Avoiding Family Estate Fights

Brigitte DioGuardi – Tax, Business and Estates Lawyer

British author, Charles Dickens, is best remembered for introducing Scrooge to the public in his novel “A Christmas Carol”. Few know that, during his early career, Dickens worked in a law office where he witnessed family fights involving contested Wills. In “Bleak House”, which he published in 1852, the narrative revolved around litigation over two competing Wills. It dragged on for years and, in the end, the legal costs entirely consumed the assets of the estate.

The old saying that there is no fight like a family fight is very true especially when the estate of a deceased parent or close relative is involved.

Reducing the Risks

In today’s fast paced society, few contemplate the possibility of death or serious injury. Like it or not, there is always the risk of a debilitating disease or involvement in a major accident that could lead to incapacitation. In these circumstances, what happens if you cannot look after your financial affairs, bank accounts, your home or investments? What if you cannot make medical or personal care decisions? Who will make those decisions? If you die without a Will, who will look after your estate? If any of these things happen, how can you plan ahead to prevent family disputes?

Planning ahead to avoid costly court actions and reduce the burden if tragedy strikes must be done while you are still able. You can appoint a trusted person to manage your financial affairs during your lifetime if you are incapacitated. Similarly, you can mandate someone in whom you have confidence to look after your health and personal care matters during your lifetime if you are unable to make such decisions. After your decease, a Will puts a trusted person or persons in charge of protecting your beneficiaries and distributing your assets to them in accordance with your stated wishes.

Protective Powers of Attorney

A Power of Attorney is an authority given by a person (the grantor or principal) to another (the attorney) to act on behalf of the grantor in conducting his or her financial affairs or in making personal decisions for the grantor. The authority given can be comprehensive so as to include all acts of a financial nature (Power of Attorney for Property) or personal decision making (Power of Attorney for Personal Care). Both are only effective during your lifetime. After your decease, your Will ensures that your assets are distributed as per your direction.

Power of Attorney for Personal Care

A Power of Attorney for Personal Care can only be utilized if you lose your ability to make decisions regarding your health and personal care matters.

Without a Power of Attorney for Personal Care, your family may have to go to court before they can make health and personal care decisions for you.

The motivation for such a document is usually to convey specific instructions about medical procedures you, the grantor, do not wish to have performed or to provide a general statement as to your philosophy – eg. As to when it would be appropriate to cease taking “heroic measures” to prolong your life when all quality of life has gone.

Continuing Power of Attorney for Property

This type of power of attorney is useful if the grantor becomes incapacitated. It allows you to appoint a trusted person(s) to act on your behalf with respect to your financial affairs.

 Your Will and Continuing Power of Attorney for Property are different documents. Neither replaces the other, but you can appoint the same person or persons to represent you in both documents. The Will only takes effect after your passing. The Continuing Power of Attorney for Property is effective only during your lifetime and terminates at your death.

In the Continuing Power of Attorney for Property you can appoint one or more persons to act on your behalf if you become incapacitated. If you appoint only one person to act, we usually recommend a substitute so that someone will be able to look after your financial affairs if the primary person dies or is unable or unwilling to act.

Bank Powers of Attorney

A Power of Attorney prepared and signed at your bank is not the same as a Continuing Power of Attorney for Property. A bank Power of Attorney is normally limited to the assets that you have with that bank. It does not deal with your other property.

Duties

There is a serious duty imposed upon the person or persons you name as your attorney. Such person must act in good faith and put your interests first and foremost. Your attorney is fully accountable for what he or she does. Make sure to discuss the matter ahead of time with the person you select or face the risk of a refusal to act on your behalf.

Each spouse should have their own Continuing Power of Attorney for Property and Personal Care.

Your Will

A Will is a disposition by which the person making it (who is called the testator) provides for the distribution or administration of his or her property after death. It does not take effect until the testator’s passing and is always revocable by the testator.

When making your Will, here are some points to be considered:

1. Do you have any foreign real estate?
2. Is any of your property subject to mortgages, liens or payments under contracts of conditional sale? If so, how are such obligations to be borne – by the beneficiary or by your general estate?
3. Have you agreed to purchase or sell any property? If so, how is the purchase money to be provided or disposed of?
4. Are special powers required in connection with any particular asset, for example – to carry on and incorporate a business?
5. Have you any personal loans outstanding, and, if so, are these to be called in or allowed to remain outstanding or forgiven?
6. Have you any obligations that may require to be renewed or extended? In particular, have you guaranteed any indebtedness of others or of a company?
7. What life insurance policies are there on your life and how are they payable? Do you wish to deal with any of these policies by a declaration contained in you Will? Have you any interest in policies on the lives of others and, if so, what disposition is to be made of such interest?
8. If you are married or in a common law relationship, how do you wish to provide for your spouse?
9. Have you or your spouse ever been divorced and, if so, is the legal validity of your present marriage beyond question?
10. If you have children, are there any special circumstances in which some of them should receive more or less than others, or that the bequests to any of them should be subject to special provisions, e.g. protective trusts? Is any child wholly dependent on you for support, by reason of being infirm?
11. If your children, or any of them, are infants, at what age or ages are they to receive their share of the estate?
12. Who are to be the executors and trustees? Have they consented to act as such?
13. What investment powers do you wish the trustees to have?
14. Do you wish to give any informal instructions or information to the trustees or beneficiaries with regard to the disposition of your remains or otherwise by way of an informal memorandum of wishes?

Probate

This is a judicial act or determination of a court having competent jurisdiction establishing the validity of a Will.

Probate Fee

This is a tax levied by government on every Will admitted to probate.

Legal Capacity

You must have legal capacity to do so before making a Will. A basic requirement of capacity is that you understand the nature and extent of your assets. In addition, it is vitally important whether you have made your Will freely and voluntarily. If, after your death, it can be proven that you were coerced into making a Will or changing it, that very likely will lead to the result that the Will is held to be invalid.

Formal Requirements

There are formal requirements that cannot be compromised. A Will must be signed in front of two witnesses and they must sign in the presence of each other and in the presence of the person making the Will. There is an exception to this rule if it is a Holograph Will. This type of Will is normally only used in emergency situations.

Your Will must set out the name of the person or persons you wish to control your estate after your death. They are called executors or trustees. Your executor has the responsibility of looking after your estate after your death. This includes paying legitimate debts, converting estate assets to cash where necessary, paying taxes, looking after income tax filings and distributing your assets to the beneficiaries. If you do not have a Will, someone will have to apply to the court to act as the “administrator” of your estate. In Ontario, this person is called an “estate trustee without a Will”.

Points a Will Normally Covers

Usually, your Will cancels any prior Wills or Codicils. However, there are situations where two Wills operating simultaneously are required in order to fulfill specialized requirements. An example could be where a person has substantial assets in other countries and requires a Will in each jurisdiction. In this situation, each Will refers to the other and sets out the circumstances and assets dealt with therein.

Your Will appoints an executor or executors to look after your estate.

It instructs your executors to pay or settle your debts and taxes owed before any assets are distributed to the beneficiaries. A certificate from the Canada Revenue Agency that taxes have been paid is usually obtained by the executor before a final distribution of the assets to the beneficiaries.

In the Will you can distribute certain personal items, gifts of money or other personal assets to the persons you have specified.

It can designate beneficiaries under life insurances policies, registered retirement savings plans, etc.

Your Will should dispose of the residue of your estate. The residue is what is left after your debts and taxes have been paid and all legacies have been distributed.

If applicable, your Will should provide for guardianship of any minor children.

Your Will can also provide for funeral arrangements and medical donation of organs.

Signature

Sign your Will in front of at least two witnesses both present at the same time. Ensure that you are complying with legal formalities. For example, a person who is going to be a beneficiary under your Will must never sign as a witness to it. Also, the spouse of anyone who benefits under your Will should not sign as a witness. Here’s what can go wrong if this strict rule is not followed.

Beneficiaries or Their Spouses Cannot Witness a Will

Claims for negligence in estate matters typically involve situations in which the lawyer, or the parties if they do not have a lawyer, have failed to observe the formal legal requirements, with the result that beneficiaries lose the gifts intended for them. In one situation, legal counsel, having prepared the Will in accordance with the testator’s instructions, attended at the testator’s home and read the Will in the presence of the testator and the testator’s son and the son’s wife. The son was the main beneficiary under the Will. The solicitor asked the son’s wife to witness the Will and she did so. This rendered the gift to her husband void. Of course, a law suit ensued. The lawyer was held to be negligent.

The judgment allowed recovery stating that, if information is sought from a person possessing a special skill and trusts that person to exercise due care and if that person knew or ought to have known that reliance was being placed on his or her skill and judgment, he or she owes a duty of care to the first person.

In another case, the defendant lawyers drafted the testator’s Will. The testator wrote to them asking that the Will be sent to him and stating that he would sign it, have it witnessed and return the executed document to the lawyers. The defendants sent him the Will with a covering letter giving instructions for its execution.  Among other things, these instructions said that it should be signed by the testator at the end of the Will in the presence of two witnesses who were not beneficiaries under the Will. The plaintiff was a beneficiary under the Will and her husband was one of the attesting witnesses. The effect of this was that the plaintiff’s gift was void. The defendant lawyers failed to notice the problem when the Will was returned to them and it was not discovered until after the testator’s death.

The plaintiff then brought action against them for damages for the loss of her benefits under the Will in that they failed to inform the testator about the statutory requirements, to check whether the Will was properly executed, to notice that the gifts to the plaintiff would be void, and to inform the testator of the problem.

The court awarded damages to the plaintiff for the loss of the benefits the testator intended to confer on her by the Will.

The judge stated that the beneficiary knew of the making of the Will and the gift to her and relied on the lawyers to ensure that the Will was efficacious.

Family Law Clause

In Ontario, your Will usually contains a Family Law clause. This protects the income generated by your married children’s inheritance if that child is ever involved in a marriage breakdown after your decease.

Your Executors

An Executor, also called a Trustee, is appointed to make sure that your estate is properly administered. A trust is a confidence reposed in a person (called the trustee) for the benefit of another called the beneficiary. Among other things, executors are responsible for arranging for your burial, paying the debts and taxes of the estate and satisfying the bequests made in your Will. Choose one or more persons suited to carry out the required duties.

You can also consider appointing a corporate entity, such as a trust company, as an executor. A corporate executor offers impartiality and permanence. The downside is that a trust company may be reluctant to accept such an appointment if the monetary value of the estate is below their minimum acceptable level. Also ask how much the institution will charge to manage your estate because that could be quite high. They want to make money so check how much the charges will be before locking them in. Sometimes it is advisable to appoint an individual together with a corporate executor, as co-executors, if such an appointment is acceptable to both parties. We often put a clause in the Will that the individual executor can fire the trust company and appoint another if the corporate services are not satisfactory or too expensive.

Talk to the Proposed Executor

If you are leaving the entire estate outright to your spouse, you may consider appointing your spouse as sole executor if you feel that he/she is capable of administering your estate.

You might think of appointing your children. However, if you do not think your children will get along since you are not there to mediate any disputes, you can choose a neutral person or financial institution to carry out this task.

It is prudent to find out if the person you wish to appoint as an executor has the time or ability to take on the task. An executor may be trustworthy, but he or she may be unwilling to accept the appointment. Executors have the right to decline the appointment after your decease when they find out that they have been named. Therefore, obtain the person’s consent before naming him or her as executor. If you are considering appointing an executor who lives in a foreign jurisdiction, there can be concerns regarding the requirement for him or her to post a bond. This may not be necessary if the future executor lives in a British Commonwealth country.

A Tie Breaker

Consider appointing a backup executor in case a sole executor predeceases you, or is unable or unwilling to act.

If you are appointing two co-executors, there could be a problem if they cannot agree. In order to avoid an expensive court application, deal with this possibility in your Will. Also, if you are appointing three or more co-executors, such as three of your adult children, consider inserting a majority clause to allow two of the three to make a binding decision. Binding arbitration might also be considered if their differences cannot be otherwise resolved.

Payment

An executor is entitled to be paid for his or her work. If you are appointing one of your children to be your sole executor, consider inserting a clause in the Will paying reasonable compensation for the work involved.

The Devil is in the Details

Here is where fights often start. Problems can arise over small things such as a clause in your Will that is not clear as to which daughter gets a favourite lamp. A blanket bequest of “household effects and furniture” is an example of what can happen if you are not specific. Beneficiaries sometimes get very agitated over such things and go to court. In one case the term in the Will which said “I bequeath my articles of household or personal use or ornament” was held to include a valuable collection of clocks and watches. There is no hard and fast rules of interpretation and decisions of the courts are all over the map. The following items have been included in bequests of “household effects”: consumable stores, garden implements and tools, movable plants, wines and liquors, but not jewellery, bank notes and stock certificates and a stamp collection.

Personal Effects

It gets even worse with bequests of personal effects.

One court decision stated that “all my personal effects” includes only articles of a nature purely personal to the deceased and does not include such household articles as bedroom linens, nor would the judge include an automobile in a bequest of “all my household goods…and personal effects”. The problem is that in another case, the judge did include the testator’s automobile. A bequest of “my personal effects such as jewellery” was held by the court to be limited to jewellery. A gift of “wearing apparel and personal effects” has been held to include all personal articles not otherwise disposed of in the Will, but not money or securities for money. A testator, after providing for certain monetary legacies, bequeathed “my personal effects in my room including pictures, roll-top desk and chiffonier complete with their contents”. The judge in that case held that three bank pass books, referring to deposit accounts of over $30,500, and promissory notes made to the order of the testator in a drawer of the desk, did not pass by the bequest as it included only such things as could properly be treated as personal effects and did not extend to such items.

If you have personal effects that you wish to distribute under your Will, speak to your lawyer about preparing a detailed binding memorandum for the purpose of distributing such items among your beneficiaries. This binding memorandum would be incorporated in your Will. You should be aware that such a memorandum cannot be changed unless you prepare a Codicil which is a legal amendment to your Will or unless you prepare a brand new Will.

If this is too complex, there is another alternative. A non-binding memorandum of wishes only expresses your wishes as to who will get what after you die. This type of memorandum is not part of your Will but is usually kept with your personal papers. Because of its non-binding nature, it would more likely apply to items of sentimental value than to items of monetary value.

Monetary Bequests

The meaning of the word “money” in a Will is not restricted by any hard and fast rule, but depends on the context in which it occurred, properly construed in the light of all relevant facts, and, given such context, it may include more than what is called “money in the strict sense”. In one court case it was held that a bequest of “all money of which I die possessed of…” in a Will drawn without a lawyer’s assistance, covered all the net personal property of the deceased. A gift of “the money I have now and that which I am entitled to now or at any future time” has been held to include all the invested capital of the deceased; “the balance of money in bank” was held to include shares and bonds in a deposit box at the bank. In another case, “any monies that I have in the bank” was held not to include savings certificates, share certificates, etc., deposited at the bank, although the language would be sufficient to include both a savings and a current account.

Gifts of Money

A monetary gift will be effective only if there are enough funds in your estate to satisfy it. Remember that all of your debts and taxes have to be paid in full before any cash gifts can be distributed to your beneficiaries.

Also consider naming one or more substitute beneficiaries to take the money in the event that your primary beneficiary predeceases you or in the unlikely event the gift is refused (it does happen).

Children and Issue

The natural and ordinary signification of the word “children” is your offspring in the first degree. A judge has said that the word “children” in a Will does not include grandchildren unless the circumstances are such that unless it does the bequest is meaningless. But circumstances can change how a judge rules. Thus, when the testator knew there was no possibility of his wife having a child by him, the word “children” in his Will was extended by the court to include a step-child and where the testator had no living sister, a bequest to “sisters” was held effective in favour of cousins who the testator had always called his “sisters”. As well, the word “children” can be extended to include a child en ventre (in the womb) for the purpose of conferring a benefit on such child.

Descriptions of Persons

The word “cousins” has been held by the courts to mean first cousins only. “Second cousins” means those persons who had a great-grandparent in common with the deceased testator and first cousins once removed will not ordinarily take under a bequest to “second cousins” but when the expression used in a Will was “cousins and half cousins”, the judge held that this included second cousins and first cousins once removed.

The primary meaning of “nephews and nieces” is descendants in the first degree of brothers and sisters and does not ordinarily include great-nephews, or great-nieces, or nephews and nieces of the husband of the deceased, though some of them may have been inaccurately referred to in the Will as “my nephew” or “my niece”. And when the residue of the estate was left to “my niece E.W.” and neither the deceased nor his wife had a niece but the testator’s wife had two grand-nieces named E.W., one of whom was illegitimate, it was held the legitimate grand-niece was entitled.

The “Residue” of Your Estate

Residue is everything you own at the time of your death less what is needed to be disbursed in order to pay your debts, administrative expenses and taxes. From that amount take out all bequests of money and other assets. Everything left after this is the “residue” of your estate.

Until the claims against the deceased’s estate for debts, legacies, testamentary expenses, etc. have been satisfied, the residue does not come into actual existence.

Be certain to name in you Will who benefits from the residue otherwise the law will determine who inherits it.

Executors’ Powers

Most well drafted Wills give executors power to sell estate assets, a power to retain estate assets in the form in which they exist at the time of decease, and a power to borrow against such assets in order to raise funds for necessary purposes. Without a power to borrow in your Will, if your executors require money in order to pay estate debts and taxes, they may have to resort to selling assets instead of borrowing against them.

It is very important that you provide your executors with adequate powers to complete their task. Otherwise, the powers you failed to grant in your Will may have to be obtained by them through an expensive court application.

Executing and Witnessing Your Will

The law imposes strict formalities upon those in the process of signing a Will. Both witnesses have to be present with you at the same time when you sign the Will. It is advisable to insert your initials at the bottom of each page of the Will and beside the date when it was signed. Each witness should also provide his or her initials in the same places.

Ensure that your Will can be found after your passing. Many people leave the signed Will in their lawyer’s custody. Others keep their Wills in their own safety deposit box. Always inform your executors where the Will is kept so it can be found after your passing.

Here is an example of what can go wrong if the formalities are not followed.

Duty in Taking Instructions

The courts have imposed obligations on those preparing Wills to satisfy themselves that testators have capacity, knowledge and approval of the contents of their Wills and that there is no apparent undue influence or fraud. This duty is particularly significant if the person making a Will is elderly or is apparently suffering from delusions or lack of capacity, if the instructions differ substantially from a previous Will, and especially if the instructions are not received directly from the testator.

In the Worrell case the testator’s Will left virtually the entire estate to his friends, Mr. and Mrs. Barfoot, their daughter and granddaughter. Mr. Barfoot had prepared the letter of instructions which the testator signed. Barfoot took the letter to a lawyer who had never acted for the testator and who drafted the Will with some changes from the instructions. He then gave it to Barfoot to have it signed.

The attesting witnesses, long-standing friends of the testator, testified that they believed him to be competent, that he had been conducting his affairs competently and that he was very fond of the Barfoot family. The testator’s physician also thought that the testator was competent to make a Will.

There was no evidence that the Will was ever read to the testator and only weak evidence that he ever read it.

The court concluded that suspicious circumstances had not been removed and pronounced against the Will.

The judge made the following comments:

I consider it necessary to comment on the conduct of the lawyer who drew the Will that is at issue. He impressed me as an honest, conscientious person, and yet on his own evidence he acted as set out hereunder:

• he prepared a Will for a testator ,
• he drew the Will without any knowledge of the size of the testator’s estate or the nature of its assets,
• he drew the Will leaving a substantial portion of the estate to the person who consulted him,
• he drew the Will with changes from the original letter of instructions signed by the testator ,
• he handed the Will to the beneficiary who had consulted him, to take out and have executed,
• he kept no docket entries or other records dealing with the matters in issue.

It seems incredible that a competent solicitor, the head of a respected law firm, would act in this manner. It seems even more incredible that he gave no indication in the witness-box which would indicate that he realized he had acted improperly.

There should be no occasion when a lawyer should prepare a Will without receiving instructions from the testator. It is certainly improper for a solicitor to draft a Will without taking direct instructions from the testator and then not to attend personally when the Will is executed. For example, a son of an old client might come to the solicitor’s office and advise that his father, a widower, is in the hospital and wants a Will leaving his whole estate equally among his children. In such circumstances, the solicitor might properly engross such a Will and attend on the testator, but should – under no circumstances – say to the testator: “I understand you want a Will leaving your property thus and so, and I have drawn such a Will. Is this satisfactory?” This, especially with older people is a dangerous practice and the solicitor should, on attending the testator, say: “I understand you want a Will drawn and will you tell me how you wish your estate to go on your death.” The asking of leading questions by a solicitor obtaining instructions from an elderly testator is a practice to be avoided. Too often the elderly person, if asked leading questions, will reply in the affirmative, but if simply asked “What property do you have?”, or “How do you wish your estate to go on your death?”, may exhibit complete lack of comprehension.

It should be clear that a solicitor taking instructions from a major beneficiary under a proposed Will rather than from the testator, should be at once alerted and should satisfy himself thoroughly that the instrument expresses the real testamentary intentions of a capable testator.  In the case before us, the solicitor took no such precautions and to my mind when the beneficiary prepared a typewritten letter of instructions, the signature of the testator thereto in no way absolved the solicitor of his responsibilities.

I simply cannot conceive how the solicitor can justify drawing a Will not in accordance with the written instructions received from the testator. The solicitor acted after obtaining information from Mr. Barfoot, the beneficiary, and one cannot escape the conclusion that the solicitor, whether consciously or unconsciously, was taking instructions from Mr. Barfoot and ignoring the testator’s written instructions which were his only connection directly with the testator.

The fact that the solicitor handed the Will, as engrossed, to the beneficiary to have executed is improper for the reasons set out above.

I consider that any solicitor drawing a Will should make full docket entries in regard to all details thereof. Especially is this so in the case of an elderly testator, and even more so in the circumstances in this case.

It is the most elementary of teaching in regard to the drafting of Wills that the draftsman should preserve his notes of the testator’s intentions. With no docket entries, the solicitor in this case was unsure as to whether he had recommended to Barfoot that he might get a letter from a doctor or somebody at the Simcoe Manor with regard to the capacity of the testator.

Testamentary Trusts

When setting up a trust in your Will, you do not give the bequest outright to your beneficiary on your death. It will be managed by your executor until payable in accordance with the terms of your Will. Usually the sum is substantial since administration of a trust can be expensive. Some trusts allow the trustee to provide income to the beneficiary during the recipient’s life, but the beneficiary does not receive the capital of the gift because it will be given to a different beneficiary. This type of trust is known as a life interest. There is also a trust for a set term.

Some parents feel that an outright gift to a child is not wise because they do not want him or her to inherit a large sum of money outright until reaching a more mature age. In this situation, the trust could be for a set term. For example “until my daughter reaches 25 years of age. At that time she gets all the capital”.

Power of Encroachment

If you are setting up a trust for your child until he/she reaches 25 years of age, your Will can be drafted so that your trustee has access to the funds required for maintenance, education, advancement, medical needs or any other matters which your trustee feels necessary for the child’s benefit. This is known as a power of encroachment. Even though the principal amount will be frozen until the child reaches the age specified in your Will, your trustee can access the amounts for those needs which the trustee feels require the payment of such funds.

A trust which includes a power of encroachment is not the only type you can set up in your Will. You also can set up a trust where there is no power of encroachment. This prevents the trustee from encroaching upon the principal amount of the trust, even in situations where your child may be in need.

You can also set up your Will so that the ages at which your beneficiaries inherit money are staggered. As an example, it could be provided that one quarter of the money is inherited when each beneficiary reaches the age of twenty-one. You could then instruct that another portion is given to them upon each attaining the age of twenty-five years and the balance at thirty years.

In considering such trust arrangements, discuss the details with your lawyer.

Dealing with a Second Marriage

A trust can also be useful in a situation where a second marriage is involved. It could allow you to benefit the children of your first marriage while also providing adequate protection to your second spouse. One version of this type of trust could consist in giving a life interest to your second wife in the whole of, or in a portion of, your estate, thereby preserving assets so that the remaining capital can be given to the children of your first marriage when your second spouse dies. This life interest can allow the spouse to live comfortably using income from your assets, but does not allow him/her to access or transfer the trust assets over the specified amounts. In other words, the life interest provides only for possession or use, but does not provide ownership. When your second spouse passes, his/her life interest ceases. At that time, the children of your first marriage or other beneficiaries that are designated to inherit will obtain the assets that were preserved in this manner.

A Possible Pitfall

If you have not signed a marriage contract that eliminates a spousal right of election, any efforts to protect the children of your first marriage in this manner could be frustrated. Your spouse may have the right to elect to receive a certain portion of the property of your estate after you pass away, even if the wording of your Will either cuts out or limits his or her rights to inherit. Before finalizing your Will, consult a family law lawyer and have the proper paperwork completed.

Under Ontario law, a surviving spouse can either accept the provisions of the deceased spouse’s Will or elect to have an equalization payment under family law legislation. Any insurance benefits or pension benefits which the surviving spouse receives from the deceased spouse are credited against this equalization payment. However, as noted above, the spouses can enter into a marriage contract in which each agrees to follow the terms of the other’s Wills and waives any election rights. Such a marriage contract will protect your estate from the claims of your surviving spouse. This usually solves problems of inadequacy of support that used to arise quite frequently. However, it should be noted as a matter of interest how the courts have determines if adequate support for dependants has been provided.

The Davies case was heard in the Ontario Surrogate Court in 1979 by Justice Dymond.

The applicant, Mr. Davies, and the deceased were married in 1969. They had both been married before and the deceased had a son by her first marriage. At the time of the marriage, the applicant was 62 years of age. He sold his house and moved into his wife’s house. For a while, both were employed, but then the applicant retired. His wife continued to work up until two years before her death. The applicant paid most of his pension to his wife to pay for the expenses and upkeep of the home. The deceased’s wife died in 1978 and left her entire estate to her son and named him the sole executor. The value of the estate was approximately $146,000, $50,000 of which represented the value of the house and $5,500 of which represented one-half of the moneys in a joint account with the applicant.

The applicant received a pension of some $400 per month and has a bank account of approximately $82,000. Of that amount, $21,000 had been taken from joint accounts of himself and his wife to which he had contributed most of the money.

The applicant made an application for support. He sought to be allowed to remain in the house for the rest of his life.

Mrs. Davies provided support for her husband by providing for him a home in which to live. Similarly, he had been providing support for her by contributing financially to their living costs and by effecting repairs to the house and grounds. In my view, each supported the other and, therefore, each was dependent [sic] on the other. It is with that approach that I intend to proceed and the judge found that Mr. Davies was a dependant of the deceased.

Once one has found an applicant to be a dependant, the next step is to decide whether the deceased by her Will “has made adequate provision for the proper support of her dependants or any of them”.

The court made the following findings of fact:

1. Mr. Davies has assets totaling just over $80,000 and is in receipt of pensions of about $400 monthly.
2. He is capable of providing maintenance for himself but is not capable of purchasing a home similar to the two-bedroom home in which he now lives and, were he to use all of his capital to purchase a similar home, he would not be capable of maintaining himself in that home.
3. Mr. Davies is over 72 years of age and is alert but his physical prowess has diminished and he has some medical problem with his eyes.
4. His needs include living in the neighbourhood where he has lived for the past ten year close to his friends and acquaintances and in familiar surroundings.
5. He will never be able to find paid employment.
6. He was married to the deceased for more than nine years and there is no evidence that his relationship with her was anything but that of a loving husband.
7. He maintained the deceased’s house, paid the taxes and utility charges and maintained his wife. She worked until about two years before her death and her earnings were hers to use as she would.
8. The deceased had also been supporting her son by giving him money from time to time, by paying him for work done on her home and by making gifts to him.
9. There was no obvious repudiation of the relationship of husband and wife.
10. At the time of her death, the deceased owned her home, then valued at $50,000, a cottage valued at $35,000 which her son testified was held in trust for him, and approximately $55,000 in her own name, excluding any joint accounts with her husband. The husband at that time owned in his own name approximately $60,000. There were joint accounts in the amount of approximately $20,000. It can then be seen that if the two pieces of realty are excluded, at the date of death of Mrs. Davies, she and her husband had close to equal assets. Mr. Davies had sold his home in order to move in with his wife and he kept the proceeds of that sale in his own account.

Evidence was adduced that the testatrix had told her son in the spring before her death that he husband was provided for and there was also evidence from the husband that both he and his wife had expected that he would predecease his wife who was younger than he and that to be forced to move from his home would “break my heart”.

The court concluded from the facts that adequate provision for the proper support of Mr. Davies was not made because such adequate provision would include the right for Mr. Davies to occupy his wife’s home as long as he is capable of living there, whether alone or with someone to look after him as he gets older and that to deprive him of that home would be to deprive him of the support which, under all the circumstances, would be adequate for him.

What About Joint Property?

The legal term for holding real estate in this manner is known as joint tenancy. The term is used to express a common property interest usually of two persons. Normally, when a joint owner passes away, the property automatically goes to the other joint owner. If the joint owner who dies left a Will, it cannot transfer property that had been held in joint ownership. The surviving joint owner or owners will receive the property by operation of law regardless of what the deceased joint owner’s Will says. Joint tenancy is often attractive to spouses because the property goes directly to the survivor. As it does not form part of the deceased’s estate, it  will circumvent the need to apply for probate with respect to this asset.

Joint ownership is only one way of holding property. Another way is referred to as tenants in common. This type of ownership is similar to a partnership. For example, if you and your brother own a farm as tenants in common, upon your death, your interest in the farm will pass according to the provisions of your Will and will not automatically go to your brother. Similarly, he is in the same position.

Right of First Refusal

Partnership or shareholder agreements relating to your business interest in a firm or corporation may prevent you from leaving those interests to a beneficiary in your Will because your co-owners may have either a right of first refusal or an option to purchase same. This gives them a prior claim to the rights of the beneficiaries named in your Will.

Marriage or Re-marriage

Under Ontario law, marriage revokes a previously made Will. Say you made a Will in 2004 and married in 2010, the 2004 Will is revoked. However, a Will made in contemplation of marriage to a specific person is valid and will survive that marriage.

Divorce and Separation

Generally speaking, the Will made prior to your divorce will continue to be effective.

When you separated, you are, under the law, still married. As a result, if you have named your spouse as beneficiary in your Will, he or she will benefit notwithstanding your separation. Protection can be obtained through a separation agreement that provides for a release of your estate, among other matters. In a divorce, this matter will be dealt with by legal counsel.

Changing Your Will

If you try to make changes to your Will yourself but don’t follow the necessary formalities, the end result could be that the Will that you made originally will continue to be effective, and the changes you tried to make will be of no effect.

Organizing Your Records

In the event of your incapacity or death, proper record keeping will greatly help your beneficiaries. The information should include:

• the name of your accountant and lawyer
• the location of all financial institutions with which you are dealing
• the name, address and telephone number of your employer, or if you are self-employed, of your partners and business associates
• the location of your birth and marriage certificates
• the name of your stockbroker
• the location of file copies of your tax returns
• if you are divorced, the location of the original Divorce Judgment or Decree
• if your estate or any particular beneficiary is entitled to a death benefit, the location of the life insurance policy or other document generating such benefit. With respect to insurance, provide the addresses and telephone numbers of the brokers and insurance companies involved and provide a memo to whoever is looking after your assets specifying that they are to keep the insurance current and in force on your home, your car and your other valuable assets in the event that you have become incapacitated
• the location of your safety deposit box specifying the address of the bank or financial institution and where the safety deposit box key is kept
• list the real estate which you own, either alone or together with others. Specify where property is held in joint venture arrangements, through corporations or syndicates. If there are mortgages or leases with respect to the property, specify that as well and whether there is any life insurance payable upon your death that could be used to pay off a mortgage loan on any of such property. Give details.
• if you own or lease a motor vehicle, the papers should be kept together with evidence of insurance
• if you are in a partnership or have an interest in a corporation, state the name and the location of minute books and other documents
• provide your social insurance number
• specify the location of your Continuing Power of Attorney for Property and your Power of Attorney for Personal Care and any trust documentation
• provide the location of your prepaid funeral plan documentation
• specify the location of your original Will and any original Codicils. As well, give the location of any memo you have prepared to guide your executor. Provide the names, address and telephone numbers of all executors, guardians and witnesses to your Will
• if you owe money to anyone, specify the particulars, including names, addresses and telephone numbers
• if anyone owes you money, gather the evidence of that debt such as an I.O.U., promissory note, or other loan documents reflecting why the money is owed. As well, if you are being paid by post-dated cheques, identify where the post-dated cheques can be found. This would apply to anyone who owes you money including another family member. In the event that you are operating a small business, where you are monitoring the accounts receivable, specify where the accounts receivable information is kept.
• if you are operating a small business, and intend that your representatives keep it operating after you become incapacitated or pass away, provide itemized information needed for the operation of that business.
• maintain a detailed and up to date list of your assets. Specify account numbers, the location of the institutions where they are kept or from where they are being administered including account representative names, telephone numbers, etc..

A Memorandum of Wishes

Often it is wise to write a memorandum of wishes so that you are able to provide some direction in the event of your incapacity or death. But remember, it is not a legal document and is not binding on anyone. A memorandum of wishes cannot take precedence over your Will but will help to guide your beneficiaries.

Probate

After the death of the testator, the question is often asked by the executors: Is it always necessary to obtain probate? The answer is, no. Generally, if the estate is small and uncomplicated, if there is no dispute as to the validity of the Will and if the members of the family can agree to the division of the property, it is not necessary obtain a grant of probate. This applies if land was held in joint tenancy by the deceased and a surviving joint tenant, and similarly in the case of a joint bank account. However, it may be impossible to deal with other types of property such as real property that is not held in joint tenancy, registered securities and sizeable bank accounts.

The purpose of a grant of probate is to provide the executors with lawful authority to deal with the estate of the deceased. This entails them getting in the assets and administering it, bringing and defending actions on behalf of the estate, paying all lawful expense, taxes, debts and other claims, setting up any trusts directed by the Will and, finally, distributing the balance to those entitled under the Will.

Intestate Succession

A person who dies without leaving a valid Will disposing of his or her estate is said to die intestate. In this situation, each province has a statute which directs who is entitled to the estate of the intestate.

In Ontario, if you pass away leaving a spouse and children, the first $200,000 is given to your spouse if he or she has decided to claim his/her entitlement. The other possibility is to claim half of the net family property. A lawyer can help determine which is the better choice. Anything over $200,000 is shared between the spouse and the descendants (e.g. children, grandchildren) . This can easily lead to conflict.

If there is no Will, no executor is appointed. Therefore, there is no one to look after your estate after your death. In order to deal with the administration of the estate, a court application  is necessary to obtain the authority to carry out the duties that would normally have been conferred on an executor under a Will.

Some people write their own Wills without obtaining legal assistance. It can work but the result may be an invalid Will.

If a person leaves a valid Will but it fails to dispose of the entire estate, whether intentionally, through inadvertence, or because residuary gifts in the Will are void, that person is said to die partially intestate. In those circumstances, the Will governs the distribution of the deceased’s estate to the extent that it is valid and effective and the provincial statute governs the remaining portion of the estate. As previously discussed, a Will may be void because of improper execution, undue influence, lack of capacity, or for other reasons. A testamentary gift may be void because it is made to a person who, or whose spouse, has witnessed the Will, because it offends a rule of public policy, because it is uncertain, because it has lapsed, or for other reasons. Absent a contrary intention in the Will, a failed gift, other than a residuary gift, falls into residue, whereas a residuary gift which fails goes out on an intestacy.

If there is a full or partial intestacy, it’s time to consult your lawyer.

Will Substitutes

Will substitutes are used for a variety of reasons, including: minimization, avoidance of probate fees and attempts to evade obligations to one’s dependents. While some of these objectives may be desirable, Will substitutes do have some disadvantages. They involve a disposition of property which the grantor cannot reverse unless he or she retains a power to that effect. This can cause difficulties later if the grantor’s financial needs change, or if relationships change, such as on a marriage breakdown.

Inter Vivos Gifts (Gifts Made During Your Lifetime)

This is a gift where the donor parts with his or her property while living.

An item of personal property normally must be handed over although constructive delivery is permissible if the object cannot be conveniently delivered itself. An inter vivos gift of land must be made by deed in accordance with applicable statutes.

Gifts Mortis Causa (On Death)

A gift which is effective on death is usually a gift made during a person’s lifetime of personal property. Example: On my decease I hereby gift my nephew, Charles, my 2018 Cadillac ATS. Usually the gift must be delivered to the donee, although in some circumstances constructive delivery is permitted. Such a gift is dependent for its absolute effect upon the death of the donor. Hence, the donor can revoke the gift while living.

Deeds and Inter Vivos Trusts

A person may transfer property to another by deed, or can retain an interest while also giving interests to others. Thus, for example, you may convey real estate to yourself for life, with the remainder to your children. Although the remainder interest takes effect on your death, the deed is not regarded as a Will, since it creates presently vested interests in the children, even though possession is postponed. Once again, the drawback is that if there is a change of mind, it prevents the donor from recalling the property.

Joint Interests

As previously noted, when title to real property is taken by two persons in joint tenancy, the right of survivorship operates on the death of the first of the joint tenants to augment the interest of the survivor. Hence it is possible to avoid having to make a Will because, on death, the entire interest of the deceased in the property passes automatically to the survivor. This form of title is often attractive to spouses. Since the property goes directly to the survivor, it does not form part of the deceased’s estate subject to probate. It is, however, necessary to state expressly in the initial deed of conveyance that the title is taken in joint tenancy, otherwise a tenancy in common is created.

Life Insurance

One of the main advantages of life insurance is that it often permits the estate of the deceased to avoid the claims of creditors. If the testator designates a beneficiary other than his/her estate, the insurance proceeds do not form part of the estate, but pass directly to the beneficiaries of the policy. Hence, the funds do not come into the hands of the estate trustee and are not subject to the claims of creditors. Only if the testator designated his/her estate as the beneficiary, will the proceeds be subject to the claims of creditors. In this eventuality, the insurance proceeds will also increase the size of the estate and, hence, the amount of probate fees that must be paid.

The immunity from creditors that life insurance affords has come under attack – sometimes successfully.

Pensions and Beneficiary Designations

A pension plan is also a type of Will substitute by means of which wealth can be transferred on death. There are a great variety of pension schemes. Many plans are private and are a term of employment. Private pension plans generally provide for vesting and locking-in of pensions benefits after a designated period of employment and attainment of a specified age. A pension normally begins upon retirement. It often takes the form of a life annuity and the annuity may be guaranteed for a specified number of years and made payable to the employee’s estate or other beneficiary as designated by the employee.

In addition to private employment pension schemes, there are also retirement savings plans operated by individuals themselves which, if registered under the Income Tax Act, defer income tax and entitle the owner to designate beneficiaries after his or her death. Finally, there are certain government insurance and pension plans, such as old age security and the Canada Pension Plan, some of which also permit the designation of beneficiaries.

© DioGuardi Law
This article provides only an overview and does not constitute legal advice. You are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained in the context of your particular circumstances.

“testator” is the person who made the Will
[1970] 1 O.R. 184, 8 D.L.R. (3d) 36
Re Davies (1979) 27 OR (2nd) 98

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