Category: Wills & Estates

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Litigation Wills & Estates

Court Invokes Doctrine of Unconscionable Procurement in Estate Matter

The doctrine of unconscionable procurement has not been invoked in Ontario in more than one hundred years, previous to a recent case heard by the Ontario Superior Court of Justice. The doctrine is used to set aside a gift or other significant transfer of wealth when it can be established that the gifter did not understand what they were doing, on the basis that it would be unconscionable to allow the gift to stand.

Proving Unconscionable Procurement

To prove the elements of the doctrine, one must establish two things:

  1. That one person received a significant benefit from another, and
  2. The receiver of the benefit had an active role in procuring or arranging the gift or transfer.

Once the two elements above have been established, there is a presumption of unconscionable procurement unless the receiver of the benefit can demonstrate otherwise.

Notably, most estate cases looking to challenge a gift or other transfer would look to the capacity of the gifter. The doctrine of unconscionable procurement does not require proof that the gifter lacked capacity.

A Mother Gifted Over $25 Million to One of Three Sons in Her Lifetime

In the case at hand, a woman passed away with a large estate, survived by two sons (a third son had predeceased her). One surviving son and the estate of the deceased son brought an action against the third due to significant gifts their mother had bestowed on him and his family while she was alive. They sought an equalization payment of 2/3 of the amount he had been gifted by their mother. In the last years of her life, she had given him over $25 million, which amounted to nearly half of her total assets.

While a psychiatrist testified that the mother had the capacity to make her own decisions at the time of the gifts, this did not have a bearing on the equitable doctrine in question. The court found that certain transactions lacked proper documentation. As a result, the son in receipt of those gifts, which totalled approximately $8 million, could not rebut the presumption of unconscionable procurement once the first to elements had been established.

The court noted that it was obliged to “look at the impugned transactions with its moral sense awakened and with a view to determining whether it would be unconscionable to allow the transaction to stand.” Given the presumption of unconscionability, the court was forced to find that the transactions lacking documentation could not stand. The remedy for the doctrine is to find any inequitable transactions are void.

The son who benefitted from those gifts was ordered to account for the money received and place it in trust for the estate, pending distribution among the beneficiaries.

Notably, this decision is going to be appealed, though not with respect to the unconscionable procurement aspect. This means that lawyers looking to challenge transfers of wealth have a new (old) method to establish their claim.

Documenting Large Gifts May Become the Norm

This case should also demonstrate the need to properly document any and all large gifts, donations and other transfers of wealth, to be sure that they will hold up under judicial scrutiny at a later time. If it is no longer necessary to prove that a person lacked the capacity to give a gift or make a charitable contribution, it may leave these types of transactions vulnerable to attack after the person has passed away. To ensure that a gift will stand, it may become necessary to set out the gifter’s intentions in writing.

At Baker & Company, our Toronto estate planning lawyers can help you establish an estate plan tailored to your needs, no matter your current family status. We have extensive experience and expertise in providing you with estate planning advice and implementing your desired plan. Should you find yourself in the position of challenging an existing will or estate, our lawyers can also represent you through the litigation process. Call us at 416-777-0100 or contact us online for a consultation.

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Probate & Estate Administration Wills & Estates

The Rule of Convenience & the Distribution of an Estate

There is a lot that estate trustees must balance when administering an estate through the probate process. They need to pay attention to the beneficiaries, paying any debts of the deceased, probating the Will, and keeping up with tax obligations. Something else that trustees should keep in mind, particularly when it comes to timing, is the Rule of Convenience.

What is the “Rule of Convenience”?

The rule is a principle of common law, which states that where a Will does not specify a time for carrying out a legacy under the Will, the payment should carry interest if it has not been paid by the one-year anniversary of the testator’s death. Therefore, if no specific timing is specified, testators need to ensure that they have distributed the estate to the beneficiaries within one year of the death, or the estate will be liable for interest on top of the inheritance itself.

Significant Interest Owed to Beneficiaries, Despite Beneficiaries Causing Delay in Part

A father with three surviving children, a son and two daughters, had drafted a Will that allowed for a relatively even distribution of his assets among them. A number of years later, the father drafted a new Will. In this one, he left each daughter a legacy of $530,000, and then the residue, which was considerably more than the two legacies, to his son. The son was also named as the executor of the estate.

After the father’s death, the daughters challenged the last Will, claiming their father had been unduly influenced by their brother. They were ultimately unsuccessful in their challenge, and the litigation delayed the payment of their legacies. Despite their role in the delay, the sisters then brought a claim for interest on their legacies, citing the rule of convenience. The interest payments they claimed would come from the residue of the estate, reducing the amount the brother ultimately received.

The lower court found in favour of the brother, citing the sisters’ role in delaying the payment of their legacies due to the Will challenge. however, when the sisters appealed the decision, the Court of Appeal overturned the lower decision and found in their favour.

Finding Any Other Way Would Discourage Litigation Going Forward

The Court of Appeal reiterated the importance of upholding the principle of the Rule of Convenience. Even though the sisters’ litigation had been the primary cause of the delay, it would be unfair to cite this as a reason not to grant them the interest they were entitled to. The Rule had been invoked in order to promote predictability and certainty in the distribution of an estate. If the sisters were denied their right to interest, it would have a chilling effect on future estate litigation, whether the action had merit or not.

In the end, the Court of Appeal awarded the sisters each 10% interest on their legacy, resulting in an interest award in the amount of $53,000 for each sister, which came out of the brother’s entitlement to the residue.

Estate trustees should keep this decision in mind when planning the administration of an estate, as an interest award can be significant and can massively affect an estate’s bottom line. On the other hand, courts should be wary of meritless claims made simply to create a delay, thereby ensuring beneficiaries of an extra entitlement to the estate.

At Baker & Company, our Toronto estate planning lawyers can help testators through the probate and estate administration process, ensuring that deadlines are met and all obligations are fulfilled. We have extensive experience in guiding estate trustees through this process and representing them in litigation should that become necessary. Call us at 416-777-0100 or contact us online for a consultation.

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Litigation Probate & Estate Administration Wills & Estates

Declaratory Relief and Limitation Periods

We have posted previously on the topic of limitation periods as they pertain to civil litigation in Ontario, however, we did not discuss the specific instance of an action seeking declaratory, rather than consequential, relief. A recent Ontario decision was faced with the question of whether an application was outside the limitation period, and whether the relief the applicant sought was purely declaratory.

What is the Difference Between Declaratory and Consequential Relief?

Consequential relief is what an applicant is generally seeking when bringing an action in court. They seek an order that something will happen; payment of damages, an injunction being granted, or an award of support. They have brought the action in an effort to bring about a certain consequence.

Declaratory relief is when an applicant presents a legal question to the court seeking only a declaration with respect to the parties’ rights. There is no consequence sought beyond the court’s opinion on the matter.

A Recent Decision

Limitation periods, typically a two-year period in Ontario for most civil actions, do not apply to matters that seek a purely declaratory order. This is not controversial. A recent decision, Piekut v. Romoli, required the court to make a determination as to whether an action was statute-barred due to being outside the limitation period. The sole basis for this determination was whether the relief sought was consequential or solely declaratory.

The case involved two of the three daughters of a deceased man. Each of the man’s daughters had been appointed as Estate Trustees under their father’s Will. Each of the daughters was also a beneficiary under the Will, which had stated that the residue of the estate was to be divided equally among the deceased’s three daughters, one of whom was not a party to this action.

However, after the death of her father, the respondent daughter presented a codicil which she claimed her father had executed two years before his death. In this codicil, the father gifted two of his properties to the respondent daughter alone.

The plaintiff daughter and the third sister were unsure how to handle the codicil, which they felt was not valid. Due to the disagreement between the daughters, they did not attempt to probate the Will for several years after their father had passed. Eventually, the plaintiff brought an application seeking an order as the validity of the codicil so that she could carry out the administration of the estate. The respondent sought to dismiss her sister’s application as it had been brought outside the two-year limitation period.

The Court’s Findings

The key issue in the case became the determination of whether the relief sought was purely declaratory or if it involved a degree of consequential relief. The court noted that no action had ever been brought to prove the validity of the codicil one way or the other. Had the respondent brought an action to prove the validity of the codicil and the plaintiff had challenged it, the relief sought would have been consequential, with each party seeking a specific outcome from the court. In that case, the limitation period would have applied.

However, in the case at hand, the applicant did not seek that the court award the properties in question to anyone in particular. She simply sought a declaration as to the validity of the codicil. Once a declaration was made, she would move on to the administration of the estate in accordance with the court’s determination. While there was no question that consequences would flow from the declaration of the court, the plaintiff did not seek one consequence over another. This was the key distinction for the court.

The two-year limitation period will still apply to most civil actions, however, it is important to understand the difference between the types of relief that may be sought. Seeking a declaration rather than an outcome could be a way to resolve an ongoing matter than has progressed beyond the statutory limitation period.

At Baker & Company, our Toronto estates and litigation lawyers can help you establish an estate plan tailored to your needs, or bring or defend a challenge in court. We have extensive experience and expertise in providing you with estate planning advice and implementing your desired plan. We also rely on our broad base of experience and expertise to provide you with exceptional legal guidance in any litigation matter when necessary. Call us at 416-777-0100 or contact us online for a consultation.

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Estate Planning, Will Planning, Succession Planning & Inheritance Planning Litigation Probate & Estate Administration Wills & Estates

Dependant Relief Claim

When a person passes away without a will, or intestate, the distribution of the estate’s assets is determined by Part II of the Succession Law Reform Act (the “Act”). For example, a spouse will be first in line, followed by children, and so on. However, it is important to note that this part of the Act only applies to married spouses. What happens in a case where the deceased had a common-law spouse at the time of their death? What are the entitlements owing to that spouse, if any?

Dependant Relief Claims Explained

Common-law spouses retain a right to claim a portion of their spouse’s estate in the form of a dependant’s relief claim. These claims are governed by Part V of the Act. In order to make a successful claim for dependant’s relief, a spouse must be able to demonstrate that they were in a common-law relationship with the deceased at the time of their death. In cases where the deceased did have a will, the spouse must also establish that the will failed to provide adequate provisions for their ongoing support.

Once the spouse has established their right to a claim, the court must then determine the amount of the award. To do this, the court will review a number of factors set out under s. 62, including the following:

  • the dependant’s current assets and means;
  • the dependant’s capacity to contribute to their own support;
  • the dependant’s age and physical and mental health;
  • any agreement between the deceased and the dependant;
  • the claims of any other dependant of the deceased; and
  • the length of time the spouses cohabitated.

These are just some of the factors enumerated in the Act. The full list can be viewed under s. 62(1) of the Act.

A Recent Example

A recent decision of the Ontario Superior Court examined a classic scenario of a common-law spouse’s claim for dependant’s relief. In the case at hand, the deceased died intestate and was survived by an adult child and his common-law spouse. Under the laws of succession, the entire estate, valued at $2,851,125.77, would have gone to the daughter of the deceased. The common-law spouse brought a claim for dependant’s relief, seeking an award of half the value of the estate. Specifically, she sought an absolute transfer of the farm property where she resided with the deceased, which was valued at $580,000.00. In addition, she sought to keep all funds and assets she had received to date, which totalled approximately $570,000.00 and then a further cash payment of approximately $275,000.00. This would leave both the applicant and the respondent with approximately equal shares in the estate.

At the time of her spouse’s death, the applicant was 73 years old. She had no physical or mental health issues and was not employed. She resided on a farm property owned by the deceased, where she had lived and worked since 1991. She had originally met the deceased when he hired her to work as his housekeeper, however, a romantic relationship developed over time. Tax records indicated that the pair had declared themselves to be common-law spouses beginning in 1999.

Records showed that the applicant had paid into the household expenses over the years, including veterinary bills, small tools for the farm, home appliances, and food and clothing for the couple.

The court examined what the applicant would require in order to maintain her own care, with the contemplation of the applicant eventually relocating to a one-bedroom accommodation in a nursing care facility. Relying on expert evidence, the court found that the applicant would be likely to suffer a shortfall if she was entitled only to the assets already in her possession. Given that the estate was sizeable enough to provide for the applicant, the court found that the deceased had failed to provide adequate support.

Once the applicant had successfully established a claim against the estate, the court then turned to the amount. While the court considered providing a life estate in the farmhouse for the applicant, it found that there was a contentious relationship between the applicant and the deceased’s daughter, and a life estate in the home would prolong the need for the parties to interact with each other. Under the circumstances, the court held that both parties would be better served by ordering a transfer of the farmhouse to the applicant.

The court ultimately found that a judicious spouse would have provided for the applicant’s care and her ability to live in relative comfort for the remainder of her life. Given that, the court ordered that the applicant keep the assets already in her possession in addition to the transfer of the farmhouse, and also awarded a further payment of approximately $275,000.00. The applicant received everything she had requested, which amounted to half the value of the estate.

Takeaways

This case serves to illustrate how the law can help to make up for a shortfall when a person dies without properly providing for a dependant. Just because a person has been left out of the will, or in a case where there was no will at all, it does not mean that they are without options. If you find yourself facing a similar circumstance, seek the advice of a skilled wills and estates lawyer.

At Baker & Company, our Toronto estate planning lawyers can help you establish an estate plan tailored to your needs, no matter your current family status. We have extensive experience and expertise in providing you with estate planning advice and implementing your desired plan. Should you find yourself in the position of challenging an existing will or estate, our lawyers can also represent you through the litigation process. Call us at 416-777-0100 or contact us online for a consultation.

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Real Estate Law Residential Real Estate Wills & Estates

Severing Joint Tenancy Via the ‘Course of Dealings’

It is taken for granted that, if a home is owned jointly, the full interest in the home will pass to one party upon the death of the other, by right of survivorship. While it has always been possible to sever a joint tenancy by mutual agreement or unilaterally (typically by one owner registering a deed to themselves as a tenant in common), there is a rarely-used third method, referred to as the ‘course of dealings’ rule. A recent decision from the Ontario Superior Court of Justice demonstrates how this method of severing joint tenancy may create a greater degree of uncertainty in the right of survivorship.

Joint Tenants at Time of Death

A man and his second wife purchased a home together as joint tenants in 2004. The husband had children from his previous marriage, two daughters and a son. The husband executed a will in 2015. In the will, the husband effectively creates a life estate for his wife with respect to the home, in which he directs the estate trustee (ET) to allow her to remain living in the home until her death, or until one of several other enumerated events occurs. Upon the termination of the life estate, the property is to be sold, with the husband’s share forming a part of the residue of his estate. The husband’s two daughters were the residual beneficiaries of his estate.

Two and a half years after their father passed away, the daughters commenced an application seeking an order declaring that they were entitled as residuary beneficiaries to a 1/2 interest in the property. They further sought an order directing the ET to sell the home and disperse the proceeds accordingly.

In response, the wife registered a Survivorship Application on title to the property and commenced her own application seeking a declaration that she was the sole and beneficial owner of the home.

Severing Joint Tenancy

The court had to first determine whether the joint tenancy ownership had been severed in some way before the husband’s death. A 2012 decision of the Ontario Court of Appeal endorsed three methods for severing joint tenancy:

  1. By unilaterally acting on one’s own share, such as selling or encumbering it (typically an owner will register a deed to him or herself);
  2. By mutual agreement; or
  3. In the course of dealings in which the parties demonstrate an intention to own the property as tenants in common.

The parties to the case at hand agreed that if the joint tenancy had been severed, it would have been by way of the third method, via the “course of dealings”. In order to make this determination, the court was required to consider the totality of the evidence.

The court considered three pieces of evidence in particular:

  1. The will – there was a clear intention on the husband’s part to create a life estate that is inconsistent with joint tenancy. The common law has established that joint tenancy cannot be severed by testamentary disposition alone. However, if the wife knew about the provision, it could help to establish that both parties contemplated their ownership as tenants in common.
  2. Recorded conversation – one of the daughters recorded a conversation between the wife and her husband while in the hospital. While the court could not determine whether the recording had been made surreptitiously, the evidence was deemed to be admissible.  In the recording, the wife could be heard acknowledging the daughter’s share in the home and her life estate under the will. She also appeared to take credit for the terms of the will, saying that had she not insisted the husband sign it, his daughters would not be entitled to a half interest in the home.
  3. An affidavit from a family friend – a long-time family friend of the husband swore an affidavit which stated that she had met with the couple prior to the husband’s death and they discussed his will and his intentions for his estate. The friend said he had asked her to act as an alternate ET, and had mentioned that he intended for his daughter’s to eventually receive his share in the matrimonial home. The affidavit was hearsay, and not sufficient evidence in an of itself, however, it did serve to corroborate the contents of the will and the recorded hospital conversation.

The Court’s Findings

The court found that both the terms of the will and the recorded conversation established that the parties had both intended to treat their ownership of the home as that of tenants in common. The affidavit of the family friend corroborated this. As a result, the court held that, in the course of dealings, the husband and wife had successfully severed their joint tenancy.

The court dismissed the daughter’s application to order the ET to sell the home. The will was very clear about establishing a life estate for the wife and the daughters had no right to demand their inheritance prior to the time contemplated in the will. If there was a breach of the terms of the life estate, it was entirely up to the ET to make that call. The daughters did not hold a legal interest in the land until the life estate was terminated.

What Does This Mean for the Future of Joint Tenancy Ownership?

This case demonstrates that property owners cannot solely rely on the fact that title to their home is held in joint tenancy in order to ensure a right of survivorship. While it is a key factor, parties should also be cautious about how they discuss their intentions with others, and how they structure their estate. Any apparent deviance from an intention to maintain the joint tenancy may be sufficient to extinguish it in court. When drafting any legal documentation, including an estate plan, a will or a domestic agreement that addresses ownership of a jointly-held property, seek the advice of a skilled and knowledgable lawyer to ensure that your intentions are made clear.

At Baker & Company, our experienced Toronto lawyers can help you ensure that your property ownership structure and estate plan accurately reflect your intentions and future plans. We have extensive experience and expertise in providing clients with estate planning and family law advice that contemplates real estate interests, both simple and complex. Call us at 416-777-0100 or contact us online for a consultation.

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Estate Planning, Will Planning, Succession Planning & Inheritance Planning Family Law Second Marriage Issues Wills & Estates

Estate Planning Concerns for Later in Life Relationships

Most people understand the importance of putting a carefully considered estate plan into place in order to ensure that one’s wishes are carried out with respect to the distribution of their assets after death. Married and common law couples generally plan their estates so that their assets pass to their spouse after death, who will then in turn pass all of the couple’s assets onto the couple’s children, if they have them.

When a young couple marries or moves in together before having children or acquiring significant assets, estate planning is generally not a complicated prospect. When two people share children and build their wealth together from the start, each party usually has similar long-term goals with respect to their estates and beneficiaries. However, when couples marry or enter into a common law relationship later in life due to divorce or the death of their first spouse, estate matters can become considerably more complicated. Each person is more likely to have grown children, established assets and other interests that were built before the relationship began. This can drastically affect the estate planning process in multiple ways.

How Much to Leave to a Surviving Second Spouse

When an estate plan involves a second spouse or common law partner as well as grown children from a previous relationship, determining the best method for the distribution of assets is key. The risks of leaving everything to the surviving spouse with the intention that they will then leave assets to one’s children after their death are numerous. The surviving spouse may not respect the intention of the original plan, gifting funds during their lifetime to their own children, charitable organizations or elsewhere, leaving little or nothing to gift to the children of the deceased when they pass. The surviving spouse may also enter into a new relationship, one that may involve other children and different or shifting financial priorities.

Aside from the potential for one’s assets to be depleted by the surviving spouse, there is also an emotional component to consider. Grown children may feel hurt, angered or forgotten should a  spouse who is not their parent inherit the entire estate in favour of them, even if the intention exists that the spouse will, in turn, leave assets to the children upon their death. This option leaves a lot of room for uncertainty, which is often what a testator is most trying to avoid when making an estate plan.

Another factor to consider is the taxability of certain assets. Assets such as Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), and Tax-Free Savings Accounts (TFSAs), may or may not be subject to taxes, depending on the beneficiary. Each of these assets can be transferred tax-free upon death to a surviving spouse, however, if they are left to children of the deceased, all will face tax penalties. This may not be a reason to leave these to a spouse rather than to one’s children, but if making decisions on which assets to leave to whom, this should be taken under advisement.

Leaving too little to a second spouse or partner is also a concern, particularly when there is a significant disparity in the parties’ assets and income. Leaving too little may result in insufficient assets, and the surviving spouse may find themselves needing to postpone retirement or facing the need to significantly curb spending in their later years.

A qualified estate planning lawyer will review all aspects of your financial situation and advise on how to determine a happy medium to the benefit of all family members over the long term.

The Matrimonial Home

When a couple shares a home, traditionally they will both go on title as joint tenants, which means that upon the death of one spouse, full ownership will transfer by right to the surviving spouse. When a couple each have children from previous relationships, they may choose instead to own the home as tenants in common. This means that they can allocate the percentage of ownership between them (often a 50/50 split) and when one spouse dies, their share in the property will be distributed according to their will. However, this can result in an awkward ownership split between a surviving spouse and the deceased’s children. Depending on family dynamics, this option could be just fine, but it may cause problems if any tension exists between the surviving spouse and the deceased’s children.

Another option that couples sometimes choose, particularly in common law relationships where the home is solely owned by one party, is for the spouse who owns the home to designate a life estate in the home for their surviving spouse or partner in their will. This option guarantees the right of the surviving spouse to remain in the home for their lifetime (a right not inherent in common law relationships), with the property ownership transferring to the owner’s children upon their death (or sooner, if the surviving spouse enters into a new relationship and/or chooses to leave of their own volition).

Obtaining Independent Legal Advice

When planning an estate involving later in life spouses or common law partners and children from previous relationships, it is advisable that both parties retain their own independent legal counsel. This will ensure that each party receives advice designed to protect their individual interests and allow the design of a plan that adequately addresses each party’s stated intentions.

At Baker & Company, our Toronto estate planning lawyers can help you establish an estate plan tailored to your needs, no matter your current family status. We have extensive experience and expertise in providing you with estate planning advice and implementing your desired plan. Call us at 416-777-0100 or contact us online for a consultation.