Happy Halloween

In keeping with the theme of today’s holiday, I’ve taken a day off of composing my usual legal blog and substituting it with a blog about the annual holiday observed and loved by many children, known as Halloween.

Halloween is often associated with the idea of fear, but its origins can be traced back to the Celtic Festival of Samhain, which means “summer’s end”.  The medieval festival of Samhain marked the end of the harvest, the end of the lighter half of the year and the beginning of the darker half.  Samhain was celebrated over the course of several days and was used as a setting for supernatural encounters.

Today, some customs that we typically see, are children dressed up in costumes as they go house to house, asking for treats, pumpkin carving, and adults who dress up in costumes and party in celebration of the holiday.

I have not celebrated Halloween since I was a small child; but after weeks of lobbying by many friends and family, I too was convinced to get into the spirit of Halloween.  Over the past weekend, I carved my very first pumpkin which can be seen below (it’s suppose to be a picture of Yoda from Star Wars):

I also dressed up as the Stay Puft Marshmallow Man, from the movie Ghostbusters – and partied like it was 1980: 

 

As I stated above, Halloween is a holiday often associated with the emotion of fear.  “Fear itself, plays an interesting role in our lives. How dare we let it motivate us.  How dare we let it into our decision making, into our livelihoods, into our relationships. It’s funny, isn’t it? We take a day a year to dress up in costume and celebrate fear.”

I hope you enjoyed my blog and until Wednesday,

Rick Bickhram

What is a Case Conference?

As a tutor who helps students prepare for their licensing examination, particularly in the areas estate and family law, I have had the fortunate opportunity of meeting students from all walks of life.  I recently started tutoring in the area of family law, and a question that I’m often asked by students is:  “in family law, what are the differences between the case conference, settlement conference and trial management conference?” 

Generally, after an application, answer and reply have been served and filed, the courts will schedule a case conference for the parties and their lawyers, unless there is a situation of urgency or hardship, in which case the parties may bring an urgent motion. 

The case conference is an informal meeting between the parties and their lawyers with a judge.  It allows the parties to hear a judge’s views on the case at an early stage before the parties end up spending lots of money on the case.  Rule 17(4) of the Family Law Rules sets-out the purposes of a case conference, which provides:

(a) exploring the chances of settling the case;

(b) identifying the issues that are in dispute and those that are not in dispute;

(c) exploring ways to resolve the issues that are in dispute;

(d) ensuring disclosure of the relevant evidence;

(d.1) identifying any issues relating to any expert evidence or reports on which the parties intend to rely at trial;

(e) noting admissions that may simplify the case;

(f) setting the date for the next step in the case;

(g) setting a specific timetable for the steps to be taken in the case before it comes to trial;

(h) organizing a settlement conference, or holding one if appropriate; and

(i) giving directions with respect to any intended motion, including the preparation of a specific timetable for the exchange of material for the motion and ordering the filing of summaries of argument, if appropriate.

It’s my experience that most cases do not settle at the case conference stage.  I find that emotions between the parties are still raw and given that it’s the first time that parties are getting the issues on the table, there is simply not enough disclosure exchanged between them at this stage to settle the case.

If the parties are unable to settle the case at the case conference or the days following the case conference, the next conference the parties will attend is often referred to as a settlement conference.  In my blog on November 2, 2011, I will be discussing the purpose of the settlement conference and differences between the settlement and case conference.

Thank you for reading,

Rick Bickhram

Who Has Standing to Challenge the Last Will of a Deceased?

I would like to use my first blog of the week to discuss when a party has standing to challenge the Last Will and Testament of a deceased person.  For those not familiar with legalese, “standing” is the legal term often used to describe a party’s ability to participate in a case.  In the context of estate law, Rule 75.01 of the Rules of Civil Procedure state:

An estate trustee or any person appearing to have a financial interest in an estate may make an application under rule 75.06 to have a testamentary instrument that is being put forward as the last will of the deceased proved in such manner as the court directs.

Rule 75.06 tells the reader that an estate trustee or “any person appearing to have a financial interest in an estate” may commence an application pursuant to rule 75.06.  Rule 75.06 states:

Any person who appears to have a financial interest in an estate may apply for directions, or move for directions in another proceeding under this rule, as to the procedure for bringing any matter before the court.

The Rules make it clear that to have standing to participate in an estate matter, a person either must be an estate trustee or must “appear to have a financial interest in an estate.”  The issue of who has a financial interest in an estate was clarified in the decision of Smith v. Vance, (1997), 12 C.P.C. (4^th) 391 (Ont. Div. Ct.).  In Smith v. Vance, the deceased executed a Will, dated October 19, 1993 (the “Last Will”).  On the same date, an earlier Will of the deceased was destroyed (the “Prior Will”).  It’s through the Prior Will that the objector asserts a financial interest in the deceased’s estate.   The objector argues that the deceased lacked testamentary capacity at the time she executed the Last Will, and thus lacked the capacity to revoke any valid Will existing on that date. In the lower court’s decision, the Honourable Justice Perras struck out the Notice of Objection and held that that the objector did not have a financial interest in the estate.  In the appeal, the Ontario Court of Appeal, held that the objector met the threshold test supporting the inference that they have a financial interest in the estate.  The courts justified its decision on the grounds that the term “financial interest” was not defined in the Rules of Civil Procedure however, in the absence of any limiting definition, those words must be taken in their natural meaning of an interest by way of money or property or other assets having monetary value.  Blacks Law Dictionary (5^th Edition) defines financial interest as: an interest equated with money or its equivalent. 

The court of appeal went on to state 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.  It 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.

In it’s decision, the Ontario Court of Appeal makes it clear that an objector must do more then simply allege that they have a financial interest in the estate.  In Smith v. Vance, the court accepted the objector’s financial interest in the estate by virtue of the Prior Will, as a genuine interest in the estate to justify inclusion as a party.  

Thank you for reading, and until Wednesday..

Rick Bickhram

Let’s Work Together to Eliminate Elder Abuse

Once a month, members of the Estate Planning Council for the City of Mississauga meet to share ideas and experiences in areas that touch on different aspects of estate planning and administration, such as legal, tax, investing, insurance, and trusts.  Generally, there is a keynote speaker to present on a current topic at every event.  On Monday night we had speakers from Distress Centre Peel and Family Services of Peel to discuss Elder Abuse. 

During our discussion, we discussed the growing problem of elder abuse in our communities.  Earlier this year, most of us can recall the horrible story where a man and his wife were accused of forcing their 68 year old mother to live in a freezing garage.  She was found by police, unconscious, freezing and starving in a makeshift bedroom set up inside a non-insulated garage.  

Elder abuse is generally caused by negative social attitude towards older adults premised on false beliefs and assumptions that older adults are weak, frail or incapable.  It’s the lack of respect for an older adult’s personal values and beliefs that can lead to elder abuse. 

It’s important to remember that elder abuse does not have to be physical.  Elder abuse can be:

1. emotional/verbal
2. financial
3. neglect
4. sexual

Something’s that we can do as a community to eliminate elder abuse is to encourage our elderly citizens to:

1. stay connected with friends and loved ones and not to isolate themselves;
2. stay active and involved as they can with community groups, volunteering, church, neighbours etc.
3. encourage them to have their cheques that they might receive (i.e. pension cheques) deposited directly into their bank account;
4. encourage them to have bills, such as telephone, utility, cable, property taxes etc. paid directly from their bank account; and
5. If possible, encourage them to designate a power of Attorney to someone that they know they can trust and whom they know will respect their wishes.

If we all do our part as a community, hopefully we can eliminate elder abuse.

Thank you for reading,

Rick Bickhram

Standard of Care for Trustees When Investing Trust Assets

It’s important to always seek professional advice when planning your estate as there are numerous tools that can be utilized to reduce income tax liability.  A common vehicle often used to defer income tax liability is a trust. 

In a trust, assets are held in trust over a period of time for the benefit of one or more beneficiaries, sometimes in succession.  The person who administers the trust is known as a trustee and he or she is entrusted to act for the benefit of others. The administration of a trust essentially means managing the trust over the period of time set-out in the testamentary or trust instrument.

Given the inherent nature of responsibility impressed upon a trustee, our common law and statutes impose standards that trustees must comply with when dealing with trust property.

Historically, the Trustee Act of Ontario provided a list of authorized investments for trustees, which set-out allowable investments for trustees of a trust or executors in an estate.  The “legal-list” approach was too restrictive as the investments listed were conservative in nature and did not keep up with the industry standard followed by most investors.  On July 1, 1999 the Trustee Act was amended, which amongst other things, replaced the “legal-list” approach with the prudent investor rule.

Section 27 of the Trustee Act sets-out the standard of care for trustees when investing assets held in a trust.  Section 27(1) states, “in investing trust property, a trustee must exercise the care, skill, diligence and judgment that a prudent investor would exercise in making investments”.  Section 27(2) states that “a trustee may invest trust property in any form of property in which a prudent investor might invest”.

With the implementation of the prudent investor rule, trustees are no longer restricted when investing trust assets as they may now make investments based on a standard of care. 

Thank you for reading,

Rick Bickhram 

Court Extends Limitation Period Allowing Surviving Spouse to File Equalization Claim

Determining the property rights of a surviving spouse, in the context of estate litigation, is often a contentious issue.  Section 5(2) of the Family Law Act (“FLA”), allows the surviving spouse, with the lower net family property value, to elect to take their interest from the deceased spouse’s estate by virtue of an equalization claim against the estate as opposed to the terms under the deceased’s Will or on an intestacy. 

Unless the deceased spouse’s Will expressly provides that the surviving spouse can have his or her entitlement under the Will, in addition to his or her entitlement under s. 5(2), the surviving spouse will need to make this election within 6 months from the date of the spouse’s death.

What often becomes an issue is the strict 6 month time-line that the surviving spouse must make an election by.  By virtue of section 6(11) of the FLA, if the surviving spouse fails to elect within 6 months, they are deemed to have elected to take under the Will or on an intestacy if there is no Will; precluding the surviving spouse from making an equalization claim.  This result can have dire consequences, however to ease the harsh result of this section, under Rule 2(8)(a) of the FLA, the Court may, on Motion, extend a time prescribed by in the FLA if it is satisfied that there are apparent grounds for relief.

In Slaven v. Williams et al., the Applicant, who is the surviving spouse, applied for, amongst other things, an Order extending the time to file her Family Law Application, wherein she advanced an equalization claim against her Deceased’s husband’s estate.  The Deceased husband died on November 2, 2009.  Prior to his passing, the Deceased drew a Will, which other then a modest bequest and a life interest in real property, disinherited the Applicant.

During the course of administering the estate, the surviving spouse was told by the Estate Trustees that she would be taken care of financially by them.  When the Estate Trustees refused to provide the Applicant with any financial assistance to meet her expenses, the Applicant, on February 24, 2010, filed an election to take her entitlement by virtue of an equalization claim against the Deceased’s estate. What the Applicant failed to do, however, within the time frame was to file her equalization Application within 6 months of the Deceased’s death.  

On May 2, 2010, the six-month period to file the Application under the FLA passed; however,  during the period following the Deceased’s death up until the 6 month time-frame had lapsed, the lawyers for the Applicant and the estate had been in negotiations trying to settle the Applicant’s claim.

The Applicant filed her election to take her entitlement by virtue of an equalization claim rather than under the Will.  The election document was served and filed on time. The Application was not served and filed until August 10, 2010, beyond the six-month time frame.

After the six month time frame had lapsed, the Estate Trustees refused to negotiate with the Applicant arguing that she was out of time and now unable to advance an equalization claim against the estate.

In her analysis, the Honourable Justice Greer, considered Rule 2(8)(a) and (c) of the FLA which provides that:

the Court may, on Motion, extend a time prescribed by the FLA if it is satisfied that there are apparent grounds for relief … and the time may be extended if no person will suffer substantial prejudice by the reason of the delay.

Greer, J. also cited Ferguson v. Ferguson, a similar case involving an application to extend the limitation period, wherein the court extended the time finding that the delay had been incurred in good faith.

In Ferguson, The Honourable Justice Tuloch stated that “Good faith has been defined as acting honestly and with no ulterior motive. A state of blameless ignorance.”  Applying this concept to the present case, Greer, J. stated the surviving spouse acted honestly and with no ulterior motive and the delay was incurred in good faith, as she was led to believe by the Estate Trustees that she would be taken care of financially and her lawyer was in the process of negotiating these terms with Counsel for the Estate Trustees.

Greer, J. held, “in my view, the Widow made it known within the time-frame that she was making the election.”  Neither party had suffered substantial prejudice by reason of the delay.  Accordingly, the court granted the Applicant’s request for an extension to file her family law application.

The moral of the story is: when in doubt, commence your Application for an extension to file your election and application from the outset of litigation.

Thank you for reading,

Rick Bickhram

 

Income Tax Liability and Registered Retirement Plans…Who is Responsible?

It’s common for investors who own registered retirement plans, such as RRSPs and RRIFs, to designate a beneficiary under their plan.  Disputes often arise when the investor dies and due to the deemed realization rule, income tax liability is triggered.   The dispute often surrounds the question of who is ultimately liable for the tax assessed by Revenue Canada in relation to the deemed realization of the registered retirement plan?

In an Ontario Superior Court of Justice decision, Banting v. Saunders Estate, the Honourable Justice Lofchik considered whether it was the estate or the recipients of the registered retirement  plan that were ultimately liable for the taxes triggered upon the deemed realization of the plans.

In Banting, the Deceased died in October 1997, and was survived by her five adult children. The Deceased left a will dated November 12, 1987 (the “Will”) in which she appointed two of her children as estate trustees.

Under the terms of the Will, the Deceased left the Applicant/friend the Estate’s share in a numbered company and the residue of the Estate is divided equally among her five adult children.  At the date of the hearing, the assets of the Estate composed of the following:

Value of shares in 728377 Ontario Limited	$ 362,000
Cash	$ 77,234
Personalty	$ 20,000
Total	$459,234

The Deceased also held three registered retirement plans totaling approximately $542,000 (the “Plans”) and the Plans were left to the Deceased’s five children equally as designated beneficiaries.  The tax liability resulting from deemed realization of the Plans amounted to approximately $289,000; however the liability had been outstanding for over a year so the amount claimed by Revenue Canada at the date of the hearing was $322,998.77. 

The Applicant/friend argued that the resulting income tax liability on the deemed realization of the Plans should be the responsibility of the five recipient children.  Clearly, the Applicant/friend would be paying the lion’s share of the taxes if it was ruled that the taxes ought to be paid by the Estate, as the Applicant/friend was the sole beneficiary of the shares in the numbered company.  By contrast, the five children, who are the residuary beneficiaries of the Estate, argued that the liability ought to be an obligation of the Estate. 

Section 146(8) of the Income Tax Act, has the effect of including the value of the proceeds of the Plans in the Deceased’s income at the time of death; however the court focused on whether or not the proceeds of the Plan were assets of the estate and if so, how liability would be borne among the beneficiaries?

The Applicant/friend argued that section 160(2) of the Income Tax Act, which provides that the tax payer (presumably the estate in this case) and the designated recipient of proceeds of the deceased’s Plan are jointly and severably liable for taxes owing as a result of the payment of the Plan and it should be the recipients of the proceeds from the Plans that should satisfy the outstanding income tax obligations.

In his decision, the Honourable Justice Lofchik considered the decision Clark Estate v. Clark (1997), 15 E.T.R. (2d) 113 (Man. C.A.) and ultimately followed it, wherein the court held that the registered retirement plans are not assets of the estate but nevertheless they are subject to the claims of general creditors of the Deceased’s estate whose claims cannot be met by the estate itself because of insufficient assets.

The effect of this decision and all the others which have followed it, places the income tax liability triggered from registered retirement plans on the estate to the extent that there are sufficient assets in the estate to satisfy this liability.  In the event that there are insufficient assets in the estate to cover all liabilities, the beneficiaries of the registered retirement plan may be called upon to satisfy this obligation.

Thank you for reading,

Rick Bickhram

Solicitor Ordered to Produce Original Will

It’s common knowledge amongst estate lawyers that an original will is ordinarily required when an estate trustee applies for probate.  In the rare circumstance, the Rules of Civil Procedure do provide for an Order permitting the use of a copy of the Will where the original will has been lost.

In a recent Ontario Superior Court of Justice decision, the Honourable Justice Brown, considered the situation where the solicitor who drafted the testator’s will was asserting solicitor-client privilege regarding the production of the original Will.

In Hope v. Martin, the estate trustees named in the Deceased’s will renounced their right to apply for probate.  One of the named estate trustees was the Solicitor who drafted the deceased’s Will (the “Drafting Solicitor”) and still held possession of the Deceased’s original Will.  As both estate trustees had renounced their right to apply for probate, a beneficiary of the Estate agreed to apply.  Counsel for the beneficiary wrote to the Drafting Solicitor requesting production of the original Will so that her client could apply for probate.  The Drafting Solicitor refused to produce the Will asserting solicitor-client privilege.  The Drafting Solicitor argued that he could only release the Will to a person who had authority to direct him to do so and he took the position that the only two people who have authority to do so are the two estate trustees; however both had renounced.  Counsel for the beneficiary/applicant obtained consents from all of the beneficiaries of the Estate, indicating that they did not oppose the appointment of the beneficiary/applicant to apply for probate; however, the Drafting Solicitor demanded that a court order be obtained before he produced the Deceased’s original Will.

In his decision, the Honourable Justice Brown referred to the case in Stewart v. Walker, a case involving the contested probate of a copy of a will, where the Court of Appeal held:

The privilege is not the privilege of the solicitor, but of the client who may waive it or not as he pleases … The reason on which the rule is founded is the safeguarding of the interests of the client, or those claiming under him when they are in conflict with the claims of third persons not claiming, or assuming to claim, under him. And that is not this case, where the question is as to what testamentary dispositions, if any, were made by the client.

In his analysis, the Honourable Justice Brown went further then Stewart v. Walker and cited a Supreme Court of Canada decision, in Goodman Estate v. Geffen, where the court held:

The general policy which supports privileging such communications is not violated. The interests of the now deceased client are furthered in the sense that the purpose of allowing the evidence to be admitted is precisely to ascertain what her true intentions were.

The order went on consent and Justice Brown ordered the production of the original Will to the beneficiary/applicant.  

The real issue facing solicitors who are asked to produce the original of a will is whether the person making the request possesses the authority to do so and the appropriate response will depend upon the particular circumstances of the case.   In his view Justice Brown stated “a solicitor should only insist on the securing of a court order for the production of the original will where some reasonable basis exists to question the authority of the person making the demand for production.”

Thank you for reading and until Wednesday,

Rick Bickhram