Are you looking for a lawyer to help with estates disputes in Ontario? Estates disputes exist in a variety of forms and are often worsened due to the emotional stress of losing a loved one. This article will discuss common estates disputes and how to address them.
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Wills can be challenged and set aside based on the following grounds:
1. Lack of Testamentary Capacity
2. Presence of Undue Influence
3. Presence of Suspicious Circumstances and Lack of Knowledge and Approval
4. Due Execution
5. Fraud and Forgery
Lack of Testamentary Capacity
A person must be of sound mind, memory and understanding to make a valid Will. When a Will is contested on the ground of mental incapacity, the propounder of the Will must prove on a balance of probabilities that the testator understood what she or he was doing.
To have Testamentary Capacity, a testator must be able to:
- comprehend and recollect what property she or he possessed;
- the people that may ordinarily be expected to benefit;
- the extent of what is being given to each beneficiary; and
- the nature of the claims of others who are being excluded.
Interestingly enough, a person may be declared incapable of managing his or her affairs but still have requisite testamentary capacity. And so, to successfully challenge a Will on the grounds of lack of testamentary capacity, substantial and persuasive medical evidence must be obtained. Evidentiary requirements may include contacting witnesses as to fact, such as neighbours and friends, to substantiate the medical evidence of lack of capacity.
In many cases, the services of an expert witness will be engaged to give a “retrospective opinion” on capacity after death. The expert witness will review the medical data compiled from various sources and consider the observations of witnesses. The expert witness will also consider relevant medical records and lawyer’s notes from the date of the instructions for, and execution of, the Will.
The burden for proving undue influence is carried by those who attack the Will on a balance of probabilities. Those attacking the Will must show that the mind of the testator was overcome by the influence exerted by another person to such an extent that there was no voluntary approval of the contents of the Will. In essence, coercion must be proved. Where one person has the ability to dominate the will of another through manipulation, coercion or abuse of power, undue influence may be found.
Presence of Suspicious Circumstances and Lack of Knowledge and Approval
Where there are suspicious circumstances, those who propound a Will have the burden of proving requisite capacity, and that on a balance of probabilities, the testator knew and approved of the contents of the Will.
Suspicious circumstances may be raised by:
- surrounding the preparation of the Will;
- tending to call into question the capacity of the testator; or
- tending to show that the free will of the testator was overcome by acts of coercion or fraud.
Due Execution And Estates Disputes in Ontario
The Succession Law Reform Act sets out the legal requirements and formalities regarding testamentary documents. Note the onus of proof regarding Due Execution is upon the propounder of the Will.
In general terms, the Succession Law Reform Act stipulates that
- a Will must be in writing;
- after it has been completed, a Will must be signed at its end by the testator;
- a testator must sign the Will or acknowledge a signature in the presence of at least two witnesses who are present at the same time; and
- the witnesses must also sign the Will in the presence of the testator.
There is a distinction between a regular Will and a “Holograph Will”. A Holograph Will is wholly in the testator’s handwriting, is signed, and does not require the presence or signature of a witness.
Fraud and Forgery | Estates Disputes in Ontario
The burden for proving fraud is carried by those who attack the Will. Obtaining the evidence of the two witnesses to the Will often dispels allegations of fraud. However, the propounder of the Will must prove on a balance of probabilities that the signature on the Will is the signature of the testator. Some allegations warrant engaging a handwriting expert. Before making an allegation of fraud or forgery, the challenger must ensure that there is substantive evidence to support the allegations. The failure to substantiate these claims could lead to unfavourable cost consequences.
Family Law Claims
A dependant support claim is a claim made against the estate of a deceased person by a dependant who meets the necessary definition and the test under the Succession Law Reform Act. A dependant is defined as a spouse, parent, child, brother or sister of a deceased who, immediately before the death the deceased, was receiving, or had a legal obligation prompting the issuance of, support. There are no age restrictions on children who are eligible to apply for support from the estate of a parent.
The Success Law Reform Act defines “spouse” to include two people who are married to each other or two people who have cohabitated continuously for not less than three years or cohabitated in a relationship of some permanence if they are the natural or adoptive parents of a child. Given this expanded definition of spouse, a person can die with multiple spouses, all of whom are potential dependants.
In analyzing whether the deceased has made adequate provision for the proper support of his or her dependents, a Court must evaluate what has been given under the terms of the Will, or intestacy, and then determine what is adequate support. The determination of what constitutes adequate support is a factual inquiry based upon the circumstances of each individual case.
Order For Payment of support
The Order for payment of support can be from income or capital of the estate or both. A claim for support can be satisfied by non-traditional assets such as life insurance or a group policy of insurance.
The Succession Law Reform Act provides for the freezing of the distribution of estate assets until the determination of the dependent’s support claim. An application for dependant’s support must be made within six months from the issuance of the Certificate of Appointment of an Estate Trustee. However, notwithstanding the six month limitation period, the Court, at its discretion, may allow an Application to be made at any time with respect to any portion of the estate that remains undistributed at the date of the application. Accordingly, an application may be made beyond the six month period if estate assets still exist, and with leave.
Equalization Payment Claims
A surviving spouse who is not satisfied with the provisions made under a Will may rely upon the statutory provisions under the Family Law Act and make a claim against an estate for an equalization payment from the estate. A surviving spouse can therefore elect to either receive what was left under the Will or on intestacy or receive an equalization payment.
The equalization payment made pursuant to the Family Law Act is one half of the difference in the value of the net family properties of the deceased spouse and the surviving spouse. The equalization payment is calculated in the following manner:
1. Determine the value of each spouse’s property the day before death, subtracting all debts from the total assets;
2. Determine the value of all assets that each spouse brought into the marriage;
3. For each spouse, subtract the date of marriage assets from the day before death assets, this amount is each spouse’s net family property;
4. Subtract the lower net family property amount from the higher one and divide the difference in half, this is the amount of the equalization payment that the spouse with the higher net family property must pay the other spouse.
Once the election is made to receive the entitlement under the Family Law Act, the gifts to the spouse in the deceased spouse’s will are revoked. The Will is then interpreted as if the surviving spouse had died before the other. A spouse may make an election under the Family Law Act and simultaneously commence a dependant’s support claim under the Succession Law Reform Act.
Joint Ownership of Assets
Where assets such as real estate and bank accounts of the deceased were held jointly, they are treated differently based on the relationship of the joint owner to the deceased. If the deceased’s spouse is the joint owner, the assets will transfer to the spouse by right of survivorship. This type of transfer is very difficult to challenge due to the presumption that spouses wish to share assets and support each other.
On the other hand, if the deceased held assets jointly with an adult independent child, the law presumes that the child holds the property in a resulting trust for the parent. This is because it is becoming increasingly more common for ageing parents to transfer their assets into joint accounts with their adult children in order to have that child assist them in managing their financial affairs or to minimize estate administration tax.
Therefore, the burden of rebutting the presumption of resulting trust is on the adult child. Where such a transfer of property is challenged, the transferee is in the best position to bring evidence about the circumstances of the transfer and to prove whether it was intended as a gift.
Objecting to an Estate Trustee | Estates Disputes in Ontario
The estate trustee’s role is to apply for probate (if required), gather the assets of the estate, pay the debts of the deceased, maintain the accounts of the estate and distribute the assets of the estate. If the estate trustee is not fulfilling their duties and is not acting in the best interest of the estate, anyone with a financial interest in the estate can apply to the court to have the estate trustee removed. Some reasons for the removal of an estate trustee include:
- An estate trustee is putting their interests ahead of the estate;
- They are making a profit from their position (beyond compensation for acting as trustee);
- The estate trustee is mismanaging estate assets; and
- The estate trustee is engaging in misconduct that endangers the estate.
Get help from a lawyer if you have estates disputes in Ontario.
The court will not lightly interfere with the deceased’s choice of an estate trustee, however, the court’s principal consideration is the welfare of the beneficiaries. There must be clear evidence of the necessity for removal of the estate trustee; the estate trustee’s acts or omissions must be of such a nature as to endanger the administration of the estate.
Objecting to Estate Trustee Compensation
An estate trustee is entitled to reasonable compensation for services rendered in administering the estate, however, the quantum of compensation can be a contentious issue.
The Trustee Act states the following…
The personal representative is entitled to such fair and reasonable allowance for the care. Also compensation for pains and trouble. Further, for the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice.” However, in Ontario, there is no method of calculating estate trustee compensation. You won’t find it set out in any statute.
The case law sets out two approaches that should be applied together. First, “tariff guidelines” based on a percentage of the estate, provide the baseline for estate trustee compensation.
The tariff guidelines are:
i. 2.5% of the value of capital receipts, capital disbursements, revenue receipts, and revenue disbursements; and
ii. if the estate is not immediately distributable, an annual care and management fee of 2/5 of 1% of the average annual value of the gross assets.
Is It Fair And Reasonable?
Second, in determining whether the amount calculated under the tariff guidelines is “fair and reasonable”, the court will consider the following five factors:
i. the size of the trust;
ii. the care and responsibility involved;
iii. the time occupied in performing the duties;
iv. the skill and ability shown; and
v. the success resulting from the administration.
The estate trustee should consider both approaches in proposing his or her compensation to the beneficiaries to avoid or minimize potential disputes.
Estates Disputes in Ontario | Unjust Enrichment
In certain circumstances, a court may determine that even though the property was held solely by the deceased, another party has an interest in that property by virtue of his or her contributions to it, this is called unjust enrichment. For example, where a party contributes to the growth or development of the family business without owning an interest in it. In other words, unjust enrichment occurs when the deceased has a disproportionate share of jointly-earned assets.
To establish unjust enrichment, there must be:
1. Enrichment of the deceased due to another party;
2. Corresponding deprivation of the other party; and
3. No juristic/legal reason for the enrichment (such as a contract, gift, or statutory obligation).
Where unjust enrichment is found there are two potential remedies. Monetary compensation or a constructive trust.
Monetary compensation, or damages, is generally appropriate where the other party has a relatively small entitlement to the property. A constructive trust, meaning an equitable right to a share in the property, is only appropriate where monetary compensation is inadequate. Also, there is a substantial connection between the services rendered by the other party and the property.
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Methods of Resolving Estates Disputes
There are three options available for resolving estate disputes in court:
If parties wish to resolve disputes outside of court, mediation is a very useful tool.
Passing of Accounts
The estate trustee has a duty to keep excellent records of all assets. Also, income and expenses of the estate for the entire period that they are acting as estate trustee. These records must be available when it comes time to account to the beneficiaries. Beneficiaries are entitled to receipt of all financial matters pertaining to the estate.
The passing of accounts refers to the formal process of obtaining the court’s approval of the estate accounts. Generally, estate trustees can simply provide an informal accounting to the beneficiaries. Therefore, the passing of accounts is not necessary. However, where all beneficiaries cannot or will not consent to the estate trustee’s accounts, then there must be a formal passing of accounts.
If any of the beneficiaries is a minor or under disability, then they are unable to waive the requirement for a formal passing of accounts.
A beneficiary can force the passing of accounts by obtaining a court order. Accounts are usually passed at the end of the administration of the estate.
The estate trustee must prepare their accounts in Court format. Further, they must then file them with the Court. Once the accounts have been filed, the beneficiaries can deliver specific objections. The estate trustee may respond to the objections. This may result in some or all objections being resolved or withdrawn. Finally, the judge will consider any remaining objections. They will also review the accounts and order which elements of the accounts to allow, disallow or modify.
Estates Disputes in Ontario Applications
Estate litigation is often carried out by way Application. An Application leads to a hearing instead of trial and is used for less complex matters than actions. Applications are particularly useful where the parties are seeking to obtain directions from the Court regarding a specific issue such as the correct interpretation of a clause in a Will.
Applications are appropriate when the dispute involves issues that can be resolved based on written documents and there are no credibility issues. In an Application, each party puts its evidence before the Court by way of sworn affidavits. Proceedings by Application tend to be a less expensive and faster than actions.
An Action is the legal proceeding that leads to a trial. Actions are used when facts and credibility are at issue. Many challenges to wills, particularly those raised on the grounds of ‘undue influence’, must be brought by way of an Action.
In an Action, there is full documentary disclosure and oral discovery. The process is very lengthy and expensive.
Mediation is a non-binding alternative dispute resolution technique. The parties use a neutral third-party facilitator to try to reach a negotiated agreement. In mediation, a decision is not imposed on the parties by the mediator. Instead, the mediator helps the parties negotiate a resolution. The mediation is confidential and privileged so nothing discussed during mediation can be used at trial. If mediation is successful, the outcome is a settlement agreement.
Mediation can be conducted at almost any time, including and often especially once litigation is contemplated.
There can be many advantages. It is significantly less expensive than litigation. It allows the parties to maintain an ongoing relationship. Also, it is less positional and more interest based than litigation. Mediation is mandatory in Toronto and Ottawa.
If a beneficiary of an estate has concerns about the validity of the Will, the estate trustee, or any other matter listed above, they should retain a lawyer to explore their options for resolving the issue. If you need help with estates disputes in Ontario, reach out to us.