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Category: Wills Estates and Powers of Attorney

Applying to Remove an Estate Trustee: Replacing Executors

Date: 05 Mar, 2014| Author: Fred Streiman

There are a number of reasons why a party would want to remove or replace an estate trustee. In this blog post I want to canvas the important elements that the court will look at when an application for a appointment of a new trustee is brought. I will also look at some of the possible grounds past cases have used as justification for replacing an estate trustee.

The first thing to note is that the courts are very reluctant to interfere with a testator’s intentions. The court will respect the fact that the deceased wanted that specific person to act as their estate trustee. However, there are certain reasons that will cause the court to intervene. The authority to do so comes from the Trustees Act and from the residual power of the court at common law (Judge made law). A co-trustee, beneficiary or any person interested in the estate of the deceased can bring an application to the court to have the trustee removed.

When considering an application to remove an estate trustee, the court will consider four things. First, the court should not lightly interfere with the testator’s decision. Second, there needs to be clear evidence of necessity. Third, the main consideration is the welfare of the beneficiaries. Fourth, the acts or omissions of the estate trustee must endanger the administration of the trust itself. This last consideration sets a very high bar for the applicant to meet. The estate trustee can always argue that they were acting reasonably and honestly. There is no obligation for the estate trustee to be perfect.

The court has repeatedly refused to set a clear point at which they will step in and remove the estate trustee. The facts of each case will determine the outcomes and the major consideration is always the welfare of the beneficiaries. In the past, successful applications have been made when the estate trustee failed to act at all, did not act in good faith, was unwilling to carry out the terms of the will, was unable to act as trustee because of incapacity or had a conflict of interest with the trust. This list is not exhaustive but it sets out some of the basic grounds for a successful application to remove an estate trustee.

If you have questions about estates and the conduct of an estate trustee, contact the lawyers at Dale Streiman Law LLP. They are experts in wills and estates and estate litigation. They can evaluate your claim and help you resolve the problem efficiently and effectively.

Executors, Trustees and Breach of Fiduciary Duty: What Happens When an Estate Trustee Ignores Their Responsibilities?

Date: 05 Mar, 2014| Author: Fred Streiman

An estate trustee is often called by the more traditional name of executor (male) or executrix (female). Their role is to carry out the terms of the last will and testament of the testator (the person who made the will). Estate trustees can be left with significant responsibilities in relation to the testator’s estate. Because their role is carried out after the individual has already passed away, the estate trustee’s relationship to the estate is characterized by a high degree of trust. This type of relationship is called a fiduciary relationship.

In Canadian law, the word fiduciary is often used to distinguish something as a special relationship. These relationships are common in Canada and some of the most prominent examples are the relationship between parent and child, corporate director to corporation, and business partner to business partner. Fiduciary law is a large area of law that covers topics ranging from aboriginal rights to corporate law. Within the estate planning context, a fiduciary relationship exists between estate trustee and the estate itself. The estate trustee is important in carrying out the final wishes of the deceased. For this reason, the law takes any breach of a trustee’s responsibilities very seriously.

Two cases from the Ontario Superior Court of Justice illustrate how the court is willing to punish rogue trustees that fall below the high standard the law sets. In Zimmerman v McMichael Estate[i], the estate trustee, Adam Zimmerman, used the estate of the late McMichael’s (of The McMichael Art Gallery) as a personal bank account. He depleted the estate of millions of dollars through questionable expense claims. Mr. Zimmerman repeatedly failed to keep proper records for his expense. Nor could he provide sufficient answers to questions concerning expenses billed for steak dinners, men’s clothing and sailing trips in Bermuda. His conduct fell well below the standard that a trustee owes. Therefore, Mr. Zimmerman was not owed any compensation for his time as trustee and he was required to repay nearly a million dollars to the estate as well as all the legal costs.

In The Estate of Paul Penna[ii], Barry Landen showed a similar level of neglect for his duties as estate trustee. He was eventually sentenced to 14 months incarceration for contempt of court. The saga began soon after the death of Paul Penna, who left Mr. Landen in charge of his $24,000,000 estate. Mr. Landen used the money to finance a lavish lifestyle complete with a house in Forest Hill and season tickets to the Toronto Maple Leafs. When his deceit was exposed he repeatedly refused to comply with court orders designed to protect the estate’s assets. Justice Greer eventually found Mr. Landen in contempt of court and ordered that he be imprisoned for 14 months.

The court in these two cases sent a stern warning to estate trustees and anyone owing a fiduciary duty. At all times, they must ensure that:

They carry out their duties with honesty and due care and attention.
They personally carry out the responsibilities which have been delegated to them
They ensure that they do not have a conflicting interest with their duties
They are not obligated to be perfect but they must act in the best interest of their beneficiaries. Failure to do so can result in strict punishments.

If you have a question about an estate trustee, rogue fiduciaries or the responsibilities of an executor, contact Dale Streiman Law LLP. They have decades of experience that makes them experts in all facets of estate law.

[i] Zimmerman v McMichael Estate, http://canlii.org/en/on/onsc/doc/2010/2010onsc2947/2010onsc2947.html

[ii] The Estate of Paul Penna, http://canlii.org/en/on/onsc/doc/2010/2010onsc4730/2010onsc4730.html

Determining Mental Capacity to Make a Will: Can a Person with Dementia Change their Will?

Date: 05 Mar, 2014| Author: Fred Streiman

Mental capacity is a very important topic when the validity of a will is called into question. There is no exact science to determining when a person is capable of making legally binding decisions, especially as it relates to their estate. Due diligence is required to ensure that the testator (person making the will) understands exactly what they are doing. With Canadians living longer than ever, questions relating to mental capacity, specifically for seniors with dementia, are on the rise.

There is a presumption in Canada that a person who has attained the age of majority can make a valid will. This presumption is rebuttable where there is evidence of suspicious circumstances that warranted further investigation. This can be anything that raises a suspicion in the preparation of the will, the capacity of the testator or a suggestion of coercion or fraud. Once this suspicion is raised, the onus shifts to the party seeking to enforce the will to establish that it was validly made. In terms of mental capacity, it is important to keep in mind that capacity is a legal definition and there is no set scientific standard that applies.

The recent BC Supreme Court decision in Moore v Drummond illustrates how the law evaluates a person’s mental capacity to make a will. Ms. Drummond died in 2011 at the age of 98. A year earlier, she made a new will that gave her entire estate to her neighbors of 40 years. Prior to this, she had a will drawn up in 1994 that left her estate to her son. However, her relationship with her son was tense and deteriorated over the years. Upon her death, the son claimed that the new will of 2011 should be excluded. In support of his claim he pointed to a medical opinion that was drawn up a week prior to Ms. Drummond changing her will. The report said she was incapable of making decisions regarding legal or financial affairs. The opinion was drawn up for the Public Guardian and Trustee of BC (PGT) using their standard form. The court also heard evidence that Ms. Drummond was suffering from dementia at the time. This raised suspicion that the will may be invalid on capacity grounds. Despite this evidence, the BC Supreme Court held that the will of 2011 was valid and that Ms. Drummond had the legal capacity to create a will at that time. The PGT report was insufficient evidence because it was drawn up specifically for PGT using a standard form. It was not a comprehensive medical opinion that addressed Ms. Drummond’s ability to create a will. Furthermore, at the time the will was made, her lawyer drafting the will took special steps to ensure that Ms. Drummond had capacity. The lawyer spent additional time with Ms. Drummond where they engaged her in conversation to evaluate her mental abilities. She was also able to fully remember the will and its dispositions more than 5 weeks later. This showed that she had sufficient capacity at the time the will was made and that she truly did intend to exclude her son from her will.

This case clearly shows that mental capacity to create a will does not mean perfect mental capacity. Diminished capacity raises a suspicion that the will is invalid, but the court can resolve this suspicion and declare the will to be valid. This is especially true when a lawyer drafting the will takes steps to ensure that the testator has the required mental ability to make a will. A medical opinion is not determinative in resolving issues involving legal capacity. They are informative and can be used to help make a legal evaluation. An experience lawyer will take specific steps to determine legal capacity and ensure that a will is validly drafted.

The lawyers at Dale Streiman Law LLP have over three decades of experience solving wills and estates issues. If you have a question about a will or the mental capacity to create a will, contact Dale Streiman Law and meet with our legal professionals to discuss your legal issues.

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