Common Estate Trust Issues
Estate litigation is an emotionally charged area of law. While family disputes over inheritance are nothing new, we are seeing more of these types of claims. Below is a brief overview of the common sources of estate and trust disputes.
1) Blended families and dependent relief claims
The amount of beneficiaries’ inheritance is often the subject of disputes. In a typical example, the deceased leaves a will in which a beneficiary(s) feels that they have not received enough of an inheritance or they may have been excluded completely. Blended families can find themselves in the middle of an estate dispute if children from a previous marriage of the testator have been excluded or feel they have received less than the testator’s new spouse and/or children. Documenting reasons for the differences in amounts is important when arguing the will should be upheld.
Similarly, common-law spouses may be under the assumption that they have the same rights as legal spouses, which is not the case in Ontario. Therefore, if proper estate planning is not undertaken by the testator/deceased to ensure their common-law partner is provided for, that spouse may have no other alternative but to make claims against the estate for dependent relief. The risk of such claims is much higher if a deceased did not leave a will so it is very important for individuals with blended family situations to have a proper estate plan in place.
2) Estate Trustee conduct
Another source of disputes is the conduct or the perceived conduct of an estate trustee. If an estate trustee is not being forthcoming with information about the estate or is difficult to communicate with, the beneficiaries can feel that the estate trustee is being evasive which in turn fuels suspicion that they are hiding something. While an estate trustee is not required to advise of every single step they are taking with respect to the administration of the estate, there are important steps where it is especially important to notify beneficiaries, for example when the estate trustee is applying for probate, and it is wise to generally keep beneficiaries informed as to the status of the administration of the estate. If beneficiaries feel that the estate trustee is being dishonest or hiding something and they are having trouble communicating, it is highly likely that they may retain a lawyer to start court proceedings to remove the estate trustee.
In order to mitigate the risk of removal as estate trustee, it is best that an estate trustee consult with lawyers specialized in this area of estates and trusts law about communicating with beneficiaries and generally their rights and obligations concerning the administration of the estate.
3) Power of Attorney Challenges
As people are living longer, we are starting to see an increase in challenges to powers of attorney. Typically, questions are raised as to whether powers of attorney may have been procured by undue influence or that an individual lacked the capacity to sign such powerful documents, which in turn has led to alleged abuse of an elderly individual’s finances or improper decisions with respect to personal care have been potentially been made.
4) Accounting and Trustee compensation and expenses
Disputes regarding compensation and the expenses the estate trustee is entitled to recover from the estate can be another source of contention with the beneficiaries.
Problems may arise if an estate trustee has pre-taken compensation prior to completion of the administration of the estate, especially if they were not authorized to do so under the will or without consent of the beneficiaries.
Problems also arise if an estate trustee has not properly accounted for their dealings and provided a breakdown of receipts and payments of the estate, which would assist with the proper calculation of compensation.
5)Joint accounts/property and beneficiary designations
Another source of estate disputes is where joint accounts are held by an aging parent and adult child. The case law is well established, specifically in the leading case of Pecore v Pecore, which has created the presumption that an account is held this way not with the intention that the adult child is the beneficial owner of the account but is a legal/registered owner simply to assist the elderly parent with the day-to-day management. The beneficial owner is solely the elderly parent and upon the death of that parent, that asset will then form part of the estate. This is what we call a resulting trust.
Recently, the court has taken the approach in Pecore and applied the presumption of the resulting trust to accounts with beneficiary designations such as a RRIF (Calmusky v Calmusky). It remains to be seen as to whether this decision will be challenged, however it highlights the need to have a clear documented instrument or declaration from the parent who owns the account as to their intentions in order to avoid disputes.
For further questions on the information in this article or questions on how we can help you navigate your estate planning needs, please contact any member of our Business and Estate Succession group.
This article is provided for general information purposes and should not be considered a legal opinion. Clients are advised to obtain legal advice based on their specific situations.