Category: PASSING OF ACCOUNTS

Beneficiaries Question Accounting Of Estate

Being named the executor or trustee of an estate is a huge responsibility requiring decisions that affect the beneficiaries of the estate. While executors and trustees might look to wrap up their responsibilities as quickly and efficiently as possible, there are many reasons why they may be faced with delays or even challenges from beneficiaries or those who were left out of a will. In a 2019 decision by the Ontario Superior Court of Justice, referred to in a 2024 decision, a trustee was faced with a motion requesting her to produce accounting records dating back years prior to her appointment as trustee.

The Estate Plan

The husband and wife (both now deceased) were married on New Year’s Eve 1984. It was not the first marriage for either party. The wife had three adult children of her own while the husband had four adult children. While the husband and wife maintained a close relationship with her children, they were not in contact with his children during their marriage.

The couple executed Powers of Attorney in 2006. They named each other as Attorney’s for Property and Care, with each naming the wife’s daughter (“LH”) as their alternate Attorney. The husband’s Power of Attorney allowed the wife to make gifts of his personal property to relatives so long as the estate maintained sufficient funds to properly care for him if be became incapable of doing so himself. Additionally, his will stated that if the wife survived him, she would be given the entire residue of his estate, subject to any debts. Should she predecease him, the estate would go to his children.

The Stroke

The husband suffered a stroke in October 2006. The stroke left the husband in need of assisted living, and he moved into a long term care facility The wife was thus called to exercise her duty as Power of Attorney. The wife arranged for his care, and in 2011 she transferred the marital home that had been held jointly with the husband to her name alone.

Questions of Accounting Arise

The wife died before the husband, passing away suddenly in July 2016. Her daughter, LH, acted as her Estate Trustee and became the husband’s Attorney for Property. The wife’s assets were distributed to her children. Including the value of the home, the assets were worth $1,063,674.

The husband passed away not long after, in November 2017. Following his death, his children (including the plaintiff, “TM”) received an initial estate accounting. They learned the assets in the father’s estate were worth only $35,963.21.

TM responded to this unexpected news by bringing a motion requesting a Passing of Accounts relating to the handling of the couple’s accounts while the wife had been acting as Attorney for Property. The wife had been expected to maintain records relating to her spending, but she did not do so. TM’s arguments included the following points,

1. At the time of the (the wife’s) passing, (the husband) reportedly had assets of $9,965.74, whereas (the wife) had assets of $1,063,674.00.
2. After (the husband’s) stroke, (the wife), as Attorney for Property, took the husband’s name off the title to their matrimonial home.
3. While (the wife) acted as (the husband’s) Attorney for Property, (his) bank account appreciated at a rate in excess of $3,000 per month. Thus, presumably, during the almost ten years (the wife) acted as (the husband’s) Attorney for Property, his savings would have been in excess of $360,000 if managed in the same way.
4. (The husband) was also believed to have a hobby farm with more than 100 acres of land.

Meanwhile LH’s position was that it was unfair to expect her to be able to provide accounting records for the time during which her mother acted as Attorney for Property.

The Court’s Analysis

The court first turned to the Province’s Substitute Decisions Act, which governs the conduct of an Attorney for Property. The court states, “An attorney is a fiduciary whose powers and duties must be exercised and performed diligently, with honesty and integrity and in good faith, for the incapable person’s benefit.” The court stated that a failure to retain receipts of cash withdrawals or expenses has failed to carry out these duties. While there is no limitation period for someone such as TM to request these, the court stated that requiring a passing of accounts at this stage would result in “a clear injustice as between the parties,” explaining that LH is not in a position to fulfill her mother’s obligations, nor would it be fair to make LH liable for mistakes made by her mother. LH had already been ordered to produce any information available, but the court would not extend any further obligations despite being sympathetic to the son’s position.

Call Derfel Estate Law for Advice on Your Estate Matter

If you are the friend or family member of a testator and are concerned about the appointed trustee or executor, contact Derfel Estate Law. Our Toronto estates lawyers help clients ensure that their interests or the interests of their loved ones are protected, and decisions are being made in the best interests of the estate. Call us at 416-847-3580 or contact us online to schedule a consultation.

One of the unfortunate realities of estate planning is that no matter how carefully one plans for their eventual death and what will happen to their property, there is always the possibility that family or even friends will feel that someone else has taken advantage of the deceased, or that they were not provided for as expected in an estate plan. Valuable family property, such as cottages passed down from one generation to another, are sometimes at the heart of such disputes and can lead to costly litigation, as we see in a recent decision from the Ontario Superior Court of Justice.

Testator deals with most property before death

The deceased in this case (the “testator”) had four children. One of them, including the applicant, “BM.” The testator had appointed her son-in-law, “THT” as estate trustee. The issue arose from BM’s request of a full accounting of the testator’s bank records, medical records, distribution of property, and more. THT says that none of that is necessary.

The testator appointed THT as the sole executor of her estate when she created her will in 2004. At the time of her death, there was no need for probate because there were no real property assets within the estate. The testator had lived on her own before her death, and she disposed of her cottage, which was given to two of her children, as well as her house, which she sold. THT said that probate was not necessary since both the home and the cottage were sold well before the death of the testator and that her TFSA had a named beneficiary, which meant it fell outside of the estate. Despite this, BM claimed there may have been issues of undue influence and capacity.

What details did the executor provide?

THT provided a “fulsome accounting” of the testator’s assets, using a proper court format, in lieu of a formal passing of accounts. He said he had attempted a passing of accounts, but was advised that a Certificate of Appointment would be required for this, which was not necessary because of the size of the estate and the costs that the process would incur. THT also told BM that the TFSA had a named beneficiary, but did not advise her that all of the estate assets were held jointly with surviving individuals. THT said there was no obligation to notify BM about the TFSA, and he did so by accident. However, BM refused to accept that the TFSA was not a part of the estate.

The court noted it is “beyond dispute” that an executor has an obligation to fully and fairly report the assets of an estate to its beneficiaries. In this case, the court found THT provided a detailed accounting of the assets of the estate and that there was no formal obligation to submit the estate to Probate, stating,

“I find that as at the date of this Application, the Respondent has administered and accounted for the Estate in a full and complete manner, while bearing in mind the following: evidence of the Testator’s ongoing capacity throughout all times relevant to this Application; the lack of joint property being held by the Testator as at the date of her death, therefore leading to a presumption of a resulting trust; the fact that the disposition of the cottage was not purely gratuitous; the fact that the TFSA passed directly outside of the Estate via the named beneficiaries thereof; and given the length of time between the disposition of the cottage property and the date of death.”

At Derfel Estate Law our Toronto estates lawyers work tirelessly to achieve the best possible resolution to your will, estate, or trust matter. Call us at 416-847-3580 or contact us online to schedule a consultation.

For many people who have lost a loved one and perhaps been named executor of the estate, the process of working through the details of distributing the deceased’s assets can be daunting. For those who expect to benefit from the estate of the deceased, there can sometimes be long waits as the passing of accounts works its way through the checks and balances imposed by the legal system. Unfortunately, people can sometimes find themselves expecting to benefit from a loved one’s estate, only to discover that they are left with nothing. In a story recently reported by the CBC, a Newfoundland and Labrador man found out that he won’t be able to benefit from his deceased partner’s pension.

Same-sex couple of 33 years

The man at the centre of the story is Ken Haire. He was in a long-term common-law relationship with his partner, Gerry Schwarz, for over 33 years until Schwarz’s death. Schwarz had worked for the rail company CN for more than 30 years. He retired in 1991 and the couple moved to Newfoundland so they could be close to Haire’s family.

The couple built a happy life in their new home, with a home on the water and a number of dogs. Haire told the CBC that they assumed Schwarz’s pension would be granted to Haire in the event that Schwarz pre-deceased him. However, when Schwarz died in 2012 due to heart failure, Haire was given bad news.

Partner’s employer did not recognize same-sex relationships

Haire told the CBC that he reached out to CN following Schwarz’s death. After doing so, he was told that while the company was sorry for his loss, their pension and benefits department told him that at the time of Schwarz’s death, the pension’s rules stated that a partner in a common-law relationship had to be a “person of the opposite sex” in order for benefits to be passed along after death.

CN has since updated this rule, but it was not applied retroactively, meaning Schwarz and others in a similar situation may be out of luck.

The company told CBC that it is now considering revisiting some of its policies, but has not stated whether any potential changes will impact people like Schwarz who have already been put at a disadvantage.

Partner plans to fight pension in court

Haire had to take drastic measures when he found out he would be without the income he had been relying on. He told the CBC that he had to sell the home he had Schwarz had lived in as well as giving away their five dogs who he could not take to the apartment he now lives in.

However, this has not stopped Haire from pursuing the pension he believes should be given to him. He has hired a lawyer and plans to challenge CN’s policy in court. The Supreme Court of Canada has already ruled on similar situations involving the Canada Pension Plan, in which it held that benefits from pension plans can be made available to same-sex partners retroactive to 1985 when the Canadian Charter of Rights and Freedoms was established.

We will be sure to keep our readers updated as the case progresses through the courts.

Contact Derfel Estate Law to speak with an estates lawyer who will guide you through the process of passing of accounts, ensure that your rights and interests are protected, and work with you to achieve the best possible resolution. Call us at 416-847-3580 or contact us online to schedule a consultation.

While being the beneficiary of someone’s will might feel like a windfall to some, the associated taxes that may come with it can feel like a burden, especially if they are a result of the deceased’s unpaid taxes. What might further frustrate things is if the tax bill arrives years after the money was distributed, as was the case in a recent decision heard by the Tax Court of Canada.

Four years go by

The two appellants in the decision were the daughters of the deceased. He died on June 8, 2011 and was the annuitant of a life income fund (“the income fund”) He had designated the daughters as the beneficiaries of the income fund prior to his death.

When the father died, each of the daughters was transferred $96,640.96 later that summer. They provided no consideration in respect of the transfer.

Four years went by, and on July 3, 2015, the Canada Revenue Agency assessed each of the daughters $96,640.96 on the basis that their father had an outstanding tax liability of not less than the amount of money they received.

The law

The CRA was relying on Section 160 of the Income Tax Act which states that when someone transfers property to a person with whom they are not dealing with at arm’s length, the person who benefits from the transfer may be liable for any taxes owed by the person making the transfer. The idea behind that section of the Act is to prevent people from transferring property in order to avoid paying taxes.

The daughters argued that they were dealing with each other at arm’s length at the time of the transfer. They argued,

“The Appellants’ position is that at the time of the transfer (the father) was now dead, did not exist, and therefore he was not a related person within the meaning of Subsection 251(6), and he therefore was not in a blood relationship with them and therefore was at arm’s length at all times, to the extent that he can of course again even be said to exist.”

The CRA’s position was that even if the father was dead at the time of the transfer, the appellants are his daughters and that their relationship is not one governed by a contract, and the relationship could not be taken away.

The court’s decision

Despite the daughters’ position that their relationship with their father was terminated when he died, the court determined that even though the father had died before the transfer, he was still their father. The court said, “It does not matter that the transfer began before his death, crystallized on his death and was completed after his death. It was a transfer between persons connected by a blood relationship.”

Contact Derfel Estate Law to speak with an estates lawyer who will guide you through the process of passing of accounts, ensure that your rights and interests are protected, and work with you to achieve the best possible resolution. Call us at 416-847-3580 or contact us online to schedule a consultation.

As we have seen with many of the cases we cover in our blogs, the best-laid plans of someone preparing their estate can sometimes be derailed, for any number of reasons, by people who have (or think they should have) an interest in the estate. One situation we occasionally run into is when a beneficiary of an estate does not approve of the way a trustee is handling the money of the estate. One way to address this is through what is known as the passing of accounts, which allows for the courts and all parties to have a look at the books and make sure the estate’s finances are being properly administered. In a recent decision from the Ontario Court of Appeal, four siblings sought a passing of accounts from their two other siblings, who had been named as trustees for their parents’ estate.

Events leading up to the dispute

The parents appointed two of their six children (“the respondents”) as attorneys for their property. The other four children (“the appellants”) challenged their appointment, but their application was denied shortly before the parents passed away.

The initial application was made under ss. 42(1) and (4) of the Substitute Decisions Act, which states, “[t]he court may, on application, order that all or a specified part of the accounts of an attorney or guardian of property be passed.” While the act further states that any person may make an application, it doesn’t necessarily follow that any person will be granted leave following the application.

In granting leave, the court must be convinced of the following:

(1) the person or persons seeking leave have a genuine interest in the grantor’s welfare; and,

(2) a court hearing the application under s. 42(1) may order the attorney or guardian to pass his or her accounts.

This second step has evolved to mean that a court may consider a number of factors before approving the application, including whether the applicant has “raised a significant concern in respect of the management of the grantor’s affairs to warrant an accounting.”

On appeal

The respondents admitted that the first step of the test has been established. The appellants clearly had a genuine interest in their parents’ welfare. Remember, the parents had not died at the time the application was made.  

The appellants disagreed with the application judge’s finding that there was a lack of evidence relating to misfeasance or wrongdoing, and as a result, erred in exercising his discretion. They also argued that the application judge failed to properly consider whether the mother had capacity when she made the appointments.

After looking at the history of the family, the court saw no error in the application judge’s finding, writing,

 “The uncontested evidence was that (the father) remained capable of managing his and his wife’s intertwined affairs. He continued to receive all bank statements until he and his wife moved into a long-term care facility in October 2016. The respondents helped their father manage his and their mother’s finances, such as paying his bills for him, but kept him apprised of all actions taken on their behalf. Before the appellants commenced their application, the respondents responded to their request to provide copies of documentation and continued to provide documentation in the course of the application. In his reasons, the application judge repeated – and, in our view, reasonably accepted – the respondents’ counsel’s characterization of the respondents as acting either at their father’s request, or with his knowledge and consent.

“Moreover, (the father), who was represented by counsel and participated fully in the application, gave evidence that he had no concerns with the respondents’ involvement in the management of his and his wife’s affairs and wanted the litigation to come to an end.”

The court also added that the value of the estate’s investments rose after the appointments were made.

As a result, the appeal was dismissed and costs of $13,500 were imposed on the appellants.

Contact Derfel Estate Law to speak with an estate lawyer who will guide you through the process of passing of accounts, ensure that your rights and interests are protected, and work with you to achieve the best possible resolution. Call us at 416-847-3580 or contact us online to schedule a consultation.