And, fittingly, just in time for the sweet sound of “trick or treat” Mars, Inc. completed its purchase of the Wm. Wrigley Jr. Company earlier this month; the $23 billion transaction was initiated earlier this year by Mars. Two wealthy family dynasties reached a deal to secure for each giant a greater piece of the world’s confectionary market.  

The privately-held Mars with its headquarters in Virginia controls information very tightly; three grandchildren of Franklin Mars apparently live on a vast ranch in Wyoming. 

In 2002, after his father’s death in 1999, issues arose about Bill Wrigley Jr.’s right to vote the company shares held in a trust set up by his grandparents three decades earlier. The trusts sheltered nearly $3.2 billion, which was particularly important for him given his pending divorce. Presumably, shares held in trust are not part of the family assets to be divided at the time of divorce. The claimant insisted that the votes attached to the shares in trust were to be shared by other beneficiaries. The recent transaction seems to have smoothed over some family differences.

In Ontario, recently, Frye v. Frye Estate, 2008 ONCA 606 (CanLII) emerged with less fanfare but it is significant nonetheless. The Court of Appeal addressed the tension between a shareholders’ agreement and the rights of a beneficiary who received shares under a Will from a signatory of the agreement.  The Justices seem to have neatly balanced competing estate and corporate principles.

Have a good night.  Boo.

Jonathan

The Application seeking approval of the variation is usually brought by one or more of the capacitated beneficiaries. The respondents are typically all of the beneficiaries who are not named as the applicant(s) and the trustee (unless the trustee is the, or one of the, Applicant(s)). As a trustee is to act impartially toward the beneficiaries, it may not be appropriate for the trustee to bring the Application depending on the circumstances.
 

The grounds being relied upon for the relief being sought are also included as are the materials being relied on. 

The supporting affidavit typically includes the relevant facts and verifies the recitals in the Deed of Arrangement. Any pertinent document such as the trust document, the listing of the trust property, and documents from another proceeding from which the variation arose, can, as necessary, be made exhibits to the affidavit.

The draft Judgment typically refers to all of the materials filed with the Court and includes, as necessary, provisions that, among other things, address the appointment of the litigation guardian, the approval of the Deed of Arrangement of behalf of incapacitated beneficiary, any ancillary relief and costs. 

Have a nice weekend. Craig
 

The approach to, and content of, the Deed of Arrangement will most certainly depend on the circumstances involved. The approach to the Deed of Arrangement may be quite different if the variation arises as a result of an ongoing proceeding (and has been negotiated as part of that proceeding conditional on Court approval) than if it does not.
 

A Deed of Arrangement may (depending on the provision and as necessary) also contain (the following are not meant to be exhaustive) (i) recitals which provide background on the trust, the parties, trustee, potential beneficiaries and provisions of the trust including, as necessary, the term in the trust that is being varied, (ii) a paragraph that the Deed of Arrangement is subject to Court approval on behalf of the incapacitated beneficiary(ies), (iii) paragraphs setting out the variation, with the paragraph number of where the paragraph fits into the trust and indicating how the paragraph fits into the trust, (iv) paragraphs addressing, if applicable, any action that is required as part of the variation, (v) a paragraph allowing for the Deed of Arrangement to be signed in counterpart if there are numerous parties, (vi) a paragraph addressing the payment of the costs of the preparation of the Deed of Arrangement and the Application, and (vii) a paragraph addressing the legal advice obtained.

Thanks for reading, Craig
 

Rule 7 of the Rules of Civil Procedure regulates the bringing of proceedings by or against parties under disability.  As set out in the commentary to the Rule, “its central requirement is that persons under disability must be represented by a litigation guardian…Rule 7.02 creates a presumptive right for a mentally incapable person’s guardian or attorney under power of attorney to act as litigation guardian, so long as the guardian or attorney has the authority to act by the terms of his or her appointment as guardian or attorney.”  

Rule 7.03(2), specifically requires, however, that where a proceeding (ie. a variation of trust) is against a minor in respect of the minor’s interest in an estate or trust, the Children’s Lawyer shall act as the litigation guardian of the minor respondent, unless the Court orders otherwise.

It may also be that a representation order, pursuant to Rule 10 of the Rules of Civil Procedure, is required to have a person appointed to represent persons who are unborn or unascertained and have an interest in the trust.

Although Rule 10 does not refer specifically to the Children’s Lawyer, the Courts have traditionally appointed the Children’s Lawyer to represent this class of beneficiaries.

If there is more than one group of incapacitated beneficiaries requiring representation by the Children’s Lawyer, the Public Guardian and Trustee will often represent one group if there is a conflict of interest.

Thanks for reading.  Craig

In a recent blog of mine (“To vary a Trust or not to vary a Trust: Does a Statute have the Answer?”), I touched upon the Variation of Trusts Act (R.S.O. 1990, c. V.1) as the authority to vary a trust.In today’s blog and several more this week, I will comment on the procedure and documents typically involved with a variation of trust.

Having decided that a variation is necessary, the trust document should be carefully reviewed to ensure that all terms of the trust are properly understood, and to identify all of the persons having an interest or potential interest (actual and potential beneficiaries) in the trust, to consider those that need to sign the proposed arrangement (which sets out the variation proposed), to consider who will require representation before the Court and those that will be affected by the variation.

The procedure for such a variation consists of the preparation of and signature of a Deed of Arrangement (or agreement setting out the variation that the Court is requested to approve), and an Application to the Ontario Superior Court of Justice (to be heard before a single Judge) seeking a Judgment approving the Deed of Arrangement on behalf of the minor, unborn, unascertained, incapable or contingent beneficiary.

The Application materials, in turn, consist of a Notice of Application and affidavit material supporting the variation. A factum will also be required unless leave is sought further to Rule 38.09(4) of the Rules of Civil Procedure dispensing with the necessity of the factum. A draft Judgment should also be submitted when the materials are served and filed.

A Consent to the Application signed by all of the capacitated beneficiaries is best included as part of the Application material.   A letter/document from the Children’s Lawyer/Public Guardian and Trustee indicating their position (ie. that they do not object on behalf of their respective interest) is also typically a part of the Application materials, unless the Children’s Lawyer/Public Guardian and Trustee are attending in Court at the Application before the Judge.

In tomorrow’s blog, I will take a look at the appointment of the litigation guardian for the minor, unborn, unascertained or incapable beneficiary of the trust for the purposes of a variation of trust.

Thanks for reading. Craig

In the case of multiple executors, in order to avoid a conflict of interest the controversial issues need to be addressed and discussed in detail. For instance, how will executor’s compensation be apportioned as between them? Is there a different relationship between each executor and the beneficiaries? Does one executor disagree with any actions taken by any of the other executors? Will their evidence be the same? Do the executors share the identical expectations of how the litigation should proceed as well as in respect of potential settlement? The potential disagreements can be discovered by exploring the issues up front.
 

Joint retainer agreements or letters explaining the joint retainer relationship can set out the above issues so that clients and their lawyer are clear on their relationship and the passing of accounts.

Canadian Olympic medal count: 13. Keep watching.

Craig
 

One is an Ontario Bar Association (OBA) full day program on September 23, 2008 commencing at 9:00 a.m. entitled “Trusts, Trustees, Trusteeships III – All you need to know and more”. This is the third year that this program on Trusts is running. The use of Trusts and Trust drafting are said to be the primary focus of this year’s program.

Topics include: Valuation Issues and Discretionary Trusts, The Effect of Bankruptcy on Estate Planning, Testamentary Trust Planning, The Use of Trusts as a Will Substitute, Charitable Gifts made by a Trust, Trust Variations, Insurance Trusts and Declarations, Judicial Supervision of the Exercise of Trustee Discretionary Powers and Trust Drafting.
 

This program is being held at the OBA Conference Centre, 20 Toronto Street, 2nd Floor, Toronto. Information on this program can be found on the OBA’s website www.oba.org/.

The other program is Hull and Hull LLP’s next Breakfast Series on October 8, 2008. Hull & Hull LLP’s long running Breakfast Series continues to provide members of the bar with presentations on topics of importance to estate practitioners.

At the October 8th meeting, the following presentations will be made: “The Will to Decide - What to do When Capacity is in Question” by Natalia Angelini, "Dealing with the Body, and other Estate Issues that Arise Immediately Upon Death" by Paul Trudelle and “Recent Caselaw Developments” by Ian Hull.

This breakfast meeting is also being held at the OBA Conference Centre, 20 Toronto Street, 2nd Floor, Toronto. Breakfast begins at 8:15 a.m. with the Presentations starting at 8:30 a.m. A fee of $30.00 ($28.30 + $1.70 GST) is payable to Hull & Hull LLP upon registration by cheque, VISA or MasterCard. Materials are included.

A CD or Cassette Tape recording of the Breakfast Seminar will be available at a fee of $20.00 ($18.96 + $1.14 GST)

To register for the Hull & Hull LLP Breakfast Series, please contact Diane Labao at (416) 369-1140 (press 0) or by email to dlabao@hullandhull.com.

Have a great day.

Craig
 

This week on Hull on Estates, Ian and Suzana discuss developments in will changes. They reference cases from Key Developments in Estates and Trusts Law in Ontario ed. 2008.

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

Accounting Concepts and Definitions - Hull on Estate and Succession Planning Podcast #121

Posted on July 16, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #121 of our podcast on July 15^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. Just want to remind everyone to please feel free to give us a call on our call-in line, 206-457-1985.

Suzana Popovic-Montag: And the number of course, is also in our show notes along with our e-mail address which is hullandhull@gmail.com. And of course you can visit our blog at estatelaw.hullandhull.com as well.

Ian Hull: So we’ve been having some great responses from our feedback line, both by the phone and by the e-mail, and we try to answer as many, well we always answer every single one of the inquiries, it’s just a question of how fast we get to it. This week I just wanted to start off with a response to a general inquiry we got on the e-mail about the whole series that we’ve been doing on the accounts. The comment that was made is, is that we are going through what are technical legal issues and they weren’t complaining in the e-mail but they wanted us to maybe recap a little bit in terms of the general framework of estate accounts, and in particular, maybe drill down on some of the core concepts and definitions, more from a definitional standpoint. So, as we started off in our podcasts in this little mini-series, we reminded everyone to first go to the Will or the trust itself. That’s an important starting point.

Suzana Popovic-Montag: And then you want to also of course, check whether there are any Court Orders that have been made, somehow interpreting either the Will or the trust documents so that it may mean something a little different than the black and white that’s actually contained in the document itself.

Ian Hull: And then backing down, of course, drilling down on the main documents and that is if there are prior accounts in the past or prior judgments.

Suzana Popovic-Montag: And then you’re going to look at starting with an original list of the assets that comprise the trust and how they were actually broken down in terms of 1iquidity and the nature of the assets that are in there.

Ian Hull: So the best typical page we see in a formal pass of accounts are the summary pages itself and that’s an important document within the document itself, but the next core listings are what are typically known as the capital receipts.

Suzana Popovic-Montag: And that of course, is followed by the capital disbursements.

Ian Hull: And again, we’re focusing on definitions today, and receipts, of course generally, are both capital, whether it’s both capital and income beneficiaries, you’re going to see capital receipts and disbursements. And with respect to that you’re going to see revenue receipts and disbursements in terms of a format of the accounts. But a capital receipt…

Suzana Popovic-Montag: A capital receipt itself will include all of the monies that have been realized on the realization of original assets in the trust or the Will and the profits on the sale of any investments that have been made by the executors or trustees.

Ian Hull: Now, with regard to staying with definitions and receipts, we turn to, of course, the concept of revenue receipts.

Suzana Popovic-Montag: And just to be clear, then Ian, that’s the distinction between a capital receipt when there’s both a capital and income beneficiaries in a trust and that’s really the only situation where a trustee or an executor has to break that down, otherwise we will just see receipts and disbursements.

Ian Hull: And so the revenue receipt itself, it’s really just a statement of revenue, money coming in and includes income that’s been received on the original assets, on investments that have been made by the executors.  And these type of receipts are generally interest and dividends and the entries usually need to contain sufficient information so you can find out where the receipt comes from, what asset it has been generated from, whether it’s capital or whether it’s from the investment account. 

The next thing that we talk about is, of course, we’ve talked about the general assets that are there, that’s like the inventory so to speak.  Then we’ve talked about the capital receipts.  Then we’ve talked about revenue receipts. The other thing, of course, is what goes out, and that’s disbursements.

Suzana Popovic-Montag: And the disbursement account should typically show to whom the money was paid out and on what account it was paid, with enough detail in there to make the item self-explanatory and, of course, indicate the amount that was ultimately paid.

Ian Hull: So all vouchers are typically numbered and so when you see formal accounts, you’ll see a numbering system so every single entry is actually numbered itself.

Suzana Popovic-Montag: And then in terms of the definition for the capital disbursement account, that’s a statement of all the disbursements that have been made including the payment of debts or funeral expenses, legacies that are provided for in the Will or the trust, and expenses that are related to things like appraisals and valuations for those assets, as well as solicitor’s fees and other disbursements that relate to the actual initial administration of the estate.

Ian Hull: So in terms of the out and we’ve talked about the in and part of the out, the other part of the out is, of course, revenue disbursements. And that is the statement of the income where money goes out, reflecting payments out of income such as income tax, that’s an easy example. Or taxes payable on capital gains on the date of death when you file your terminal return, that’s typically a central tax that is paid and dealt with. And in our last podcast, of course, we talked about the investment account itself and the form of it.

Alright, now we’ve wanted to sort of go through this analysis and this sort of definitional approach today because we are coming to, nearing the end of our discussions on how we are to account as executors. And one of the fundamental things that we’ve talked about throughout is an important question and that is, do the accounts balance?

Suzana Popovic-Montag: And when you say that, Ian, I guess you’re suggesting or questioning whether the total of the capital in the revenue receipts, less the total of all the capital in the revenue disbursements will actually equal the investments on hand and the balance in the bank account. And that’s the formula to make sure that the accounts do, in fact, balance.

Ian Hull: I’m a bit mathematically challenged, let’s break that down just one more time. So we take, to make sure (a) we need the accounts to balance, as best we can. That’s the first thing a judge looks to when they pass accounts, and actually beneficiaries do. So if I’m trying to balance the account, I take the total of what we’ve called the capital, that’s a total of what came in, and take all of the capital receipts plus all of the revenue receipts.  And then what do I do? So I’ve got those two items added up.

Suzana Popovic-Montag: And again, if you don’t have a distinction between income and capital beneficiaries, if you have an outright distribution, then you’re really just looking at the receipts. So capital receipts and revenue receipts, less the total of capital and revenue disbursements, so everything that’s come in, minus everything that’s come out, should equal what you have invested on hand, together with the balance in the bank account.

Ian Hull: Alright, so that is really, I mean, we can’t overemphasize the importance of that because really the minimum expectation of the parties is to do that.

Suzana Popovic-Montag: And that, I guess, then takes us to the actual reason that most trustees or executors will in fact prepare formal accounts in addition to, of course, getting the Court’s stamp of approval, and that is the heading of compensation.

Ian Hull: And that’s really, I guess that’s the second last thing we want to talk about in this series is compensation. We’re going to talk about and continue to talk about compensation throughout our various podcasts, because it is such a central part of, there’s the obligation to account and there is the reality that people want to get paid to account. So, but when we’re looking at accounts, let’s talk a little bit about what we’re looking for in the context of compensation.

Suzana Popovic-Montag: Well the easiest starting point, of course, is to compare the totals in the accounts to the figures on the statement of compensation.  And what we mean by that is, because we’ve talked about on previous podcasts the fact that there is a sort of rule of thumb in terms of an entitlement to compensation based on the value of the estate. And when you do the calculation, you want to apply the right percentages to the right total amounts in order to break down the compensation and then be able to justify it at the end of the day.

Ian Hull: Alright, so just in general terms, we’ve talked about this in the past, but in general terms, you are expected to be paid approximately 5% for your hard work throughout the administration of the estate. And how is that generally broken down?

Suzana Popovic-Montag: In terms of the big picture, Ian, it’s 2½ % on all of the assets that have come into the estate and then 2½% on all of the assets that are paid out of the estate.

Ian Hull: Alright. And that figure itself, the actual percentage figure, is that something that’s fixed or how do I work with that number?

Suzana Popovic-Montag: It really is just a rule of thumb and the cases will indicate as much.  And so when you’re looking at accounts, and you’re sort of sitting back on the other side, from the beneficiary’s perspective and wanting to ensure that the trustee is entitled to the amount that they’re claiming, or want to submit that they’re not entitled to as much, you’re going to make the arguments that you need to, to suggest that reduced percentages should apply. And we can discuss some of those situations where we might want to say that less than perhaps 2½ % is what the trustee is entitled to.

Ian Hull: Alright, well I think we really need to talk a little bit about, we now have the general rule.  And as with law and life, every rule is made to be broken.  So I think in our next podcast, we should spend some time just talking about what will typically be looked at in terms of deductions from compensation, the changes to the general rule, whether up or down.  And most of the time it’s down but we can also talk about some of the developments in respect of the compensation being increased up. So why don’t we save that for our next podcast?

Suzana Popovic-Montag: Okay, Ian, that sounds good. Just a reminder of our call-in number to anyone who’d like to call in, 206-457-1985.

Ian Hull: And please keep the e-mails coming and go to our webpage at hullandhull.com and drill through all of the various source documents we have.  We have a ton of work that we’ve done and put on the web for passing accounts materials, but feel free to e-mail us at hullandhull@gmail.com.

Suzana Popovic-Montag: Thanks very much, Ian.

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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Today’s case is Simpson v. Leardi, [2005] O.J. No. 4282 (Ont. S.C.J.).  

In Simpson, the deceased had left a substantial estate. The plaintiff had brought an Application pursuant to the Succession Law Reform Act seeking support in the amount of $3,750 per month. The plaintiff was already receiving $1,000 per month pursuant to the deceased’s Will, leaving an alleged deficiency of $2,750 per month. The Court ordered that the Application be converted to an action and made an order awarding the plaintiff $2,750 a month in interim support.

The parties were subsequently in agreement that the plaintiff’s personal financial circumstances had improved since the interim order. The estate of the deceased was worth $10 million and the plaintiff’s assets were worth approximately $3 million.

The plaintiff cited Cummings as support for her position that when the moral duty of the deceased to her is taken into account, the plaintiff should receive her fair share of the deceased’s wealth. The plaintiff conceded that based on a “needs based” analysis, she would not likely obtain a support order. The plaintiff contended, however, that the interim order should be maintained.

The Judge terminated the interim support, declining to accept the plaintiff’s argument that Cummings allows a court to take into account the respective wealth of the parties and reapportion that wealth in a “fair” manner. 

The judge noted that it was important that after the parties’ positions are put forward at trial, a judge may well determine that the plaintiff is entitled to more support than the $1,000 stipulated in the deceased’s Will. The plaintiff had not established, however, at the time of the motion, a continued need for interim support. 

Have a good weekend. Craig

Posted on May 27, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #114 of our podcast on Tuesday, May 27^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: Fantastic.

Suzana Popovic-Montag: That’s good.

Ian Hull: So just to remind everyone to make sure that if you have any comments, to call in and, of course, the number is 206-457-1985.

Suzana Popovic-Montag: And that number, of course, is in our show notes along with our e-mail address which is hullandhull@gmail.com.

Ian Hull: Okay, Suzana, why don’t we come back to some of the discussion we were having in our last podcast because of the importance of the accounting. And we sort of left off in our last podcast talking about one of the big roles that we have, when once we become an executor.  And probably, arguably, the most important role of that is, to keep good records and to account financially for your conduct. I thought what we might do today is talk a little bit about, maybe, I don’t know if we’ll call it a checklist, but just sort of things to watch for when we’re going through this process, because these items here that we want to talk about today are things that the Court will typically look to when, ultimately, if you do get audited by a judge, what the expectations are of you as a fiduciary and as an executor.

Suzana Popovic-Montag: And just a reminder, of course, that you don’t necessarily have to prepare Court format accounts.  There are situations when an informal accounting of all of the ins and outs of the estate, so to speak, is prepared and that, similarly, will be reviewed by beneficiaries and you want to, as you say, sort of keep things in mind or what to look for in either of those two situations.

Ian Hull: That’s true and I think some of these comments, most of these comments anyway, reflect what you need to watch out for, whether you formally pass your accounts or whether you’re just keeping them informally.

Suzana Popovic-Montag: And the first thing that I normally do, Ian, when I’m looking at a set of accounts that have been prepared by an executor or when I’m telling people to prepare accounts, is to actually read the entire Will and any of the Codicils that are associated with it.  So that you know as a starting point what the executor is supposed to do, who they’re supposed to pay out monies to and how they’re supposed to ultimately administer the estate.

Ian Hull: That is such a crucial first step and the comments about sort of what we need to look to when we’re going to be audited, either informally or formally by the Court, also reflect the expectations in large part for those who are appointed guardians or who are appointed attorneys under Powers of Attorney.  So it’s crucial to look at the Power of Attorney document, for example.  Or if we have been appointed under a Court Order as a guardian, look at, what we call in Ontario, the Management Plan or what was the scheme of expectation as to how money was going to be spent. If you skip over this stage, you can miss important factors.  And one example would be, if you haven’t read the Will carefully, you may not realize that it’s a trust Will or it is a straight outright distribution Will. And that would dramatically affect how you’re supposed to keep your records, for example.

Suzana Popovic-Montag: And, of course, if you’re looking at actual responsibilities of an executor, normally you’ll look to the Will to find what those responsibilities are.  For instance, investment powers, if there is in fact, this trust Will situation, you want to know what kind of investments the executor is authorized to invest in, or what kind of powers and duties they have in those responsibilities in those situations.

Ian Hull: So another preliminary step to consider in the course of preparing for this ultimate look-over-your-shoulder is to make sure you’ve looked at any other prior Orders of the Court or any judgments of the Court, if there’s been a prior passing of accounts by a Court. It’s crucial to look at that judgment because that gives you your starting balance for the next set of accounts, so to speak. But there may be other Court Orders that have said that, for example, there may have been an interpretation of the Will or the trust that’s involved, which tells the Court how, tells the parties as well, how to administer the estate. 

I was involved in a case years ago where I had a client come in and say, “Geez, I need you to pass these accounts” and we had to go back about 40 years and approximately five years after the date of death of the deceased.  So 35 years ago there was a Court Order that identified that the widow of the deceased got an Order for an extra payment under the Will. And that, of course, created a new trust in that example and it changed the whole accounting format. Now if we hadn’t drilled back and looked at that Court Order, we may have set up the accounts in the context of what we thought was the Will provisions.  But there was a Court Order subsequent, under what we called the Dependant’s Relief Act in those days, and it changed the whole distribution of the assets of the estate. So we needed to make sure that we had all of the core documents in front of us before any mistakes may have been made in the context of preparing our accounts.  And in that case, the accounts were just prepared informally, but we would have looked like we had real egg on our face if we hadn’t incorporated this dramatic change which was essentially creating a new trust.  Notwithstanding the provisions of the Will, the Court said there is a new trust for the widow.

Suzana Popovic-Montag: That’s a great story, Ian, and it really does underscore the importance of cross-referencing all of the information in the situation to make sure that you’ve got the whole lay of the land, so to speak, when you’re doing these accounts. 

Another thing to sort of cross-reference is this list of investments that estate trustees will have if there is, in fact, a trust in the Will. And you want to make sure that at the end of any earlier period, those balances are the same as the beginning balances for the next period, and that any unrealized assets that were on hand at the close of an earlier period are then the new beginning balances for the next period.

Ian Hull: And just, some of this stuff sounds a little bit daunting over the air, so to speak, because we don’t have visual representations to identify this. But we did do, Anne Werker of our office, did do with Jordan Atin, an excellent two-part series which we have on video format on our webpage, that shows you an example of audit accounts that are ready for Court passing.  So you can see the unique format that’s involved. And it identifies things like the investment account, things like unrealized assets on hand and sometimes, a picture tells a thousand words. You can look at that and feel free to go to the webpage at hullandhull.com and look in the media links for that, so you can get some examples to see what we’re talking about with Court format accounts.

Okay, so one of the other sort of technical areas that we talk about in accounting for estates is the whole concept of receipts, both from a capital receipt standpoint and a revenue receipt standpoint. But why don’t we start with the original assets, cross-referencing it into the capital receipts because really, again, to simplify estate accounting, it is a bank book summary, a line by line date chronology summary of every financial transaction.  So all that’s received comes in, all that’s dispersed comes out. It gets into another, more complicated layer of revenue receipts and revenue disbursements, which is essentially, a good illustration is just simply interest income on the capital of the estate that comes in and out. But let’s stay with the basic starting point, and that is, capital receipts at this point.

Suzana Popovic-Montag: And basically, what happens is that every asset of the estate is recorded as initially a capital receipt.  And so it’s, as you say, this line by line bank book entry. Everything that comes into the estate is recorded at its value as of the date of death and then cross-referenced to this list of original assets, so that you can make sure that everything has been accounted for and has come into the estate.

Ian Hull: So, once we’ve created that, and what we do with estate accounting is actually we, line by line itemize it.  But we also put a cross-reference number to it so that it’s easy to track them. So, for example, say there are ten assets of the estate, a couple of RRSP accounts, a couple of bank accounts, a cottage, that kind of thing, all of those line items, that’s one through ten, so we’ll itemize them as original receipts, capital receipts.  But we’ll also put a number to them so that you can then track what happened to that receipt throughout the administration of the estate because you can always come back to what we call, in that case, Capital Receipt No. 3, for example. What happened with the RRSP account? Well, it’s not just line item 3 on page 16, it’s actually given itself a number. And again, if you look at our precedent on our webpage, you’ll see how important that can be because you end up putting in a lot of line entries because literally, every single transaction is set out in these format accounts.

Suzana Popovic-Montag: And by setting it up in this fashion then cross-referencing it to each of the transactions, it gives everyone an opportunity to see if the particular asset is suddenly being realized at a much higher or a lower value than its original date of death value. And that then leaves it open for an explanation as to why there is, in fact, this discrepancy.

Ian Hull: Alright. Before we wind up today’s podcast, we’ll just make a couple of comments about a unique capital receipt and that is, where you have real property. And with that, there are some preliminary steps you’ll want to take before you start putting the entry in, so to speak.

Suzana Popovic-Montag: And one of the first steps you’ll want to do is to actually obtain an appraisal of the value of that property as of the date of death, and then eventually, if there’s a delay in its sale, then possibly as at the time that you’re considering selling that asset as well.

Ian Hull: And finally, just make sure you’ve identified what encumbrances, if any, are on the real property.  And that, too, needs to be identified in the accounts and how that encumbrance was dealt with. 

So, although some of this stuff is a bit technical, we’re trying to simplify it as best we can.  And we’re going to continue to work through this because this is, without a doubt, seen to be one of the more complex areas in estate administration. But, I can assure you, that in my experience and certainly Suzana’s, this is the one area that is a real hotbed of contentious problems.  So the more we can learn about it now, the more we can avoid the problems later.

Suzana Popovic-Montag: Well, thanks very much, Ian. Just a quick reminder to our listeners, to please feel free to give us some feedback at 206-457-1985 or feel free to visit our blog at estatelaw.hullandhull.com.

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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After his untimely death in 2003, Dr. Robert Atkins' widow sold his business netting proceeds of some $420 million. In his will, the famous diet guru set up two trusts: (i) a spousal trust that would benefit his wife, holding 90% of his assets, and (ii) a research foundation which would get the remaining 10%.   

Cue the sword clanging of the three musketeers:  a self-described entrepreneur, an accountant, and a lawyer, who befriended Ms. Atkins and became the widow's closest advisors as well as trustees for the spousal trust (replacing the two trustees who had been appointed by Dr. Atkins). It is reported that Ms. Atkins subsequently agreed to pay each of them $1.2 million per year (excluding bonuses), signed them to 10-yr contracts, and allowed each of them to take out a $5 million life insurance policy on her life, naming themselves as beneficiaries.  

Fast forward to a Wall Street Journal online report  that a lawsuit had been filed by the Musketeers accusing Ms. Atkins of improperly firing them.  Ms. Atkins and her new spouse asked for the trio to be removed as her trustees and further sought reimbursement of some of their fees.  The relationship between the Musketeers and Ms. Atkins began to disintegrate in 2006 when Ms. Atkins met her new spouse to be, who himself then became increasingly involved in her finances. When the Musketeers balked at her new spouse's demands to encroach for an additional $100 million for Ms. Atkins (above and beyond her $15 million annual income), he started making noise about having them removed as trustees.  

$420 million.    

That's a lot of bread.

Have a great weekend,

David

The article quotes Hull and Hull's own Jordan Atin: "A will is usually the last thing that a parent says to his or her children...". As such, the document "creates a definitive, lasting record of the relationship between parent and child and among a child and his or her siblings. That reason alone explains why estate disputes are so hotly contested".

Jordan Atin states that in addition to addressing the mechanics of the estate plan, solicitors also need to address their client’s family dynamics. Lawyers should consider with their clients the emotional effects of the will may that arise after the testator passes away. 

In the article, Sender Tator, a solicitor with Schnurr Kirsh Stephens, notes that in the context of litigation, “emotion often gets in the way of legal or practical realities; your client is often looking for a certain result, which legally may not be feasible".

The interplay of family dynamics and human emotion is one factor that makes estate litigation so interesting. (It is also a factor that often makes the practice so frustrating!)

One of the functions of a solicitor in estate litigation is to consider the role of family dynamics, and to see that it is identified and addressed. In addition, the solicitor should strive to ensure that the legal or practical realities are not overlooked, and that passion alone does not drive the litigation.

Thanks for reading, and happy Halloween.

Paul Trudelle

Interestingly, the judgment was not for the full amount of the gift. The Defendant alleged that he had paid out approximately $22,500 on behalf of the deceased, and that this amounted to a debt in his favour. The Court accepted this, without much discussion, and reduced the amount repayable to the Estate by $22,500.

The Court heard from the Defendant that the deceased had made a gift of the funds to him, and that the Defendant had made various expenditures on behalf of the deceased. The Court did not accept that the transfer from the deceased to the Defendant was a gift. However, the flip side of this was that the expenditures by the Defendant for the deceased were not gifts, either: hence, the reduction of the judgment in favour of the Estate.

In dealing with the case of an alleged gift, counsel should always consider the bigger picture: if the gift fails, is there a basis for a counterclaim by the defendant for advances from the defendant to the deceased, or on the basis of quantum meruit?

Thank you for reading,

Paul Trudelle

The deceased had sold her home and had given the proceeds of sale, being $65,000, to her boyfriend, and then moved into his home.

The Court found that there was insufficient evidence to establish that the advance was a gift. 

As to a remedy, the Court heard evidence that the advance was likely for the purpose of defeating creditors of the deceased. As such, the Court declined to apply the doctrine of resulting trusts, applying a Court of Appeal statement to the effect that "evidence of an illegal scheme will not be received to support a resulting trust."

However, the Court found that it was not necessary to rely on the doctrine of resulting trusts. The Court found that it was able to make a monetary award, and granted judgment in favour of the deceased’s estate.

In advancing a claim on behalf of an estate, the imposition of a trust is not always necessary, and a monetary award will often be the most appropriate remedy.

Have a great day,

Paul Trudelle

In 1995, the defendant inherited property from his aunt. The plaintiff helped pay property taxes on the inherited property. Furthermore, as the defendant became ill in 1999, he ultimately contributed less to the parties’ expenses. 

The plaintiff sought a declaration of a constructive trust over the inherited property based on unjust enrichment. The plaintiff claimed she supported the defendant over the course of many years and that her financial contribution to the defendant enabled him, among other things, to pay taxes on the inherited property. Alternatively, she sought monetary compensation for the defendant’s enrichment. 

The defining feature of the case is that the inherited property came to the defendant by way of an inheritance. As noted by the British Columbia Court of Appeal, the case was different from the majority of cases where the parties lived together and jointly built up assets over many years. If, in fact, the plaintiff was entitled to any trust claim to the inherited property, such a claim would derive from what she did after the defendant inherited it.

However, the court found that it would not be appropriate to award the plaintiff a constructive trust remedy over the inherited property, having regard to her relatively sparse direct contributions to maintaining or improving the property after the defendant inherited it. A constructive trust is the appropriate remedy for unjust enrichment only where a monetary award is insufficient and where there has been a direct contribution to the property by the party seeking such a remedy. 

According to the court, spouse-like care and assistance, some personal and some financial, entitled the plaintiff to a monetary award based on unjust enrichment. In the circumstances, the court felt that an award to the plaintiff of one-third of the value of the property accruing to the defendant was fair.

Justin

Mr. Connolly died in 1887. He left a will which established a trust “for the purpose of educating or assisting to educate poor children resident in Prince Edward Island who are members of the Roman Catholic Church and who are either Irish or the sons of Irish farmers...".

The trust was said to have paid out over $1 million in bursaries since inception, and had a reserved capital of approximately $1 million.

The trustees stated that with the passage of time, the question of eligibility had become more difficult. The trustees sought direction from the court as to whether eligibility was open only to males, and whether eligibility was open to those who had “significant” Irish ancestry, being at least 50%.

It was noted that the administration of the trust was not affected by the discrimination provisions of the relevant human rights legislation.

The court had little difficulty in concluding that the trust did not benefit males only.

A more difficult question is what was meant by the term "Irish". The court reviewed the history of Ireland and its society and noted that 19th century Ireland was not the product of a pure strain of "Irish", but was a melding of a variety of ethnic strains of immigrants who arrived at different times through history. The court traced the history of Ireland back to 3000 B.C. The court concluded that when he referred to a person being “Irish”, the testator intended to refer to either a person who had emigrated from Ireland, or to a person who was a descendent of a person who had emigrated from Ireland. By making reference to "sons of Irish fathers", the court concluded that the testator had visualized the Irish blending into the larger community in PEI, and thus, felt that having 50% Irish blood was reasonable and sufficient.

The case is an interesting read, as it not only reviews Irish history, but it sets out in some detail the life of the testator in the mid-1800s, including a detailed report of his death in December, 1887.

Thanks for reading,

Paul Trudelle

In Szabo Estate v. Adelson (2007), CanLII 4588, the solicitor acted as estate solicitor, having been retained by the estate trustee named in the will. He rendered an account for legal services in the amount of $3,230.79. This account was not paid, and the solicitor asserted a solicitor’s lien over the documents in his file, including the original will.

Interestingly, the solicitor offered to release the will if the estate trustee agreed to a charge against the estate. The estate trustee would not agree.

The estate trustee brought an Application under s. 9 of the Estates Act for the production of the original will. In considering the Application, the court noted the basic proposition that where a client discharges a solicitor without cause, the solicitor may exercise a lien for his or her fees over the documents in the solicitor’s possession, and may retain them until paid. 

The estate trustee relied upon an article and an excerpt from a text that stated that a solicitor’s lien did not extend to a will. The court found that the article did not cite any authority for that proposition, and that the case referred to in the text, an 1823 decision, did not support the proposition, either. 

This illustrates that one should not blindly rely on articles and texts as setting out black letter law (unless, of course, one is relying on Hull and Hull, Probate Practice).

The court concluded that a solicitor can exercise a lien over a will, just as he or she could over any other important document.

However, the court can and will intervene in order to prevent an injustice to a client resulting from the exercise of the lien. In the case under consideration, the court ordered the solicitor to deliver up the will IF AND WHEN the estate trustee agreed to a charge against the estate in the amount of the solicitor’s account.

Thanks for reading,

Paul Trudelle

Following her death, it was revealed that she set up a $12m US trust to care for her dog, Trouble.

Last week, it was reported that the named trustee of the trust, her 80 year old brother (who received over $15m US himself from the estate) does not want to care for Trouble. It is yet to be seen whether the alternate trustee, Leona’s grandson, will take on the responsibility.

In addition, Leona’s will directed that Trouble, following his death, be buried with her at the family mausoleum. However, state laws forbid animal remains from being interred at human graveyards.

To make matters worse, it appears that Trouble bit a housekeeper, and the housekeeper now wants a piece of Trouble’s money.

The present circumstances illustrate the need for open discussion of estate plans. Trustees should be consulted in order to ensure that they actually will agree to take on the role of trustee; special requests should be explored to ensure that they are feasible.

Thank you for reading,

Paul Trudelle