for someone other than one of the trustees to have a say or authority with respect to the appointment of another trustee. So it could very much in fact empower someone else other than a trustee to deal with the appointment. So you have to be mindful of that. And then you need to look at, once you’ve decided whether you can proceed by way of a deed, that is, without going to Court. Or whether you need to go to Court. You need to decide who’s going to be involved in the process. And if you’re going to Court under Section 5 of the Act, that’s the one that allows for additional trustees and the removal of trustees and the replacement of trustees, then you have to put the co-trustees and all the beneficiaries on notice.

Paul Trudelle: And that’s a requirement under the Rules of Civil Procedure as well.

Craig Vander Zee: That’s right. And the one caveat I’d make to that is you have to be mindful as to whether there’s minors or incapable parties. Because if there’s minors or unborn or unascertained people, then the Children’s Lawyer will need to be involved and put on notice. And of course, then if there is an incapable person over the age of 18, then the Public Guardian and Trustee is put on notice and then they have to form part of the negotiations to the extent that negotiations are necessary to be able to deal with the issue.

Paul Trudelle: Okay, so if I’ve determined what the proper process is, whether I need to go to Court or not and if I’ve put all of the people on notice or involved them in the decision-making, what is the effect of how the trust has been administered on whether I can be easily removed or get removed?

Craig Vander Zee: Well, it’s one thing to want to be removed, maybe retire. It’s another thing for a person to be forcefully removed, because the beneficiaries are discontent or the co-trustees are discontent. But that’s only really one aspect of the whole removal process. You have to be mindful of the potential liabilities and those can be different, depending on your viewpoint. Your viewpoint being who you might be representing in this whole situation. If you’re the outgoing trustee, you would like to make sure that there is no residual liability that’s going to follow you around if you’re simply discharged. That is, there’s been no passing of accounts. A passing of accounts enables someone to provide their accounts to the other parties such that they can be reviewed and then approved by the Court. Once that’s done, the administration of the trust has been approved by the Court. So if there is misgivings or allegations of improper conduct against the outgoing trustee, the outgoing trustee will want to make sure and have that proper protection of a Court Order received by way of a passing of accounts. If you’re the beneficiaries, you may want to have the passing of accounts for a number of reasons, but perhaps as simple as the fact that you don’t know what went on in the administration and before you can criticize the outgoing trustee, you have to know what the administration was all about. The co-trustees would also want to have that same sign-off on liability and an incoming trustee also wants to deal with the issue of liability because they don’t want potential liability from former acts, conduct in the administration to be visited on them, simply because a passing of accounts wasn’t done. So from a liability standpoint, everyone has concerns. One way of dealing with that as I’ve mentioned is a passing of accounts and either having the accounts prepared informally or formally and agreed to by the parties, or physically having an application to pass accounts before the Court as a part of this process.

Paul Trudelle: Can I also deal with the potential liability if I’m a trustee being removed by way of a release or an indemnity from the trust, the beneficiaries of that trust, if I’m outgoing if there is no serious issue with respect to what I’ve been doing as a trustee. Is that one way of dealing with that problem?

Craig Vander Zee: It is, and I think that when you’re looking at residual liability or potential liability for the past administration of the trust, you really want to look at a number of different factors. One is, has there been a breach of a duty? The outgoing trustee unto himself may know or not whether that’s actually occurred. And certainly in speaking to a lawyer that can be confirmed as to their conduct. But then you also look to Section 35 of the Act which relieves trustees of technical breaches and it may very well be that if the trustees acted honestly and diligently and in good faith, that even if it were to go to Court, a Court would agree that that kind of breach can be relieved. And then just touching upon exculpatory clauses. There may be clauses within the trust itself that actually relieve or are intended to relieve the trustee of liability. And the trustee may be aware of those and may be comforted by those, but a trustee has to be cautious in relying on those provisions because, depending on their wording, they may not be enforceable in Canada. And if they allow for a complete exoneration of any kind of conduct on the part of the trustee, then the better view of the law as it stands in Canada is that they’re not going to be valid. 

So before you get to a release, there’s those factors which you might take into consideration and then you look towards a release and knowing whether there’s been any misconduct, knowing what the assets are of the estate, knowing that the accounting has been provided to the beneficiaries and at least been approved on in a formal sense, then there might be comfort in having a release rather than a passing of accounts.

Paul Trudelle: So again, the type of protection that I want, be it a passing of accounts or a release for indemnity would depend to a large extent on how the administration of the estate has proceeded, whether my removal is a friendly one, whether it’s going to be on consent or whether I’m being removed for a specific reason or a specific fault on my part, I would guess would be a fair way of putting it.

Craig Vander Zee: That’s right and another factor that you would want to give some consideration to is whether there’s an indemnification being provided to the outgoing trustee that is, and perhaps an incoming trustee as well. There could be liabilities of the trust that are attached to the trust property which are proper liabilities, they just arose in the course of administering the trust and there could be environmental issues with respect to a property that the trustees had no participation in and their conduct was in no way the cause of such kinds of potential liability. And in that situation, the trust may speak to the indemnification of trustees, whether outgoing or incoming, from the trust property. It may very well be that an indemnification could be provided by the beneficiaries. And it could be the case that third parties might provide an indemnification. It could very well be that a trustee in respect of a trust property has contracted with a third party to do something. And the outgoing trustee doesn’t want to bring the responsibilities of that contract as against them personally and in order to do that, they may go to the third party and ask that a new contract be entered into with the new authority for the trust. Or that they be indemnified in respect of the contract. So there’s a bunch of different factors which could be taken into consideration there.

Paul Trudelle: And a number of those factors or considerations would apply to the incoming trustee as well, I presume. If I’m an incoming trustee, I may want a passing of accounts so I know what the assets of the trust are, when I take on the position. I would want to know or have determined what the liability of the prior executors is. We didn’t talk about compensation yet but that’s another substantial issue I, as an incoming trustee, would first of all (a) want to know what the compensation entitlement of the outgoing trustee is and also perhaps nail down what my compensation agreement is with respect to the administration of the estate.

Craig Vander Zee: Well, that’s right. And the incoming trustee will want to protect himself or herself as against again past conduct of trustees and in respect of how that conduct may relate to liabilities on the trust. If you’re a corporate trustee, an outgoing corporate trustee, it would be my strong expectation that they will simply just go ahead and pass their accounts so that they know that the administration has been put before the Court regardless of whether the beneficiaries are prepared to provide releases. It may also be that if the incoming trustee is a corporate trustee, they will require that a passing of accounts be done so that they know, as you’ve mentioned, the starting line for their administration, that they have a clean slate, they know what the numbers are going forward. And it’s at that time too the incoming trustee can negotiate compensation. It may very well be that the compensation is not fixed in the trust document and in that particular situation, the incoming trustee may look at all the factors and weigh them and negotiate the compensation going forward. And in fact, may have that compensation agreement attached to the Court Order removing and replacing the respective trustees.

Paul Trudelle: So there’s a lot of reasons, I guess, that brings us back to the Court Order removing the trustee and the passing of accounts. You want that security of having the Order, although it may not be necessary in all cases. Perhaps in our next podcast, we’ll talk about the specific mechanisms for the removal or replacement and to also talk about some of the steps that may be taken in order to ensure that some of the protections are put in place that we talked about today.

Craig Vander Zee: I think that’s a good idea, Paul.

Paul Trudelle: Okay, thank you very much, Craig.

This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

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

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

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The outcome in most types of litigation is pretty simple – you lose, you pay. How much you pay usually depends on various factors, including how the parties conducted themselves during the litigation, whether any offers to settle were exchanged and on what terms.

The unique thing about estate litigation, however, is that historically, regardless of whether you were triumphant or defeated, the estate often bore the expense of the proceeding.

As most estate lawyers already know, however, things are changing. One speaker at the Ontario Bar Association’s 2007 Trusts and Estates conference explained the following trends arising out of more recent court decisions:

• Will Challenge – when unjustified allegations are made against a defendant, the plaintiff may be ordered to pay the defendant’s costs

• Will Interpretation – when a Will does not need interpreting or when its provisions are not unclear, the party requesting its interpretation may be denied its costs

• Dependant Support Claim – successful claimants may have to bear their own costs when the court considers factors (similar to those applied in other litigation) that weigh in favour of such a result

• Passing of Accounts – when executors neglect or refuse to furnish accounts, fail to keep proper records or mismanage estate funds, they may be ordered to pay the costs of the successful beneficiaries

I am pleased to see such modifications to traditional cost principles, as in my view it will deter unfounded litigation being brought by those mistakenly of the view that the estate will foot the bill.

Until tomorrow,

Natalia Angelini

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Today, I want to consider limitation periods in the context of a passing of accounts.

For lawyers, limitation periods are more of a curse than a blessing. While it provides a client with certainty, the conscientious lawyer is always nervous that a limitation period is approaching or has already passed. The first question a lawyer should ask a prospective client is when a claim or cause of action first arose.

Currently, I am embroiled in a complex estate passing of accounts. The issue of whether the beneficiaries of an estate are out of time in which to claim damages pursuant to section 49 of the Estates Act is very much in play.

A passing of accounts is essentially an estate audit. The executor is required to account for his/her actions to the beneficiaries. An executor will often be required to bring a court application to have the accounts approved. Beneficiaries can object to specific transactions and/or the compensation claimed by the executor. The beneficiaries can also seek damages against the executor on a passing of accounts as a result of misconduct, neglect or default. The issue is whether the two year limitation period set in the new Ontario Limitation Act, which came into force January 1, 2004, applies to a passing of accounts and a claim for damages.

In Ontario, there is generally a two year limitation period in which to bring a claim, subject to some exceptions, including the concept of discoverability (that is, when a claim could have been reasonably discovered by the complaining party). Whether the two year limitation period applies to a passing of accounts is less than clear and the answer seems to depend on the facts. The general sense is that it is up to the executor to pass his accounts from time to time and that a beneficiary need not request that the executor pass his/her accounts every two years in order to preserve the right to object to the accounts or claim damages pursuant to section 49 of the Estates Act. However, once estate accounts have been prepared, it seems reasonable that the beneficiaries have two years in which to make a claim for damages.

However, the one situation where there may be some onus on the beneficiary to demand that an executor pass his or her accounts immediately is when the executor dies without having passed his/her accounts. Section 38 of the Trustee Act generally imposes a two year limitation period for claims against a deceased’s estate. No doubt, a beneficiary would become aware in short order that an executor died. Given the two year limitation period imposed by section 38, a beneficiary should demand that the executor’s estate pass the executor’s accounts in order to preserve the beneficiaries’ right to claim damages for misconduct, neglect, or default on the part of the dead executor. The courts have stated in no uncertain terms that there must be some degree of legal finality with death. From a public policy point of view, it would be an anomaly if a damage claim, in the context of a passing of accounts, could survive indefinitely while most other claims against an estate would be statute barred.

Justin de Vries