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Posts from the ‘Estate Planning’ Category

Was Parents’ Money a Gift or Loan? The Perils of Poor Documentation

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Was Parents’ Money a Gift or Loan? The Perils of Poor Documentation

Picture this not-uncommon scenario:   The parents provide their newly-married adult daughter or son with a significant amount of money to put towards the down-payment of a first home.

All goes well until a few years later when that son or daughter, ensconced in the home purchased partly with the parents’ money, decides to divorce.  How does that money get treated in that divorce settlement?  Was it a gift to the couple, or a loan that was expected to be repaid?

The question is a very important one because under Ontario family law, the characterization of the parents’ money in the hands of the adult son or daughter becomes a prime consideration in the valuating separation-date assets. Under the Family Law Act, funds that are gifts to the couple during marriage get put into the “pot” for equalization of Net Family Property as usual; funds that are considered loans must naturally be repaid to the original lender.

So the intent behind the advance of funds is key.

In a recent 130-paragraph judgment in a case called Chao v. Chao, the courts scrutinized the evidence to determine what the parents’ intentions had been a full 37 years earlier, when they advanced over $450,000 to their newly-married son, as well as half the cost of the couple’s new $260,000 home.

The then-newlyweds used invested those funds wisely:   For the last 25 years of their marriage, neither husband nor wife worked at anything other than small jobs here and there, and essentially lived off the income generated from investments purchased with the money from the husband’s parents.  By the time of the trial, their investments and various account balances had grown so that the couple’s assets were nearing the $2 million mark, although neither party provided reliable figures.

Indeed, the court commented specifically on the unsatisfactory state of the financial and other evidence that had been given, some of which was purported to come from the husband’s mother, who was now 89 years old.  (The husband’s father had already passed away).  As for murky evidence of the intent behind the initial advance of funds, the court wrote:

 It is noteworthy that neither the [wife], the [husband], nor the [husband’s] mother … gave evidence of any verbal agreements, representations, expressions of intent or discussions between either of the [husband’s] parents and one or more of the parties surrounding or touching upon the [financial] advances. The evidence of each of the affiants regarding the intentions of the [husband’s] parents in making the advances consist of assumptions, understandings or conclusions of what was intended by the parents, rather than indications of what one or more of the parties may have said at the time.

By way of illustration, the husband said that in 1975 when the parents advanced half the costs of their first home, there was “an understanding” between him, them and the wife that whenever the house was sold, half the proceeds would be returned to the parents.  However, the court noted that he “never asserted that anyone ever expressed this understanding verbally or in writing.”

The court also dismissed some other late-breaking evidence put forth by the husband:

 I would strike out exhibit D to the [husband’s] affidavit as it is stated by the respondent to be undated handwritten lists made by him which he “discovered” when he “found” a file and “discovered” that it contained “some evidence to support my case that while I was unemployed, my mother provided investments in our names for our living expenses.”

The handwritten list is self-serving, has marginal probative value and in any event should have been disclosed earlier by the [husband] The probative value of handwritten list is marginal because there is no suggestion by either party that the investment accounts owned by them or with their children originated from their own earnings or resources. It is common ground that the investments were derived from advances made by the [husband’s] parents. The issue is how to properly characterize those advances, whether as gifts, loans or as subject to a resulting trust.

Ultimately the court considered what little evidence had been provided, in the context of deciding a motion for summary judgment which (if granted) would obviate the need for a trial on this issue.   It found as follows:

Based upon all of the evidence before me I find that the presumption of resulting trust in favor of [the husband’s mother] has been rebutted. I also find that the various advances made by the [husband’s] parents cannot be characterized as loans from them to the [husband]. Based upon the evidence the reality of the situation is that there never was any expectation, prior to the parties’ separation, on the part of [the husband’s mother] that the [husband] and the [wife] would be required to repay any portion of the funds advanced by her and her husband. … [I]t would be unfair to permit the [husband] to receive a credit for a debt to his mother, with the financial benefits that would flow to him from that credit on the equalization calculation.

The lesson to be learned from Chao v. Chao is a simple one.  Parents:  Put it in writing. 

Anytime parents advance funds to adult children with the expectation of being paid back, they must make sure there is ample evidence in the form of clear documentation that a loan was intended.

For the full text of the decision, see:

Chao v. Chao

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders.  For more information, visit us at RussellAlexander.com

 

Wednesday’s Video Clip: Ontario Wills & Estates – What Is A Power Of Attorney


Wednesday’s Video Clip: Ontario Wills & Estates – What Is A Power Of Attorney

In Ontario, a Power of Attorney is a legal document that gives someone else the right to act on your behalf.

In this video we discuss the importance of a Power of Attorney and what options and decisions you should consider when deciding who should be your power of attorney.

At Russell Alexander Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at RussellAlexander.com

Testator’s Freedom to Make Even “Unsavoury or Distatesful” Bequests Upheld – In Some Cases

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Testator’s Freedom to Make Even “Unsavoury or Distatesful” Bequests Upheld – In Some Cases

Although my law firm focuses primarily on Family Law, we also provide legal advice and services in relation to Wills and Estates, and it’s a topic that I don’t often write about.

But perhaps I should: There is an interesting recent case from the Ontario Court of Appeal, for example, that is certainly worth looking at.

Imagine this scenario: A 71-year old man name Eric had two daughters with his first wife, whom he later divorced. After their parents’ separation, one of the daughters went to live with her mother in England; the other, named Verolin, lived with her father in Canada.

But when Eric, who was black, learned that Verolin was pregnant and that the baby’s father was a white man, it caused a permanent rift in their relationship; eventually Eric cut Verolin off entirely and never met his grandson, who is now 13 years old.

After Eric died, his Will revealed that although he had included the other daughter and her children, he had specifically excluded Verolin, ostensibly because (according to the wording in the Will itself) she had shown “no interest in [him] as her father.” However, the extrinsic evidence from witnesses told a different story: Eric had actually excluded his daughter Verolin in order to show his disapproval of the fact that her son’s father was white.

Verolin applied to the court to have the Will declared set aside and declared invalid because it was against public policy on racial grounds. Verolin was initially successful in the lower courts.
On appeal, the court reflected on the basic question of whether it was entitled to scrutinize Eric’s Will – which was unambiguous on its face – merely because a potential beneficiary like Verolin was being excluded.

In this regard the Appeal Court pointed out that a “testator’s freedom to distribute her property as she chooses is a deeply entrenched common law principle”, and that this testamentary autonomy “should not be interfered with lightly, but only in so far as the law requires.” With that said, the court added that the testator’s right can still be constrained by public policy considerations in some circumstances.

But even applying those general principles here, the fact remained that the wording on the face of Eric’s Will was not, in and of itself, legally objectionable. It adverted only to cutting off Verolin for not communicating with him; any other racially-discriminatory motives on Eric’s part were hinted at only through external evidence. Plus, even though she was his daughter, under Ontario law Verolin was not entitled to demand a share of Eric’s estate. Nor was there anything in the Will that called for the trustees or beneficiaries to act in a way that was discriminatory, unlawful, or contrary to public policy, in order to give effect to Eric’s wishes.

In ultimately upholding Eric’s Will, the Court of Appeal concluded:

I conclude that to apply the public policy doctrine to void an unconditional and unequivocal testamentary bequest in cases where, as here, a disappointed potential heir has been disinherited absolutely in favour of a different, worthy heir, would effect a material and unwarranted expansion of the public policy doctrine in estates law. Absent valid legislative provision to the contrary, or legally offensive conditional terms in the will itself, the desire to guard against a testator’s unsavoury or distasteful testamentary dispositions cannot be allowed to overtake testamentary freedom.

Do you agree with the Court’s ruling?

For the full text of the decision, see:

Spence v. BMO Trust Company, 2016 ONCA 196

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at RussellAlexander.com.

Ever wonder what happens if you die without a will? – video

 

Wednesday’s Video Clip: Ever wonder what happens if you die without a will?

This LawPro video emphasizes how preparing a will can avoid a lot of headaches. As stated in the video, a surprising 65% of Canadians don’t have a will. Everyone should consider getting a lawyer to help them prepare a will if they don’t have one, or to review any will that hasn’t been updated recently.

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

Battle of the Ex-Spouses – Who Gets the $2.4 “Prize”?

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Battle of the Ex-Spouses – Who Gets the $2.4 “Prize”?

In a contest between two former spouses, which of them gets the deceased husband’s $2.4 estate? That was the question for the court in a recent Ontario case called Quinn v. Carrigan.

The man, Ron, had been estranged for 12 years from his first wife Melodee, with whom he had two now-adult children. They did not divorce or even enter into a formal separation agreement, but Ron promised that he would always support her. For the last 8.5 years of their separation, he had been living common law with another woman, Jennifer, who had a limited income and medical problems. At the time of his sudden death from a heart attack at age 57, Ron was the sole financial support for both women.

After Ron died, it came to light that he had left nothing in his will or pension for Jennifer; instead, he left his whole $2.4 estate to Melodee and their daughters. He also gave a 1/3 share of his $1 million pension to each of them. The title to the condo that he and Jennifer lived in together at the time of Ron’s death was actually in his and Melodee’s name.

Jennifer applied under the Ontario Dependent’s Relief Act, which allows a court to order Ron’s estate to pay her support – whether or not he left a Will – in cases where he failed to adequately provide for her financially. The court awarded her $350,000 to be paid from Ron’s estate and pension.

But after two trials, and two appeals, the true legal characterization of Jennifer’s status for claiming under the estate and pension was still uncertain. Under pension legislation, for example, the question of who was Ron’s “spouse” was unclear: at least one earlier court had found that it was Jennifer (who had been living with him in a common-law relationship at the time of Ron’s death) rather than Melodee (who was technically still married to him). A later appeal ruling had overturned that finding, concluding that the mere fact of living with Ron did not turn Jennifer into a “spouse” for pension purposes.

Returning to the dependent’s relief application (which was separate from the pension issue), the court reviewed the complex details of Ron’s estate and the various holdings, expenses and entitlements of both spouses and the adult daughters. Although Ron was certainly entitled to arrange his estate so that his first wife Melodee receive the bulk of it (and that it would eventually trickle down to his children and grandchildren), his wishes could not ignore or override Jennifer’s valid legal claims. While there was evidence that he intended to provide for Jennifer somewhat, those intentions were never implemented and in any event they would not have been enforceable unless Ron made full disclosure to her of his substantial wealth (which he did not want to do) and unless she obtained independent legal advice (which was never done).

The court explained that under that same dependent’s legislation, Melodee was still entitled to a “preferential share” of Ron’s estate; however, it was unfair to ignore Jennifer’s support entitlement, particularly since she was in poor health and impoverished. (She had returned to work shortly before Ron’s death, but had lost her job due to an economic downturn. Her health concerns also limited her employment prospects, and had no assets other than her personal belongings, and had some debts. In contrast, the first wife Melodee and the daughters were living comfortably).

Ultimately – and after some complicated analysis – the court allowed Jennifer’s appeal, and awarded her $750,000, comprised of $550,000 for her legal entitlement to spousal support (calculated using the Spousal Support Advisory Guidelines and based on Ron’s significant annual income) plus another $200,000 reflecting her “moral claim” to Ron’s estate.

For the full text of the decision, see:

Quinn v. Carrigan, [2014] O.J. No. 4589, 2014 ONSC 5682 (Div. Ct.)

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com

 

Can Dead Husband’s Kids Drag 90-Year-Old Widow’s Adult Children into Court?

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Can Dead Husband’s Kids Drag 90-Year-Old Widow’s Adult Children into Court?

In a recent Ontario case called Brash v. Zyma, the outcome hinged on certain statutory technicalities, but the question came down to this: Could the adult children of a man, who was on a second marriage at the time of his death, pull the second wife’s children into litigation, hopefully to get a court order that they must support her and thereby keep her from taking more from the Estate than the roughly $20,000 he had left her in the Will?

When they each married for a second time in 1990, Charles was 61 and Dorothy was 67. Charles had previously been married to another woman for 34 years, and had six children with her. Dorothy had four adult children of her own, and had been widowed for 15 years.

When Charles died in 2012, Dorothy was just shy of 90 years old. Her adult children were now all in their 60s. Charles left Dorothy $13,000 in his Will, plus almost $9,000 tied to the value of his home.

However as his wife and a “dependent,” Dorothy also claimed support from Charles’ estate under the provisions of the Ontario Succession Law Reform Act (SLRA). This was necessary because Dorothy was in poor health, had moved into a nursing facility even while Charles was still alive, and had assets of only $60,000 in account with one of her children. Her monthly expenses were said to exceed her income by up to $1,000 per month.

But rather than see Dorothy dip into their father’s Estate funds under the succession law provisions (which money would otherwise go to them), Charles’ own children brought an application to the court to have Dorothy’s three surviving children added to Dorothy’s court application. (Dorothy had declined to add them herself). Charles’ children did so on the basis that Dorothy’s offspring had a legal obligation under certain provisions the Ontario Family Law Act (FLA) to support their mother in light of her modest financial circumstances.

Charles’ children also claimed that given Dorothy’s age and health, she could provide for her own needs from existing resources, particular in light of what their father left her under his Will. Finally, they questioned the motives behind her SLRA dependent-support application: As the court put it, they “go on to say that this whole exercise is being managed by [Dorothy’s] children on behalf of their elderly mother and is nothing more than an effort by them to transfer a larger portion of the late [Charles’] estate from his children to them.”

The court’s jurisdiction hinged on the interpretation of these two competing statutes: the FLA and the SLRA. If Charles and Dorothy had separated before he died, the matter would be simple: Dorothy would be entitled to claim spousal support under the FLA, and under that legislation, the court would have the right to unilaterally add anyone to the litigation who possibly had an obligation to support her as well – which arguably encompassed Dorothy’s children.

As it happened, though, Charles had died, and that made Dorothy eligible for a support claim under the SLRA. She had brought her application under that legislation, which now governed. There were no equivalent provisions to those found in the FLA. Charles kids asked the court to make the same type of order, by analogy.

The court granted the order, and added Dorothy’s three remaining adult children to the litigation. Charles’ children were merely trying to draw Dorothy’s kids into the litigation because they might have an obligation to support her. The court was able to rely on the longstanding basic legal principle that the court should have all interested parties before it, in order to allow the court to properly adjudicate the matter on the merits.

For the full text of the decision, see:

Brash v. Zyma, 2014 ONSC 4066

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit our main site.

Should Deceased Mother’s New Partner Win Custody Over Kids’ Biological Father?

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Should Deceased Mother’s New Partner Win Custody Over Kids’ Biological Father?

The recent decision in Van v. Shilletto features an unusual custody contest between a biological parent on the one hand, and the new partner of now-deceased other parent, on the other.

The background facts were a little unusual, too: The parents of two children had divorced and each parent was living with a new partner. In the mother’s case, the new partner was a patron at the restaurant where she worked. In the father’s case, the “new” partner was actually his first wife – who happened to be the mother’s older sister.

(To explain: The father and mother were both from Vietnam. The father had been married before – to the mother’s older sister, whom he divorced after moving to Canada. After that divorce, the father returned to Vietnam to marry the mother, who joined him in Canada two years later. But when she arrived, she was dismayed to learn that he was back living with his first wife, i.e. the mother’s own older sister. Although the mother was not pleased, this living situation – which involved both women having separate sections of the house – apparently continued throughout their marriage until the mother moved out several years later).

In any event, when the children’s mother later died of cancer, her will stipulated that her surviving new partner was to be the guardian and have custody of the children, and that they were to spend all day each Saturday with the father as they had been doing. The children themselves were on-board with this plan, and neither of them expressed an interest in spending more time with their father than had been the case until now. In fact, at times each of the children expressed an unwillingness to see their father at all, and pronounced the Saturdays they currently spent with him to be “boring”.

Nonetheless, the father brought a court application for custody, which the new partner countered with a custody application of his own.

The court considered the situation, starting with the fact that the mother’s new partner had made considerable effort to get along with the father, had cared for the children and the mother during her battle with cancer, and had been an important and positive influence in their lives for the past few years.

In contrast, the father had shown that he was not sensitive to the children’s emotional needs: After the mother’s death, for example, he denigrated her in front of the children, calling her “mental” and a “bad woman”. He routinely made negative remarks about the new partner as well, calling him “evil” and accusing him for breaking up the marriage and “stealing” the children. This was despite the fact that the new partner had been providing love and security to the children both before and after the mother’s traumatic death.

The court observed that a child’s biological parentage is not determinative in a custody dispute; rather, it is one of several factors, including the wishes of the children themselves, which was to be given considerable weight.
In this case, it was not in the children’s best interest to be in their father’s custody. The application of the mother’s new partner was granted, with the father being given access on the same Saturdays-only schedule as before.

For the full text of the decision, see:

Van v. Shilletto, 2014 ONCJ 104 (CanLII)

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

Ontario Wills 101: Issues to Consider Before Meeting your Lawyer – video

Wednesday’s Video Clip: Ontario Wills 101: Issues to Consider Before Meeting your Lawyer

In Ontario, a Will is a written document that sets out the person’s wishes about how his or her estate should be taken care of and distributed after death. In this video, we look at what a will is, some of the early issues to consider for preparing a will, and what steps you should take once you have your will in place.

To learn more about child support visit our website at www.russellalexander.com or join us on Facebook at http://www.facebook.com/RussellAlexanderFamilyLawyers

 

 

Accountant Was the “Last Man Standing” – Court Orders Questioning of Non-Party

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Accountant Was the “Last Man Standing” – Court Orders Questioning of Non-Party

Judges hearing family law matters are granted very wide-reaching powers by legislation, in order to ensure that justice can be done for the litigants. Among those is the power to order that non-parties – meaning individuals who are not directly involved in the litigation as either plaintiff or defendant – can be questioned or forced to disclose information or documents that might be relevant to the trial or proceeding.

In Ontario, this power is specifically granted by the Family Law Rules, but it is not unfettered: Judges must still consider the circumstances and weigh certain factors, including potential delay, any unfairness to the party requesting it, and whether the information is easily available elsewhere. The court can then exercise its discretion in determining whether to make an order which essentially drags a third-party into the family litigation.

This was precisely the court’s task in a case called Elgner v. Elgner. There, the couple separated after a traditional marriage lasting 33 years. The husband was 63, and the wife was 62. The couple were wealthy and there were multiple family law proceedings; at one point the court had temporarily ordered the husband to pay the wife $110,000 per month in support.

A key issue in the litigation was the husband’s attempt to exclude $86 million from his net family property. He claimed that they were corporate rather than personal funds that had been generated as part of a corporate buy-out and estate freeze that took place back in 1993, involving a company with which he had virtually no involvement.

This meant that determining the nature and source of that disputed $86 million was of chief concern to the parties. Unfortunately – and aside from the husband and wife themselves – the only person who was still alive and available to give evidence on that point was the accountant who had been involved in the transaction. (The lawyer who acted on the estate freeze, for example, had died and the wife was in the process of bringing a court motion to obtain access his computer hard drive). Even though the accountant was not part of the proceedings between the couple, the wife wanted to question him.

She therefore asked the court for an order compelling him to submit to questioning. The court agreed with her request.

Even though the accountant would be giving evidence based on his recollection from 20 years ago, the proposed exclusion of the $86 million was the single most contentious and largest financial issue in the case. He was an important factual witness and, under the circumstances, it would be unfair to force the wife to proceed with the family litigation without allowing her to question him.

For the full text of the decision, see:

Elgner v. Elgner, 2010 ONSC 5238 http://canlii.ca/t/fn2q4

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

What Is A Power Of Attorney?


 

Wednesday’s Video Clip: What Is A Power Of Attorney?

In Ontario, a Power of Attorney is a legal document that gives someone else the right to act on your behalf.

This video discusses the importance of a Power of Attorney and what options and decisions you should consider when deciding who should be your power of attorney.