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Category: Wills

Aretha Franklin and her Holograph Will, Part 1

Two handwritten wills of the late singer Aretha Franklin have spurred some discussion on the issue of holographic wills.

Brief facts

 Franklin passed away in 2018. She is survived by four adult children: Clarence Franklin (Clarence), Edward Franklin (Edward), Teddy Richards (Teddy), and Kecalf Franklin (Kecalf). Clarence was not involved in the subsequent dispute between the other three children. Franklin’s niece, Sabrina Owens, was selected as the personal representative of the estate.

During the search of the Franklin’s home, the personal representative found two different handwritten wills. One was in a notebook under a couch cushion and was dated 2014 (the “2014 will”). The other will was located in a locked cabinet and was dated 2010 (the “2010 will”).

Both wills contained contradictory instructions pertaining to the distribution of the estate. Both wills indicate that the sons would share income from music and copyrights. The 2010 will named Teddy and Owens as personal representatives and stated Kecalf and Edward “must take business classes and get a certificate or a degree” to benefit from the estate.

The 2014 will crosses out Teddy’s name as the personal representative and has Kecalf’s name in his place. There is no mention of business classes. Additionally, Kecalf and the grandchildren would get the Franklin’s main home in Bloomfield Hills, Mich.

In the 2014 will, Franklin states that her gowns could be auctioned or go to the Smithsonian Institution in Washington. She indicated in both papers that oldest son, Clarence, who lives under a guardianship, must be regularly supported.

Kecalf and Edward favoured the 2014 will while Teddy favoured the 2010 will. A six-person jury deemed the 2014 will worthy of “respect,” rejecting the contention that the 2010 will ought to be valid as it was notarized.

Decision of the jury

  • The jury considered the law pertaining to the validity of wills in Typically, a will is valid under the Michigan law if it meets three requirements: (i) it is in writing; (ii) it is signed by the testator or, while the testator is present, by another at the testator’s direction; and (iii) it is signed by at least two witnesses in a reasonable time after seeing the testator sign or after the testator acknowledges the signature.
  • However, Michigan recognizes handwritten or “holographic” wills if the document is signed, dated, is in the testator’s handwriting and demonstrates by clear and convincing evidence that the testator intended the document to be their
  • The jury decided that the 2014 will was valid on the grounds that: (i) it was more recent; (ii) handwritten with Franklin’s signature at the end of the document and (iii) reflected her clear intention for the document to be a will.

If Franklin was in Ontario: Section 21.1

 If Franklin was a resident of Ontario, it is likely that the 2014 will would have also been upheld in Ontario.

While Franklin’s estate raises a novel issue, the legislature has made room for holographic wills in Ontario. With section 21.1 of the Succession Law Reform Act (SLRA), the legislature appears to provide the courts the power to validate a testamentary document or writing that does not comply with the formalities of execution.

Section 21.1 of the SLRA now provides that if the court is satisfied that a document or writing that was not properly executed or made under the SLRA (which sets out the testamentary intentions of a deceased or an intention of a deceased to revoke, alter or revive their will), the court may order that the document/will is a valid and effective will of the deceased, or as a revocation, alteration or revival of the existing valid will.

This provision was incorporated with a view that an approach which is too rigid may result in a barrier to promoting testamentary freedom and intention. This new judicial discretion should ensure that an individual’s final testamentary intentions are not defeated by inadvertent or clerical errors.

Analyses under section 21.1 of the SLRA are to be fact-driven to the very nature and circumstances of the making of the document itself, the expression of final wishes and the intention of the testator.

The goal appears to be to protect a person’s last wishes, and to ensure that too strict an adherence to formalities does not block the testamentary intention they are intended to protect. The SLRA now has clarified that there ought to be “substantial compliance” and not “strict compliance” to determine a will’s validity.

Part 2: General revocation clauses and designated beneficiaries

As we discussed in the first article in this two-part series, the decision of Alger v. Crumb, 2023 ONCA 209 (Alger), by the Ontario Court of Appeal addressed the issue of whether a general revocation clause in a will revokes designated beneficiaries.

In this case the court was faced with two issues:

  • Whether the application judge was correct in law by finding that the general revocation clause in the will did not revoke the beneficiary designations as it failed to expressly refer to the prior designations; and
  • Whether the decision in Ashton Estate v. South Muskoka Memorial Hospital Foundation, 2008 J. No. 1805 on whether the general revocation clause in a will can revoke a designated beneficiary is correct.

On issue (a), the Court of Appeal observed that it is imperative to understand that a designation must specifically relate to a plan and a revocation must relate expressly to the designation. The court summarized the following propositions of interpretation:

The Succession Law Reform Act (SLRA) prescribes statutory requirements for the designation of a beneficiary by will and for the revocation of the designation by will, which varies from the requirements of revocation and designation by instrument. Specifically, a designation of a beneficiary by will relate expressly, whether generally or specifically, to the plan, while a revocation by will of the designation made by an instrument must relate specifically to the designation (s. 51(1) and s. 52(1) of SLRA).

Firstly, the court interpreted the general revocation clause to determine whether the designation is testamentary in nature. The answer is yes – the designations of beneficiaries by instruments of the RRIF and TFSA plans are testamentary dispositions.

Secondly, the court analyzed whether the revocation was made expressly.

The court noted the following:

  1. Section 51 of the SLRA sets out the approach to designations in Ontario. Under section 51(1), a participant is able to designate a beneficiary of a benefit payable under a plan on the participant’s death through two mechanisms: (a) a signed instrument, or (b) by will. Where party elects to designate a beneficiary by will, the designation is only effective “if it relates expressly to a plan, either generally or specifically”: SLRA, at s. 51(2). A later designation will revoke an earlier designation where there is inconsistency: SLRA, at s. 52(2).
  2. Section 52 of the SLRA sets out the approach to revocations in Ontario. Participants may revoke a designation of a beneficiary through the two mechanisms set out above for designations: SLRA, at s. 51(1). However, a revocation in a will is only effective to revoke a designation made by instrument where it relates “expressly to the designation, either generally or specifically”….

At paragraph 25, the court states the following:

  1. The remaining question is whether the revocation of “all … testamentary dispositions of every nature and kind whatsoever” relates “expressly to the designation, either generally or specifically”. This statutory requirement has two components for the revocation to be effective:

1) it must relate to the designation, as opposed to the plan; and 2) it must relate to the designation “expressly … either generally or specifically”.

At paragraph 25, the court states that the revocation must relate to the designation and not the plan. However, this stance is unclear as at paragraph 16 the court states:

Whereas s. 51(2) requires that a designation by will relate expressly to a plan, s. 52(1) requires that a revocation in a will relate expressly to the designation.

A bare reading of the remarks in paragraph 16 indicates that the revocation clause needs to mention both the designation and plan. However, paragraph 25 states that a revocation clause must include the designation and not the plan. This aspect of the judgment is ambiguous and needs clarification.

The Court of Appeal considered that “expressly” must mean something beyond a general category. Justice Kathryn Feldman referred to the thesaurus feature of Microsoft Word to support her conclusion and lay down the synonyms of “expressly.” All the synonyms support the conclusion that reference to a general category that includes the thing to be referred to is not an express reference to that thing.

After due deliberation, it was held that as the general revocation clause in the testator’s will does not relate expressly to the beneficiary designations made by the testator for her RRIF and TFSA plans, it does not comply with s. 52(1) of SLRA. As such, the general revocation clause was held to be not effective to revoke the designations of beneficiaries by instrument(s) of the RRIF and TFSA plans.

Issue (b): The second issue before Court of Appeal was whether the decision in Ashton Estate regarding the effectiveness of a general revocation clause in a will is correct.

The application judge chose to not rely upon the decision in Ashton Estate on the basis that the decision is “plainly wrong” (R v. Scarlett, 2013 ONSC 562, at para. 43).

The Court of Appeal in the decision of Alger held that court in Ashton Estate erred in finding that the clause in that case constituted an effective revocation of the earlier designation by instrument. It was observed that the application judge in Ashton Estate did not discuss the requirement that the revocation clause must relate expressly to the designation, whether generally or specifically.

Resultantly, the application judge in Alger was correct in finding that the interpretation of the general revocation clause in Ashton Estate should not be followed.

The Court of Appeal did, however, give a caveat that the result in Ashton Estate nevertheless appears to be correct under the provisions of SLRA, in the facts and circumstances of the case.

The decision in Alger has reaffirmed and reinstated the statutory requirements for designation and revocation by way of will and instrument. The judgment functions as a code to be followed in the contentious issues that might arise before the other courts from time to time.

This is the second in a two-part series. Read the first article: General revocation clauses and designated beneficiaries, part one.

 

Part 1: General revocation clauses and designated beneficiaries

The decision of Alger v. Crumb, 2023 ONCA 209 (Alger), by the Ontario Court of Appeal addressed the issue of whether a general revocation clause in a will revokes designated beneficiaries

A revocation clause is a clause in the will which expressly states that the will revokes any prior wills. It can be a simple one-line clause, such as, “I revoke all wills and codicils previously made by me.” It is not required for a revocation clause to be included in a will; however, it is best practice to include this provision so there is no confusion if a prior will is still in force and effect.

A designation is a specific clause by which the testator/policy holder names someone to receive money, property, investments, or any other specific “benefit.” There are certain assets whereby a named beneficiary can be nominated to receive the funds upon death of a person. Some examples of such instruments are life insurance plans, RRSPs/RRIFs and TFSA. The testator/ instrument holder can either name a beneficiary on the policy itself (in which case this is recommended and best practice to pass outside the estate and avoid probate tax). However, the testator/instrument holder may also name the beneficiary in their will.

In Ontario, designations are governed by section 51 and 52 of the Succession Law Reform Act, R.S.O. 1990, c S.26 (SLRA). Under s. 51(1), a participant can designate a beneficiary of a benefit payable under a plan on the participant’s death through two mechanisms: (a) a signed instrument, or (b) by will.

A will is a legal document that is used to transfer holdings in an estate to other people or organizations after the death of the person who makes the will (the testator). An instrument is a testamentary document through which a specific plan/asset is designated to the nominees/beneficiaries specified in the instrument. These instruments can be life insurance plans, RRSPs/RRIFs and TFSA plans.

The Ontario Court of Appeal in the present case has clarified that the designations of beneficiaries by instrument(s) of the RRIF and TFSA plans are testamentary dispositions and therefore are included within the meaning of that term.

The decision of Alger is instrumental in interpreting the provisions of the SLRA that deal with designation and revocation by will and by instrument.

Section 51(1) of the SLRA states the following:

A participant may designate a person to receive a benefit payable under a plan on the participant’s death.

Section 51(2) of the SLRA prescribes the following:

A designation in a will is effective only if it relates expressly to a plan, either generally or specifically.

Section 52(1) of the SLRA stipulates the following:

A revocation in a will is effective to revoke a designation made by instrument only if the revocation relates expressly to the designation, either generally or specifically.

Factual background

Theresa Lorraine Crumb (the testator) had four children, the appellants, and the respondents. By her will dated May 29, 2019, (the will), she named the appellants as her estate trustees.

The will leaves a $20,000 bequest to each of the respondents, some small bequests and the residue to only two of her children who are the appellants.

At her death, the testator had RRIF and TFSA plans at Scotiabank. By instrument(s) which were executed before the will, the testator designated all four of her children as equal beneficiaries of the plans.

The will contained a general revocation clause in paragraph one. In the affidavit, the appellants stated that the respondents were estranged from their mother during her final years and that was why she made her will to favour the appellants and that the general revocation clause was effective to revoke the designations.

The application judge found that because the general revocation clause did not relate expressly to the testator’s existing designations by instrument(s) of her RRIF and TFSA plans, it was not effective to revoke those designations and the designations remained in effect.

Decision of application judge

 The application judge made the following findings:

  • The beneficiary designations by instrument(s) of the RRIF and TFSA plans are testamentary dispositions at law.
  • The general revocation clause in the will does not relate expressly to the designations. Section 52(1) of the SLRA states that the revocation clause is only related to the will if the revocation clause expressly states the revocation.
  • The Superior Court of Justice decision in Ashton Estate South Muskoka Memorial Hospital Foundation, 2008 O.J. No. 1805, which held that a general revocation did revoke the designation is “plainly wrong” in law and the application judge was not obliged to follow the decision.
  • The general revocation clause in the testator’s will did not revoke her beneficiary

This is the first of a two-part series.

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.

Decision Underlines Power of Testamentary Wishes

Decision Underlines Power of Testamentary Wishes

The decision in Walters v. Walters 2022 ONCA 38 outlines the circumstances under which a court in Ontario can intervene with the absolute discretion given to estate trustees, particularly their decision not to exercise their discretionary powers. The Ontario Court of Appeal held that the refusal to exercise discretion in discretionary trusts due to extraneous matters is actionable.

Three important takeaways estates lawyers can learn from this case, mainly:

  1. Estate planners must be wary of drafting wills that put the estate trustees in a conflict of interest;
  2. Estate administration requires the utmost impartiality to execute the testamentary wishes of an individual; and
  3. Testamentary wishes remain paramount in Ontario.

Summary of Walters v. Walters

 In Walters, the deceased set up a testamentary trust in her will which included a provision permitting the estate trustees, her children, to encroach on capital as needed in their absolute discretion to maintain the “comfort and well-being” of her husband, the children’s father. The residue of the estate, less the capital provided to the father, went to the children.

She appointed her three children as estate trustees, but one of the children ultimately renounced himself. The father asked the remaining estate trustees to encroach on capital to pay a large sum of his living expenses. The estate trustees disliked and mistrusted their father and declined to use their discretionary powers to distribute funds to him.

The father applied for an order to compel the trustees to encroach on capital by arguing that they were required to do so. The trustees argued, inter alia, that the testator left absolute discretion to the trustees. The lower courts found that the trustees were being influenced by extraneous matters (mainly, their distrust and dislike of their father) and ordered the trustees to pay the father. The trustees appealed, and for the most part, the Appeal Court upheld the lower court’s decision (but reduced the amount of total arrears).

Background on trusts

 There are two general categories of trusts: inter vivos and testamentary trusts. An inter vivos is a living trust, which means it is established when the grantor is alive. A testamentary trust is established by a testator in their will and takes effect upon their passing. A discretionary trust is a trust that is flexible and determined by the criteria set out in the trust instrument by the testator, meaning that the beneficiaries and/or their entitlements are not fixed. As seen in Walters, a discretionary trust generally gives trustees absolute discretion in determining distributions to beneficiaries.

Lesson 1: Reduce the conflicts of interest

The conflict in Walters may have been easily avoided if the will of the deceased was not drafted as such. In this case, the deceased appointed the residual beneficiaries as estate trustees. The will gave the estate trustees absolute discretion to encroach on capital (the estate trustees’ inheritance) to ensure the “comfort and well-being” of the deceased’s spouse.

While a will may grant a trustee absolute discretion to encroach on capital, one should be careful in using ambiguous terms in this context. “Comfort and well-being” is a qualitative term meaning that there could be a range of acceptable living situations. Positing a qualitative term to the estate trustees who have the discretionary power to place their personal interests above their father’s interests creates an enormous potential for conflict. A more practical suggestion could have been to include in the will a provision for a lump-sum or a monthly sum to the father.

Conflicts of interest in estates law may not escalate to the Ontario Court of Appeal, but in this case it did.

Lesson 2: Remind estate trustees of fiduciary duty

This second point follows the first. Estate administration requires the utmost impartiality to execute the testamentary wishes of an individual. In our previous article “Estate trustee checklist” we wrote about the duties and responsibilities of an estate trustee. It is important that the following point is echoed:

The estate trustee should know that they have a fiduciary duty to administer the estate, meaning that the estate trustee must do their utmost to act in the best interest of the estate and follow the wishes of the deceased.

It would be difficult to follow the wishes of the deceased when there is a bad relationship between the estate trustees and a beneficiary, and where an estate trustee stands to inherit more by not distributing funds to the beneficiary (despite it being against the deceased’s wishes). In this case, the estate trustees’ distrust and dislike of their father may have clouded their judgment as the court ruled at paragraph 76 that “no reasonable trustees would refuse to exercise their discretion in favour of a monthly encroachment that reflected the $3,875 monthly cost of Gerald’s residence at Rural Roots Retirement.”

Practically, for estates practitioners, a trust company may have brought their impartial perspective and eliminated any conflict of interest fulfilling the impartial duty owed the estate.

Estate practitioners must advise estate trustees to carefully read the wording of the will or the trust instrument. They should also advise clients that testamentary wishes remain paramount in Ontario and that courts may intervene with a trustee’s discretionary powers if “extraneous matters influence the trustee’s decision,” or in other words, if there is a breach of fiduciary duty.

The decision in Walters highlights the importance of estate trustees acting in the “best interests of the estate” — had the estate trustees been able to put aside their feelings about their father, they would have been able to preserve more money.

Lesson 3: Testamentary wishes remain paramount in Ontario

The personal feelings of the estate trustees are secondary to the wishes of the deceased. We have written multiple articles that speak about testamentary freedom in Ontario such as “Decision highlights major difference between B.C., Ontario estate laws” and “The problem of racist wills in Ontario.”

In this case, a discretionary power was expressly permitted under the terms of the deceased’s will to pay for the father’s living expenses. The trial judge found that the trustees refused to exercise their discretion mainly based on their dislike and distrust of their father. The Appeal Court stated that the personal feelings of the estate trustee had “nothing to do with their obligation to ensure his well- being and comfort” as determined by the testator’s intentions, and that “their refusal to encroach on capital to provide for his comfort and well-being was an abuse of their discretionary powers granted under the will.”

Ultimately, the litigation in Walters was decided in favour of the father because of the estate trustees’ failure to follow the deceased’s will. The wishes of a deceased need to be followed as after all, they are the last decision(s) someone makes during their lifetime.

Kim Gale is an estate litigation lawyer and principal of Gale Law, an estate litigation firm in Toronto. She can be reached at 416-868-3263 or [email protected]. She is the author and creator of the blog Law for Millennials — The Complete Beginners Guide to Law and is co-founder of diversity and inclusion group NCA Network. Priyanka Bahl holds a J.D. from the University of Ottawa (2021) and is currently articling at Gale Law in the area of estate litigation. She can be reached at (416) 868-3263 or via e-mail at [email protected].

The Pro’s and Con’s of Joint Ownership: Part 2 of the Estate Administration Tax Series

In case you missed our last article, we covered the essentials of the estate administration tax (estate tax): who applies for it, how is it calculated and who pays for it. Now that we have covered the fundamentals, we can discuss strategic tax planning. When tax planning for estates is done correctly, estate tax can be reduced or avoided.

In this six-part series, we will be discussing five different methods to consider in order to reduce or avoid the estate tax. These are: joint ownership for property, naming a beneficiary for your assets, gifting assets, holding assets in trusts and making primary and secondary wills.

In this article, we will be explaining how to reduce or avoid estate taxes through joint ownership of property. To understand how to do this correctly, we will first need to explain the basics: what it means to be a joint owner vs. tenant-in-common, the right of survivorship and how property can evade the probate process through this designation.

Joint ownership and right of survivorship

Joint tenancy allows for two or more people to own property together, equally and indivisibly. It is the most common form of homeownership for legally married spouses in Ontario.

Pros

There are many benefits to jointly owned property, for example, if one owner loses mental capacity, the other owner(s) may proceed to make decisions about the property.

Another benefit is when one owner dies, their interest in the property automatically transfers to the surviving owner. This is called the right of survivorship. This means that the deceased’s will does not determine how the ownership in the property will be dealt with. It is the surviving owner who owns the whole property.

No probate tax

 As mentioned above, assets held by the testator and another joint owner with a right of survivorship do not form part of the estate. Because jointly held property passes on right of survivorship, it passes to the surviving owner outside the deceased’s estate. If there is only one name on title, the property must be included in the probate process along with all other assets of the estate. This would significantly increase the amount of estate tax that must be paid before the assets of the estate can be distributed to beneficiaries.

There are two exceptions to this general rule:

  1. When two joint owners die at the same time, or in situations where it is unclear who predeceased the other, they are deemed to have held the property as tenants-in-common.
  2. If the property is designated as a matrimonial home for the child, 26(1) of the Family Law Act (FLA) states that the joint tenancy will sever if the child predeceases the parent.

The Supreme Court of Canada decision in Pecore v. Pecore, 2007 SCC 17 held that there is a rebuttable presumption of a resulting trust in the case of a transfer between a parent and adult child. In this case, a father added his daughter as a joint tenant to his financial accounts before his death. In the father’s will, the estate was to be split between the daughter and her husband. When the daughter and the husband divorced, the courts considered whether the financial accounts were to fall back to the father’s estate or pass to his daughter outside the estate by joint tenancy (of the bank account), through the right of survivorship. The Supreme Court determined that the father intended to gift ownership of the account to the daughter. If the father’s intent had been missing, there would be presumption of a resulting trust. The onus would be on the adult child to rebut the presumption. Make sure to distinguish between transfers to a minor child, where a rebuttable presumption of advancement would apply.

Cons

 If you decide to pursue a joint ownership to avoid/reduce the estate tax, be careful — there are possible adverse consequences for joint ownership. The following risks typically arise with parent to child joint ownership transfers with right of survivorship:

  1. Real estate: remember that the testator will lose exclusive control over the property. The consent of the child will be required to sell, encumber or transfer the interest of the Be mindful of who you are adding as a joint owner — all owners are registered on title. The actions and debts of one owner may compromise title that will inevitably impact the other joint owner(s) as well.
  2. Bankruptcy/creditors: Creditors of the child, if any, may have an interest in the property should the child have financial
  3. Family Law Act: As mentioned above, if the property is designated as the matrimonial home for the child under Part II of the FLA, the joint tenancy will sever if the child predeceases the
  4. Income Tax Act: Adding a new joint owner may trigger adverse or unexpected tax consequences where beneficial ownership is transferred. For example, if the transferred property is the parent’s principal residence (and not the principal residence of the child) the transfer will likely result in a loss of a portion of the principal residence exemption for future taxation You should determine whether the potential savings (1.5 per cent) are worth the risks.

Tenants-in-common

Tenants-in-common is a type of joint ownership where two or more individuals own a divided interest or share of the property where no rights of survivorship exist. This type of legal relationship is beneficial for individuals who may wish to leave their respective share of property to specific beneficiaries, for example, business partners who would like to leave their share to their families, or those involved in a second marriage who would like to distribute their share to children in a previous marriage. If one owner dies, their share of the property passes on to their estate and will be distributed in accordance with their will or the laws of intestacy. The surviving owner retains their percentage interest in the property.

A tenancy-in-common will generally be subject to a probate process and associated estate taxes because the deceased’s interest in the property forms part of the estate upon death. As part of the estate, the value of the interest must be ascertained in the probate process and estate tax must be paid upon the total value of the estate.

Plan wisely

Thinking ahead about how to designate your property between joint-ownership and a tenancy-in-common will help you strategically avoid or reduce taxes in estate planning. Next up in our series, we will discuss strategies in naming beneficiaries for assets to pass outside the estate to reduce or avoid estate taxes.

This is the second of a six-part series. Read the first article: What is estate administration tax, part one.

Digital Assets: The Next Frontier

Digital Assets: The Next Frontier

In  an increasingly  digital world, estates lawyers must consider social media presence when planning and administering an estate. A significant percentage of the population  will have at least a Facebook, Instagram or Twitter account, and this percentage is only on the rise. These social media accounts will likely hold a lot of sentimental value, and so the access and management to those accounts will need to be addressed upon death.

Fiduciaries Access to Digital Information Act

 Currently, in Ontario, there is no legislation in place that addresses the estate trustee’s access to digital assets upon death. This means that there are no intestacy rules relating to social media presence, and so, if this is not addressed in the will, or if the estate trustee does not know the passwords to the accounts, then the deceased’s social media presence will be stuck in limbo.

 

In Saskatchewan, however, there exists the Fiduciaries Access to Digital Information Act (the Act) which addresses the estate trustee’s ability to access to digital assets upon death. The Act also allows  for  other fiduciaries to access digital assets belonging to someone else:

  1. an administrator for a deceased account holder;
  2. a property guardian;
  3. a property attorney; or
  4. a trustee appointed to hold in trust a digital asset or other property of the account holder to access digital assets on someone else’s

If you are a trustee in Saskatchewan and you need assistance as to how to deal with a digital asset, the Act is of great assistance:

  • Section 4 grants ways other than a court order that a fiduciary can access the digital assets of the deceased or The other methods in which how that right of access can be given include a will, guardianship order, power of attorney and a trust;
  • Section 6 provides that an estate trustee can access a digital asset of the deceased and how the estate trustee can take action relating to the digital asset that could have been taken by the deceased account holder if the account holder were alive – essentially stating that the estate trustee is deemed to be the authorized user of the digital asset;
  • Section 8 provides the details on how an estate trustee can interact with the custodian of the digital asset to obtain access; and
  • If all fails, 9 allows for an estate trustee to apply to court for directions.

Ontario

 In a Globe and Mail article from Oct. 7, 2021, titled “Why your digital footprint needs to be a part of your will” by Joel Schlesinger, Kimberly Whaley  of WEL Partners described  the  workaround  for  Ontario as “creating a list of accounts and password information for a spouse or trustee to access in the event of a death or incapacity” and added that an authorization is likely needed for the spouse or trustee to access the digital assets.

This workaround, while extremely practical, requires the user to take the proactive steps to ensure that their digital assets are protected. The percentage of the population who have wills executed is around 49 per cent. Of the 49 per cent, we can only speculate that a small percentage of half the population will have signed an authorization regarding the digital assets of their estate.

Legislation like the Fiduciaries Access to Digital Information Act needs to be enacted to protect the population from a significant loss of digital assets. The adoption of legislation in order to keep up with the population’s growing accumulation of digital presence is necessary, and it needs to happen now.

Legal aid services & estates law

The Legal Aid Services Act (LASA) received royal assent in July 2020 as part of the Smarter and Stronger Justice Act. The LASA is a step forward to modernize the legal aid framework for low-income Ontarians through a shift from a regulatory regime to giving Legal Aid Ontario (LAO) more flexibility to develop and adapt its own rules, policies and services that better serve low-income Ontarians.

Why is the LASA relevant today?

 The LASA gives LAO the power to set its own rules. On April 8, 2021, LAO released a statement indicating that it  had created  the  rules to  support the implementation of the LASA. A large part of its modernized approach asks for feedback from the private bar, clinics, other service providers and stakeholders. This feedback period is open from April 2, 2021, to May 20, 2021. You can provide your feedback for the LAO draft rules here.

LAO’s areas of practice

 Charles Harnick, chair of LAO  stated  in a July  2020  press release:  “Our core mandate continues to be to serve low-income Ontarians. We will still provide poverty law and other services in criminal  law, family  law  and refugee law to low-income Ontarians. Nothing  is changing  in terms of  who we serve and why we do what we do. Nothing ever will change that.”

The main areas of practice of LAO as listed on its website include criminal, family, refugee and immigration, domestic violence, mental health and legal clinics. There is nothing listed for the simple will or power of attorney, and estate administration, an area of law that is underserved and needed by individuals in Ontario.

Estates law should be considered an area of practice by LAO

As members of the estates bar, we see positives with having an estates law service for low-income residents. These include:

  • COVID-19 impact: there is an increased risk, and it follows that there is an increased need for drafting by low-income individuals who are forced to work as the paid sick leave structure introduced by the Ontario government only provides for three days of paid sick leave when the recommended quarantine period is 14 days;
  • As the population ages, there will be an increase for drafting We previously posted about the importance of a will;
  • The need for probate to access bank accounts of the Even though there are new rules that make it easier to apply for a certificate of appointment for small estates, knowledge of the probate process is still required to navigate the rules and minimize delays;
  • For the more modest estates, every dollar counts; and
  • Every person should have a chance at testamentary freedom and have their last wishes followed as closely as

Proposed introduction of services

A proposed addition to LAO would be the introduction of estates law services. These would include:

  • drafting of wills;
  • drafting of powers of attorney;
  • having a mediator on staff; and
  • probate services for small estates .

The first two proposed services can be done in conjunction with student legal clinics. For example, the Queen’s Elder Law Clinic can be used as a guiding example for the drafting services under one supervising lawyer and provides a fantastic experience for 2L and 3L students looking to obtain experience and exposure to the legal profession. With virtual commissioning and witnessing here to stay, it can also be done by a staff lawyer from LAO.

Mediation can be a costly process for low-income part ies .  By having a staff lawyer  who can also mediate or a mediator on staff, LAO can assist those parties in a dispute come to a resolution where previously they would not have been able to. This is especially important for the low-income clients where every dollar and costs savings count .

Guiding services such as a helpline, whether phone or website, for the newly introduced small estates probate rules may be helpful for those with some experience in the probate process. Additionally, having someone on the LAO staff who can assist with completing the forms may also be an option.

The LAO should seriously consider the implementation of estates law services. Having a small department solely focused on estates law can have big implications for access to justice.

Decision highlights major difference between B.C., Ontario estate laws

Decision highlights major difference between B.C.,

Ontario estate laws

On April 7, 2021, the British Columbia case of Jung v.  Poole Estate  2021 BCSC 623  was released. In  this decision, the testator who had disinherited his daughters in his last will and testament, had his will varied by the court which resulted in the adult daughters being awarded 70 per cent of his estate .

As wills, trusts and estates practitioners it is interesting to see the different approaches in succession law from other jurisdictions. It is unlikely that the same decision would have been reached in Ontario as finality and testamentary freedom are key aspects of Ontario's succession laws.

Wills, Estates and Succession Act, s. 60

Section 60 of B.C.'s Wills, Estates and Succession Act (WESA) gives the court discretion to vary a will if the court believes it to be adequate, just and equitable to do so if the court is of the opinion that the will does not provide proper support for the testator's spouse and/or children:

Despite any law or enactment to the contrary, if a will-maker dies leaving a will that does not, in the court's opinion, make adequate  provision  for the proper maintenance and support of the will-maker's  spouse or children, the court may, in a proceeding by or on behalf of the spouse or children, order that the provision that it  thinks adequate,  just and equitable in the circumstances be made out of the will.

Section 60 was applied in Jung v. Poole Estate. The testator fathered twin daughters that he did not want. The mother took full custody of the twins from birth until they were 4 years old - when she passed away. The mother's will stipulated that a couple that she was close friends with should become the daughters' guardians. A custody battle ensued, and custody was awarded to the couple, but the testator was given a generous amount of parenting time.

After the order for custody was made, the testator "dropped out of the twins' lives and disappeared ." The testator was never prevented by the couple from seeing the twins, nor did he provide any financial  assistance.  The testator  never  made  an effort  to reach  out  to  the twins, even though he had the couple's contact information . The twins  could not  reach  out  to  him  as the testator never  provided  the  couple  with  his contact  information.  The twins  were  34  years  old when the testator died.

Rules and case law

 For Ontario estates litigators, the rules and case law that the court relied on in Jung may shock you.

The court asked if the testator owed a moral obligation to the twins to provide for them in his last will and if so, what provision would the court consider adequate, just, and equitable for the twins in the circumstances to be paid out of the testator's estate. This is where the two jurisdictions start to differ. In terms of varying a will with these facts at hand, the closest that Ontario's Succession Law Reform Act comes to this, is a dependant support claim which would likely have failed here. Ontario allows for more testamentary freedom and as such, does not have a section like s. 60 where an applicant can rely on moral obligation to further their case.

The court in Jung relied on the Supreme Court of Canada case of Tataryn v. Tataryn Estate [1994] 2 S.C.R. 807 for its principles to guide it on its determination of any moral obligations. The test for determining what is "adequate, just and equitable" is grounded in "society's reasonable expectations of what a judicious person would do in the circumstances, by reference to contemporary community standards." [emphasis added] "Only where the testator has chosen an option which falls below his or her obligations as defined by reference to legal and moral norms, should the court make an order which achieves the justice the testator failed to achieve." Societal expectations may allow a court to vary a will, which gives British Columbia courts more power to vary wills than in Ontario.

The court cited McBride v. Voth 2010 BCSC 443 (at paras. 129-142), which sets out six factors for s. 60 of the WESA. The court relied on the two factors of estrangement/neglect and the testator's reasons for disinheritance. The factor of estrangement and neglect asked if it was the testator's fault that he and the twins were estranged, and the reasons for disinheritance asked if the reasons for disinheritance was logical based on facts and the act of disinheritance.

Conclusion of Jung

 In regards to the factor of estrangement and neglect, the court concluded that the deceased abandoned the twins from the outset and he had a strong moral obligation to attempt to make up for his desertion of them. He owed a moral obligation to them and failed to meet it during his lifetime .

In regards to the factor of testator's reasons for  disinheritance, the court concluded  that the testator's rationale for disinheriting the twins was invalid, irrational and not based on what a reasonable testator judged by contemporary community standards would or should have done. The court concluded that the testator failed in his last opportunity to behave like a judicious father and recognize his moral obligations to the twins .

The case turned on moral obligations, a B.C. principle, and the court varied the will to make adequate, just and equitable provisions for the twins. This included adding the non-estate assets (Tax Free Savings Account with a beneficiary designation) into the estate assets. The twins were each awarded 35  per cent of the  estate and this meant that  the decision  directly  went against the testator's intention to disinherit them.

Applying Jung to Spence v. BMO Trust Company

 Spence v. BMO Trust Company 2016 ONCA 196 is an Ontario Court of Appeal case that stands for testamentary freedom . You can read more about the case and its analysis in our previous article in previous article, The problem of racist wills in Ontario. Essentially,  it  is not  open to  courts to scrutinize an unambiguous and unequivocal disposition in a will, with no discriminatory conditions or stipulations.

In Spence, the father ceased communicating with his daughter during the final 11 years of his life and updated his will to exclude her because she, as a Black woman, married a white man. The daughter's claim that the will made by her father was discriminatory and undermined public policy was initially successful but overturned at the Ontario Court of Appeal, even with strong third-party extrinsic evidence.

Had a similar provision to s. 60 of the WESA been in place in Ontario, or had Spence occurred in British Columbia, applying the factors and rationale from Jung, there may have been a different outcome for this landmark Ontario case. Perhaps Jung can start the discussion on how Ontario can review and reconsider the balance Spence struck between testamentary freedom and discrimination .

British Columbia's strong belief in moral obligations directly contrasts Ontario's love of testamentary freedom. Yet both ideas are foundational to each province's understanding of succession law. Both have its positives, and both have its drawbacks. It is difficult to say if one set of laws  is better than the other. However, what is certain is the evolution of the law. B.C. and Ontario can learn from each other's succession laws and move towards justice for all.

Bill 245 and predatory marriages in estate law

Bill 245 and predatory marriages in estate law

On March 2, 2021, Bill 245, the Accelerating Access  to  Justice  Act, passed  its  second  reading  in the Ontario legislature. There remains to be a third reading before the Act can receive royal assent, but from reading the Hansard debates, it is optimistic that Bill 245 will become law.

As wills, trusts and estates practitioners it is important to note these changes to the legislation – in particular, the change in legislation regarding wills and the marital status of the testator.

Marital status and the SLRA

Schedule 9 of Bill 245 has proposed amendments to the Succession Law Reform Act (SLRA).

The following are the proposed changes to be made to the sections in the SLRA relating to marital status:

  • It is proposed that 16, where a will is revoked by the marriage of the testator, is repealed.
  • An addition is proposed for 17 to add other instances  where  a  testator’s will shall be construed  as if  the  former  spouse had predeceased  the testator. Most notably, the proposal  for  s.  17  is to  include  spousal separation between married spouses to be construed as if the spouse had predeceased the testat or.
  • Following the theme of separation, the proposed addition of 43. 1 adds that intestacy rules do not apply in respect of any or all property if the person and the spouse are separated at the time of the person’s death.

The changes reflect the name of the bill as accessibility to justice is accelerated through the proposed amendments. This accessibility to justice is most notable in the proposed s. 16 revocation .

How changes promote accelerated access to justice

 Current Section 16:

Revocation by marriage 16 A will is revoked by the marriage of the testator except where,

  • there is a declaration in the will that it is made in contemplation of the marriage;
  • the spouse of the testator elects to take under the will, by an instrument in writing signed by the spouse and filed within one year after the testator’s death in the office of the Estate Registrar for Ontario; or
  • the will is made in exercise of a power of appointment of property which would not in default of the appointment pass to the heir, executor or administrator of the testator or to the persons entitled to the estate of the testator if he or she died intest ate .

As some estate litigation practitioners may have experienced, an unfortunate situation can occur

when an elderly testator marries a significantly younger spouse. Unless there was a declaration in contemplation of marriage, the elderly testator’s previous will is revoked, leaving the beneficiaries a difficult journey to regain their inheritance, and almost always at a cost. Unless a new will is created, the new younger spouse jumps to the front of the line and if a new will is actually created, it may be the case that the new will is borne from coercion or undue influence. This was the case in Banton v. Banton [1998] O.J. No. 3528.

Problems with current law as in Banton v. Banton

Banton is a classic example of predatory marriage. In Banton, 88-year-old George Banton met a 31- year-old woman named Muna Yassin, and they had”… formed a friendship, which quickly developed into a close attachment … .” After surgery for one of his many physical ailments, Banton’s doctor assessed and issued a Certificate of I ncompetence. Shortly after the declaration of incompetence, Banton, with Yassin, withdrew $10,000 from his bank account and attempted to cash more of his cheques.

When his children discovered the withdrawal and attempted withdrawals, they, as Banton’s attorneys for property, put everything  in a trust to protect his assets. The trust was created similar to Banton’s will executed in 1991. After the withdrawals were stopped, Yassin married Banton and he made a will that left everything to her.

Based on the evidence, the court found Banton’s will that left everything to Yassin to be invalid because he was incapable and it was procured through undue influence. Unfortunately for the children, the court found that the marriage was valid.

Predatory marriages

A problem with respect to capacity  is the  lower standard  required  for the  capacity  to  marry  as compared to the capacity to make a will or appoint a power  of attorney.  The act of marriage  may  be simple to understand and carry a lower bar for capacity (although when is love ever that simple), but there are still consequences to  marriage  that invoke  financial  repercussions  in  some  instances,  as seen above.

For individuals with less time – such as the elderly – marriage is extremely problematic as marriage more than likely revokes a will. For people with more time in their lives to  make a new  will, this is not as big of a problem as compared to older individuals (but everyone should endeavour to have a will

– see our previous article: Estate COVID problems part two: The importance of a will).

It is because of the revocation in s. 16 that makes the elderly extremely vulnerable to predatory marriages due to factors that include, but are not  limited to,  the deterioration  of the mind and body and loneliness . The elderly become likely targets  for  parasites  that  need to  only  come into a  senior’s life for a short period of time to steal a large amount of money from rightful beneficiaries. Yassin was married to Banton for just over a year and a half.

Why the new law is better than status quo

If the revocation by marriage is repealed, then the Banton estate would not have lost money to a predatory marriage. They would have been successful in the will challenge, and Banton would not have died intestate. He would have died subject to his true testamentary intention as in his previous will where he was capable. His five children and 18 grandchildren would not have given up a part of their inheritance to an outsider.

From the Hansard, MPP Robert Bailey addressed the floor and advocated for Bill 245. He stated the bill’s intent to combat predatory marriages through the s. 16 amendment “the proposed changes in Bill 245 that will benefit seniors who may enter predatory marriages.”

This amendment may not rid Ontario of predatory marriages, but it is a good place to start .