This week on Hull on Estates and Succession Planning, Ian and Suzana finish up the discussion on the question of accounting by reviewing deductions from compensation and briefly sum up the procedure of the passing of accounts.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.

Deductions from Compensation - Hull on Estate and Succession Planning Podcast #125

Posted on August 12, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #125 of our podcast on Tuesday, August 12^th, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada. From the offices of Hull Estate Mediation in Toronto, Ontario, Canada, here are Ian and Suzana.

Suzana Popovic-Montag: Hi there, Ian.

Ian Hull:  Hi, Suzana. How are you doing?

Suzana Popovic-Montag: I’m good thank you, how are you?

Ian Hull: Just great. We’re having some fun with this whole question of accounting, and I think I’ve done the numbers, and I think we’re almost done. But before we go through our podcast today, let’s remind everyone, please feel free to call in on our call-in number and our call-in number is of course, 206-457-1985.

Suzana Popovic-Montag: Or send us an e-mail at hullandhull@gmail.com or of course, you can visit our blog at estatelaw.hullandhull.com as well. 

Ian Hull: So before we launch into the substantive podcast today, I just wanted to do a couple of things. One, I want to deal with an e-mail that came in and another is I want to just welcome people to listen and look at the, last week we enjoyed Jordan Atin who is our associate counsel here, our Senior Associate Counsel, and he was on Canada AM for four days in a row talking about family feuds and the link to the webpage where CTV is still running the streaming is worth looking at, and we’ll make sure that’s in our show notes.  But Jordan had a great opportunity to talk about family feuds and sort of the issues that arise out of his book, “The Family War” which is co-written by Les Kotzer and of course, my good friend, Barry Fish.

Alright, so we were talking about some of the e-mails. And we had two e-mails last week come in. Both of them were semi-related and so I’m sort of going to merge the two of them together. And the question really comes down to this:  What are we talking about with The Shoebox Effect? And what we’ve been mentioning in the past and what we’re going to talk a little bit about today, because part of our wind-up is the importance of vouchers, is The Shoebox Effect is this. When you are a trustee, no matter what you think, no matter what you do, you will be someday possibly asked to show your receipts and that’s all I’m saying The Shoebox Effect is. Make sure you keep receipts, even if it’s in a shoebox. Your lawyer or your accountant can work on the presentation of it when you ultimately have to go to Court, but keep the receipts. So that was the two questions that came in, actually, both were from different parts of Canada but asking about the same question. So I’m not going to dwell on it other than that and say that when we’re winding up our comments on accounting, please, please, please keep your receipts if you’re a fiduciary.

Suzana Popovic-Montag: And just to add one thought to that, Ian, I would also suggest that it’s really helpful to make sure that you document as much as possible everything that you do as a trustee.  And when it comes to exercising your discretion, and if particularly the Will or the trust document allows you to have a broad discretion, to write down your thoughts or your reasoning or the underlying reasons that you decided to do something or not do something and include that in the shoebox that you end up bringing to a lawyer one day possibly.

Ian Hull: That’s a great suggestion and it comes down to, when we’re talking about getting paid for all of these efforts, the deductions from compensation that we briefly talked about in the last podcasts, what can you look to? So we talked about that you can get paid, say approximately 5% as a tariff, so to speak.  And we’ve talked about some of the things we’re going to knock you out from, but one of the easy deductions is the delineation between the executor’s work and lawyer’s work or accountant’s work. And that ties into your comment, Suzana, on docketing, keeping records beyond just the receipts that I talked about.

Suzana Popovic-Montag: And things for instance, like the preparation of tax returns, when fees are associated with that, depending on who’s preparing the tax returns and how much those fees are, that’s another thing that might possibly be a deduction from compensation if the trustee for instance is an accountant. And these are situations where a trustee is an accountant or a lawyer that you see most often, where these issues can arise.

Ian Hull: Alright, so another concern that we raise and probably the last deduction from compensation we’ll just mention now, is this whole idea of pre-taking compensation. Under Ontario legislation, if you’re a fiduciary or, as I say, a guardian under the Substitute Decisions Act, they actually allow you to pre-take your compensation, take before you’ve made your efforts. But we’ve talked about in the past the cases, and we’ve talked about them in the show notes as well, the case law that talks about Re: Knoch which we talked about in our previous podcast and others, and we want to be very, very careful about pre-taking, getting paid before you’ve done your work. So that’s an easy deduction.

Suzana Popovic-Montag: Ian, just a question that I find often gets asked is whether or not GST is actually payable on executor’s compensation. What are your thoughts about that?

Ian Hull: Well, that’s a great question and it’s a murky area of the law.  And what has happened in the past is you would typically have to look at it case by case. First and foremost, you have to look at the amount of the payment that the compensation is. If it is over $30,000 that you’re being paid in compensation, which could be the case because it’s typically a one-time payment, you may have to pay GST on that income as having rendered services. So it’s really case-by-case. Talk to your accountant, get good advice before you wrap up that issue, but that’s an excellent question and a really important heads-up for people who are accounting and doing compensation work.

Okay, I think we’ve pretty well covered off our accounting in the in-depth form and so we wanted to make sure that we stayed the course and came full circle to our sort of checklist that we’re trying to work through. And one of the things I will say is we’re hopefully going to be changing our format and trying to pick up a video feed for our podcasts which is in the process. Some technology glitches haven’t allowed for it to fall in just yet, but we’re going to be moving into some different topic areas. But one of the topic areas that we have to, I think, just sort of at least wrap up in a minimum way, is the process itself. We’ve talked about the passing of accounts process but let’s talk about the physical steps that are taken because many people don’t understand passing of accounts and what you can expect in the courtroom once we’ve got the Court format accounts.  And my introduction to this, by way of the fact that we’re going to be moving this into an audio, is that we’re going to have our own mini-series on this issue, where we’re really going to flush out these topics.  But I think its worthwhile talking about them briefly now, so that people understand what they’re going to get themselves into once they’ve got these beautifully created Court format accounts.

Suzana Popovic-Montag: And procedurally speaking, certainly here in Ontario, the Rules of Civil Procedure will govern what is included in an Application to pass the Court format accounts. And we started when, before we got into this discussion of how we would audit estate accounts or how to prepare a best kind of set of accounts in the circumstances, we talked about the fact that it’s all part of an application process.  And so there will be an actual Court date that’s assigned to the hearing for the return of the executor’s accounts, and you’ll serve a Notice of that application on all the beneficiaries together with, in many circumstances and many situations, a copy of the accounts as well. And the Rules themselves specifically provide what has to be in this Application record and I thought, Ian, it might be good to just sort of flush out some of those specific requirements.

Ian Hull: Alright. Well I think and it’s helpful because it’s not quite as daunting when you get the document itself thrown at you because, as I say, a lot of these accounts are passed in a non-contentious environment.  But it’s legal mumbo-jumbo to some people so you want to make sure you sort of know what you’re getting yourselves into when you get it. And the main document behind the accounts is the Affidavit verifying the accounts, they’re proving that you’re swearing to the truth of the accounts, and that’s the fiduciary sort of statement that says these accounts are true and accurate.

Suzana Popovic-Montag: And that Affidavit, as I say, is included in the record that is served upon everyone who has a financial interest in the estate. And financial interest in the estate I think we’ve talked about on previous podcasts, has a very broad meaning in the sense that even people with a contingent interest in an estate will be served with the accounts as well.

Ian Hull: And talking about service, we don’t want to forget that there may be government agencies that we have to serve, of course; the Office of the Children’s Lawyer should there be any minor child’s interests, or interests of those who are unborn and unascertained.  And without getting too technical about it, we just want to look at the trust document or the Will and see if there is a trust. And typically if there’s a trust, more often than not, almost certainly in fact, the Children’s Lawyer would be served, that’s the Office of the Children’s Lawyer.  And it’s different in each Ontario jurisdiction, but basically the lawyer in charge of minor interests. Another person to be concerned about serving is

Suzana Popovic-Montag: the Public Guardian and Trustee. That office would be served on behalf of any incapable beneficiaries of the estate. And so just like the Children’s Lawyer protects the minor, the unborn or the unascertained, the Public Guardian and Trustee here in Ontario will represent those incapable beneficiaries.

Ian Hull: So those are just things to keep a heads-up on so that you don’t get out of the box and miss a page of the application process by not putting important entities on notice. Obviously, we come back to our cardinal rule: Read the document, read the Will, read the trust and make sure you’ve served everyone named in that, but the Public Guardian and Trustee and the Office of the Children’s Lawyer, are two entities that aren’t necessarily named and quite often aren’t named, so just a heads-up. 

So I think that gives you sort of a sense of what the document itself, in a friendly environment will be, so I think we’ll wrap up today’s podcast and again reminding you, please feel free to e-mail at hullandhull, h u l l a n d h u l l @gmail.com.

Suzana Popovic-Montag: Or feel free to call and leave us an audio comment at 206-457-1985. Thanks very much, Ian.

Ian Hull: Thanks, Suzana.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

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

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

/mem

A will challenge can be commenced pursuant to 75.06(1) of the Rules of Civil Procedure. Rule 75.06(1) is a procedural remedy that permits any person who appears to have a financial interest in an estate to apply for directions or move for directions in another proceeding.   This begs the question, who is considered to have a financial interest in an estate? This issue was addressed in the Ontario Superior Court (Divisional Court) decision of Smith v. Vance.

In Smith, the Deceased died on October 27, 1995, leaving a will dated January 5, 1994 which named the applicants as the estate trustees.   A notice of objection was filed by three individuals who were cousins of the deceased through marriage. The objection was subsequently struck by the Honourable Justice Perras during the motion for directions on the grounds that the objectors did not have a financial interest in the subject-Estate. In this hearing, the objectors appealed this decision.

The objectors asserted their financial interest in the Estate based on their close relationship with and their physical and financial assistance for the deceased. There was also an earlier destroyed will in which the objectors were named beneficiaries. Finally a letter was allegedly written by the deceased wherein she acknowledged that the objector will have an interest in her estate.

The court acknowledged that a financial interest is not defined in the Rules of Civil Procedure. In such cases, words should be taken by its natural meaning. Black's legal dictionary defines financial interest as an interest equated with money or its equivalent. The court held that claimants must do more than simply assert an interest. They must present sufficient evidence of a genuine interest and meet a threshold test to justify inclusion as a party. The interest need not be conclusive evidence at that stage but must be evidence capable of supporting an inference that the claim is one that should be heard. 

If the evidence offered by an objector is capable of supporting an inference that the claim raises a genuine issue, and thus is one that should be heard, the objector is entitled to standing and should be granted permission to be added as a party. The appeal was allowed and the order by the Honourable Justice Perras was set aside.

I hope you had fun reading today's blog. Until tomorrow,

Rick Bickhram

The issue of a failed gift is a common subject in the context of will interpretations. The Ontario Legislature has considered failed gifts in sections 23 and 31 of the Succession Law Reform Act.

In essence, Section 23 states that unless a contrary intention appears in the subject-will, when a devisee or legatee predeceases the testator, the failed gift falls into the residue of the testator’s estate. 

Section 31 is commonly referred to as the "anti-lapse provision."  Section 31 prevents devises or bequests from failing by virtue of the devisee or legatee predeceasing the testator. In such a scenario, a gift is saved if the devise or bequest was left for a child, grand-child, brother or sister of the testator and the pre-deceased devisee or legatee died leaving a spouse or issue who survived the testator. If these conditions have been met, the devise or bequest will not fall into the residue, however it will take effect as if it had been made directly to the spouse or issue of predeceased devisee or legatee. 

Thank you for reading,

Rick Bickhram

Listen to Compensation for work done by estate trustees and solicitors.

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

Case citation:

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

Too bad the research shows that Living Wills may not live up to the hype.  According to a recent study by two University of California Irvine researchers, Professors Peter Ditto and Elizabeth Loftus, Living Wills appear to have serious defects.  One problem is that patient preferences change over time.  For instance, one tends to be more inclined against end-of-life treatments immediately after a hospital stay, but this changes with time.  Also, positive treatment results of family members make a patient more inclined to end-of-life treatment.  Many people who make Living Wills change their preferences but forget about their Living Will, or misidentify those preferences in the Living Will. 

Perhaps the most glaring weakness is that Living Wills do not appear to provide guidance  to surrogates who have read them.  According to the study, the accuracy of a surrogate who has read a Living Will in prediciting a loved one's treatment preferences is no higher than that of a surrogate who has not read the Living Will.  So a Living Will can be totally inconsistent with the patient's most recent intentions.   

Having a Living Will apparently makes both the patients and the surrogates feel better, so it's not all bad news. 

Have a safe day,

Chris Graham

Diane Vieira

Essentially, an Ethical Will is a testament of what you want your survivors to know, rather than what material assets you want them to have. Ethical Wills can include expressions of wisdom, values and beliefs of the “testator”, reminders of heritage, apologies, explanations of actions taken or not taken, regrets, expressions of love and gratitude, and words of encouragement.

Ms. Hicks sets out numerous extracts from Ethical Wills so that the reader can get a flavour of the types of matters that an Ethical Will can to address. She concludes by observing that an Ethical Will can be a valuable exercise for both the writer and the recipient.

For more information, read her article, or visit www.ethicalwill.com. This site explains the concept, and provides several examples of Ethical Wills in different forms. 

Have a great weekend.

Paul Trudelle

Posted on April 22^nd, 2008 by Hull & Hull LLP

Suzana Popovic-Montag:  Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #109 of our podcast on Tuesday, April 22^nd, 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: I’m just great, thanks. How you doing today?

Suzana Popovic-Montag: Good thank you.

Ian Hull: Spring has come to our cold part of the world so all is well.

Suzana Popovic-Montag: That’s for sure, I love this time of the year.

Ian Hull: Well, we’ve got probate so before we get into our ongoing discussion about what we do next, let’s just not forget that if you’re interested in commenting, please feel free to give us a call at 206-457-1985.

Suzana Popovic-Montag: Or send us an e-mail at hullandhull@gmail.com. Of course, you can also visit our blog at estatelaw.hullandhull.com as well.

Ian Hull: Now as I said, we’ve got probate and we want to sort of continue to work through the administration process. One of the – what are typically a flash point in our world when things get contentious is the payment of legacies or the lack thereof. So hoping to avoid contentiousness, let’s talk a little bit about the payment of legacies and what are legacies and what are we getting ourselves involved with.

Suzana Popovic-Montag: Well at this point Ian, what we’re talking about are gifts that are actually set out in the Will.  So a legacy is a gift in the Will and presuming that there is in fact a Will as opposed to an intestacy, then you know, the estate trustee is going to turn his or her mind to preparing cheques for the amounts of those legacies to send to the beneficiaries and to consider obtaining releases or receipts from the beneficiaries as well.

Ian Hull: Okay, sorry. That’s the great thing about podcasting. Just had a drink of water and I’m dying here. Alright, so we’ve got this specific gift outlined in the Will as opposed to the residuary gift, which we’ll talk about and we’ve talked about in other podcasts where there’s sort of a global gift of whatever’s left. But we’ve got this idea, say a $10,000.00 gift, for example, could be to a charity, could be to a niece or a nephew or, someone who’s being identified with a specific amount. One of the things that – in terms of before we get into the mechanics of it, is that I worry about is the general proposition that the Courts have continued to insist on is that you’ve got to pay these legacies.  Typically the cases say you’ve got to pay these legacies within a year of the date of death. Or if it doesn’t happen then, interest is supposed to be accruing on that gift. So you want to be careful that it’s done in a timely way. And as I say, from a mechanic’s standpoint, really this kind of thing, when people know they’re expecting a specific amount, the sooner you pay them in most cases, the better. Just to sort of keep the pot from boiling over. But anyway that’s sort of a side comment to the fact that you want to prepare the letters to the beneficiaries, get the cheques ready and get the receipts organized. Now what’s the difference with a gift of a legacy and a gift of a residue in terms of what kind of release or receipt you’re entitled to?

Suzana Popovic-Montag: Well a legacy, Ian, is usually a fixed amount and so in that case, you’re looking to obtain a receipt from the beneficiary who’s going to acknowledge the fact that they’ve received that amount of money. A release, on the other hand, is normally what we look for when we send gifts of the residue to the beneficiaries. And the reason for that is because residue is typically not set out specifically in the Will, it’s going to be what’s left at the end of the day after all the legacies and all the debts of the estate have been paid and all the other liabilities of the estate. And so it’s not quantified, it’ll have to depend on what has ultimately happened during the course of the estate administration and that’s how that amount comes about.

Ian Hull: And I find that some of my clients get a bit alarmed when I say to them, when you’re giving a legacy a specific gift to an individual or to a charity, you’re actually not technically entitled to a release per se. All you’re entitled to is a receipt to show that you actually paid it. Some of my clients get a little nervous, well if I’m going to pay it, I want a release. And as I say, in technical terms, you’re not really entitled to it. But lots of times you ask for a release as well when you pay out the specific bequest.

Suzana Popovic-Montag: Another thing that I remind my clients to keep in mind, Ian,  when they’re paying out these legacies is that when you’re paying out amounts on behalf of beneficiaries, our statute here in Ontario specifically says that you can pay an amount of up to $10,000.00 to a parent of a minor and if it’s an amount over $10,000.00 then steps have to be taken to obtain some form of guardianship, and we’ve talked about that in the past, over the minor’s property or alternatively a trustee can pay that money into Court.

Ian Hull: Okay great, well now that we’ve satisfied the legacies, and here again in Ontario and across Canada, of course, we are lurching toward the deadline of income tax filing. So let’s talk a little bit about income tax, filing returns at this point because it seems to be a good next step to consider.

Suzana Popovic-Montag Well what we know will typically happen in these situations is that the trustee is going to collect all the information and send it on to the accountant in order to prepare what we call the T1 Terminal Income Tax Return. And that’s the tax return that’s filed from the date of the deceased’s death to pick up all of the income and the things that have occurred during that course of time until they’ve died and that is prepared for the purposes of the estate.

Ian Hull: So what I will often do is tell the executor to get this stuff to the accountant obviously, but also make your own note or I’ll diarize it for them, to look for the Notice of Assessment with the T1 Terminal Return filing. You’re not going to always be personally involved with the actual filling out of the tax return, you’re going to get professional advice typically for that. But you – it doesn’t hurt to stay on top of the process and one of the things you want to look for is essentially the response from the tax authority as to whether or not it is an appropriate filing and, you know, sort of a benchmark is you can look to getting those Notices of Assessment approximately 6-9 months after filing.

Suzana Popovic-Montag And the reason we’re looking for that, of course, is so that as soon as we’ve got that in hand, we can request the Clearance Certificate from CRA so that we can get that comfort that, up until the day of the deceased’s death, CRA at least is saying that all the taxes have properly been paid.

Ian Hull: And we’ve had just as an administrative thing and somebody – some of you may run into this.  Over the years, CRA has been sort of a bit inconsistent on this point. There’s two points in time that you obviously need to get sort of a technical sign off from CRA. One is the Terminal Tax Return which we’ve just talked about.  And the other is the Final Return that you file once you want to close the estate off. And sometimes it is difficult to get this sort of interim Clearance Certificate from CRA. Sometimes they will require us to wait until we’ve filed the Final Return which, as I say, it’s a bit case by case, but it always, I think anyway, makes sense to ask our tax advisor to try to get your Clearance Certificate to the date of death after the Notice of Assessment has come in because if CRA agrees to issue it, that is truly a great release that you want to have in your pocket as an executor.

Suzana Popovic-Montag So Ian, maybe you can turn now to discuss – we talked about it a bit at the beginning about the payment of the actual residual bequest to the beneficiaries and one of the things that I thought we would mention and you eluded to it earlier, was the fact that, you know, typically there is what is called an executor’s year. A year’s frame of time during which the executor has to actually deal with the estate and at that time, once that year has expired, then bequests under the Will are going to start to incur interest possibly. When you’ve got an intestacy, however, you typically won’t even administer or pay out those bequests until the year has passed. And the reason for that is because there’s an expectation that you’ll be advertising for creditors and making sure that, you know, any expenses or liabilities of the estate are satisfied before you start making payments out on account of the estate.

Ian Hull:  So we talked – that’s right, because when we talk about this…I mean this is all about keeping the client happy. And when I’m an executor, I tell my clients, I say look, think of yourself as the person who is in charge of servicing the client, keeping them happy. One way you keep beneficiaries happy is that you properly file tax returns and you do what is being required as an administrator. But two is, and sometimes more importantly to the beneficiaries, is show me the money. And we talked about paying the legacies in a timely way.  Another option, of course, is to talk about when you have a Will, not when - as Suzana points out, you’re in an intestacy situation, to pay interim distributions to the residuary beneficiares. I remind my clients that where you can, it is a crucial step to take because they shouldn’t be treated more unfairly than the legacy gifts recipients if it is appropriate to get them some money now. And what you can do is sit down with your financial advisor and benchmark what makes sense on an interim basis to pay out, because you have to watch that you don’t pay too much out.

The reason for not paying too much out is, of course, you want to hold back for sort of ongoing – like anything. You’re running a business, you need to pay the accountants to finalize the return, you need to pay compensation to the executor, you need to consider other tax liabilities that may arise when you go to make your final filing application. So a sensible holdback is important, coupled with a timely payment of an interim distribution to the residuary beneficiaries if possible.

Suzana Popovic-Montag: And that really does underscore again the importance of actually retaining an accountant to help you with these steps because you’ll rely on their guidance in terms of some of the proposed numbers to pay out these interim distribution.

Ian Hull:  Okay, well I think that gives us a good summary of this portion of the administration. Because it is tax time, we will also tie into our theme and talk a little bit about some more tax issues that we want to keep in mind on the administration side. But I think it’s been interesting and thank you for your comments, Suzana.

Suzana Popovic-Montag: Thanks very much to you too, Ian, and just a quick reminder of our call-in number if anyone would like to comment on our podcast. The number there is 206- 457-1985.

Ian Hull:  Thanks again Suzana.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

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

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

/mem

This week on Hull on Estate and Succession Planning, Ian and Suzana discuss what to anticipate as an executor and how to ensure that you are well prepared for your duties.

The fact situation is based on the decision of Moore J. in Rudling Estate v. Rudling, 2007 CanLII 51794 (Ont. S.C.).

There, the court held that the word "debt" in relation to Property B could not include within its meaning all of the taxes, expenses and other charges that the estate trustee is directed by the will to satisfy in addition to "debts" of the estate. The court found that all reasonable charges against the estate arising from the death of the deceased were, by the terms of the will, intended to be paid from the estate before the specific bequests of the two properties are made. That is, both A and B are to share the burden of the testamentary expenses.

The court found that the will could be fairly construed upon the language contained within its four corners, and without the need to resort to extrinsic evidence in order to interpret the meaning.

However, in light of the Orders Giving Directions made in the case, and the issues is raised in the pleadings, and “because I am aware of the recent tendency of Canadian courts to apply the ‘armchair rule’”, the court also addressed the interpretation of the will in light of the surrounding circumstances. The court examined the surrounding circumstances, hearing from ten witnesses over the course of seven days. After considering this evidence, the court concluded that the evidence did not support a conclusion that the testamentary expenses be borne by A alone.

Did you make the right call?

Paul Trudelle

A starting point is s. 18 of the Succession Law Reform Act (“SLRA”). This section provides that an alteration is not effective unless it made in accordance with the provisions of the SLRA regarding due execution, or unless the alteration makes a word or words “no longer apparent”.

If the will is a formal will, holograph alterations are not permitted (although a holograph codicil is permitted).

These principles were applied in the case of Luty v. Magill. There, it was found that handwritten alterations to a will that were undated and that did not totally obscure the original bequest were invalid, but that other alterations that were initialled (initials can constitute a signature for the purposes of the SLRA) and dated were considered holograph codicils, and were therefore valid.

With respect to obliteration, if the original words cannot be read, by holding the will up to the light or by using a magnifying glass, (but without the assistance of any other mechanical aids) then the words will be considered to be revoked, regardless of when they were obliterated.

Altered wills will usually require an application for the opinion, advice and direction of the court. Testators should be cautioned as to the requirements for validly altering a will so that the costs of such a court application can be avoided.

Thanks for reading,

Paul Trudelle

In this week's episode of Hull on Estates, David Smith and Diane A. Vieira discuss the issues surrounding spousal exclusion from the will of the deceased and how to challenge this exclusion.

Click "Continue Reading" to read the transcribed version of this podcast.

Posted on August 28^th, 2007 by Hull & Hull LLP

David Smith: Hello and welcome to Hull on Estates. You’re listening to Episode #74 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 afternoon Diane.

Diane Vieira: Good afternoon Dave.

David Smith: Diane, today we decided that we’re going to talk about the issues that generally arise when the surviving spouse of the deceased walks into your office and shows you a Will where she’s not a beneficiary or he’s not a beneficiary. And asks you what you can do for him or her. And I understand that there’s a fact situation that we can relate to our listeners that might help illustrate this example, and I wonder if you could lead us into that.

Diane Vieira: The fact situation is we have someone who’s in a short marriage, less than two years, and they’re away for a short period of time on a small vacation. And during that time, her spouse makes a Will that completely cuts her off or leaves her a very small part of his estate. She doesn’t find out about this until after the Will has been probated and now she’s left in a situation of not knowing what her rights are or what’s she’s entitled to.

David Smith: I guess the first thing that jumps to mind, Diane, when you present the fact situation is a Will challenge. And I think if we look at the Will challenge first of all, does this fact situation, just as you’ve described it, give rise to any basis upon which to challenge the validity of that Will?

Diane Vieira: There are a few red flags that come up immediately. The Will was drafted when she was out of the country for a short period of time.  Other things to consider was the lawyer who drafted the Will was introduced to her spouse by a third party. There’s also some issues regarding the capacity of her spouse to make the Will or to transfer his assets at the time.

David Smith: In this situation where she’s out of the jurisdiction and the Will is made in her absence, what does that suggest in terms of creating a legal argument to challenge this Will?

Diane Vieira: The first thing that immediately comes to mind is undue influence by third parties and in this situation, it was other family members. They waited specifically for a period of time where her spouse would be isolated and she would not know about this Will until after.

David Smith: And earlier, Diane, you mentioned that she was, or that the deceased was taken to a new lawyer by a third party. Do we know in our fact situation as presented whether the third party who took the deceased to a lawyer was in fact one of the family members who benefits under this new Will?

Diane Vieira: In this case it was.  It was a family lawyer known to the other family members and who had done work for the other family members. And the lawyer who drafted the Will actually spoke to the other family members prior to ever speaking to her spouse.

David Smith: You know that just strikes me as just a fantastic set of circumstances. If I’m the lawyer wanting to challenge the Will, you’re telling me I’ve got a situation where the wife is out of the jurisdiction.  The theory will be that the family members swoop in, take the Dad or uncle or whoever the person is in terms of their relationship, to a lawyer of their choosing with whom they have a relationship. It’s kinda surprising, isn’t it, that that lawyer would even agree to make the Will in those circumstances?

Diane Vieira: It is, and it appears that it could be even the third parties in this circumstance who paid to have the Will drafted and the costs associated with that.

David Smith: Wow, I mean that’s just, that’s just something that, for a practicing lawyer, you got to think that the advice, common sense and any good advice would dictate that you just simply would not make a Will in those circumstances.  Or refer the deceased to someone else. So it sure sounds to me like there’s a good basis for a Will challenge there. Of course, if we’re alleging undue influence, the burden of proof is on the surviving spouse challenging the Will to prove undue influence, isn’t it?

Diane Vieira: Yes it is and another thing to consider is testamentary capacity. 

David Smith: And what are we looking for in terms of testamentary capacity?

Diane Vieira: Whether or not the testator was capable of drafting that Will or making his wishes known. 

David Smith: And, of course, we know from the case law, Banks and Goodfellow being the leading case, that what you need to demonstrate is that the deceased knew who he had obligations to, knew the value of his assets, and had a clear plan and a clear understanding of what it was he wanted to do. Now it’s quite possible he may have wanted to cut his wife out of his Will.  It doesn’t necessarily mean that he was capable if he didn’t know the value of his assets, didn’t understand that he had obligations.  It’s not enough simply to have the intention to want to deprive someone of their entitlements. I think now though what I’d like to do, Diane, is why don’t we segway into a different fact situation or same fact situation but different argument which is, let’s assume that we’ve got no basis for a Will challenge. What can we do to help such a person if she were to walk into our office in terms of advancing her entitlements when we don’t have a good case to make a Will challenge?

Diane Vieira: One thing she can, she or he can decide is to not take under the Will and make an equalization claim under the Family Law Act.

David Smith: Alright and in this case, if there’s no entitlement under the Will whatsoever, clearly electing under the Family Law Act would probably be the prudent thing to do.

Diane Vieira: It appears so.

David Smith: Right.  Certainly and, you know, we’ve talked a little bit about Family Law Act elections. The difficulty with Family Law Act elections is that they can be very complicated in terms of preparing the net family property statements and given a choice, what else or is there anything else, Diane, that can be pursued apart from a Family Law Act claim?

Diane Vieira: You might also consider a dependency claim under the Succession Law Reform Act under Part 5.

David Smith: If we want to make a claim for support under the Succession Law Reform Act on behalf of a spouse, can you give me a little bit of an explanation as to what that entails?

Diane Vieira: The spouse will have to look under the definition of dependent in the Act; if they do fall under that definition, they can make a claim.

David Smith: Let’s talk about that just briefly. How is a spouse defined under the Act?   I mean, do you have to be married or can you be a common-law spouse?

Diane Vieira: You can be a common-law spouse as long as you’ve lived together continuously for three years or if you have a dependent child together.

David Smith: Alright and so, I mean, in our fact situation, we’ve said that this was a situation where the deceased was married and I take it, it’s probably obvious that someone who’s married, that meets the definition of spouse as well.

Diane Vieira: Yes.

David Smith: And in terms of dependency, what does it mean to be a dependent?

Diane Vieira: First and foremost, you consider if the dependent is in need of support. There’s also, under Cummings and Cummings, a moral obligation, if that first part can’t be met.

David Smith: Yeah and I think, Diane, what we want to look at there, what we consider is, did the deceased have moral obligations to the spouse which give rise to a support claim? And can that exist independently of need? And, you know, that’s a whole topic for a separate podcast. But I think certainly we want to consider the relevant section of the statute.  And the relevant section of the statute for this purpose is Section 62 of the Succession Law Reform Act. And Diane, I wonder if you can just sort of touch on some of the issues that the court considers under that Section in determining the amount of support.

Diane Vieira: Some things the court will consider are the current assets of the person making the claim. The assets they’re likely to have in the future, the capacity to contribute to their own support, the person making the claims age, physical and mental health.  They will also look at the standard of living, what they were accustomed to when they lived with their spouse and the lifestyle they were accustomed to.

David Smith: And let me interrupt there, Diane.  I think that’s a really important point because if someone comes to your office as a spouse and says my spouse has died, I’m cut off, I’m now in a new relationship.  But my new spouse is not making anything close to the relationship I had with my previous spouse.  And yes, I’m able to get by, but no, I’m not going on vacations and out to dinner and what have you. Isn’t it fair to say that that person could still advance a support claim even though it’s as if they’re missing wants rather than needs.

Diane Vieira: I think that’s fair.  In their Affidavit evidence, they should demonstrate how the lifestyle has changed from what they were previously accustomed to, to what they’re accustomed to now.

David Smith: And then you touched briefly on the Cummings case, Diane, and you know, that’s, of course, engendered a whole lot of debate within the Estates Bar. A decision of the Court of Appeal saying that the court must consider if there’s any moral obligation owing by a spouse, a deceased spouse, to a surviving spouse which gives rise to a determination of support.  And really, the interesting language in that case is when the court says that a surviving spouse is entitled to a fair share of the estate.  And it’s going to take a lot of case law to determine exactly what that means. So I think, Diane, we’ll wrap things up here at this juncture but perhaps, you know, in terms of summarizing, perhaps you can just, for the listeners, summarize what we’ve talked about in very general terms, in terms of claims and entitlements that a surviving spouse can make.

Diane Vieira: Sure, if someone approaches you, a spouse that has been cut off from a Will or did not receive their fair entitlement, some things to consider would be a Will challenge if those circumstances exist. If that is not the case, they can try to make an equalization claim under the Family Law Act and not take under the Will. Or a third option is to make a dependency claim under the SLR Act.

David Smith: And in terms of preparing material and going to court with respect to this, what kind of information gathering should you do if you’re going to make a support claim?

Diane Vieira: I would gather evidence of the lifestyle that you were accustomed to before, the assets of the estate currently and I would refer to Section 62, subsection 1 of the SLR Act under the different subheadings there and see if you have evidence to support your claim.

David Smith: Right and then it’s that evidence which the court will consider, won’t it, in evaluating the claim? So thanks very much.  I enjoyed podcasting with you, Diane, and we’ll look forward to doing this again soon.

Diane Vieira: Thank you.  Bye.

David Smith: 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.

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.

Enjoy the weekend,

David

Until tomorrow,

David