The Courts Need To Be Run Like A Business

Date: 14 May, 2019

I am a lawyer that has practiced in Brampton Ontario for 40 plus years.

While the judicial system is a fundamental pillar of our democracy, that is no reason for a businesslike approach not be applied to it.

The Government for shortsighted economies has starved the support staff of the courts of funding, which in turn has led to a shortage of qualified clerks able to promptly deal with court filings.

I would propose that except for those litigants that are unable to afford the appropriate fees, that every filing should be accompanied by a fee that properly identifies the true cost to the court for the processing of that document. The Province should retain the services of a cost consultant to determine the proper cost of the processing of the filings that require the court’s attention. That cost should be all inclusive, not only of the clerk required, but the hard facilities that are needed to support that individual. That is the fee that should be charged. Like any business, there must be a cost benefit analysis and the proper burden upon the Province should be alleviated by the fee paid by the individual seeking that relief.

As a result of Government cutbacks which I believe are completely unnecessary and detrimental to all concerned. There are huge backlogs on the processing of mundane applications that my office is involved in.

The processing of an uncontested divorce can literally take months to obtain. We have heard reports of stacks of mail received by the courts that have not been opened as they do not have the manpower to deal with them.

Most egregiously from the Provinces’ financial prospective, the Province is not negotiating cheques that have been submitted. As a specific example, an Application for “Probate” at one time was processed within a reasonable four to six weeks within Peel Region.

That has now climbed to generally exceeding six months. Our office has submitted the appropriate documentation and the government’s estate tax in excess of $9,000.00. Again due to the lack of sufficient staff, the Application has not even been looked at and the cheque has not be negotiated. What business would sit on income of $9,000.00 from a single file without negotiating that cheque? Indeed this has come to my specific attention as our accounting department has pointed out that the cheque is now likely stale dated. The Government is losing vast amounts of money unnecessarily.

I repeat, determine what the true cost is and charge it. At the very least this is a transaction that should be a neutral expenditure.

One must also consider the ripple effect upon the economy. People need to wait hours to file documents, which is a great financial burden to the economy. Similarly, various financial transactions such as selling a home cannot take place until the courts are able to attend to what is often a routine transaction. Again, the Government is losing its land transfer tax that would obviously be earned as a result of such a real estate transaction.

I urge the Government to take a businesslike approach to this problem. If the Province indeed is open for business, then let it at least apply this principle to its own house.

Rest Easy – Multiple Wills Are Just Fine

Date: 03 Feb, 2019

Faithful readers of this blog will be aware of the earlier decision of Justice Dunphy of the Ontario Superior Court of Justice, who held as a result of a “basket clause” found in a standard precedent for Primary and Secondary Wills that the Secondary Will was invalid.

All one needs to know is that as a result of Justice Dunphy’s decision, thousands of Wills created across the province by hundreds of law firms may very well have been invalid. This led to lawyers across the province, including our firm, sending out letters and emails to their clients warning that the estate planning that had been done on their behalf may need to be redone. Luckily the executors of the Milne Estate decided to appeal.
On January 24, 2019, the Ontario Divisional Court reaffirmed the validity of the Will that had been criticized and invalidated by Justice Dunphy.

While the precedent that our firm had been using was a slightly different form than that criticized by Justice Dunphy, it is now academic. The court accepted that the very premise of Justice Dunphy’s criticism of the Will in which he stated that a Will was in essence a Trust was undercut by the Divisional Court.

Bottom line, the Estate Bar and its clients across the province can breathe a sigh of relief as there is no need for an update, there is no need for changes, the existing Wills that our firm had prepared for you are as valid as the date upon which they were originally drafted.

That is not to say that reviewing the factual basis upon which your Wills were drafted, is not a valid exercise.

If things have changed, if the people you had initially felt were appropriate executors no longer hold that title in your mind, then you should return and speak to one of our lawyers. Well done to the appeal counsel and to the Divisional Court in pouring oil upon troubled waters.

Estate Complications with Estate Trustees

Date: 17 Oct, 2018

Sometimes, third parties who are not related to the deceased may be appointed by the court as an estate trustee.

It has been our experience in highly contested estates when competing parties will not agree on permitting the other acting as estate trustee, the court has the ability to appoint a third party.

On consent, we have even had the situation where a solicitor in our office has been appointed as an estate trustee during litigation.

An example set out in the Taylor Estate decision was a fight between appointed executors/siblings. The Court held that the situation was obviously unworkable, due to the conflict between the siblings.

The court selected and appointed a mutual agreed third party.

Under the Estates Act, a named executor has the ability to nominate a third party to act as estate trustee which can be successful with the court’s authority.

One has to be careful in not looking to a third party who resides outside of Ontario. Looking at S.6 & 29 of the Estates Act, the court can only appoint an estate trustee with a will to a non-resident of Ontario who has the consent of the majority of the persons living in Ontario who otherwise are entitled to apply for such an appointment.

Clearly, there is a considerable expense in having an outside party so appointed as they rarely will act unless they are paid to do so.

This leads back to the author’s own prejudice against naming multiple executors. It is a recipe to create conflict when none is necessary. As we discussed elsewhere, testators often wish to name all of their children as joint executors as an expression of their equal love for them. This is a failed logic for that love should be expressed in the naming of the equal beneficiaries rather than the complication of multiple executors.

Benjamin Orders

Date: 17 Oct, 2018

What is an estate to do when a beneficiary cannot be found. While relatively rare, this does occur and it has been the author’s experience that in the absence of specific instructions in the will, this can lead to significant costs. There are specialized beneficiary hunters and as one can imagine they are not cheap. Such an effort is required before the court will assist.

One remedy is an application to the court for what is commonly known as a “Benjamin” order. The name arises from an almost 120 year old decision from England. However it has been adopted by a number of Canadian Courts and most relevantly in Ontario by the decision in Kapousouzian Estate v. Stink.

In a recent decision by Justice Rady in Steele v. Smith the judge examined the circumstances. Suffice it to say, the court looked at numerous factors including the lengths that the executors had gone toto try and find the missing beneficiary. The effect of a “Benjamin” orderis a declaration that the missing beneficiary had pre-deceased the testator and as such the will would be interpreted through that lens. In the Steele decision it would mean that the remaining beneficiary would receive the missing beneficiaries’ share.

The Public Guardian and Trustee, a Government agency opposed the “Benjamin” order asking that the monies be paid into court while further searches were made for the missing beneficiary. In the Steele decision, the executors were ultimately successful. Primarily, because they had made extensive efforts to find the missing beneficiary.

One alternative to consider is when a will is being drafted to provide the executor with discretion, after reasonable and extensive efforts to locate a missing beneficiary to simply have their bequest or interest in the estate eliminated. The circumstances in which such a clause is warranted would include naming a beneficiary that the testator had long been alienated from.

What to do when the bad son will not Move out after mom dies

Date: 17 Oct, 2018

We now look at Justice Spiescomments in the 2017 decision relating to the Filippelli estate. In this case, one child lived with mom for two years prior to her death. There was a very loose and rarely observed understanding that the son living with the mother would pay some type of rent. The son rarely did and after mother’s death, continued to live in the family home rent free.

The son remaining in the home was not one of the executors and refused to leave.

The executors then asked the court for an Order for vacant possession and also to require the son in the home to pay occupation rent. The son in the home tried a tactic that everyone was in front of the wrong court and rather that this was a residential tenancy matter akin to a landlord and tenant relationship.

The court did not buy it and ordered that the hold over son move out and pay some type of rent. It is interesting to note that there actually had been four payments over a sixteen month period of $650.00 towards the mother. It is not inconceivable that the decision might have gone the other way and holding that indeed there was a landlord and tenant relationship.

Beneficiaries Gone Wild

Date: 17 Oct, 2018

Justice Spies, whose decisions have surfaced in this blog repeatedly,grappled with a group of siblings who suffered delusions as they fought over a $30,000.00 painting. I make no comment about the reasonableness of destroying a sibling relationship for mere money.

In the Newlands decision, the court had earlier found that one brother’s position with respect to a $30,000.00 painting was actually correct. The conclusion was the one brother was to pay the other siblings $30,000.00 and a family painting was his. That is not the point of this particular decision. Rather, it is the astounding fact that the two sides each spent approximately a quarter of a million dollars in legal fees fighting over the rights surrounding the painting.

What was crucial in deciding that the two brothers that failed to recognize at an early stage that their sibling was indeed entitled to purchase the painting for $30,000.00 had caused the parties to waste a combined $500,000.00 for no good financial reason though I am certain emotional and family history played a very large role in the parties’ motivation. When the successful brother asked the court to order costs, the judge carefully looked at all the circumstances. Most importantly the successful brother had made an early offer to settle which in the end reflected almost exactly what the court had done. The court ordered the unsuccessful siblings, out of their own pockets to reimburse almost all of the $250,000.00 spent by the successful brother. Justice Spies held:

“In my view, not ordering them to fully reimburse the successful brother for his legal costs would bring the administration of justice into disrepute.”

Some time ago, the norm was that the estate itself would bear the costs rather than the parties personally but the court has a discretion to order that the parties themselves be personally responsible. In another decision, Tarantino v Galvano, the court looked at the same type of factors and especially the lack of proportionality in deciding that costs should be borne by the contesting parties personally rather than the estate.

A Strategy to Reduce or Eliminate Probate Fees – Full Monty

Date: 27 Jun, 2018

HOW TO USE A TRUST TO SAVE THOUSANDS OF DOLLARS IN PROBATE FEES.

This strategy is driven by 2 primary goals.  We call this strategy the Full Monty.

To arrange for an orderly estate succession (what happens after you die) and minimize estate administration tax, also known as probate fees.  An additional benefit can be a reduction in exposure to potential creditors.

SOME BASIC PRINCIPALS.

A “Testator” is the formal name of the person making the will, whose death activates the will.

A “third party asset holder” is usually an institution that is holding an asset for someone.  A prime example would be a bank maintaining a bank account for the testator.  Another common third party asset holder is the Province of Ontario which maintains a land registry system controlling the registration of owners of real estate.

The “Attorney” in Powers of Attorney does NOT mean a lawyer, rather it is the person granted the authority to act on your behalf while you are alive.

Probate” is the process by which the Superior Court of Ontario formally appoints someone to represent the estate, the executor or estate trustee and  seals and certifies that a will is indeed a person’s last will and testament subject to a later claim.

  • The main purpose of “PROBATE” is to both formally appoint an individual as the estate trustee, also known as “executor” and, in the case of such an appointment with a will annexed, it certifies to the world that this indeed is the late testator’s last will and testament.
  • Simply put, it is the method by which, for all third party asset holders, a will is certified to be the last will of the deceased and can be acted upon.
  • However, the Province of Ontario, in return for the granting of Probate, formally known as a Certificate of Appointment of an Estate Trustee, either with or without a will annexed, will levy an estate tax roughly equal to 1.5% of the value of the assets being probated.
  • By a combination of a series of documents and transfers which are set out in greater particularity below, the need to pay this probate tax is reduced and/or eliminated.
  • In the era of million dollar homes being common place, the probate fees saved can easily exceed $10,000.00 or more.  Another benefit is that it avoids the laborious and time consuming process of applying for probate in many instances.
  • Probate, especially one centered in the City of Toronto is a process that can easily take in excess of 6 months during which the administration of an estate can be suspended.  Even determining what the assets are can be caught in this lengthy never never land.

The documents involved include the following:

  • Primary will.  This is the will in which assets that cannot be protected from tax are subject to probate fees. This is a rare asset. An example would be an asset that the testator obtains after the Full Monty is created and no steps are taken to bring it under its control.
  • Secondary will.  This is one of the two primary document engines that accomplish the entire thrust of this process.  A secondary will is the will that deals with those assets to which probate need not apply.  An example would be shares in a privately held corporation or property held in trust for the testator by others.  This would include a piece of real estate owned jointly owned with others, often family members but with a trust agreement confirming that beneficial ownership remains solely in the hands of the testator.
  • Power of attorney for property.  This is a crucial document and, in its absence the only alternative is an extremely expensive court application for the appointment of a guardian of property.  Of course, one must recall that the essential difference between a power of attorney and a will is that the power of attorney grants power and is only effective during the life of the grantor, but a will disposes of assets and only takes effect upon death.
  • Power of attorney for personal care.  This is the document that grants to the attorney the ability to make vicarious decisions for one’s health which includes residence as well as medical decisions.
  • An extensive multi page trust agreement. The other primary document along with the secondary will.   In this agreement, both the beneficiaries and the trustees sign and acknowledge that the assets that are specified in the agreement, which will often include the primary residence of the testator and various liquid assets irrespective of ownership still remain solely and beneficially owned by the testator until death.  Upon death, these assets fall into the secondary will (and if you recall, this is the will that is not subject to probate and probate fees) and are so distributed.
  • Transfer(s). Title to any real estate one wishes to be covered under the aforementioned trust agreement and secondary will would be transferred.  Here one would typically convey a family home into the name of the parent(s) along with some of the trusted children as joint tenants.  Upon the death of the last of the parent(s), title remains solely in the names of the surviving children.  However, the children are acting merely as trustees and the trust agreement mentioned above confirms that the home is to be dealt with in accordance with the terms of the secondary will.
  • Trust declaration for the purposes of land transfer tax.  This affidavit is required so no land transfer tax is triggered by the transfer of real estate.
  • Transfer of liquid assets. If liquid assets, such as savings accounts are to have trustees added to them as owners, these are listed in the aforementioned trust agreement and further will require transfers to be done by both the beneficiary and trustees at the institution.

We have to point out what can go wrong.  Primarily, the inter-relationship between the beneficiary (usually the parent) and the trustees (usually the child(ren)).    While formal beneficial ownership always remains with the donors or testator, in the event of a conflict with a child, this may require the intervention of a court to enforce the terms of the trust agreement.

The trust agreement is the lynch pin and the formal declaration by all concerned that irrespective of the transfers, the beneficial owner remains the donor, usually the parent(s).  This process is not appropriate when there is no close and reliable relationship between beneficiary and trustee.  However, in the instance of a close family network, especially as the donors become older, this is a practical and beneficial process for all concerned.

Also the trust agreement protects the assets from being claimed by ex-spouses of trustees or their creditors.  It also permits the trustees who may own their own primary residence to maintain the capital gains exemption for everyone’s residence.

The cost is generally similar to the fees we charge in administering an estate.  The probate fees are an outright saving.   If you are interested in learning more about this approach, please contact Fred Streiman at Fred@dalestreimanlaw.com 905-455-7300 ext. 231

To learn more check out the illustration – The Full Monty

Weird Will Wonders # 1

Date: 31 Jan, 2018

You must be very careful in choosing the witnesses to your will. A normal will,(in other words, not a handwritten holographic will which is an entirely different topic,) requires a will to be signed by the person making the will and in front of two witnesses who must also sign their name.

However, no beneficiary or their spouse may be a witness. If they are, to paraphrase, Section 12 of the Succession Law Reform Act “where a will is witnessed by a person to whom or whose spouse is a beneficiary, the inheritance is void as it concerns the witness, their spouse or any person claiming under either of them”. So, be careful, it is important that the witnesses are completely unrelated and also in no way a beneficiary under the will.

Weird Will Wonders # 2

Date: 31 Jan, 2018

What happens to your will if after you sign it, you marry? Unless some magic words are used in the will upon a subsequent marriage it goes poof, it disappears, it becomes void, it becomes invalid. The magic words are along the lines “I make this will in contemplation of my marriage to Kim Kardashian…” In those circumstances, your will will survive your marriage to Kim Kardashian.

Weird Will Wonders # 3

Date: 31 Jan, 2018

What happens to your will if after you make your will you get divorced? In those circumstances the will is interpreted as if the person that you divorced had died immediately before you. So, if you name your wife as the executor and the beneficiary of you will and then you divorce her, unless you use some magic words your will will be interpreted as if your now ex-wife had died just before you. It is important to note, this is a divorce, not separation.