What I’m Reading: Interesting Estate Litigation Articles for January 2021

The following is a roundup of noteworthy articles published this month on estate litigation and related issues:

  1. Doreen So at Hull & Hull LLP (in Ontario) authored a two part post on a recent Ontario decision where the public guardian and trustee sought to remove an attorney (acting under a power of attorney), and set aside a $250,000 transfer to the attorney along with various other transfers totaling $350,000. The attorney breached her fiduciary duty by accepting the money: Part 1: https://hullandhull.com/2021/01/pgt-vs-cherneyko-part-1-context-and-timing-is-everything/ Part 2: https://hullandhull.com/2021/01/pgt-vs-cherneyko-part-2-breaches-of-fiduciary-duty-in-the-time-of-covid/
  2. WEL Partners (Toronto) continued their series on solicitor negligence in estates and trusts with several posts on the issue this month, including no. 8 – a review of a couple of cases on this issue: https://welpartners.com/blog/2021/01/solicitors-negligence-in-estates-and-trusts-context-no-8-case-review-mccullough-v-riffert-barbulov-v-huston-2010/
  3. Hull & Hull (Ontario) posted two articles about less common potential causes of lack of capacity:  lack of sleep (https://hullandhull.com/2021/01/can-sleeping-too-little-affect-ones-capacity/ by Suzana Popovic-Montag and Tori Joseph), and medication (https://hullandhull.com/2021/01/medication-and-mental-capacity/ by Nick Esterbauer)
  4. Janis Ko at Onyx Law discusses a case that serves as a reminder that an executor must remain neutral in a wills variation claim, https://onyxlaw.ca/bc-executors-fees-not-allowed-for-opposing-wills-variation-claim/
  5. Trevor Todd at Disinherited.com has compiled some pointers (with case references) for removal of a trustee: https://disinherited.com/removing-executors/removal-of-a-trustee-pointers/

Happy Reading!

Case Comment: B.C. Court Dismisses Attempt by Estranged Spouse to Set Aside Property Transfer and Vary Will

I am often contacted by executors or beneficiaries of an estate when they have been served with what they consider to be a “nuisance claim”. Unfortunately, the death of a loved one may present an opportunity for others to bring unmeritorious claims. The estate may be large enough to attract claims that should never have been made, and the person who would have the best evidence to oppose the claims (the deceased person) is dead.

A typical example is someone surfacing and claiming to be the deceased’s spouse for the purpose of bringing a wills variation claim or other claim. This person may be a former spouse of the deceased, a casual romantic partner, a roommate, or even a stranger. I have previously written about the test to determine whether someone has standing as a “spouse” to bring a wills variation claim here.

The B.C. Supreme Court recently dismissed a dubious claim by a person claiming to be a current spouse of the deceased (but was found not to be one) in Lee v. Chau 2021 BCSC 70. In Lee, the deceased transferred his real property into joint tenancy with his adult children as joint tenants. His children said that he intended the transfer to be a gift, that their father’s relationship with the plaintiff ended many years before, and their marriage was a sham. The plaintiff argued that she was the deceased’s wife for 19 years. She claimed that the defendants held the property in resulting trust for her benefit, and she also sought to vary the deceased’s will to make provision for her.

The Will included the following rather scathing clause explaining why the deceased made no provision for the plaintiff:

“I am giving nothing to NU LEE [the plaintiff] whom I married on May 30, 1995, as although we were married, she refused to consummate our marriage or live with me as husband and wife and on March 1, 1996, she left me and returned to Taiwan, China and has not returned. I believe that she married me for the sole purpose of facilitating her entry into Canada as a landed immigrant. She has never and refused to consummate our marriage and we have at no time lived together as husband and wife relationship”.

The Court concluded that the deceased understood the effect of transferring property into joint tenancy, and that by doing so he intended to gift his property to his children. The Court gave clear indication that it did not think much of the plaintiff’s attempt to claim an interest in the property. In addition to quoting the above passage from the will, they relied upon the following evidence that the plaintiff was estranged from the deceased:

  • The plaintiff’s extended absence from the property for many years before the deceased’s death;
  • Her full-­time residence outside Canada for more than three years before his death;
  • Her ignorance of his terminal illness;
  • Their lack of contact immediately before his death, and
  • The fact that he died without her knowledge.

The Court also held that the plaintiff was not the “spouse” of the deceased at the date of death, and therefore did not have standing to bring a wills variation claim. The plaintiff was ordered to pay the defendants’ costs. While the Court did not use the words “nuisance claim” or say that the claim was a frivolous or vexatious one, the judge was clearly not impressed by the plaintiff’s attempts to come back and try to make a claim against the property and the deceased’s estate.  This decision confirms that the B.C. Courts are fully prepared to dismiss claims that they consider to be without merit.

What Happens in B.C. when Spouses die Simultaneously?

Unfortunately, it is not uncommon for spouses (or other family members) to die in a “common disaster” or tragedy, in which they die at the same time or in circumstances that make it uncertain which of them survived the other. One spouse may also survive the other, but then die mere days later (perhaps from injuries caused by the “common disaster”). If the two spouses have different estate plans, then the question arises: how are each of the estates to be distributed? This may be an issue when dealing with multiple marriages and blended families, where perhaps each spouse has left all or part of their individual estate to the other spouse and their own children, but not to their stepchildren. This arises not just with respect to their wills, but also with respect to jointly registered property, which carries with it a right of survivorship.

Fortunately, the Wills, Estates and Succession Act (“WESA”) simplifies this issue in British Columbia.

WESA provides that if two or more persons die at the same time or in circumstances that make it uncertain which of them survived the other, unless a contrary intention appears in an instrument, rights to property must be determined as if each had survived the other. If two or more persons held property as joint tenants, then unless a contrary intention appears in an instrument, for the purpose of determining rights to property, each person is deemed to have held the property or joint account as tenants in common with the other or with each of the others.

WESA goes one step further: a person who does not survive a deceased person by five days, or a longer period provided in an instrument, is conclusively deemed to have died before the deceased person for all purposes affecting the estate of the deceased person. If two persons hold property as joint tenants, or hold a joint account, and it cannot be established that one of them survived the other by five days, then one half of the property passes as if one person survived the other person by five days, and one half of the property passes as if the other person had survived the first person by five days.  Under the wording of WESA, the five-day survival requirement cannot be shortened in a will, but it can be extended.

As a result, in these circumstances each person’s assets (or their “half” of joint property) forms part of their estate and will be distributed as per their estate plan.

The above provisions do not apply to certain insurance monies, which are dealt with under the Insurance Act. For example, unless a contract or declaration provides otherwise, if the person whose life is insured and a beneficiary die at the same time or in circumstances rendering it uncertain which of them survived the other, the insurance money is payable as if the beneficiary had predeceased the person whose life is insured.

Beneficiaries may Demand Early Distribution of Trust Property

The beneficiaries of a trust may be able to compel the trustees to wind up the trust and distribute the assets before the distribution date actually contemplated by the trust.

Many people want to maintain control over their assets and their legacy, even after death. They may have concerns about a child or other beneficiary receiving their bequest immediately or all at once. They may believe the beneficiary is too young to receive their inheritance immediately, or they may have concerns that the beneficiary will spend all of the money inappropriately if they receive it all at once.  There may be concerns about the beneficiary’s lifestyle or mental health.

This control can be maintained through the use of a trust provisions, either as part of a will or as a separate trust. For example, a will may provide that a child’s share of the estate is to be held in trust, with set amounts or percentages of the bequest to be paid out when the child reaches certain ages. A trust may provide that the child’s share cannot be paid out until a given date, but in the meantime the trustee may make distributions in their discretion, or for certain purposes such as education.

The beneficiary may find this frustrating. They may resent that they have to wait until they attain a certain age, or that they have to approach a trustee to request a discretionary distribution from their inheritance. A beneficiary in this position may have a remedy.

If all beneficiaries are of full capacity (i.e. they are independent adults), then they may call for the extinguishment of the trust, notwithstanding the settlor’s expressed wishes. This is referred to as the rule in Saunders v. Vautier.

For example, consider if a settlor established a trust for their child, which provided that the child would not receive the estate until they reached the age of 30. Once the child is an independent adult, they could, under the Rule, demand that the trust be wound up and the assets immediately distributed.

Another example: if a settlor established a trust for their three children, which provided that each child would not receive their share until they reached the age of 30, and if any child did not reach the age of 30 then that child’s share would be divided among the remaining children, then all three children (once they are independent adults), could demand that the trust be wound up and the assets distributed to them.

No court order or approval is technically required when the Rule applies. The beneficiaries may demand that the trustees deliver the trust property, and the trustees must comply. However, in practice most trustees want to ensure that they will not face any liability for winding up the trust early and acting contrary to the express language of the trust, and so they will often seek the direction and approval of the court confirming that they should proceed with the beneficiaries’ request.

The Rule only applies when all of the beneficiaries are adults with capacity. This is often not the case. For example, a trust may be intended to benefit all of the settlor’s grandchildren who have been born by a particular distribution date. If the trust is wound up early, there may be unborn grandchildren who would have benefitted had the trustees waited until the distribution date. Another typical example is a trust to be distributed to a child at some future date, but if the child is not alive on that date then to any children of that child who are alive at that date. There are contingent beneficiaries that may benefit if the trustees wait until the proper distribution date.

In B.C., the Trust and Settlement Variation Act [RSBC 1996] Chapter 463 addresses this situation.   If property is held in trust, the court may approve any arrangement or variation of the trust on behalf of any person having an interest in the trust, whether vested or contingent, who by reason of infancy or other incapacity is incapable of providing consent under the Rule in Saunders v. Vautier. The Act also allows the court to approve an arrangement on behalf of unborn beneficiaries or other persons who may become beneficiaries in the future.

However, the court must not approve an arrangement or variation of the trust on behalf of these classes unless the carrying out of it appears to be for the benefit of that person.

Revisiting one of the examples above: a settlor establishes a trust for their children, which provides that each child will not receive their share until they reached the age of 30, and if any child does not reach the age of 30 then that deceased child’s share would goes to their children (i.e. the settlor’s grandchildren) in equal shares. If the three children want to wind-up the trust before the distribution date (assuming they are all capable adults), they would need the court to approve the wind-up on behalf of their children (born and unborn). The beneficiaries would have to show some reason why the proposed wind-up and distribution would also benefit their children.   This may require creative arguments.

In summary, beneficiaries may not be bound by the timelines for distribution established by the terms of the trust.  They may have remedies to obtain an early distribution.

What I’m Reading: Interesting Estate Litigation Articles for December 2020

The following is a roundup of noteworthy articles published this month on estate litigation and related issues:

  1. The suspension of limitation periods in B.C. as a result of Covid-19 ends on March 25, 2021. Stan Rule discussed some of the implications for estate litigation: http://rulelaw.blogspot.com/2020/12/suspension-of-limitation-periods-in.html
  2. WEL Partners (Toronto) published a series of posts on elder law this month, identifying potential scams and available resources. A post on a concerning case of elder abuse reported in the media can be found here: https://welpartners.com/blog/2020/12/elder-law-series-woman-with-power-of-attorney-takes-thousands-from-97-year-old-with-dementia/. A post with various resources for victims of elder abuse (or their concerned family members) can be found here: https://welpartners.com/blog/2020/12/elder-law-series-stay-safe-resources-should-you-or-your-loved-ones-become-a-victim-of-elder-abuse/
  3. Ian Hull and Daniel Enright of Hull & Hull LLP (in Ontario) discussed the Slayer Rule – a general rule of public policy that forbids a criminal from profiting from his or her own wrongdoing: https://hullandhull.com/2020/12/murder-insurance-money-and-the-slayer-rule/
  4. Ian Hull and Daniel Enright also wrote about an interesting case in which new homeowners found $600,000 in cash hidden in their house, presumably left there by the previous (and now deceased) owner. The personal representative of the estate of the deceased prior owner sought the return of the monies to the estate. The judge refused to grant summary judgment, concluding that more evidence was required to determine the matter. This means that the unusual case may return to the courts in the future. The post can be found here: https://hullandhull.com/2020/11/finders-and-keepers-and-the-hidden-half-million-dollars/

Happy reading, and Happy New Year.

The Final Hurdle: Passing of Accounts and Determining the Executor’s Fee

Once contentious estate claims have been determined, such as challenges to the validity of a will or wills variation claims, there is one final hurdle for the executor: the passing of accounts and determination of the executor’s fee.

The B.C. Trustee Act provides that a personal representative is entitled to remuneration to a maximum of five percent of the gross aggregate value, including capital and income, of all of the estate at the date of the passing.  An executor is also entitled to a fee for annual care and management of the estate which must not exceed 0.4% of the average market value of the estate assets.

In determining the fee payable, the court will consider the magnitude of the trust or estate, the care and responsibility involved, the time occupied in administering the trust or estate, the skill and ability displayed, and finally, the success achieved in the result. The fee is to be determined based upon the reasonable value of the services rendered, subject to the five percent cap.

If the beneficiaries do not consent to the form of accounts and the fee sought by the executor, then the executor must seek the approval of the court.

If there have been contentious court proceedings relating to an estate, there may be lingering resentment or continued conflict when the matter proceeds to the final passing of accounts. This gives the parties one last thing to fight about.

This was the case in the recent decision of In the Matter of the Estate of Nehar Singh Litt, deceased 2020 BCSC 1921. In Litt, the executor was one of six beneficiaries, all of whom are siblings. The deceased had left each of his four daughters $150,000. The residue of the estate (the total estate was valued at $9 million) was left to his two sons. The daughters brought a wills variation claim, and the court divided the estate 60% in favor of the daughters, and 40% in favor of the sons. I previously wrote on this decision in a post found here. The judgment in the wills variation matter can be found here.

The executor sought to pass his accounts, and he sought total remuneration of $654,449.34 for both parents’ estates.  The court observed that there was “considerable animus” between the executor and his siblings, and so it was not surprising that the executor was not able to obtain the consent of the beneficiaries to the fee that he sought and a hearing was required.  The court heard evidence and reviewed each factor over a three day hearing. Although the executor displayed skill and ability in handling the estate, and achieved success overall in maximizing the estate’s assets and income over a period of three years, the court held that the remuneration sought was excessive, and reduced the executor’s fee to $400,000.

Case Comment: The Importance of Putting Agreements with Family Members in Writing

Contracts between family members are enforceable if the parties intended to create legal relations, just like any other contract. The problem is that communications in the family context are often no more than statements of intent or wishes, which do not rise to the level of a binding agreement. Arrangements between family members are often more casual, and may not be reduced to writing. The “agreement” may also be more akin to a gratuitous promise, where only one party is truly receiving a benefit form the “deal”. All of this creates problems when it comes time to try to enforce an alleged agreement with a family member.

The B.C. Supreme Court case of Siemens v. Munroe, 2020 BCSC 1862 is a recent example of this. In Siemens, a 31 year old son alleged that his mother breached an agreement that he would receive an interest in property registered in his mother’s name. The mother had approached her son and proposed that she move into a suite in her residence, and allow her son and his family to move into the main floor of the house. The mother would keep the equity she had built up in the property, and the mother and son would share the costs of the mortgage and utilities. Subject to the mother’s equity, the son would become a 50% owner in the residence.

The agreement was never reduced to writing.

The parties proceeded with the agreement. The son and his family moved in, and the son paid his share of the mortgage payments and utilities. However, there were difficulties adding the son’s name to title. The son became frustrated, and the relationship between mother and son deteriorated. The son sent a series of “unfortunate and hurtful” text messages to his mother.

First, the Court considered whether there was a binding agreement between the parties and concluded that there was no such agreement.   A promise that was made because of the familial relation of the parties, or out of “natural love and affection” cannot form the basis of a contract. There must be actual consideration exchanged between the parties. While both the son and the mother suggested they were entering into the arrangement to assist the other, the Court observed that the son really benefited more from the arrangement. His family got a larger home, for less than the cost of their smaller condominium, and they were able to rent and later sell their condominium.  There was also not sufficient certainty on all of the terms of the agreement to create a binding contract.

However, the son was entitled to a 50% interest in the property (after deducting the mother’s prior equity), on the basis of unjust enrichment. The mother was enriched through the son’s contribution to the mortgage payments.

The mother consistently (including at trial) acknowledged that subject to her equity she still considered her son to have a 50% interest in the property. Her statement that she was morally bound by the arrangements did not create a contract between the parties. However, it was an important factor when considering an equitable claim in unjust enrichment, where the court will look at the parties’ reasonable expectations.

A theme throughout the judgment was the emotional toll that this has taken on the relationship between the mother and son. The judge notes at the beginning of her reasons that the case cried out for a creative solution that the parties could unfortunately not reach. She deliberately refrained from repeating the text messages sent by the son to her mother in her reasons, “as doing so would serve no useful purpose.”

It can be awkward to insist that that arrangements with your own family members be reduced to writing, and we have an tendency to avoid uncomfortable discussions. This case is a good reminder that the failure to have those conversations up front may result in greater discomfort (and a lawsuit) down the road.

What I’m Reading: Interesting Estate Litigation Articles for November 2020

The following is a roundup of noteworthy articles published this month on estate litigation and related issues:

1. Trevor Todd at disinherited.com observes that one of the top reasons for disinheritance of a child is alleged estrangement, and he considers various B.C. cases on this issue: https://disinherited.com/uncategorized/wills-variation-overcoming-estrangement/

2. Janis Ko at Onyx Law provides a case comment which also deals with the issue of alleged estrangement of a child leading to disinheritance: https://onyxlaw.ca/spite-not-a-valid-and-rational-reason-to-disinherit-a-child/

3. The court will sometimes uphold the disinheritance of an estranged child, as Janis Ko at Onyx Law observes in a case comment found here: https://onyxlaw.ca/bc-court-finds-father-had-good-reason-to-disinherit-two-sons/

4. Stan Rule provides a useful and detailed discussion of some of the issues to be considered when granting a power of attorney: http://rulelaw.blogspot.com/2020/11/powers-of-attorney-consider-allowing.html

5. In advance of U.S election, Paul Trudelle at Hull & Hull LLP (in Ontario) considered the issue of whether an attorney under a power of attorney can vote on behalf of the grantor: https://hullandhull.com/2020/11/voting-and-powers-of-attorney/

6. Polly Storey at Clark Wilson provides a detailed update on medical assistance in dying (“MAID”) in Canada: https://www.cwilson.com/medical-assistance-in-dying-a-step-forward-in-ottawa/

7. Finally, Suzana Popovic-Montag and Tori Joseph at Hull & Hull LLP (Ontario) also provide an update on MAID, and go on to discuss the difficulty of accessing these services during the Covid-19 pandemic: https://hullandhull.com/2020/11/maid-accessibility/

Happy Reading!

Case Update: Removal of Reproductive Material from a Deceased Person

I previously discussed a case in which the petitioner wife applied for an order that her deceased husband’s sperm be removed from his body to be used for reproductive purposes by his wife. The application was dismissed.  The wife was not entitled to receive her deceased husband’s sperm for reproductive purposes because he had not provided his written consent during his lifetime. The post can be found here.

The petitioner appealed the decision and the B.C. Court of Appeal recently released their reasons for judgment dismissing the appeal at L.T. v. D.T. Estate 2020 BCCA 328. The Court of Appeal accepted that the deceased husband would have consented to the use of his reproductive material after his death if he had considered the issue during his lifetime. However, he did not provide this consent during his lifetime, and the prohibition on the removal of a person’s reproductive material without consent is criminal in nature. The legislation is clear: without the deceased person’s consent, the reproductive material cannot be used.

The Court dismissed the appeal with regret, acknowledging the painful and tragic circumstances confronting the wife. The Court granted a stay of the order for 60 days to permit the parties to consider their position on an appeal to the Supreme Court of Canada.

Family of Deceased Fights $1.5M bequest to the SPCA

A woman in Vancouver is contesting a bequest made in her great-aunt’s will in favor of the SPCA. A recent CBC story on the lawsuit can be found here: https://www.cbc.ca/news/canada/british-columbia/vancouver-family-heading-to-court-in-1-5m-inheritance-fight-with-spca-1.5803925

The deceased left the residue of her estate to the SPCA. The estate includes a valuable home in the Point Grey neighborhood of Vancouver. As a result of skyrocketing property values, it is estimated that the SPCA stands to receive approximately $1.5M from the estate.

The plaintiff is not the spouse or child of the deceased, so she does not have standing to vary the will. Instead, she wants to have a handwritten note composed by the deceased on her 99th birthday (in 2017) admitted to probate as reflecting the true final testamentary intentions of the deceased. The note purports to limit the amount of any gift to the SPCA to $100,000.

Section 58 of the Wills, Estates and Succession Act [“WESA”] allows the court to admit to probate a document or record that does not meet the technical requirements of a will. I have discussed this section in other posts, including one found here. This section would permit a handwritten note to be fully effective as though it had been made as part of the will.

In this case, the handwritten note is unsigned, undated and unwitnessed, and the deceased did not take any steps in the three years after writing the note to change her will to make it consistent with the note, so it will be interesting to see if it meets the test under s. 58 of WESA. The SPCA has also raised concerns about the deceased’s testamentary capacity when the note was written. If she had lacked capacity at the time, the handwritten note would not be effective as a testamentary instrument.

The plaintiff says that the SPCA is “greedy” for attempting to enforce the terms of the will, while the SPCA has called this a “challenging situation” for all parties.  The trial is set for January 2021.  However, as most estate litigation claims are settled in advance of trial through mediation and negotiation to avoid the expense and uncertainty of proceeding to trial, we may never know the final result.