Settlement Issues - Hull on Estates Podcast #122

Posted on August 5^th, 2008 by Hull & Hull LLP

Paul Trudelle: Hello and welcome to Hull on Estates. You’re listening to Episode #122 of our podcast on Tuesday, August 5^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.

Paul Trudelle: Hi, I’m Paul Trudelle and welcome to another episode of Hull on Estates.

Chris Graham: And I’m Chris Graham.

Paul Trudelle: How are you Christopher?

Chris Graham: I’m great, Paul, yourself?

Paul Trudelle: Very good. We just came off of a great long weekend and I’m looking forward to a compressed but busy week ahead, but before we do that, we thought we’d put this podcast out there.  So let’s get to that. We were talking about what we were going to talk about today, and we decided we would talk a bit about settlement issues, what a settlement is, and considerations that go into settling, why parties should consider settling and the implications of not settling. So let’s start on that topic. 

Chris Graham: Okay, Paul, settlement is a beautiful word in estates litigation, so why don’t you tell us what a settlement is.

Paul Trudelle: Well a settlement is an agreement or a contract between the parties to end the lawsuit, to determine the matters in issue and to determine how the matter is going to be resolved. It’s a resolution that is arrived at by the parties, not judicially handed down.  However there are matters that still need to be determined by the Court; but usually that is done on consent and the Orders necessary in order to wrap up or finalize the litigation are made by the Court but on the agreement of the parties.

Chris Graham: And are there any special situations where you must go to Court in order to finalize the settlement?

Paul Trudelle: Oh, there’s a number of those. Court approval is required if there are minors involved. If there’s an issue with respect to getting probate of a Will or determining what Will is to be probated, that’s a matter that’s determined by the Court as well. In most cases, you need an Order from the Court dismissing the application or action, if the litigation has actually been started. There are other times when you will need to get other incidental Orders that are necessary in order to implement the terms of the settlement.

Chris Graham: Okay, in estates litigation, experienced practitioners typically throw out the line that 95% of estates litigation matters settle without a trial. I think it might be higher, it might be more like 97 or 98%. Why do so many cases settle in this area?

Paul Trudelle: I think it’s probably by necessity. I think there’s a number of factors that come into play that make going to Court expensive, time consuming, difficult, uncertain, and all of those factors should lead the parties acting reasonably to come to a resolution in order to avoid that, in order to have the matter determined with some certainty, probably, hopefully at a cheaper cost and much quicker, without the risk and uncertainty of trial. So I think those are all factors that play into arriving at a settlement. I’m not sure what the percentages are.  I know that most cases do settle outside of estate litigation and that’s probably the case or higher in estate litigation. We’ve been accused by senior counsel in our firm of being white flag waivers, but I think that’s not a fair assessment. I think that it’s something that is to the benefit of all the parties involved if the settlement can be reached at an early stage.

Chris Graham: Well we never wave a white flag. We never wave any flag. Our clients make all the calls.

Paul Trudelle: Yes. So why don’t we talk a bit about the factors, or reasons why matters settle. I think we talked or touched on one briefly, it’s the cost of proceeding.

Chris Graham: Yeah. Every litigation matter is different but it’s a ball-park figure and a fair one that a basic trial that lasts five or fewer days is going to cost $125,000 - $150,000 per party appearing in the trial, and that cost, of course, is obviously staggering, because that is a modest cost. It can easily far exceed that. 

Paul Trudelle: Yeah, the costs, I think, are one of the biggest factors as to why things should settle. There was a lot of talk in the newspapers last week I think, about the cost of proceeding and the fact that most middle-class people in Ontario couldn’t afford or can’t afford to proceed with full-blown litigation. It’s just simply too cost prohibitive.  And I think that’s a real consideration why things should settle. You know every case is different, but I think what they all have in common is that the expense of proceeding is simply too high and it’s something that the parties all have a difficult time in bearing and in most cases can’t warrant that. In fact, no case should warrant the full cost of proceeding to trial. And that’s a factor that’s got to be taken into account as you proceed and when you turn your mind towards a resolution from the outset.

Chris Graham: You know, typically, when clients come in, of course we see all kinds of cases, strong cases, weak cases, people asking questions about the strength of their case or whether they even have a legal issue.  But certainly, I just named three or four different scenarios. What ties them all together is risk. Can you tell us a little about the risks that litigants face in terms of why those risks may create incentive to settle?

Paul Trudelle: I think that no case that is going to become litigious is without risk. I think there are very few cases that are sure things and any case, if anybody tells you that a case is a sure thing, well I don’t know if that’s a fair thing to say. I think that there are risks involved, issues arise as matters proceed. There’s uncertainty with respect to who your judge is, how he or she is going to see the evidence, the evidence you’re going to be able to get, the evidence that’s going to be admitted, how the witnesses are going to present on a particular day, what their recollection is going to be, whether your witnesses are going to survive and be able to testify as it goes to trial, because of the delays involved and other uncertainties in life that we all know about. There’s just a myriad of risk and uncertainty as matters go to trial and we’re always told in mediation that you can avoid that by coming to a mediated settlement or some agreement that avoids that risk, takes the matter out of the hands of a third party in deciding this and lets the parties come to a resolution. The avoidance of that risk is a paramount concern. 

Chris Graham: Absolutely. Even for parties who may be justified at a particular point in time in feeling like they have a very strong case. The longer the procedure, the process evidence gathering goes, the longer they’re exposed to the risk of evidence that really doesn’t favour them emerging. A phantom letter coming out of nowhere, some long lost relative emerging, a doctor coming forth with notes.  It happens, and not to say it happens in every case, but it really does happen and strong cases may get a lot weaker right before trial.

Paul Trudelle: That’s right. And playing into that is just the time that it takes to get to trial. Unfortunately, it takes months, if not years in most cases, in order to get a matter to trial if you want a trial date that’s, you know, three or four or five days or more. I know that in certain jurisdictions in Ontario they are now setting trials in 2010-2011, which seems like it’s a lifetime away, although it’s quickly creeping up on us. But it does take a long time to get to Court and that’s a factor as well. It’s better to have the settlement funds in your pocket today than win at trial and get that money at a later date.

Chris Graham: And that’s also doubly the case in estates litigation where typically you’re fighting over assets that, a very common one is a house where it has a carrying cost but it may not necessarily be appreciating, or a small business worth $1.5 to $2,000,000. You need a trustee in there managing it, it may not be making money, the estate may be deteriorating in value over the course of this litigation.  And you may wait for two years to get to trial, have a great case that only gets stronger, and find that your ultimate result is far inferior to the settlement you could have taken 2½ years ago that also would have paid you 2½ years of peace of mind.

Paul Trudelle: Yeah, that’s right. I think that the passage of time exacerbates both the costs by necessity and the risk involved and it may mean that you’re dealing with a smaller pie at the end of the day because of that and simply because of the passage of time. One of the things we didn’t mention is that after your trial, there is always the likelihood or prospect of an appeal which may add another year or two years to the matter before it’s finally determined.

Chris Graham: Okay, what we’ve told you so far is generic information about the trial system with a bit of an estates flavour, but generally most of it applies to general litigation as well as estates.  But estates, of course, is a specialized area and there are significant differences with other areas. Can you lead us through some of them, Paul?

Paul Trudelle: Yeah, I think one of them is that in estates matters, for example, usually if we’re talking about the example of a Will challenge, there’s usually a fixed amount, like we talked about the pie, we know what the size of the pie is. Usually by, early on in the litigation or as it proceeds, everyone gets a firm grasp of what the pie is, what the size of the estate is.  So you have a pretty good handle on what it is you’re fighting for, and unlike a personal injury case where that’s another variable, everyone knows what the size of the pie is. I think that allows the parties to, it should make it easier to settle the case because you know what you’re fighting over as opposed to a personal injury case where that’s something that the parties may differ on what the quantum of the damages is going to be. Here, although they’re not damages, you know what the damages are.

Chris Graham: Yeah, and that leads us, because there’s that pot of gold, that leads us into another difference, and this is a huge fundamental difference between estates litigation and say, contract litigation, where you sue someone for breach of contract $2,000,000 or $3,000,000, you win, they may pay, they probably will pay at least some of your costs. How does estates litigation differ in that respect?

Paul Trudelle: In estate litigation there’s another possibility with respect to the costs awards in normal, not normal litigation, not the right word, but in traditional litigation.  Fees are payable by the winner or loser.  That may be varied according to the conduct of the parties, or any offers to settle that are made. But it’s the parties that will end up paying the costs. In estate litigation, that is often the case and that seems to be the trend now, that the winner or the loser will pay the costs. However, there is that third possibility which is that some or all of the costs will come out of the estate. And I think that extra variable leads to the uncertainty, it also leads to the risk on the parties. Historically, costs would always come out of the estate and that would reduce the risk; now the Courts are moving away from or have moved from that and I think that just increases the risk that at the end of the day, someone’s going to be very upset by the outcome.

Chris Graham: Exactly, and let’s take a simple example. If you’re fighting over a $500,000 estate and you have a basic trial, $125,000 a piece, so you’ve got a quarter of a million, half of the estate in legal fees. There’s the risk for the winner. There’s the remote risk that the winner may have to pay his own lawyers, the other side’s lawyers and get the $500,000. So the winner may win and only get a quarter of a million, there’s an outside risk that that person who won may actually lose, pay all his fees, pay all the other side’s fees, so you’re down three quarters of a million dollars, well you’re down a quarter of a million but you’ve lost out on the estate, and those are the two worst-case scenarios. But, I mean, right there, $500,000, you were fighting over $500,000 and your worst-case scenario is negative $250,000, it’s a pretty huge spread.

Paul Trudelle: Yes. I think another difference in estate litigation that you don’t see in other types of litigation is that in a Will challenge, for example, if you can settle it, you can settle it on the basis of some fair division or a division of the estate that would satisfy everyone. When you go to Court though, the Court isn’t able to make that division, it’s not able to split the pie so to speak -- Will challenge is an all or nothing prospect. When it goes to Court, either the Will is valid or it’s invalid. If it’s valid, you may get nothing or you may get everything.  Whereas, if you’re able to negotiate a settlement, you can come to some resolution that’s somewhere between those two extremes. So I think that’s an important factor and another reason why estate litigation settlements make sense and are very important to consider.

Chris Graham: And with the types of assets that we typically encounter, a businessman may die and have a growing business that may roll over into his spouse’s spousal trust so there aren’t taxes, capital gains taxes payable. There are all kinds of opportunities in settlement negotiations to come to genuine win-win bargains where both parties avoid huge risk and potentially come out on top. Sometimes, even on top of where they may have ended up in a “total victory” scenario minus legal fees.

Paul Trudelle: Well that’s great, Chris. Why don’t we end it on a win-win and wrap up for this week. If you have any comments or questions, we hope you can pass them on to us. We love to hear from you. You can send us an e-mail at hull.lawyers@gmail.com, or just pick up the phone and leave us a message on our comment line at 206-350-6636. And be sure to visit our blog at estatelaw.hullandhull.com where you’ll find even more information about today’s practice of estate law.

Chris Graham: We hope you enjoyed the show. I’m Chris Graham.

Paul Trudelle: And I’m Paul Trudelle. Thank you.

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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Becoming an Executor After Death - Hull on Estates Podcast #115

Posted on June 17^th, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi and welcome to Hull on Estates. You’re listening to Episode 115 of our podcast, on Tuesday, June 17^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.

Ian Hull: Hi, this is Ian Hull.

Suzana Popovic-Montag: And Suzana Popovic-Montag.

Ian Hull: And we are thrilled to be back on Hull on Estates. Before we get into this, we have to remind everyone that Suzana’s voice may be affected slightly today in the podcast. She has just suffered a broken wrist and has full access to everything except a fairly immobile right arm which I understand she is right-handed.  So any errors and omissions in today’s podcast are entirely related to the bad wing.

Suzana Popovic-Montag: And God knows, I’m always looking for an excuse.

Ian Hull: So, we’re excited to be on Hull on Estates. We’ve had some really interesting episodes before this one and a great one with Dave Smith last week.  But why don’t we just remind everyone to please feel free to call in on 206-350-6636.

Suzana Popovic-Montag: And you can find that number in our show notes if you didn’t catch it, along with our e-mail address which is hull.lawyers@gmail.com.  And, of course, you can feel free to visit our blog as well, at estatelaw.hullandhull.com.

Ian Hull: Well Suzana, we enjoy doing our podcasts weekly on Hull on Estates and Succession Planning, and in the past series that we’ve been working on, in that podcast venue, we’ve been focusing on estate administration issues and how to better be prepared to be an executor. Our last few podcasts have been dealing with estate accounting issues, but prior to that we had focused a lot of our attention on what are the early stage steps that we must consider or we think we must consider, and we tell our clients to consider, when they take on the heavy burden of being an executor. So I thought today would be a good opportunity to go through some of the practical early steps and I think we want to focus on the steps for a very specific period in time.

Suzana Popovic-Montag: And that period, of course, is the one just after being advised of the death.  And the first question that comes to us as a lawyer is, who is our client? Ultimately, you know, we’ve got someone who comes in to us, they’ve got a copy of a Will, and the Will appoints an executor or it doesn’t, or there is no Will.  And the question is, how do we assist the individual who is sitting across from us right from the get-go?

Ian Hull: And at that point, I always like to focus on what possible roles that individual or that group of individuals has in the process. An easy example for me is when you have a situation where you might have a surviving spouse as named executor, plus you have the family accountant and you have the family lawyer, who have been trusted advisors of the deceased.  And, of course, the surviving spouse who is typically financially significantly impacted by the Will. And in that scenario at that first meeting and that first consideration, who your client is, is very important, because that surviving widow will have separate individual, if financial interests, that need to be considered. And I think an easy example is the case of Reed vs. Reed Martin, probably ten years ago now, but where the Court essentially had set out the practice being that if you have a surviving spouse, you probably need to, as the lawyer for the estate, tell that surviving spouse about this delineation, this personal interest, and this fiduciary interest that she has.

Suzana Popovic-Montag: And I guess no one could really tell the client better, Ian, than you, having actually argued that case from what I recall.

Ian Hull: Well it was one of the few cases that I actually won, but the case stands for the proposition that a surviving spouse, when making an election or obviously a Succession Law Reform Act claim, is really essentially precluded from acting as a trustee.  And that’s sort of a stark example of how you want to initially talk about and consider who is your client.

The next issue which is maybe a bit morbid but you’ve been given the job of an executor and morbid is your life, the physical issues and the urgent physical issues that arise.

Suzana Popovic-Montag: And I guess what you’re eluding to there, Ian, is the fact that in most cases, I would say almost these days, people are actually signing organ donor cards and providing for the use of their body upon their death.  And how an executor is going to deal with that, in light of firstly, the emotional issue of dealing with the death at all; and secondly, possibly competing family abuse on whether or not those issues of the deceased should, in fact, be respected.

Ian Hull: And this whole question comes from the fundamental obligation of an executor to have “control and custody of the body”. You typically won’t have probate at that moment in time, but you will have the obligation to deal with the body. The transplant issue is a great example of a complex scenario that you’re going to probably have to consider.  And the basic issue, too is, of course, getting the funeral organized and dealing with what can be family dynamics as to cremation or burial and sometimes the Will doesn’t speak to it, and those kinds of things. So the physical issues about that are important.  And, you know, in terms of the transplant issue, of course, there’s the possibility that there is some tension as to whether or not, of course, transplant is required for some of the organs.  But there are other physical issues as well.

Suzana Popovic-Montag: One of the things that it just sort of brings to mind, Ian, is the very first case that I worked on when I came to Hull & Hull, and that was actually what we morbidly call ‘the fight over the body’.  And it was a situation where I personally, as someone who hadn’t had a lot of experience in estates, was shocked to find that the executor can determine the funeral arrangements and that he or she can trump any of the family member’s wishes in that regard. So I know that that certainly surprises people even when I advise them in the course of meetings, as well. It’s a very powerful right that an executor really does have.

Ian Hull: So one of the things that we’re going to talk about is the financial steps, and we’ve got sort of a few bullet points at the end of this podcast we want to talk about.  But one of the things that sort of stems from that is the need…a lot of financial institutions require…is the need for the death certificate. And the death certificate can play actually an unusually important role in an estate administration at this early, urgent, immediate stage. For example, if you want to create some cash flow to pay some funeral bills and so on, often banks will require presentation of a death certificate and a copy of the Will, not probate, usually, for the payment of that, and also insurance companies. If you want to get the cash flowing on the insurance company side, a death certificate can be vital. So getting the death certificate again, is important. The funeral directors are usually careful about just handing out a death certificate to just anyone. They want to make sure you have jurisdiction to receive the death certificate.

Suzana Popovic-Montag: And that really is a particularly timely issue of consideration these days when we see a lot of talk about the impetus to really know your client, so to speak. And financial institutions are looking for validation of the fact that they’re dealing with someone who is authorized to speak on behalf of the estate, as are lawyers as well.  And so just being able to demonstrate that is a really key issue.

Ian Hull: Alright, so that’s some of the immediate, there are lots of other immediate issues that come to mind.  But let’s turn, so we have enough time in this podcast to sort of fit this all in, and talk about what would be, we would consider, the immediate financial issues.

Suzana Popovic-Montag: And I guess what you’re eluding to there, Ian, is just actually right from the get-go, stepping into the home of the deceased, their prior place of residence, and dealing with the issues right off the beginning. Like cancelling, for instance, deliveries of newspapers, subscriptions of papers, suggesting that a family or friend can stay at the home just to take care of the home in the meantime, removing and securing any valuables and putting them in safekeeping.

Ian Hull: And one of the things that I will do, I would tell my executor clients to do two other immediate steps as well with the house, and that is, (1) change the locks. It makes people crazy sometimes.  Obviously in certain circumstances this is not appropriate.  But remember you are charged with, like you are charged with the care and custody of the body, you are charged with care and custody of the property, and often, in a lot of estates, the main asset is the home. So, if you don’t take the basic steps like changing the locks, I think it can be problematic. 

And the other twist is, is that I encourage my executors to grab a video camera and walk through the house with the video camera to determine the assets and the chattels, I mean, in terms of what’s in the house with more certainty. And the final subtext of that is, of course, there are lots of houses such as Waddington’s and Sotheby’s and so on, that will come in and create a comprehensive inventory of each and every item in the house, with valuations, which can cost a little bit of money sometimes, but can be a very, very useful evidentiary tool as an executor and one that is too often overlooked at this immediate, urgent stage.

Suzana Popovic-Montag: Another thing that I think is really important right from the get-go is to make sure that any property owned by the deceased is properly insured including their home, their cottage, any other properties they might own, cars, other forms of vehicles and that. It’s very important to make sure that that insurance is in place and that it continues on properly.

Ian Hull: Okay, well I think those are sort of…obviously this is, we’re dealing with a very specific point in time in an estate administration and every estate administration has its own twists and turns.  But in preparing for this podcast, we sat down and tried to highlight some of what we find are matters that end up being contentious later and therefore, are helpful to be alerted to now. So if you have the job of executor, it seems to me, don’t forget that that job starts immediately; a lot of these steps are urgently required and once you get over that hump, an administration can be done in a timely but not as stressful environment.

Suzana Popovic-Montag: Well I think that brings us to the end of this podcast, Ian. It was great being back on Hull on Estates with you. I’d like to remind our listeners to again, please feel free to give us any feedback at 206-350-6636.

Ian Hull: And, of course, we look forward to hearing from you. An easy way to get to us is hullandhull.com, our webpage and that links you in to all of our blogs and podcasts.  But feel free to e-mail us at hull.lawyers@gmail.com.

Suzana Popovic-Montag: Thanks very much, Ian.

Ian Hull: Thanks, Suzana.

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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Posted on April 1^st, 2008 by Hull & Hull LLP

David Smith: Hello and welcome to Hull on Estates. You are listening to Episode #104 on Tuesday, April 1^st, 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. I’m meeting today with Sarah of my office.  Hello Sarah.

Sarah Fitzpatrick: Hi, how are you today?

David Smith:  Good.  And again, this is David Smith and I’m with Sarah Fitzpatrick.  And today, Sarah, we thought we would talk about issues causing delay in the granting of probate.  And what exactly are we concerned about here?

Sarah Fitzpatrick:  Well, with respect to some of the recent podcasts done by Ian and Suzana considering the process in obtaining Certificates of Appointment for Estate Trustee, we thought it would be useful to consider ways in which to avoid the delay.  Delays are notorious in many estates Courts and it can often be very difficult to obtain probate without having your application sent back for rectification.  So we thought we’d just canvass some of the ways, just practical ways in which you can, when drafting your application, try and avoid some of those delays.

David Smith:  And Sarah, I mean, what’s the concern in terms of delaying the receipt of probate?  If you can’t get probate, what does that prevent you from doing?

Sarah Fitzpatrick:  Well often the estate trustee is anxious to obtain the probate so that they can go ahead and administer certain assets.  And in certain Courts, probate can be granted very quickly, within, for example, a week.  But in other Courts, it can take up to 6 to 8 weeks.  And if, for example, there may be a transfer of property pending, or other assets that need to be administered, delay can seriously jeopardize the ongoing administration of the estate.  So it is important to get your probate as quickly as possible.

David Smith:  Alright.  And you touched on this at the beginning, but probably just as an aside, we should point out that we are podcasting today on Hull on Estates.  Our sister podcast is Hull on Estate and Succession Planning.  And as you’ve pointed out, Sarah, there is a couple of recent podcasts which have been done by Ian Hull and Suzana Popovic-Montag, that touch on some other issues relating to the obtaining of probate.  Again, our focus today is on delay.  So what can cause delay in the obtaining of probate, and what should we consider in the 10 minutes we’ve got today?

Sarah Fitzpatrick:  Most likely the most common error that is sent back for rectification is the names.  The Court insists on total uniformity of names in the Application documents, which means that in your Application, in all of the documents that are required in the Application, there must be total uniformity of the names.  They must be referred to the same throughout the Application.

David Smith: Now Sarah, as a litigation lawyer, I obviously don’t run into this issue quite often that often, and part of the reason you’re obviously podcasting on this issue with me is that in your practice, you do do this sort of work.  To what extent can you comfortably delegate any of those reviews to support staff?  Is that something you can delegate or do you need to do that yourself?

Sarah Fitzpatrick:  Absolutely, certain of the…you know, the Application, can certainly be filled out by clerks that are knowledgeable in this area.  However, it is important to review everything.  Again, errors are very common and not only is it good just to have a second set of eyes reviewing the Application, but again it’s…the Court does insist on uniformity in all of the Application documents and it’s important to review them, the solicitor in charge of the file as well.

David Smith:  And ultimately you, as the solicitor, are accountable for that, right?

Sarah Fitzpatrick:  Exactly, that’s right.  But, for example, with respect to using the same names throughout, often what you’ll find is that the Will may refer to the deceased by a certain name, but that many of the assets are actually registered in a different name.  For example, the Will might be the estate of James Smith, but many of the assets are registered in the name of Jim Smith.  So the Application actually provides in two different lines where you can actually state “in the estate of James Smith” and then there’s a secondary line down below, where you would need to put “also known as Jim Smith”.  And the important issue here is that not only do you need to address that issue in the actual form of the Application, but this needs to be consistent throughout all of the Application documents: the Affidavit, the Certificates.  Everything does need to have that “in the estate of James Smith, also known as Jim Smith”.  And they will send it back if it’s not exactly correct everywhere.

David Smith:  And, of course, if it’s sent back and you’re acting for the executor, is there an obligation to advise the beneficiaries that there has been some delay caused through any kind of inadvertence?

Sarah Fitzpatrick:  David, no, there’s no obligation per se to advise the beneficiaries of the estate.  It may be just a matter of practice.  Certain solicitors can certainly advise, but I wouldn’t say that’s typical practice.  But the errors are so frequent that it would not be unexpected for this to happen quite frequently.

David Smith:  Right, and I guess the only reason that sort of occurred to me was just again wearing my litigator hat, if you’ve got a contentious relationship between the executor and the beneficiaries, obviously you want to perhaps communicate any deficiencies to the beneficiaries, if there’s any…if it’s particularly acrimonious.  Sometimes my practice is even if it’s over the top, you advise them of every single delay, just so that they know that things are being done.

Sarah Fitzpatrick:  Right, well certainly just on that, in terms of advising beneficiaries, one issue is the Notices.  And that’s another area which can cause delay.  The Court is insistent, you do need to serve the Notices of Application on all the beneficiaries.  Now the Notice doesn’t affect the legal rights of the beneficiaries in any way.  But the Court still does require that the Notices of Application be served on all the beneficiaries and as importantly, the names of the beneficiaries need to be identical to the names referred to in the Will, as well.  So that’s another key point to keep in mind when serving the Notices of Application on the beneficiaries and keeping them advised of that.

David Smith:  Okay, so good tip, Sarah.  Now, you know, shifting away from the actual form of the Application, why don’t we touch now on some specific situations.  I’m thinking particularly of holograph Wills, just because that’s near and dear to my heart.  I run into it in litigation context on occasion.  What specific challenges are presented by holograph Wills that may cause delay if not dealt with properly?

Sarah Fitzpatrick:  Well, first of all, we’re going to need an Affidavit in the holograph Will, attesting to the signature.  And what can often cause delay is that there can often be only one beneficiary or major beneficiary and ostensibly there could be a conflict of interest if the beneficiary is signing the Affidavit attesting to the testator’s signature.  So that’s one area that you do need to be concerned about.  However, I don’t think there’s any legal restriction on a major beneficiary signing the Affidavit attesting to the signature.  And often, of course, there’s no one else that’s available to do that.  In my experience, I’ve had cases where often there may be a cheque from a bank, for example, and you can often have the bank teller sign an Affidavit attesting to the signature.  But certainly, when there is only a single beneficiary able to swear that Affidavit, that can certainly cause delay.

David Smith:  Okay, and certainly the characteristic of a holograph Will is not only that it’s signed by the deceased, but is wholly made in the handwriting of the deceased.  And I presume, of course, that the Affidavit would reference that fact as well?

Sarah Fitzpatrick:  That’s right.  And I…and further to that point as well, I think that this is a case if there was a sole beneficiary of the estate, and they were the only ones that could sign the Affidavit, it would very well be a case that would be referred to a judge.

David Smith:  Okay, for our last topic we can touch on, and we’re not going to hit everything obviously, let’s just talk briefly about administration bonds.  I mean these, you know, just uttering that phrase causes me anxiety because every time I’ve encountered bonds in the litigation context, they’ve been very difficult to obtain.  Can you just tell me briefly what problems administration bonds can cause in the context of obtaining probate and how that can cause delay?

Sarah Fitzpatrick:  That’s right, David.  In a case where you have an Application without a Will, or if it’s an Application with a Will where the estate trustee is either…well the Applicant is either not named in the Will, or the estate trustee is resident outside of Ontario, the Court is going to require either a bond or an Order dispensing with the bond.  And, as David mentioned, the bonds are notoriously difficult to obtain these days.  And so typically you’re left with the option of getting an Order from the Court dispensing with the bond.  What you’re going to need to obtain here is consent of all the beneficiaries, and you’re going to need an Affidavit from the Applicant as well.

David Smith:  Right.  The bond just boils down to an issue of trust, doesn’t it?  I mean, I’ve always found it kind of…the surprising thing about bonds, to my mind, is the executor is chosen by the testator because he or she is someone they trust.  Yet here you’ve got a situation where the Court orders that they’ve got to post security and that there’s a concern that they may not be trustworthy.  I always find that a little bit odd.

Sarah Fitzpatrick:  Yeah, exactly.  The Court is obviously protecting the beneficiaries in the event of negligence by the estate trustee.

David Smith:  Right, but I suppose if it’s good estate planning and the executors…the beneficiaries like the executor, trust the executor, then the bond might well be waived.

Sarah Fitzpatrick:  That’s right. And certainly the bond is a requirement when you have an Application without a Will as well.  So there may not have been an estate trustee named, so that can be critical as well.

David Smith:  Okay, that’s great Sarah.  So thanks so much.  It was a lot of…it was very interesting rather, doing this topic, and I look forward to podcasting again.

Sarah Fitzpatrick:  Great, thanks.

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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Posted on March 25^th, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #105 of our podcast on Tuesday, March 25^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: Just great, thanks. Glad to be podcasting again with you. Missed you last week.

Suzana Popovic-Montag: Sorry about that.

Ian Hull: No it’s – these things happen.

Suzana Popovic-Montag: They do.

Ian Hull: Don’t forget to all those who are listening, feel free to call us at 206-457-1985.

Suzana Popovic-Montag: Or if you’d like to drop us an e-mail at hullandhull@gmail.com or, of course, you can visit our blog at estatelaw.hullandhull.com.

Ian Hull: Okay, we’ve been trying to follow through the process of an estate administration per se, and what it takes to get the job. One of the things that we talked a little bit about, not at the last podcast but the one before, was the application for probate itself. And I thought what we could do today is, sort of, talk about some of the things that might come as a surprise to people just how much notice you have to give to the beneficiaries.  And just who needs to be given notice in the application process and some of the other, sort of, what I might consider more mundane steps you have to take in the process. We talked, not in the last podcast but the one before though, about the bonding requirements in Ontario anyway, the probate tax that gets calculated.

Suzana Popovic-Montag: And we didn’t mention the fact though, Ian, that when you don’t necessarily know the exact value of the estate and you can’t necessarily calculate the administration tax that will be payable, you can still file on the basis of an estimated value for the estate, as long as you provide an undertaking that our statute here in Ontario provides for.

Ian Hull: That’s right.  It gives us some flexibility and so it means that you don’t have to know the numbers right down to the dollar.

Alright one of the next things that I think of whenever I’m applying for probate is I think of the Affidavit of Execution.  And that’s because you need it, it is such a vital document. I mean, when you’re dealing with an estate, to administer an estate, you have to have a valid Will and you have to prove that it was properly executed with two witnesses in the room at the same time as the deceased. So the Affidavit of Execution is something you want to track down and sometimes that’s not as easy as it sounds.

Suzana Popovic-Montag: And that Affidavit, for people who aren’t familiar with it, is an Affidavit by those witnesses to the Will saying that they were actually present for the signing of the Will and that all the formalities required by the legislation were abided by.

Ian Hull: And some difficulties can arise because, for example, say the Will was done 20 years ago and you don’t have any real information about the Will and the Affidavit wasn’t signed at the time, you can get into some trouble with the Affidavit of Execution in the sense of trying to track it down. So I always remind my clients whenever they do sign their Will up, make sure that they have asked their lawyer where the Affidavit of Execution is and make sure it’s in a secure place, because it is a vital part of the application itself.

Suzana Popovic-Montag: That’s for sure, Ian. And then once you’ve got all this documentation in place and this information all put together, then what you’ll typically do is actually meet with the lawyer and have the documentation signed up.

Ian Hull: Now in Ontario, and I think it’s a useful exercise to go through because when you do this for the first time, I find people are often surprised at just what needs to be involved in an application for probate. Now let’s talk a little bit about some of the people that get notice of the application itself.

Suzana Popovic-Montag: And that basically is all of the beneficiaries who are named in the Will. And so if you’ve got a beneficiary who’s actually a charity, in that instance, you have to serve not only the charity itself but also possibly the Public Guardian and Trustee as well.

Ian Hull: And people forget that when you have made a gift of a charity, what you’ve done is you’ve created a new layer of bureaucracy in the probate process and in the accounting process, if the gift is part of the residue, and we’ll get into more of that later. But the point is, is that it’s wonderful to give to charities in the Will but I notice in the last 10 years certainly, the taxing authorities in Canada have started to encourage us to gift during your lifetime. You get better tax advantages than you used to for that gifting and, quite frankly, on death, the gift to a charity can be a bit cumbersome. It’s not overwhelming, but it’s just another layer in the process.

Suzana Popovic-Montag: And another government institution that you serve with this notice of application, if you have minors who are beneficiaries of an estate, is the Children’s Lawyer’s office here in Ontario. And that is, again, if you’ve got a minor who’s a beneficiary of an estate, you’ll serve the Children’s Lawyer on their behalf, as well as the parents of the minor.

Ian Hull: So we can’t forget, too, because a lot of these Wills will have what we call is a gift-over provision and they will have a situation where there may be a trust or something of that nature, and so there are minor beneficiaries’ interests that need to be protected. And the governing authority gets a copy of it, opens a file and then is in a position to audit your administration, so to speak. So you put them on notice of the Will and you put them on notice of the financial interests.

Suzana Popovic-Montag: And if you have beneficiaries who are actually not capable, whether if mentally or otherwise, you may have to also, in those circumstances, serve their guardian of property or their attorney for property, if they’ve got one that you are aware of.

Ian Hull: That’s a really good point because sometimes people overlook that aspect of the administration.

Now the final step, of course, is to go up to the Court and file the application itself, and that can be done by your lawyer or it can be done by yourself, it depends in your circumstances. So let’s just take a minute now and we’ve filed for the application, we’ve covered off and maybe been a bit surprised at who all knows about the information.  And I say that because, in Ontario anyway, we’re required to say and provide a copy of the Will to the individual who’s a beneficiary. But we’re not necessarily required to put the amount of the estate. You actually file an Affidavit of Execution with the Court and you also file an Affidavit verifying the amount of the assets when you file in Ontario, so that it’s a public document, but it is not necessarily produced in this first series of disclosure steps. So it’s one of those things that I often will say to my clients “Look, you know what, it’s a public record. Maybe you want to go up to the Court, get a copy of the Affidavit that they file in support because in it will tell you the value of the estate and you might get some answers very quickly as to what’s going on.”

Alright, so we’ve got our Certificate of Appointment and now what do we do? This is the document we’ve all been waiting for, so to speak, and we are in a position now to start to show it to third parties to start to meaningfully administer the estate and get access to certain aspects of the assets that we haven’t been – we’ve been prevented from getting until we got this famous probate document.

Suzana Popovic-Montag: And so one of the first things that my clients will normally want is to have a couple of copies, notarial copies, you know, our Court of approval or seal of approval on that document, indicating that it is a valid probate document that they can then take and use with the authorities who actually require it, in order to help them collect and administer the assets of the estate.

Ian Hull: And that lets you get into various… gets access to various assets. It’s like getting into a safety deposit box, for example.

Suzana Popovic-Montag: And also closing out bank accounts as well.

Ian Hull: And we talked about in other podcasts and the problem is, is that the banks and third parties will not necessarily deal with you as executor without this formal order.  And banks are classics for that and the brokerage companies are classics for that because they want to know that they’re dealing with the right person before they start to release the funds to the estate bank account. Often the bank will also insist on probate before they’ll even open an estate account. So that’s case by case, but that’s something that, you know, as I say, it’s great to have the document now, get lots of notarial copies of it, use them properly and you’re in a position to start to really meaningfully administer the assets.

Suzana Popovic-Montag: And that’s particularly important when you’re trying to collect life insurance policies which typically are in large denominations. And so you’ve now got that Certificate that you can give to the institutions in order to be able to get those funds.

Ian Hull: Another one asset that we sometimes run into glitches on is RRSPs, here in Canada, and again, with our probate documentation, we can usually complete that transfer fairly quickly.

Suzana Popovic-Montag: As part and parcel of that, too, just other kinds of securities where you have to provide the transfer agents with proof of the fact that you’ve got authority to deal with those assets. And again, you’ve now got it in hand and you can give that to them in order to collect those assets as well.

Ian Hull: And, of course, one of the fundamental assets that you have to concern yourself with is the transfer of real estate. And with many different jurisdictions, it is mixed in terms of whether or not you need probate or not. But I would say, sort of, as a good general rule, probate is almost always required. And so now we can start to transfer and sell real estate.

Okay, now one little twist that some people don’t often think of the beauty of probate and before we get into some of this, what I will call some of the other action items that you can take the steps on with the probate document, are things like dealing with personal affects. And for our next podcast, I want to start to…we’ll talk a little bit about not just personal affects but automobiles, talk about other assets that we can now start to administer with the document in hand, that being probate, and with authority that we’ve been waiting for.

So thanks so much Suzana. Good to have you back and we look forward to our next podcast.

Suzana Popovic-Montag: Thanks to you, too, Ian. And just a reminder to our listeners, that we’ve got our comment line set up at 206-457-1985.

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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Posted on March 11^th, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi and welcome to Hull on Estate and Succession Planning. You’re listening to Episode 103 of our Podcast on Tuesday, March 11^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?

Ian Hull: Just terrific, thanks. How you doing?

Suzana Popovic-Montag: I’m well, thank you.

Ian Hull: So just as a reminder, of course, we have our call in number at 206-457-1985 and if you want to look at our blog, our daily blog, go to our webpage at www.hullandhull.com and our e-mail address at hullandhull@gmail.com. We always welcome feedback and look forward to hearing from anyone who has any comments or wants to engage us at that level.

Suzana Popovic-Montag: So Ian, at the end of our last podcast we were just, sort of, wrapping up some of the preliminary considerations that an estate trustee who comes to meet with a lawyer and the lawyer, him or herself, would consider before actually doing that magical document, that application for probate or a Certificate of Appointment of Estate Trustee. And I just thought maybe before we move into that second phase of this whole process, we might just do a quick recap in terms of the discussions we’ve had over the course of the last few podcasts.

Ian Hull: Well go ahead, I think you’re best suited to recap as we go along.

Suzana Popovic-Montag: Great Ian. We did start, of course, by discussing sort of the difference between an estate where there was a Will that was going to determine how it would ultimately be distributed to the beneficiaries of the estate, and situations where there was no Will. And as we looked into a little bit of the discussions and considerations that people would think about in terms of funeral arrangements for a deceased and we talked about the situation where there are certain remedies that are available to a surviving spouse and what those options would be in the circumstances. We then touched upon briefly some discussions on the custody of children and guardianship of a child’s property in circumstances where a parent has died and we also had an interesting discussion on beneficiaries of an estate and things that would arise during the course of an administration and how we would look for beneficiaries, how we would advise them of their rights and that was a really neat podcast.

You did a solo podcast at one point, I believe it was our 100^th podcast, where you talked about valuation issues and that’s another thing that’s really important in the context of an estate administration. And if I recall correctly, our last podcast we talked about tax returns and considerations that executors and lawyers who are advising them should sort of keep in mind when they are dealing with these situations.

Ian Hull: Great, thanks very much. So now we’re at the point of getting probate. And I wanted to spend a couple of minutes on two fundamental points on this at this point in the process. One is probate itself.  It is typically required by banks and investment institutions and third parties who want confirmation by the Court that this is indeed the last and valid Will of the deceased. So its – and we’ll talk about it throughout this series no doubt, when you need probate and when you don’t need probate. But for the purposes of our discussion today, let’s presume of course we need probate.  An easy example would be if I had an investment account with a couple hundred thousand dollars in it, a bank or financial institution just isn’t going to release it typically without probate.

Suzana Popovic-Montag: And another common example is if there’s real estate. If there’s a house, or a cottage or something like that. In those situations, you’ll typically need probate.  But I think you make a good point about the fact that you don’t always have to. And that’s something that we should keep in mind.

Ian Hull: At this point in the process, typically when you’re going to make this application, the person has died some weeks later, you’re starting to discuss this – it’s not something you move urgently on always. In most cases, you’re maybe even a month or so after the death. So things have settled a little bit and so you want to take a deep breath and I want to encourage my clients to look at the nature of the assets and decide if you need probate at all. And we’ve talked about in past podcasts the fact that you could have primary and secondary Wills so that’s a two Will option. And those two Will options, give me one Will for the assets that need probate, another Will for the assets that don’t need probate, are important tools and you want to make sure you’ve sat down and considered those options because while the probate fee is not insignificant, it’s still 1.5% of the assets of the estate, and anything you can avoid paying in tax is a good thing.

Suzana Popovic-Montag: That’s for sure.

Ian Hull: The other thing that probate triggers, it seems from our practice and yours and my practice is predominately dealing with mediation and litigation in estates, is the fact that the act of applying for probate is often the tipping point in terms of contentious proceedings. As I say, typically we’re at some time down the road, maybe a month or so or maybe more after the date of death. The parties have started to consider their positions and when you go to apply for probate, this is often the time where you have to fish or cut bait.  Are you going to accept the Last Will and Testament being the document that’s being put forward at that time or are you going to challenge it? Are you going to take a run at it, so to speak? So it seems to me anyway, this is a really important turning point to sit back, consider your options, get advice, because the third component of this is, of course, if it isn’t contentious and you’re going to proceed with probate, now the clock is truly on in your fiduciary hat. I mean it’s probably on at law, and we won’t get into too much of that detailed analysis before you get probate, but it is certainly on, you’re a true fiduciary once you apply for probate. So you can’t let go easily and it’s an important turning point from even a non-contentious standpoint.

Suzana Popovic-Montag: Well, Ian, I think with that introduction, maybe we’ll look at some specific procedural requirements that actually arise when you’re trying to apply for a certificate, starting, of course, with deciding in what jurisdiction you’re going to actually file that application.

Ian Hull: And certainly that’s crucial because in a contentious environment, you typically have to commence your proceedings in the place where the deceased died. And obviously in a non-contentious, where you’re just applying for probate, you have to do it where the deceased died.  And in our mobile world, it’s not an easy answer all the time. In Ontario, for example, you can look to Section 7 of the Estates Act to get some guidance.  But what if you’re a situation where you have a person who lives predominately in Florida during the winter and then up in Canada, but lives at the cottage in the summer and then lives at a condominium in the off season, so to speak, and the rest of the year at Florida? There can be some discussions as to where you want to apply for probate. And some tricks of the trade because you may be able to get probate quicker in different jurisdictions. You just have to be careful.  The Local Registrar will ultimately be the one who will decide where it should be brought and I find that it’s not worth getting too cute about where the deceased died, because the Local Registrars are too smart to let us, sort of, take advantage of that.

Suzana Popovic-Montag: And that’s especially the case when there’s a timing sensitivity, like if you want to sell, for instance, a piece of property that’s owned by the estate and you need that certificate quickly, you want to make sure that you’re sort of in the right jurisdiction from the get go, so that there isn’t unnecessary delay because, yes, you’re right, those Registrars are very, very bright.

Ian Hull: So now in terms of the application, we don’t want to go through too much detail, the Ontario forms are particular and across Canada each jurisdiction has their own particular forms. But the one important theme and we’ve applied for probate across Ontario, certainly in different provinces…the one clear theme is back to the Registrars, the Court is very careful about these documents and they literally have to be letter perfect. And if they aren’t, the Local Registrars send them back for corrections.

Suzana Popovic-Montag: Another thing that we definitely run across quite frequently is the fact that a bond is required if the deceased died without a Will or if the person who’s applying to be an estate trustee doesn’t reside in Ontario. Or the different situation, of course, is if you’ve got an applicant who’s a trust company, then they don’t need a bond, so even if they’re not named in a Will, per se.

Ian Hull: And that bonding requirement can be tremendously onerous because…a couple of things; one is, is that you’re putting your own personal assets at risk. Basically, the Court wants to know that if you abscond with the money as an executor, there’s something behind it, some security to make sure the beneficiaries ultimately get their money. And if you haven’t been a named trustee, the Court gets a little more nervous obviously. But bonding requirements are really onerous and the bonding companies, certainly across Canada, are getting very, very tight about when they will issue bonds. The premiums are very expensive and so a lot of the time we’re finding anyway in our practice that we have to turn to the trust industry to step in, in administrations of this nature. And one of the things you always hear is, “Oh my gosh, the trust companies are going to be too expensive.” When you get that answer from you clients, Suzana, what do you typically tell them?

Suzana Popovic-Montag: Well then you say to them, “Well what is your alternative?” and as you say, the bonding requirements are really difficult and as we know, certainly from the profession, that there’s just a few companies out there that will even do it and when they do, it is very expensive.  And typically it tends to be less expensive than having a professional trustee in place.

Ian Hull: And the one great fallacy, too, is that the trust companies don’t charge anymore than anyone else. They can’t. There’s a certain limit to what they can charge. And because they’re in the business, what I have found is, is that I will typically go to the trust company, negotiate the fee before we agree to put them on as the estate trustee. So you get a competitive fee for their services. And in fact, it can often be more competitive than if you went to a local lawyer or accountant because they’ve got an infrastructure set up that is more efficient for them to run an administration than with some. So it’s worth looking into anyway.  I mean, we’ve got some great local counsel and local chartered accountants who will do it in a very efficient way too.  So it’s one of those situations where I just think, when you have a bonding requirement being thrown at you, it’s worth pushing back to your lawyer and saying, “Wait a minute. I mean, okay, I understand the Courts are going to insist on that.  But what alternatives do I have and does the estate have and can we avoid this?” and those are just a couple of suggestions.

Suzana Popovic-Montag: Those are great thoughts Ian, thank you very much. I think that basically brings us to the end of this podcast. Thank you for joining me and I look forward to our next podcast.

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 Estate and Succession Planning, Ian and Suzana  talk about the first, pre-probate stages of administering an estate.

Posted on December 11^th, 2007 by Hull & Hull LLP

David Smith:  Hello and welcome to Hull on Estates.  You’re listening to our next episode in our continuing podcast series.

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 morning.  Today Allan Socken and I are speaking about probate issues.  Good morning Allan.

Allan Socken:  Good morning Dave.

David Smith:  Allan, we thought what we would do in terms of our discussion today is talk about probate generally and when probate is required in the province of Ontario.  Now, Allan, am I correct in thinking that probate is now a somewhat dated term?

Allan Socken:  Yes, that is correct, David.  Currently the term that is used when probating a Will is referred to as a Certificate of Appointment of Estate Trustee with a Will, or the case when a person dies without a Will or intestate, someone can apply for what is known as a Certificate of Appointment of Estate Trustee without a Will.

David Smith:  Oh, so that’s interesting.  So, you know, quite a different terminology.  But I suppose in a sense it’s more lay friendly in the sense that it’s more evident exactly what we’re talking about.  I think the term “probate” maybe had confused the public or created this impression that there was something arcane or overly legally technical about a process which simply consists of proving the validity of the last Will, right?

Allan Socken:  Correct.

David Smith:  And Allan, why do we need probate?  And let’s refer to it as probate just because it’s easier in terms of using less words.  But why do we need probate typically in an estate?

Allan Socken:  Typically probate is required because it enables the estate trustee, which was previously known as an executor, to administer the assets and liabilities of the estate as well as the fact it gives some comfort in showing that even if the Will subsequently is determined not to be the last Will and testament of the deceased, any administration of the estate that has taken place until a subsequent Will is shown to be valid, leaves the executor without any liabilities and the administration that has occurred to date is fine.

David Smith:  Right, and that’s an important point, isn’t it, Allan?  I mean, if we’re, as lawyers, advising executors, we want to make sure first of all that if they come in with what they say is the last Will, we want to be sure that it is the last Will, because if it isn’t the last Will, it’s of no validity.  And the Court’s seal of approval, which is what a Certificate of Appointment of Estate Trustee is, essentially tells the world that this executor has the authority to act under that Will.  So I completely agree with that in terms of the kind of advice that we want to render to an executor.  If we’re thinking about who demands probate, who are we talking about here, Allan, in terms of we think about estate assets.  Say we’ve got a house, some bank accounts, an investment portfolio, a safety deposit box, that all belong to the deceased.  Can we ever access those without a Certificate of Appointment of Estate Trustee with a Will, or is it typically going to be required?

Allan Socken:  Well there are certain circumstances in which a Certificate of Appointment of Estate Trustee with or without a Will is actually not required.  For example, property that is registered under the Registry Act does not require probate, as it was known previously.  In addition, insurance policies, RRSPs, RIFs, all usually don’t require probate as well.

David Smith:  Well let’s talk briefly about that point.  I guess when we’re talking about those last three items you mentioned: insurance policies, RIFs, RRSPs, typically the deceased is going to designate a beneficiary of those assets other than the estate, correct?

Allan Socken:  Correct.

David Smith:  And the purpose, of course, for doing that is to avoid estate administration tax or probate fees.  And maybe this is a good segway to just briefly talk about the merits of probate fee avoidance, because if we do designate beneficiaries of certain assets that pass outside of the estate, we avoid probate tax.  Likewise, if as a testator and in planning my affairs, I jointly hold assets with someone rather than keep them in my own name, when those assets pass by right of survivorship to the survivor, they’re not going to be included in the probate fee calculation either.  So I think, Allan, over to you in terms of can you just explain to us briefly what you understand about estate administration tax, or probate fees as they’re commonly called, and how they’re charged?

Allan Socken:  Well, up until recently, until 1998, there was a direct tax levied in respect of probating a Will.  In a sense, it was probate tax.  However, in 1998, the Supreme Court of Canada found that the probate fees charged by the Ontario government were unconstitutional, as they constituted a direct tax which could not be levied by regulation.  The government then proceeded to quickly amend the process and would satisfy the Supreme Court’s ruling by invoking something that is known as the Estate Administration Tax, 1998.  And in effect, what the tax says is that for $5 for each $1,000 or part thereof of the first $50,000 of the value of the estate, is taxable and $15 for each $1,000 or part thereof by which the value of the estate exceeds $50,000, is taxable.

David Smith:  I guess, and you know, Allan, my initial thought whenever I hear that figure is, you know, gee, that’s just not a really exorbitant tax.  I mean the lengths to which people will go in avoiding this tax, which amounts to $250 bucks on the first $50,000 of assets, sometimes seems to me to be overkill.  I mean this is not a terribly significant tax in monetary terms, is it?

Allan Socken:  No, because it all comes down to what is meant by the term “value of the estate”.  In a sense, value of the estate simply means the assets held under Section 32 of the Estates Act.  In effect, the actual assets held by the deceased at the time of death, excluding assets that were jointly held and other things that we’ve talked about before such as insurance policies that don’t form part of the estate.  So in effect, even though the tax sounds as though a substantial amount of the deceased’s assets will in fact be taxable, in reality, a substantial portion through careful estate planning may in fact not be taxable.

David Smith:  Right, that’s an excellent point, Allan.  And I think that’s something that everyone should sort of…you know, estate planning is a good thing and the idea of avoiding estate administration tax…I mean, nobody likes paying taxes for sure.  But I sometimes wonder when I think about the costs associated with litigation over questions left by a deceased respecting whether or not he intended a jointly held asset to result back into his estate or her estate, I sometimes wonder if had the deceased known what would have occurred and saw how much litigation can be created by these attempts to avoid probate tax which often can create confusion, whether in fact that testator might have said, you know what, I’m going to just pay the tax and keep things simpler.  Of course, the other way to do this is to document your intentions and, you know, that’s a subject for another podcast altogether.

Allan, I think just to keep things moving along and to do as much of a sort of survey of probate as we can do, let’s talk a little bit about probate as it relates to litigation.  Now I understand that there’s a specific document or appointment called a Certificate of Appointment of Estate Trustee during Litigation.  You’re familiar with that?

Allan Socken:  Yes, David.

David Smith:  And Allan, how does that work?  How does that differ from an estate trustee with a Will or an estate trustee without a Will?

Allan Socken:  An estate trustee during litigation simply means that the estate trustee or executor is in charge of preserving the assets and dealing with them with the best interests of the beneficiaries in mind throughout the litigation process.  And that’s more it’s job as opposed to simply administering all the assets when the Certificate of Appointment of Estate Trustee is given.

David Smith:  Right.  I think the fundamental distinction is what you touched upon which is, well, the biggest difference is an estate trustee during litigation, as you implied, cannot distribute the estate.  His or her job is to hold the assets, do everything that an estate trustee would otherwise do but not distribute the estate, so that a judge can ultimately decide who’s going to get the money.  And an estate trustee during litigation is appointed by a Court Order and is under the supervision of the Court.  And that’s a fundamental distinction from the appointment of another estate trustee.  In a sense, it is a grant of probate but it’s strictly regulated and restricted by the appointment of the Court and the fundamental distinction, as you and I both alluded to, is the fact that the estate trustee during litigation simply cannot distribute without an Order of the Court.  And I might point out, even if all the beneficiaries or litigants to the case agree that they can distribute, that estate trustee during litigation is still going to say to them, you know what, I was appointed by a Court Order and I’m going to need a Court Order directing me to distribute even if you all agree that I can distribute.

Now if…an interesting question which I’ve run into frequently is, do you need probate or an appointment of an executor to commence litigation or respond to litigation?  Have you run into that issue before, Allan?

Allan Socken:  I have with several of my files, actually, to date.  And that’s a very interesting question, simply because from my understanding, is when commencing litigation, initially an executor or estate trustee is not required.

David Smith:  What’s the applicable rule, Allan?

Allan Socken:  The applicable rule is Rule 9.03(1) of the Rules of Civil Procedure which states “where a proceeding is commenced by or against a person as executor or administrator before a grant of probate or administration has been commenced and the person subsequently receives a grant of probate or administration, the proceeding shall be deemed to have been properly constituted from its commencement”.

David Smith:  Right, and you know, that’s important, Allan, because you can often have cases where litigation is necessary.  Where, for instance, an estate needs to commence a claim to comply with the limitation period or what have you.  And it may be that the litigation has to be commenced before the grant of probate occurs.  And so what the lawyer in that situation should do is issue the proceeding naming simply the estate of, you know, John Doe, as the plaintiff and then later on, he can correct it in terms of naming the appointed estate trustee once probate is granted.  So, you know, that’s a good point as well.

Allan, I’ve really enjoyed this discussion.  It was good to touch upon these various issues and certainly I look forward to podcasting with you in the future.  And I think what we can leave this podcast with is a better understanding, hopefully, of the situations in which probate is required.

Allan Socken:  Thank you very much, David.  I also enjoyed podcasting with you.

David Smith:  Thanks Allan.  Take care.

Allan Socken:  You too.  Bye-bye.

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.

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