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Category: Financially Supported by Deceased

Personal Liability of Estate Trustees in Dependant Support Claims

Personal Liability of Estate Trustees in Dependant Support Claims

As a fiduciary for an estate, an estate trustee must comply with various legislation including the Succession Law Reform Act (SLRA) when disbursing estate assets and managing the estate. When dealing with a person who may be a dependant of the estate, and who may bring a Dependant Support Claim, estate trustees must adhere to s. 60 of the SLRA, failing which, they could be held personally liable. This article will consider the extent of an executor’s personal liability under s. 67(3) and remedies available to dependents should an executor disburse estate assets before a claim is heard.

What is a Dependant Support Claim?

A Dependant Support Claim is a claim initiated by an application against the estate of the deceased with whom the applicant is a legally recognized dependant of pursuant to s. 57 of the SLRA. A legally recognized dependant is defined as a spouse (common law or ex-spouse), parent, child/grandchild, or sibling of the deceased to whom the deceased was providing support to or was under a legal obligation to provide support to, immediately before their death. A Dependent Support Claim can be used in the following situations:

  1. If the deceased died with a will and did not leave adequate support for the dependant; or,
  2. If the deceased died without a will and the dependent is: a) not entitled to relief from the laws of intestacy (i.e. common law spouses); b) the dependant is further down the line of succession and requires support from the estate.

Limitation periods under SLRA: Six months

 It’s important to remember that the general limitation period of two years does not apply to the timing of bringing a Dependant Support Claims.

Section 61 of the SLRA contains the limitation period. A claimant has six months from the granting of probate to bring a claim. The exception to this period is that a court may consider an application made at any time as to any portion of the estate which remains undistributed at the date of the application (61(1)).

An estate trustee must then comply with s. 67(1) which stays the distribution of the estate after service of notice upon them, until the court has disposed with the Dependant Support Application. The exception here is that an estate trustee may continue to make reasonable advances for support to dependants who are beneficiaries of the estate (67(2)).

Now, this is where things get interesting. Pursuant to s. 67(3), if an estate trustee distributes any portion of the estate in violation of ss. (1), and support is ordered by the court to be made out of the estate, the estate trustee is personally liable to pay the amount of the distribution.

Awareness of an impending claim can initiate personal liability

Executors can be held personally liable if they distribute the estate, to the dependant’s detriment, before the expiry of the six-month limitation period.

In Dentinger (Re), [1981] O.J. No. 303, the executors were aware that the dependant intended to make a claim under the SLRA, yet distributed nearly all of the estate’s assets shortly after probate and before the application was made. The executrices were advised within six weeks of probate being granted that the dependant intended to make a claim for relief under the SLRA. Within a further three weeks, the executrices rapidly conveyed all the real property in the estate to themselves and two other residuary beneficiaries. The Ontario Superior Court held the executors personally liable and ordered them to make a payment directly to the dependant.

Estate trustees can be held personally liable

Executors have a duty not to distribute the estate before the expiry of the limitation period if there is a possibility of a Dependant Support Claim, and if they do so, they do so at their own peril.

The leading authority on this issue is Gilles v. Althouse et al., [1976] 1 S.C.R. 353, where the Supreme Court of Canada considered Saskatchewan’s mirror legislation to the SLRA, The Dependants’ Relief Act of Saskatchewan. The estate had been fully distributed, and the Saskatchewan Court of Appeal had concluded for that reason that no order for maintenance could be made. The Supreme Court rejected the argument that executors were free to proceed with distribution until they had notice of an application for relief.

They unanimously found that at least until expiry of the six-month period, the applicant was a potential applicant under The Dependants’ Relief Act. She did not effectively disclaim any rights which she might have under that Act. The court opined that the true meaning and effect of the SLRA is to afford an applicant the opportunity to obtain an order against the entire estate, but if they delay and make an application after the six-month limitation period, the claim can only be against the portion of the estate which remains undistributed. However, if the executors have “distributed the estate in a manner contrary to the terms of the will as so varied, they will be under a duty to account.” (54).

The SLRA creates a “temporal window” which is commenced by the granting of probate. It is within this temporal window that the applicant must apply. Estate assets distributed after the temporal window has closed will not be subject to the applicant’s claim.

Should an executor distribute estate assets before a claim is heard, dependents may apply for relief through the clawback provision. Section 72 of the SLRA permits the court to “claw back” certain assets deemed to be part of the estate and subject to the application for support.

Non-arm’s length party can still incur personal liability

 Executors will be held personally liable even if the estate trustee and dependant are non-arm’s length parties. In Gefen v. Gefen 2015 ONSC 7577, the estate trustee, the deceased’s spouse, distributed the estate to herself before the expiry of the six-month limitation period in the SLRA. The Superior Court found that the deceased’s son qualified as a dependant and was entitled to monthly payments. He was entitled to claim against the entirety of the estate as he brought his claim within the limitation period. However, the estate trustee had already distributed the estate assets. The court ruled that the estate trustee had distributed the estate at her own peril since she had not waited for the limitation period and that she was responsible for making the payments that otherwise would have been payable out of the estate itself, had she not made those distributions.

Responsibility for estate practitioners

 Estate practitioners must be prudent in advising estate trustees of their personal liability in mishandling estate assets by distributing assets before the expiry of a limitation period. If an estate trustee has knowledge of a possible dependant and/or an impending Dependant Support Claim, they could be held personally liable to repay these funds in addition to other potential penalties if they distribute estate assets within the six-month limitation period following probate. They must also be aware that estate assets may be clawed back should a judge deem them to be a part of the estate.

The Wife and the Mistress – Can they both be Dependants?

What happens when a man is married, but is in another relationship? Can their mistress be considered a dependant (in addition to their wife)?

The wife and the mistress

In the case of Prelorentzos v. Havaris (2015) the deceased had died at the age of 71 leaving behind his wife with whom he had separated from but never divorced. During the time of his separation, he lived with a woman named Helen whom he initially took in as an act of kindness as she had nowhere else to live. Helen claimed that she lived with him in the same household for about 9 years and that she was a common law spouse of the deceased.

The court noted that the only missing link in this case was whether Helen and the deceased had cohabited. The deceased’s wife claimed that even though they lived together, it was merely a brother-sister type relationship. The wife claims that the deceased always intended to resume his relationship with her and  this is why they never got divorced.

Moral Considerations are important

Justice Grace quoted Cummings v. Cummings (2004) and Tataryn v. Tataryn Estate (1994) and concluded in paragraph 233 that “moral considerations are important in this case.”

[111]   When faced with such an application the court is required to consider the interests of all dependants even if some of them seek no relief.   As Blair J.A. said in Cummings v. Cummings (2004) at para. 27:

When judging whether a deceased has made adequate provision for the proper support of his or her dependants and, if not, what order should be made under the [SLRA], a court must examine the claims of all dependants, whether based on need or on legal or ethical obligations.  This is so by reason of the dictates of the common law and the provisions of ss. 57 through 62 of the Act.

…..

[231]   Non-financial considerations must also be considered.  Blair J.A. used the phrase “moral and ethical obligations” in Cummings, supra at para. 27.  At para. 40 of that decision, Blair J.A. addressed the need to consider such matters in proceedings under Part V of the SLRA.  He wrote:

In my view these questions have been resolved by the decision of the Supreme Court of Canada in Tataryn v. Tataryn Estate…There, the court held that a deceased’s moral duty towards his or her dependants is a relevant consideration on a dependants’ relief application, and that judges are not limited to conducting a needs-based economic analysis in determining what disposition to make.  In doing so, it rejected the argument that the “judicious father and husband” test should be replaced with a needs-based analysis: see para. 23.  I see no reason why the principles of Tataryn should not apply equally in Ontario, even though they were enunciated in the context of the British Columbia Wills Variation Act…in which the language is somewhat different from that of the Succession Law Reform Act.

The court decided that even though sufficient evidence was missing, Helen was still deemed to be the deceased’s common law spouse (by a very thin margin). Therefore, Helen was be entitled to support and was awarded $30,000.

Case Dependant

In this case, the court did not focus on the fact that the deceased already had a wife. Rather, the court was concerned with the moral obligations of the deceased to provide support to Helen. It is evident that even though Helen was a “mistress” she was still deemed to be a common law spouse.

Judges are continually defining the limit and scope of dependants and who shall be considered to be a dependant still varies from case to case.

 

Online Romance & Dependant Support

Who is a dependant?

As opposed to the English law principle laid down by Cockburn CJ in Banks v. Goodfellow (1870) LR 5 QB 549 that a testator enjoys absolute freedom in giving out his estate to any person of his choice, Part V of Succession Law Relief Act (the “SLRA”) makes a provision for dependants to claim support from the estate of the testator, even if they were given something (but not enough or “adequate” support).

Part V of the SLRA was introduced to protect dependants, including individuals in a common law relationship or a parent who was the responsibility of the deceased so that they do not become deprived of their wealth.

Section 58 of the SLRA states that if a person dies (either testate or intestate) without making appropriate provision for the support of his dependants, the dependant may (themselves or through their parents) apply to the court for support. The court shall thereafter order support to be paid from the estate of the deceased to the dependant.

However, who is considered to be a dependant for the purpose of the Act? Section 57 of SLRA states that the spouse, parent, child, brother or sister of the deceased whom the deceased was providing support (or under any legal obligation to provide support) immediately before his death shall be considered his dependants.

Online Romance

Definition of “Spouse”

There have been several cases where courts define the scope of what it means to be a ‘dependant’.

In Stajduhar v. Kerzner 2017 ONSC 4954, Branislava Stajduhar contended that she was a dependant of Jeffrey Kerzner, deceased, merely because she was in an online romantic relationship with him. She had claimed to have been committed to him since August 2009 until his death (December 31, 2016).

The issue was whether Ms. Stajduhar met the definition of a ‘spouse.’

The SLRA defines spouse to include the definition of “spouse” from the Family Law Act (the “FLA”). In s. 29 of the FLA,  “spouse” is defined as including “either of two persons who are not married to each other and have cohabited… continuously for a period of not less than three years.”

Further, the SLRA defines cohabit to mean to “live together in a conjugal relationship, whether inside or outside marriage.”

Ms. Stajduhar claimed that she was in a committed relationship with Mr. Kerzner and that she was being supported by him until the time of his death.

Place of Residence

Justice Dunphy denied Ms. Stajduhar’s claim due to the fact that she was not living with the deceased and that the relationship was not continuous. Justice Dunphy found no clear evidence that they cohabited. His honour defined a residence to mean a “readily identifiable…place where both are ordinarily to be found most of the time when they are at ‘home.'”

This case is helpful to show what the court will (and will not) consider when looking at a relationship and a dependant support application. It is evident that living together is crucial.

While love can be found online, there are other parameters set out in the SLA which judges will take into consideration when determining support, such as the deceased providing support immediately before death, being a couple, living together, and having a continuous relationship for not less than three years.