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Posts from the ‘Wills’ Category

Did Testator’s Chronic Alcoholism Affect His Ability to Make a Valid Will?

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Did Testator’s Chronic Alcoholism Affect His Ability to Make a Valid Will?

In a recent Ontario Court of Appeal decision involving a Wills and Estates matter, one of the main questions was whether the testator – a man named Jack – was so impacted by his chronic alcoholism and the after-effects of a heart attack that he did not have the legal capacity to validly make the Will that entirely excluded his wife Loretta.

In Dujardin v. Dujardin,  Jack and his brother Noel jointly owned and operated farm property that had been in their family since 1958.  They both executed mirror Wills stating that upon their death, they would leave their equal interests in the farm to each other.  Jack’s first Will of this nature, which he executed prior to his marriage to Loretta in 2000, excluded her from the Will completely. A second Will, which he made in 2009 after having a heart attack two years earlier, likewise excluded her in favour of his brother Noel.  (However, he did designate her as the sole beneficiary of a RRIF valued at $123,000 at the time of his death).

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Loretta challenged the validity of Jack’s Will, but her claims were dismissed at trial.   On appeal, she argued that the trial judge had been wrong to rule inadmissible the evidence of a doctor who had  concluded Jack lacked the capacity to make the will, due to his chronic alcoholism and heart attack-related cognitive impairment.

The Appeal Court was left to evaluate the premise for the doctor’s conclusions, as against the other established facts.  As the Court put it:

Jack had a difficult relationship with alcohol.  The evidence established that, during the day, he was a productive worker. However, when he finished his work in the late afternoon, Jack would go into the Town of Aylmer to have a couple drinks. When he returned home, he drank into the night, until he fell asleep. Noel testified that Jack purchased 40 ounces of liquor each day.

That said, the Court also noted evidence showing that Jack could function well enough notwithstanding his excessive drinking:

Despite his alcohol use, the evidence established that, around the time he executed his 2009 wills, Jack was able to function properly at work and in his business dealings. A parade of witnesses from the local farming community testified that, while they knew that Jack liked to drink, they noticed nothing wrong with his cognitive functioning.

Against this background, the Court addressed Loretta’s objections that the trial judge had erred in ruling the doctor’s evidence as to Jack’s testamentary capacity inadmissible.

On this point the Court noted doctor had never met Jack, but rather was relying only on his medical history and hospital records to conclude that he suffered from “Organic Brain Syndrome.”  This, the doctor concluded, had impaired Jack’s cognitive ability to comprehend and understand the contents of any legal document that he signed in 2009.  Also, based on Jack’s pattern of drinking, the doctor had surmised that he was either drinking or experiencing withdrawal when he attended his lawyer’s office to sign the Will.

Unfortunately for Loretta, the Court of Appeal found that these conclusions by the doctor were – at best – speculative.  For example, Jack’s heart attack had occurred almost two years before he signed the Will, and there was no convincing evidence that this event affected his cognitive ability.   Nor was there compelling proof that Jack suffered from “Organic Brain Syndrome” as speculated.   Overall, the trial judge had not been wrong to exclude the doctor’s evidence was inadmissible.

The Court also took a broader look at the Will’s legal validity under the law.   Once a Will is proven as having been “duly executed with the requisite formalities, and having been read over to or by a testator who appeared to understand it”, it will be generally presumed that the testator knew and approved of the contents, and that he had the necessary testamentary capacity.  The onus to prove these elements falls to the proponent of it – in this case, Jack’s brother Noel.

Although were some suspicious circumstances relating to Jack’s mental capacity at the time he signed his Will, Noel had addressed them to the court’s satisfaction by the evidence of the other witnesses who were present.

The Court dismissed Loretta’s appeal, but pointed out that she may be able to make a claim under Family Law legislation.

For the full text of the decision, see:

Dujardin v. Dujardin

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

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

 

Deceased’s Estate Division Pits Sister and Ex-Wife Against Each Other

Deceased’s Estate Division Pits Sister and Ex-Wife Against Each Other

Here’s a slightly convoluted tale, but it’s an interesting one involving a dispute between the estranged wife and sister of a deceased man over his estate. Here is the cast of players:

1) Paul, who died in 2013.

2) His wife Pauline, from whom he separated in 2002.

3) Paul’s sister Rita, to whom he left half his estate, and who was also his Estate Trustee.

When Paul and Pauline separated, Paul agreed under their separation agreement to designate Pauline as beneficiary of a $150,000 insurance policy and keep up the premium payments. If Paul failed to maintain the insurance, it was agreed that Pauline would have “first dibs” against his estate for $150,000, in the role of a creditor.

In fact, Paul did not maintain the life insurance as agreed, and it lapsed before he died.

But there was a problem: Paul’s estate was too small to pay Pauline the $150,000 he owed, since his assets at death totaled only about $100,000.

Enter Paul’s sister Rita. As a beneficiary under his Will – and but for Pauline’s $150,000 claim – she stood to inherit 50% of Paul’s estate. In the role of Estate Trustee, she had obligations to all estate creditors, including Pauline. These duties These duties included ascertaining the debts and liabilities of Paul’s estate, and paying them. So Rita essentially wore “two hats”.

Pauline’s asserted first-dibs claim against Paul’s estate became a contentious issue, and the matter went to court for resolution. In an earlier application, the court rejected Rita’s argument that Pauline had missed the deadline for bringing her claim against Paul’s estate, which she did in 2015, more than two years after Paul’s death.

On appeal, the Court of Appeal confirmed that finding. The reason for Pauline’s delay was actually Rita’s own obfuscating conduct, and it would be unfair to hold her to that deadline in the circumstances.

As Estate Trustee, Rita had control over the information Pauline needed to ascertain whether Paul held any insurance policy for her benefit, as the separation agreement required. Pauline could not obtain the information from the insurer directly, so she was understandably beholden to Rita to provide it. Only Rita knew whether Pauline’s debt claim against the estate even existed; this put her in a unique and privileged position.

The problem was, Rita was not forthright with Pauline, and withheld the information she needed.

Initially, she had her lawyer advise (inaccurately) that Paul had maintained the life insurance, and later had the lawyer advise that the policy “may have lapsed”. Neither of these statements were true: Rita had known early on that Paul had let the life insurance lapse despite his obligations under the separation agreement, knew Pauline had a valid claim against his estate as a creditor. Yet she kept the information from Pauline and caused her to delay taking timely steps in pursuit of it.

From a legal standpoint the Appeal Court found that – wholly unrelated to their family connection – Rita and Pauline had a “special relationship”, and that Rita’s withholding of information made her guilty of fraudulent concealment, and made her conduct “unconscionable”.

The Appeal Court referred to and endorsed the findings of the application judge, who had written:

By withholding material facts, the estate trustee [the sister, Rita] concealed from [Pauline, the wife] that she had a legitimate debt against the estate as a creditor. In my view, given the special relationship between the estate trustee [Rita] and [Pauline], it was unconscionable for the estate trustee [Rita] to initially suggest that insurance was in place, then delay matters by promising to bring an application for directions, and then later take the position (a position which provided a direct material benefit to her as a beneficiary of the estate), that the time for claiming against the estate had expired.

The court accordingly found that the usual deadline for Pauline to claim for $150,000 against Paul’s estate did not expire in this case, and could proceed.

For the full text of the decision, see:

Roulston v. McKenny, 2017 ONCA 9 (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 RussellAlexander.com

Both Executor-Siblings Liable When One of Them Squanders Money Under Dad’s Will

Both Executor-Siblings Liable When One of Them Squanders Money Under Dad’s Will

A recent Ontario Court of Appeal case addresses a very straightforward issue: If there are two trustees appointed under a Will, can one co-trustee stand by and do nothing, while the other co-trustee squanders Estate money?

In Cahill v. Cahill the facts were also straightforward, and involved a deceased father and his adult children. When Thomas died in 2010, his Will appointed his daughter Sheila, and his son Kevin as executors and trustees of his Estate. They were directed to set aside $100,000 in a trust fund for the benefit of another brother, Patrick, and to pay him $500 per month from that trust money.

Instead, Kevin spent the $100,000 for his own benefit. Kevin was at liberty to do so because Sheila had informally abdicated her responsibilities as co-trustee, giving him sole discretion over the funds and their management. By her own admission, she had virtually no involvement in the administration of her father’s estate. Kevin assured her that he was handling everything properly, and she made no inquiries of him.

The court found that the obligations of a co-trustee such as Sheila were clear: he or she is not entitled to shrug off the wrongful actions of another co-trustee and claim ignorance.   Passive acquiescence was not a defence. Rather, each co-trustee is responsible for the trusteeship, and can be held both jointly and individually liable for everything that is done through the exercise of the trustee’s powers. Their duties arose from the express wishes of the testator under his or her Will, and bBy legislation, they were each entitled to payment out of the Estate for their efforts.

In short – and even though there was no evidence that she acted dishonesty — Sheila was not entitled to unilaterally devolve her responsibilities as co-trustee to Kevin, and therefore remained liable to the Estate unless she could bring herself within the narrow exceptions under the Trustee Act. That legislation allowed for the court-ordered relief from responsibility, provided that Sheila could show that she: 1) acted honestly, 2) acted reasonably, and 3) ought fairly to be excused, in the circumstances.

Typically, “honest” behavior involves active involvement in the affairs and decisions related to administering the trust. “Reasonable” is usually judged according to what an ordinary prudent business person would have done in the circumstances.

Here, Sheila’s conduct was not a mere technical breach but rather a wholesale delegation of her responsibilities to Kevin, without making any inquiries at all.   This was not reasonable in the case.

The lower court’s ruling, which held that Shelia had been negligent and that both she and Kevin and breached their fiduciary duties to Patrick and other beneficiaries of their father’s Estate, was confirmed by the Appeal Court. Sheila and Kevin were jointly and severally responsible for almost $81,000, which was the outstanding principal needed to fulfil their father’s testamentary wish to pay $500 per month to Patrick.

For the full text of the decision, see:

Cahill v. Cahill, 2016 ONCA 962

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.

Ontario Wills & Estates: What Is A Power Of Attorney – video

 

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 review 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.

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, Rita, a senior law clerk with Russell Alexander Family Lawyers, describes 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.