My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned.

Wednesday, October 12, 2011

The Top Five Areas of Estate Litigation

I have written several blogs on wills, estates and executors; some from a tax planning perspective and others  from a purely philosophical or observational perspective. I find this topic area fascinating. Thus, I am pleased today to have a guest blog by Charles Ticker, a lawyer who specializes in estates. Charles will discuss the ugly underbelly of estates, the litigation that can arise.

The Top Five Areas of Estate Litigation


The writer Ambrose Bierce once quipped: “Death is not the end, there remains the litigation over the estate”. As a lawyer who deals with estate disputes, I can certainly confirm Bierce’s observation. Today I will discuss the top five areas where litigation tends to occur.

Challenging the Will


Wills can be challenged if the testator ( person who made the will) lacked the requisite capacity. The legal test for capacity to make a will was set out in the 1870 English case of Banks v Goodfellow :

It is essential to the exercise of such a power that a testator shall understand the nature of the act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties — that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not been made.

Anytime an elderly person changes his or her will in a significant fashion or decides to leave a child out of the will, the likelihood of a will challenge greatly increases. To defend the will against any possible claim, it is well worth spending the money to obtain the written opinion of a capacity assessor prior to the making of the will as to whether the individual had capacity. As well, it is helpful if the will is prepared by a lawyer as opposed to a self –help will kit. Medical records and lawyer’s records can be reviewed and may shed some light on the testator’s mental condition.

Another ground for challenging the will is undue influence. If Mom was coerced by daughter Sally to cut brother Bob out of the will, then the will may be set aside. However, it is difficult to prove undue influence.

Family Law Act Applications


In Ontario, if a married spouse dies without making adequate provision for his or her spouse, the surviving spouse can within 6 months of the date of death make an election either to take the gifts under the will or apply to the Court for an equalization payment similar to a divorce situation. Sometimes the surviving married spouse needs more time to make a decision whether or not to seek an equalization payment because the spouse does not have sufficient information or documentation concerning the deceased’s assets. In those situations, the surviving spouse can apply to the Court for an extension of time within which to file the election. Legal advice should be sought as soon as possible after the spouse’s death.

Dependant’s Support Relief Applications


In Ontario and most jurisdictions, there is an expectation that the deceased make adequate provision for the support of dependants. The definition of dependant varies from jurisdiction to jurisdiction, but in Ontario dependants can include minor and adult children , grandchildren, parents, siblings, married spouses, common law spouses and same sex partners. The dependant in Ontario needs to prove not only financial need but also that the deceased was under a legal obligation to pay support or was paying support just prior to the time of death. Once gain, there are time limits within which to launch a claim ( six months from the grant of letters probate of the will or of letters of administration) and legal advice should be sought as soon as possible. The Court, if it considers proper, may allow a claim that is filed later if there are still assets in the estate that have not been distributed.

Claims based on constructive trust and unjust enrichment


If a person has contributed money or labour or has provided value to the deceased which benefited the deceased and contributed to the acquisition, maintenance or improvement of an asset, a claim based on the doctrine of constructive trust can be brought against the estate. The Court may award the claimant an interest in the asset if there is a connection between the asset and the contribution made or may make a monetary award of compensation. Constructive trust cases are not easy to prove. There is often no real agreement that the claimant will receive compensation. Therefore, the claimant must show that the deceased received a benefit and was unjustly enriched at the expense or detriment of the claimant and that there was no legal reason for the benefit and related deprivation, that is the person contributing the money or services was not making the contribution as a gift or did not receive some other benefit from the deceased. Constructive trust claims are often seen in the context of a common law spousal relationships because at present in Ontario common law spouses do not have the same property rights on death as do married spouses.

Claims against executors


Executors have a difficult job. They are trustees and fiduciaries owing the highest duty of care to the beneficiaries. They are responsible to manage the estate in accordance with the provisions of the will and keep detailed records. If trusts are involved, they must prudently invest the estate. Executors can be called upon to account for their actions and in particular any compensation they propose to take. Even if the will allows the executors to pre-take compensation they will still be required to account to the beneficiaries. If the beneficiaries do not approve of the accounting, the executor must have his accounts passed by the Court. Sometimes, the Court will remove an executor if the Court is satisfied that the executor is not carrying out his duties competently or honestly. Executors also face potential personal liability from creditors of the estate if the executor distributes the estate and neglects to pay the deceased’s creditors. To avoid this problem, executors should advertise for creditors.

Charles Ticker, is an estates lawyer based in Toronto, Canada who focuses on estate litigation and mediation of estate disputes. More information about him can be found at http://www.tickerlaw.com/. The information in this blog is not intended to be legal advice. Readers should consult their own lawyer, attorney or other professional for advice.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

2 comments:

  1. Mark, can you answer or ask Charles if a capacity assessor is engaged, does that pretty much bullet-proof any challenge to the elderly persons will?

    ReplyDelete
  2. T.H.

    This is Charles response:

    There is no way to fully bullet proof a will against a will challenge. However, having a strong capacity assessment report in the file will certainly be very helpful in defending the will against a challenge. It is important to retain a professional who is qualified and experienced to carry out the assessment.

    Because a capacity assessment is an opinion, there will always be the possibility of another professional who ,upon reviewing another expert's report and supporting documentation and medical records, will come to a different opinion. Conflicting expert evidence in our Court system is not unusual. Having said that, someone who is thinking of launching a will challenge will need to tread with caution in the face of a report that concludes the testator had capacity.

    ReplyDelete