The Executors Year

In the ordinary course, estate trustees are permitted a period of one year from the date of the death (sometimes described as the executors year) to gather in and realize estate assets, absent special circumstances that might indicate an abridgement of this one year period.

Re Engledow Estate 2001 CarswellOnt 2453

In Currie v Currie Estate 2005 PESCTD 64 the general rule was quoted from Feeney On Wills:

 

“In Baker v. Baker Estate, [1986] N.BJ. No. 185 at para 53, Godin, J. referred to Thomas G. Feeney, in The CanadianLaw of Wills, voL 1, Probate at p. 176:

(d)      Realization of Assets (The ‘Executors Year)

The executor must not unreasonably delay in getting in the assets and settling the affairs of the estate and he will be personally responsible for any loss occasioned by undue delay. There is no hard and fast rule as to what constitutes undue or unreasonable delay, but it is the practice to speak of the executor’s or administrator’s year and the courts attach importance to the question whether the alleged failure to convert or realize assets which resulted in the loss to the estate occurred within or beyond a year. Therefore, all investments which are not proper to retain should be realized within a year of the testator’s death or, in the case of an administration, within a year of the date of the grant.  It is the practice of the courts to consider that the estate ought to have been reduced to possession at the end of a year and to allow interest to then become payable on legacies, if there is any delay.”

 

The “executors year” developed as a rule of thumb  in the  common law, and provided that the executor of an estate has 12 months from the date of death to

call in the assets of the estate, pay the debts and liabilities, and to distribute the net assets to the beneficiaries in accordance with the provisions of the will.

The entire rationale for the rule is that executors must not unduly delay in the administration of the estate.

The Currie case  provides that if this is not accomplished within a year, the beneficiaries have the right to demand interest on their gifts and to call in the executors to explain why the administration of the estate has not been completed.

There are of course many complicated estates together with litigation and other such difficulties that can easily delay the administration of the estate well

longer than a year. Some clauses in wills also give executors wide latitude in determining how and when to realize the estate, and these clauses are often

relied upon by executors to explain why the administration of the estate is taking longer than one year.

In the experience of disinherited.com most of the complaints relating to the executors year is often related to an executor that either cannot or will not deal with the estate for various reasons, usually emotional, or they are simply power tripping over the other beneficiaries and literally keeping them in the dark.

If either of these are the case scenario than the executor is typically at fault and may be removed as executor for proper reasons.

Words “Born After” Interpreted

Born after“Born After” Interpreted in Two Express Trusts

Turk v Turk 2011 ONSC 6497 dealt with the various rules of construction and interpretation of the words“born after the date of the settlement” that were used in to family trust settled by a grandmother in 1992 and 1996, for the benefit of her two sons families.

One of the sons remarried after a divorce, and adopted two children who were 18 and 17 years of age at the time of their adoption.

Both were clearly born before, and not after,  the date that the trust was settled.

The two sons brought an application to have the terms of the trust interpreted, which resulted in the adopted children not being  beneficiaries of either trust.

After analyzing some of the general rules of interpretation, the court found that there was no ambiguity in the clause “born after the date of this settlement”, and that the words “born after” in particular,  meant exactly what they said, and had no other natural meaning.

Some of the principles used by the court are as follows:

 

  • All parties agree that there is no Canadian case law, which is on all fours with the issues in the interpretation of these Trusts. One firstly looks at the Settlor’s intention as ascertained from the four corners of the Trust Settlements themselves and from the Trusts as a whole and not solely from the words used. See: James MacKenzie, Feeney’s Canadian Law of Wills, 4th ed. Looseleaf (Markham: LexisNexis Canada Inc., 2000) at para. 10.60.

 

  • Feeney’s, also says that if a Trust Deed describes a certain person with sufficient certainty to enable a Court to recognize the person intended by the settler, the Court will overlook the inaccuracy in the rest of the description. In my view, this principle cannot apply to the Trusts in question. Such descriptions relate to a beneficiary’ name, which is incorrectly spelled or misdescribed, such as a charity’s name. It can also apply when a testator or settlor describes someone as “my niece Ann Smith”, but that person is not blood-related to the testator or settler and whose name is actually “Anne Smith”, not the name shown in the document.

 

  • I have also reviewed the wording of Feeney’s in paragraphs 10.61,10.62,10.67,10.69, 10.71,10.80, 10.98,11.14,11.1,11.12,11.29 and 11.33.1 cannot see where any of these propositions apply to the wording of the Trusts. The clause in the Trusts is worded, “…and any other children of Jonah Turk born after the date of this Settlement, and the issue of such children”. There is nothing in this clause that is ambiguous or capable of two constructions. The words “born after” mean exactly what they say.

 

  • Nor can I find that the Settlor’s intention is not clearly expressed in the words used in the Trusts. The words “born after” cannot have any other meaning than their natural meaning.

There is no doubt as to the meaning of the words “born” and “after”. Any natural children Jonah may have in the future, and any infants or other children he may adopt who were born after the dates of the Settlements, would be included in the class described in the Trusts. Nor can I see where the Settlor had a general intent other than what the words themselves say in the Trusts.

There is no indication that she contemplated her son, Jonah, adopting adult persons or children who were almost adults and born “before” the dates of the Settlements, so that they would now be included in the classes of beneficiaries named in the Trusts.

  • The construction of the words of the Trusts is neither unjust nor absurd nor does the rule against disinheritance apply, as outlined in Feeney, in para. 10.80. The words “Jonah’s Family”, while now including his adopted children, is not a conflicting provision to “born after”. A conflicting provision must arise in the original wording of the Trust Deed, so that it is conflicting throughout the time from the Trust’s settlement date to the date of the interpretation. That is not the case here. The problem only arose when Jonah adopted persons born after the dates of the Trusts.

 

  • On the question of what is the Settlor’s intention, I adopt the traditional view on the interpretation of trusts as summarized in Lewin on Trusts 18th ed., John Mowbray et al., (Toronto: Thomson Sweet & Maxwell, 2008) at 200-201:

“Lifetime settlements are no different from other documents in that the subjective intentions of their authors are irrelevant. What counts is that the objective meaning that the words of the document convey to the court when considered as a whole in light of the surrounding circumstances.”

The intention that the court seeks is the intention as expressed; that is, the way in which the document is to be understood, not the purpose, motive, desire or other subjective state of mind of the settlor. The reason for the rule is that, otherwise, no lawyer would be safe advising on the construction of a written instrument, nor any party in taking under it.

 

Ad Hoc “Casual” Fiduciary Relationships

Fiduciary- ad hoc

Sedin Estate v Rusin 2011 BCSC 1207 is an excellent example of financial abuse of an elderly person by a trusted financial advisor who was found to be in a casual and ” ad hoc “fiduciary relationships with the deceased.

The deceased and her husband became friends with the defendant financial advisor when the deceased was 69 years of age and the defendant was 32 years old. The deceased remained friends with the defendant after her husband’s death and in fact became dependent on the defendant for management of her finances as her health deteriorated.

The deceased was a modest woman and an unsophisticated investor who is the trial judge found, placed unwavering trust and reliance in the defendant and his abilities to manage her finances.

The deceased sold her house to the defendant’s company when she was 92 years old for $270,000.

The company issued a debenture as security but never made payments thus causing a significant loss to the deceased and her estate.

The executor brought action for damages arising from breach of fiduciary duty and the action was allowed.

The court found that an ad hoc fiduciary relationship existed between the testator and the defendant who had undertaken to look after the deceased financial well-being and to act in her best interests, and he accepted this role answer financial manager.

The defendant had power over the deceased finances, which he unilaterally exercised in a way that directly affected the deceased’s interests.

The deceased was exceptionally vulnerable to the defendant’s control, and the defendant was found to have breached his fiduciary obligation when he took advantage of the deceased by arranging for the sale of her house to his limited company.

In particular the defendant breached his fiduciary duty by providing worthless security for funds advanced by the deceased, and for failing to repay the principal amounts that the deceased invested with him.

The following exerpt of law is from the Sledin case:
Fiduciary Relationships

64    Certain relationships on account of their very nature result in fiduciary obligations for one of
the parties. For example, a lawyer has a fiduciary obligation to his or her client and a trustee has a
similar duty to his or her beneficiary. These types of relationships are generally referred to as per

se fiduciary relationships.

 

  • An ad hoc fiduciary relationship is one that does not fall within the traditional categories of fiduciary relationships. Instead, it is one that arises out of the specific circumstances and dynamics of the particular relationship.
  • In dissenting reasons in Frame v. Smith, [1987] 2 S.C.R. 99 (S.C.C.) at para. 60, Wilson J. described what she considered to be the general characteristics of a fiduciary obligation as follows:

 

  1. The fiduciary has scope for the exercise of some discretion or power.
    1. The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests.
    2. The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power.

 

  • These observations of Madam Justice Wilson were later endorsed in International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574 (S.C.C).
  • The Supreme Court of Canada revisited the issue of fiduciary obligations and the constituent elements of such relationships in Hodgkinson v. Simms, [1994] 3 S.C.R. 377 (S.C.C), and Perez v. Galambos, 2009 SCC 48 (S.C.C).
  • While the characteristics of a fiduciary relationship articulated in Frame continue to be relevant in determining whether such a relationship exists, the more recent case authorities have recast those characteristics and added to them.
  • It is now clear that for an ad hoc fiduciary relationship to exist, the court must be satisfied that one party undertook, either expressly or by implication, to act for the benefit and best interest of another party: Galambos, at para. 66.
  • Moreover, a relationship whose distinguishing feature is only the vulnerability or power imbalance of one party vis a vis another will not, without any additional features, meet the threshold of a fiduciary relationship: Galambos, at paras. 67 and 74. 

Tracing and Accounting For Assets

TracingTracing & Accounting For Assets

It is very common in estate litigation that the form of an asset may change substantially over a period of time.

For example a bank account of cash can be converted into a stock portfolio, which in turn can be used to buy a house that is subsequently sold and put into long-term bonds.

As long as those funds can be identified, they can be traced and accounted for, and where appropriate and ordered by the court, transferred into the name of a rightful heir.

 The principals relating to orders for tracing and accounting were articulated by  Pitfield J. in  Ruwenzori Enterprises Ltd. v. Walji, 2004 BCSC 741 at paras. 240-242 and 245, aff’d 2006 BCCA 448:

1]    Neither tracing nor an accounting is a remedy.  Each is a process designed to assist in the perfection of a remedy…

2]    It follows that tracing is the process employed to identify and particularize the manner in which funds have been applied.  The results of the tracing permit a claimant to determine whether it will opt for a proprietary remedy in respect of funds derived from it, or a monetary judgment in respect thereof.

3]    An accounting is directed at the determination of profit, gain or loss derived from assets in respect of which tracing has identified a right to, and the claimant has opted to assert, a proprietary interest.

 

4]    Upon termination of any part of the tracing process at their option or otherwise, [the plaintiffs] will be entitled to elect to apply to confirm a proprietary interest in respect of assets other than those in respect of which the election to do so has already been made and by virtue of my reasons granted, or to enter judgment for the amounts I have enumerated and to apply for judgment in respect of any additional funds identified by the tracing process.

Administrator Removed For Misconduct With Special Costs

Administrator Removed For Misconduct With Special Costs

Sahota v Sandhu 2012 BCSC 552 is an example of a very straight forward court application to remove and replace a court appointed estate administrator who flagrantly acted in breach of his duties.

His actions were clearly so egregious that there was little surprise or discussion in  the courts removal of him as administrator.

The parties father died in 2008 intestate ( without a will).

The Court appointed the administrator who then breached his duties by transferring title to certain real properties initially to himself.

He then transferred title to his 6 siblings contrary to the terms of a court order.

The Court had little difficulty in ordering the removal of the son as administrator, transferring title to the properties into the petitioners’ names as administrator of the estate, requiring the removed son to pass his accounts , and ordering special costs against him.

Special costs typically means that the losing party must pay the winning side’s entire legal costs, and not just a portion of them, typically around 1/3 of the actual legal fees charged,  as most orders for “costs” provide.

Special costs are usually reserved for situations where one parties conduct is so reprehensible that the court’s need to sanction that form of egregious behavior.

Executor Must Remain Neutral In Estate Litigation

Estate Litigation

Ketcham v Walton 2012 BCSC 175 involved an application by the executor for directions pursuant to section 86 of the Trustee act for an order authorizing the executor to follow the provisions of the deceased’s  last will to defend any wills variation action and gifts as vigorously as possible, even to the extent of depleting the assets of the estate in the defense and appeal of such attack on the will.

In effect the executor was asking the court for directions on how he should govern himself in the face of the disinherited three adult children’s claim for relief under the wills variation act.

The deceased left his estate to friends and charities, and disinherited his three adult children entirely.

It was a most unusual directive to his executor to fight any contests brought against his will by the children, to the extent of depleting the entire assets of the estate.

The judge in fact had no difficulty in dismissing the executors application, and restated the law that the primary duty of an executor is to preserve the assets of the

estate, pay the debts and distribute the balance of the to the beneficiaries entitled under the will, or, in accordance with any order made under wills variation act.

An executor should not take sides between the beneficiaries or use estate funds to finance litigation on their behalf under the wills variation act.

The law anticipates that the executor will remain impartial between the opposing beneficiaries.

 

The decision in Quirico v Pepper estate (1999) 22 BCTC 32 was followed, as was Doucette v Doucette Estate 2008 BCSC 506, at paragraph 16 where Justice

Metzger states ” The law requires an executor to remain neutral.

How to Calculate the Value of Life Estate Land

How To Value Life Estates Land

Life estates, also known as life interests, are a well-established part of estate planning. The owner of a life estate (“the life tenant”) has the right to occupy, use and deal with real and/or personal property for his or her lifetime. Determining the value of life estate land can be done with the help of a professional, but this post will help you get an idea for yourself.

How Life Estates Work

When the life tenant dies, the remaining interest in the property then passes to the next person entitled, historically named the “remainder man”. The interest remaining after the death of the life tenant is called the “remainder interest”. After the death of the life tenant, the remainder man enjoys full ownership of the life estate land or property.

A life interest in property has a value that can be determined by an actuarial calculation done by a professional actuary.

Calculating the Value of Life Estate Land

The purpose of this commentary is to simply give an overview of the process as well as an example. It should not be followed as any sort of professional opinion as to how to calculate such interests.

The formula consists of taking the date of birth of the life tenant as at the date of the creation of the life estate, rounded off to the nearest year, then comparing the age to an actuarial table to determine the”life tenant factor”. Then multiplying that number by the market value of the life estate land in which the subject life interest is being created to calculate the value of the life interest.

That figure in turn is subtracted from the market value of the land to calculate the value of the remainder interest (The life interest plus the remainder interest must equal the total market value of the land being transferred).

Here’s an example of calculating life estate land value:

Pam aged 77 is the sole registered owner of land valued at $185,000.

Pam decides to transfer this land to her son for $80,000, subject to a reservation of a life interest in it for herself.

Referring to actuarial tables, Pam’s life tenant factor is calculated as a female aged 77 years giving her a life tenant factor of .38603

The value of the life interest is $185,000 x .38603 = $71,415

Therefore, the value of the remainder interest is $185,000 – $71,415, = $113,585

Further reading on life estates

Life Estate Can Be Partitioned

Life Estate Valuation

Life Estates aka Life Interests

Executors Fee Slashed By Court For Mis-Management of Estate

Executors Fee Slashed By Court

Re Stolarchuk Estate 2011 BCSC 1681 discusses the various principles involved in the calculation of an appropriate remuneration for an executor who mismanaged the estate assets.

The deceased died in October 2004 leaving his estate consisting primarily of her house and an adjacent lot.

Her will bequeathed her estate equally to her four children, one of whom was the executrix.

The executrix attempted unsuccessfully to negotiate with her siblings to purchase the property from the estate for several years, and finally ended up selling the property through a realtor in 2009 for $250,000.

The executrix submitted an account for her remuneration at $17,000.

The court fixture remuneration at only $3000.

The registrar found that the executrix failed to realize on the estate assets and to distribute them in a timely fashion. She also acted wastefully in maintaining the phone and cable service to the house.

The court relied upon the following legal principles in assessing executors remuneration:

In Bernhard v. Wist, 2011 BCSC 101,  outlined the legal principles relevant to executors remuneration:

[100]       Section 88 of the Trustee Act governs executor’s remuneration. The executor is entitled to:

a)   a maximum of 5 per cent of the gross aggregrate value of the estate;

b)   a maximum of 5 per cent of the income earned during the administration of the estate; and

c)  an annual “care and management fee” of 0.4% of the average market value of the assets.

 

[101]       However, the percentages stipulated in s. 88 are not necessarily to be applied in every calculation of remuneration. The percentages provide a rough guide to assist in appropriate computation of the executor’s remuneration: Re Turley Estate (1955), 16 W.W.R. 72 (B.C.S.C.). In the end, the court must be satisfied that the compensation claimed “bears some reasonable relationship to the work and responsibility involved”: Re La Chance, [1955] 15 W.W.R. 141 (B.C.S.C.).

 

[102]       Various factors are to be considered when determining the appropriate executor’s fee. Those factors include the magnitude of the estate, the care and responsibility involved, the time occupied in the administration, the skill and ability displayed and the success (or lack thereof) achieved in the administration: Re McColl Estate (1967), 65 W.W.R. 110 (B.C.S.C.). Similar, but not the same, types of considerations apply with respect to a care and management fee: Re Pedlar (1982), 34 B.C.L.R. 185 (S.C.).

[103]       In terms of calculating the capital fee, the gross aggregate value of the estate is the realized value of the original assets of the estate.

Co-Executor Trustee Removed for Lack of Co-operation

Co-Executor Trustee Removed for Lack of Co-operation

Levi- Bandel v Talesiesin Estate 2011 CarswellBC 384 is a good example of what disinherited.com perceives as an increased willingness by the courts to remove obstructive and uncooperative executors and trustees in the interests of the beneficiaries.

The deceased estate was managed by 2 co-executrixes who were also the co trustees.

The deceased made a bequest to pay $25,000 to one of the trustees for the care of the deceased’s 2 cats, with any residue of the sum going to an animal organization.

The petitioner who was a trustee but not a beneficiary, brought this application to have the co trustee removed as an estate manager, to have her pass accounts, for a declaration that she was not entitled to remuneration, as well as special costs.

All of that relief was granted by the court.

The co trustee had taken the cats to live with her, and the petitioner successfully argued that any expenses for the care of the cats had to be approved by the estate.

The court found it had jurisdiction to remove a trustee, and determined that the welfare of the beneficiaries was the major factor in possible removal.

The co trustees’ failure to act prevented the estate from being properly administered, so the co executor was removed.

It was not necessary to appoint a new trustee in place of the removed trustee.

Lost Wills and the Presumption of Revocation

lostLost Wills and the Presumption of Revocation

An update to this article is that since the introduction of WESA on April 1, 2014, I anticipate that the courts will be more willing to allow copies of wills as proof of the testator’s intention to more easily admissible into probate

Often when a person dies, his or her original will cannot be found and will never be found.

Frequently years have passed between between the date the will was signed and the testator’s death.

In many circumstances a true copy of the will be accepted for probate in the place of the original will.

However, if the will was last known to be in the custody of the testator, and is not found after the death of the testator, then the presumption is that the testator destroyed the will with the intention of revoking it.

The presumption of revocation may be rebutted by evidence such as the following:

A. The character of the testator;

B. The existence of codicils;

C. Statements made to beneficiaries with respect to provisions made for them; and

D. Words and actions of the testator before and after the execution of the will.

The degree of evidence required by the Courts to rebut this presumption is not usually very high.

If the existence of a valid will is proved then the presumption of revocation is rebutted. The contents of the will must then be proved.

If there is a copy or completed draft, and the solicitor who prepared the will gives evidence as to proof of execution by the testator, there should be sufficient evidence of the contents of the will.

If there is no copy or completed draft, the evidence of the witness as to the contents of the will may be sufficient, even if that witness has an interest in the will.

Such evidence may include statements made by the testator before or after the execution of the will, evidence that the witness with the will, evidence of codicils to a will that reference to the will in written documents.