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This article is intended to offer general comments on legal developments of concern to individuals, business and legal professionals and is not intended to provide legal opinions. Readers should seek legal advice on the particular issues that concern them. © All Rights Reserved 2010.

What is Undue Influence?

Toronto Wills Fight Lawyer

A common ground for contesting a last will and testament arises where a family member of the deceased feels that the deceased was coerced or manipulated into signing a last will and testament that they did not agree with or did not understand.  This ground for a will challenge is known as “undue influence”.   The issue of undue influence is closely related to the issue of mental capacity, as it will often be necessary that the testator’s mental capacity was diminished at the time the last will and testament was signed, thereby making him or her susceptible to the influence of others.  The person challenging the last will and testament must be able to demonstrate that there were suspicious circumstances surrounding the preparation of the last will and testament, and that undue influence actually occurred.

In this type of case, the challenger to the last will and testament alleges that the last will and testament does not really represent the true wishes of the deceased, but that the deceased was coerced into it, or unduly influenced by someone into writing the last will and testament.

When Does Undue Influence Arise?

Dependency

Undue influence arises where the deceased was heavily dependent on one family member, such as a child who is living with their parent and providing care for that parent prior to his or her death.  If the parent leaves all of their estate to that child, the other children may suspect that their sibling had pressured or coerced their parent into excluding them from the last will and testament.

Stranger to Family

Undue Influence commonly arises where the deceased leaves their estate to someone whom they have known for a relatively short period of time, such as a boyfriend/girlfriend or even an attendant nurse.  The family members who could reasonably be expected to have benefited from the estate will undoubtedly be concerned that some undue influence was exerted by this “stranger” leading to a last will and testament which does not really reflect the true desire of the deceased.

Changes to a Last Will and Testament

Undue Influence can also arise where the deceased has made a change in their last will and testament which is a significant change from their previous last will and testament.  If an initial last will and testament names all of the testator’s children as beneficiaries, and a subsequent Will which is prepared after the testator has remarried deletes one of the children, there may be cause to suspect that there is undue influence being exerted on the testator.  These cases are very fact specific, and the ability to make out a case of undue influence will depend on the particular facts in question.

How Can I Prove Undue Influence?

In the case of Re: Willis Estate, 2009 CarswellNS 426, the Court commented on the issues of testamentary capacity, suspicious circumstances and undue influence.  The Court referred to the case of Vout v. Hay, 1995 CanLII 105 (S.C.C.), which is the leading case on the validity of last wills and testaments.   In these cases the Court established that once the formal requirements of due execution are established (i.e. the last will and testament was properly signed and witnessed) there is an automatic presumption that the testator knew and approved of the contents and had the necessary testamentary capacity.  In Vout the Supreme Court of Canada ruled that:

Where suspicious circumstances are present, then the presumption is spent and the propounder of the will reassumes the legal burden of proving knowledge and approval. In addition, if the suspicious circumstances relate to mental capacity, the propounder of the will reassumes the legal burden of establishing testamentary capacity.

In other words, when there are suspicious circumstances surrounding the making of a last will and testament, it will be up to the person trying to uphold the last will and testament to prove that the testator understood what he or she was signing and approved of the contents of the last will and testament.  Under such circumstances, the Court will not automatically presume that the testator had knowledge of gave approval to the contents of the last will and testament.

The decision in Vout also established that to prove undue influence it is not sufficient to show only that the beneficiary had the power to coerce the testator, but it must be demonstrated that the overbearing power was exercised and that because of its exercise the last will and testament was made.

The case of Bale vs. Bale highlights some of the issues that commonly arise in an undue influence case.  This was a case which dealt with undue influence with respect to a gift, as opposed to a last will and testament.  In that case, a mother left her estate to her three sons equally.  Prior to her death she gave her farm to the one son who was taking care of her in her old age.  The other two sons had very little part in their mother’s life.  Upon his mother’s death, the one son brought a court application to get a court declaration that the gift of the farm was valid.  The other two sons brought their own court application to say that the gift was invalid and was a result of undue influence.  The Court noted that the mother was old (93 years old) and vulnerable at the time she gave the farm to her son, and went on to consider whether the gift was made under undue influence.

In Bale the Court did find a relationship of dependency and placed the burden on the one son to rebut the presumption that he had unduly influenced his mother to give him the farm.  In the end, the Court disallowed the gift, finding that the one son had exerted undue influence on his mother to give him the farm.  Despite evidence that the mother had full mental capacity and that she was very disappointed with her other two sons, the Court was not satisfied that the gift was made as a result of the mother’s “full, free and informed thought”.  The Court also noted the absence of any evidence to show that the gift was made out of gratitude to the son who was caring for her.

It is interesting to note that the Court found undue influence even though there was nothing wrong with the relationship between mother and son, nor was there any intention on the one son to push his other brothers out of the inheritance.  The relationship of dependency itself was enough to establish the undue influence.

What Are The Remedies Available When Undue Influence Is Proven?

Constructive Trust

A constructive trust is an equitable remedy imposed by a court to benefit a party that has been wrongfully deprived of its rights due to either a person obtaining or holding legal right to property which they should not possess due to unjust enrichment or interference.

A constructive trust is not a trust, in the true meaning of the word, in which the trustee is to have duties of administration over a period of time, but rather it is a passive, temporary arrangement, in which the trustee’s sole duty is to transfer the title and possession to the beneficiary.

This remedy is particularly useful when the funds from the estate have been converted into or put towards another asset.  For example, where the unjustly enriched person has taken money from the estate and put it towards their mortgage on their house, the Court can place a constructive trust on the house, so that the rightful beneficiary can trace and recover their money into the house itself.

Equitable Execution

Equitable execution is a means of enforcing the judgment of a court when the judgment creditor cannot obtain satisfaction from the normal methods of execution.  In an estates context, a judge may appoint a receiver to manage the property which was improperly obtained or may impose an injunction to prevent the party in question from dealing with the property.

Rescission

Rescission is the unwinding of a transaction. This is done to bring the parties, as far as possible, back to the position in which they were before the transaction in question.  In the case of a Will executed under undue influence, rescission will essentially void the Will that has been attacked and return the parties to the position they were in before that Will was executed.

 

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What Mental Ability Must a Person have to Draft a Last Will and Testament?

Toronto Wills Fight Lawyer

One of the most common legal grounds for challenging the validity of a last will and testament is by alleging that the person who made the last will and testament (this person is called “the testator”) did not have the mental ability or mental capacity to legally make the last will.

In legal terminology, this legal requirement for mental ability is referred to as testamentary capacity.  In order to establish the validity of a last will and testament the person seeking to uphold the last will must prove, among other things, that the testator had the testamentary capacity required by law to make a valid last will and testament.

What is Testamentary Capacity?

The definition of testamentary capacity has been the subject of many lawsuits in Ontario and in Canada.

A Sound Mind

In the case of Hall v. Bennett Estate the Court of Appeal for Ontario dealt with the question of the mental ability that is needed to make a valid last will and testament.  The Court referred to the general principle that a testator must have “a sound disposing mind” to make a valid last will and testament.  The Court said that a “sound disposing mind” is where a testator:

  • understands the nature and effect of a last will and testament;
  • recollects the nature and extent of his or her property;
  • understands the extent of what he or she is giving under the last will and testament;
  • remembers the persons that he or she might be expected to benefit under his or her last will and testament; and
  • where applicable, must understand the nature of the claims that may be made by persons he or she is excluding from the last will and testament.

Can a Person with Psychotic Delusions Make a Last Will and Testament?

In the recent case of Brydon v. Malamas the British Columbia Supreme Court undertook a thorough analysis of the law with respect to the issue of testamentary capacity.  In that case the testator, Stella, had suffered from schizophrenia since 1975 and had made a will in 1995 leaving her house and one half of the residue of her estate to the Plaintiff (the testator’s grandniece and goddaughter).  In 2004 Stella spent several months in the psychiatric ward of a hospital.  When she returned home, her sister Mary, the Defendant, moved into Stella’s home.  Sometime later, Stella made a new last will and testament and made Mary the main beneficiary, and excluded the Plaintiff from her new will.  She also gave Mary a number of inter vivos gifts ( gifts which take affect during the testator’s lifetime).

When Stella died, the Plaintiff challenged the validity of the new will and the inter vivos gifts, claiming that Stella lacked the testamentary capacity to create the second last will and testament.   The Court held that Stella was affected by psychotic delusions at the time she made her second will, which affected her mental processes and caused her to disinherit the Plaintiff.  Accordingly, the Court ruled that Stella lacked testamentary capacity in making the second will, and therefore the last will and testament was invalid.

In considering the issue of psychotic or insane delusion, the Court in Brydon referred to a number of cases on this issue including the Supreme Court of Canada of decision from 1902 in the case of Skinner vs. Farquarson.  In that case, the testator had made a last will and testament which greatly favoured his son and his wife.  A few years later he made a new will, in which he reduced what he had originally left to his wife and son.  Before he signed the second last will and testament , however, the testator accused his wife and son of committing incest.  It was demonstrated to the Court that there was no truth to that accusation.

In that case the Court provided the following guidelines for determining whether a testator suffers from psychotic delusions.  The court stated: “…an insane delusion is defined as to be a belief of things as realities which exist only in the imagination of the patient . . . Delusion is insanity where one persistently believes supposed facts (which have no real existence except in his perverted imagination) against all evidence in probability and conducts himself however logically upon the assumption of their existence.”

In contrast to Brydon, there are many cases in which the courts have found that despite having questionable beliefs or opinions, a testator nevertheless does possess the necessary capacity to make a last will and testament.  For example, in Royal Trust Co. v. Ford, the Supreme Court of Canada upheld the validity of a last will and testament which was challenged based on testamentary capacity.  In that case a testator had made a last will and testament in 1933 in which he left most of his estate to his son.  He made a new will in 1958, which left only a small part of his estate to his son.  The son challenged the second will, on the grounds that his father had an insane or psychotic delusion that he was not the natural father of his son.  On appeal, the Supreme Court of Canada restored the trial judgment, and agreed with the trial judge that no insane delusion was shown to exist.  [The trial judge] found that the testator really believed the son to be legitimate even though he expressed doubt.  Although the 1933 last will and testament was largely in the son’s favour, a separation for 31 years prior to the 1958 last will and testament and the reception of bad reports about his son were sufficient reason for a sane testator to change his last will and testament.  Furthermore, a legacy of $50,000 was inconsistent with a testator having a poisoned mind resulting in the complete rejection of his son, and consistent only with belief in his legitimacy or, at most, doubt.  Whether the testator’s suspicions were reasonable or not, they were such as a sane man could hold. The essential finding of fact in Royal Trust Co was that the testator did not believe that he was not the natural father of his son (and therefore did not believe in the truth of a fact that was proved to be false).  The mere expression of doubt as to the truth of a fact (even a fact which is obviously true) could not qualify as a psychotic delusion.

Thus, the questions of whether a testator has or had the capacity to make a valid last will and testament is highly fact specific and must be considered on a case by case basis.  If there is any question as to whether the testator has ability to understand the choices he or she is making or to appreciate the consequences of those choices, it may be useful to consult with a professional “capacity assessor” who can provide a professional opinion as to the capacity of the testator, or the lack thereof.  This is recommended especially when there are indications of undue influence or where suspicious circumstances exist.

It is clear from the law that the test to be met to prove testamentary capacity is a high one and the onus falls on the party trying to uphold the last will and testament.  The law on testamentary capacity is strict and for good reason.  The making of a last will and testament is an important activity and one that is often engaged in by a person who is approaching the end of his or her life.  It is also not uncommon that a person at that stage of life may suffer from some form of mental impairment which may not be apparent to people who are not closely associated with the person.  Accordingly, it is crucial that the issue of testamentary capacity be closely examined and well documented at the time the last will and testament is prepared, in order to avoid conflict and uncertainty down the road.

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Estate Planning – Spousal and Family Trusts

The Presumption of Advancement -Family Gifts and Trusts

When property is transferred between a husband and a wife or between a parent and a minor dependent child, there is a presumption (“The Presumption of Advancement”) that the property was transferred for the individual’s sole benefit and that they, therefore, could keep the property. If anybody challenged this transfer in Court, they would have to prove on a balance of probabilities (i.e. more than 50%) that the gift was intended to be held in trust (i.e. “A Resulting Trust”) for the benefit of the giver (“the transferor”) If the persons or person challenging the transfer were able to meet this burden of proof, the property would have to be returned to the transferor.

Dying With a Last Will and Testament

If the transferor died with a last will and testament, the property would be distributed in accordance with the wishes of the transferor as outlined in his or her last will and testament.

Dying Without a Last Will and Testament

If the transferor died without a last will and testament, the transferor’s property would be distributed in accordance with the provisions of a government law titled, Succession Law Reform Act.

The Presumption of Resulting Trust -Non-Family Gifts and Trusts

When a gratuitous transfer of property (i.e. a transfer of property for no money or other consideration) is made from the giver (“the transferor”) to the receiver (“the transferee”) and the transfer is challenged in Court, the Court will presume that the transferee is under a legal obligation to return the property to the transferor (i.e. a Resulting Trust) unless the transferee can show proof on a balance of probabilities (i.e. more than 50%) that the transferor intended the transferee to keep the property for him or herself.

Dying With a Last Will and Testament

Where the transferor is deceased and died with a last will and testament, the transferee must return the property to the transferor’s estate to be distributed in accordance with the wishes of the deceased as outlined in his or her last will and testament.

Dying Without a Last Will and Testament

If the deceased died without a last will and testament, the deceased’s property is distributed in accordance with the provisions of a government statute law,Succession Law Reform Act.

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I have Been Named as an Estate Trustee in a Last Will and Testament – What Does this Entail?

Toronto Wills Fight Lawyer

What is an Estate Trustee?

An estate trustee, sometimes called an executor, is the representative who is designated to carry out the terms of a last will and testament.  In cases where a person dies without a last will and testament (i.e. “intestate”) a person may apply to the Court to be approved as the estate trustee.  If the application is approved, the applicant would be given a “Certificate of Appointment of Estate Trustee without a Will”.  Essentially, the estate trustee acts as the alter ego of the deceased; his or her fundamental role is to wind up the affairs of the deceased and distribute the estate to those entitled.  As an estate trustee you will be responsible for collecting, managing, and investing the assets of the deceased. You will need to pay any debts owed by the deceased and then distribute the remaining assets to the people who are entitled to them (i.e. beneficiaries).   As estate trustee, your first and foremost duty is to act in the best interests of the beneficiaries of the estate.

Be aware that the job of estate trustee can be quite onerous and should not be taken lightly.  If you agree to accept the role of estate trustee be aware that this will require a significant commitment of time and effort on your part.  You should also bear in mind that whatever you can do to help organize the deceased’s affairs will ultimately reduce the legal fees to be paid out of the estate.  If you do not feel that you are capable of or willing to performing the tasks of an estate trustee you can formally renounce the right to act as such.  In deciding whether to accept the job of estate trustee , it is important to consider that there may potentially be personal liability to the estate trustee for contracts made after the death of the testator and for debts incurred by the trustee in the course of carrying on a business of the deceased.  The estate trustee may also be personally liable if he or she mismanages the estate or commits a breach of trust.

What are the Duties of an Estate Trustee?

Toronto Lawyer PublicationsAn estate trustee’s duties begin immediately upon the death of the testator.  Although the last will and testament may need to be probated (i.e. formally approved by the Court), there are tasks that you can perform before the last will and testament is probated.   First of all, you need to know who the deceased was – what was their citizenship, where was their residence, and where was their domicile (i.e their place of permanent residence, which may be different from the place they were actually living at the time of their death).  A person’s residential history can have a dramatic impact on the administration of the estate and should always be considered prior to taking any steps in distributing the estate.  It is equally important to be aware of any changes in the deceased’s marital status.

In Ontario, a person’s last will and testament becomes invalidated upon marriage, so it is crucial to know any and all dates pertaining to the deceased’s marital status.  As well, if there is a last will and testament, you, as estate trustee, should make sure that you have the original last will and testament and any codicil’s (i.e. attachments or additions) to the last will and testament.  The estate trustee should also see if there are any historic last wills and testaments in existence and should try to take control of those as well, to minimize the chance of disputes arising from those documents. It is advisable that you obtained a few notarized copies of the last will and testament, as this will allow you to begin a lot of the estate administration, even before the last will and testament is probated,  Some of the other main duties of an estate trustee include the following:

·         Making funeral and burial arrangements;
·         Retain an estates lawyer;
·         Determine the names and locations of the beneficiaries/ next of kin, and notify them of their interests;
·         Dispose of all perishable assets;
·         Open an estate bank account;
·         Make provisions for the immediate needs of the deceased’s spouse and other dependants;
·         Pay bills, mortgage payments, insurance premiums and credit cards;
·         Advertise for creditors and prepare inventory of debts;
·         Settle and pay all legitimate claims against the estate;
·         Apply for any benefits payable upon death.
·         Obtain tax clearance from Canada Revenue Agency;
·         Dispose of or distribute assets according to instructions in the last will and testament;

This list is not exhaustive.  The duties of the estate trustee will depend on the particulars of each estate and on the instructions set out in the last will and testament.  If any complexities arise in the administration of the estate it is advisable for the estate trustee to seek professional legal advice to ensure that they are administering the estate properly.

Compensating the Estate Trustee

3366720659_b746789dfd[1]Estate trustees are entitled to compensation for the work that they do for the administration of an estate.   The Ontario Trustee Act states that an estate trustee is entitled to a fair and reasonable allowance for his or her “care, pains, trouble and time” spent administering the estate.  In a typical estate where the assets are gathered in and distributed relatively quickly, the executor’s compensation would be 5% of the value of the estate.  The amount of the trustee’s compensation may be adjusted up or down based upon a number of factors including the total value of the estate, the complexity of the estate, the time spent by the estate trustee in the discharge of their duties, the degree of care exercised by the trustee and the results of the administration and any investments made by the trustee.

Removal of Estate Trustee

Finally, as an estate trustee you should be aware that pursuant to section 37 of the Trustee Act, the Superior Court of Justice may remove an estate trustee“upon any ground upon which the court may remove any other trustee, and may appoint some other proper person or persons to act in the place of the executor or administrator so removed”.  An application to remove a trustee may be made by the estate trustee themselves, or by someone else who is interested in the estate and has grounds to seek the removal of the estate trustee in question.  There is little guidance in the legislation as to what constitutes grounds for removal, and accordingly, very broad discretion is given to the Court in removing an estate trustee.  Some typical situations where a trustee could be removed are when the trustee:

·         Declares bankruptcy;
·         Is convicted of a criminal offence;
·         Is removed from the jurisdiction;
·         Becomes incapacitated;
·         Commits a breach of trust;
·         Demonstrates a lack of appreciation of his or her duties;
·         Conflict of interests
·         Generally inappropriate behaviour

If you do accept the job of estate trustee you must be aware that your actions may well be scrutinized by other people who have an interest in the estate.  If an interested party feels that you are not performing your duties in a careful and diligent manner, they have the ability to remove you as estate trustee.

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Who Pays for the Lawyers When a Last Will and Testament is Challenged?

Toronto Wills Fight Lawyer

The question of who pays the lawyer fees in estates lawsuits is of central importance to anyone who challenges a last will and testament.

Historically, the courts have taken the position that the lawyer fees of both parties are to be paid out of the estate, regardless of which party was successful.  This made it relatively easy for a lawyer to encourage his or her client to pursue litigation, knowing that there was a very minimal risk of costs being awarded against them.  The policy to award costs out of the estate was based on the idea that where there are reasonable grounds upon which to question the validity of a last will and testament, it is in the public interest that such questions be resolved without cost to those questioning the will’s validity.

The problem with this approach is that it encouraged frivolous litigation, as the applicant/plaintiff knew that even if they lost, their lawyer fees would be paid out of the estate.  Estates would frequently become depleted by the cost of the lawsuit, even where the litigation was unwarranted.

In recent years, the courts have become more cognizant of this problem and have made a clear move towards the general civil litigation regime in which the costs follow the event – i.e. “the loser pays his lawyer and some of the other side’s fees”.

In the case of Estate of Brett Salter, Justice Brown effectively summarizes the reason for the courts shift in position on the issue of costs in estates litigation:

A view persists that estate litigation stands separate and apart from the general civil litigation regime. It does not; estates litigation is a sub-set of civil litigation. Consequently, the general costs rules for civil litigation apply equally to estates litigation the loser pays, subject to the Court’s consideration of all relevant factors under Rule 57, and subject to the limited exceptions described in McDougald Estate. Parties cannot treat the assets of an estate as a kind of ATM bank machine from which withdrawals automatically flow to fund their litigation.

The factors that the court will consider when assessing the appropriate costs of an action or application are set out by the Ontario Court of Appeal in Cohen v. Kealey & Blaney (1985), 26 C.P.C. (2d) 211 (Ont. C.A.).  The factors include

  • the time spent
  • hourly rates
  • legal complexity
  • degree of responsibility assumed by the solicitor
  • monetary value involved
  • importance to the client
  • degree of skill and competence demonstrated
  • results achieved and the ability of the client to pay
  • and the expectation of the clients with respect to the fee.

In sum, if you are considering commencing a will challenge, it is crucial that you discuss the issue of legal costs with your lawyer prior to initiating the estates lawsuit.  The current state of the law is somewhat ambiguous, but there is certainly a greater willingness on the part of judges to award legal fees against the losing party.  Litigants must be aware that if their litigation is ill-advised or unreasonable, they may be responsible to pay the other side’s legal costs.