Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
CHAPTER 5 – INTESTACY
- Importance of making a will and barriers
- Misconceptions about estate planning
- Intestacy and what are the rules
- Order of death and survivorship
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 10 – ADMINISTRATION OF TRUSTS AND ESTATES
- Role of executor
- Duties, obligations, accepting the role
- Delegation
- Conflicts of interest, even hand, prudent investor
- Corporations, instructions from court
- Agent for executor, role of solicitor
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 1 – POWERS OF ATTORNEY FOR PROPERTY
1.1.3 Origin
The origins of powers of attorney is based on the common law, mostly the law of principal and agent
although other legal concepts such as law of contract and fiduciary duty are relevant. Every province
has legislation creating statutory powers of attorney that in effect codify and expand the common law
principle and requirements.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
1.1.4 Common-law Principles
At common law:
Note some of these have been altered i.e. a POA may “continue” during incapacity if the provincial
legislation provides.
(7) The continuing power of attorney may provide that it comes into effect on a specified date or when a
specified contingency happens. 1992, c. 30, s. 7 (7).
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
1.1.7 Power of Attorney vs. Trust
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
1.2.4 Misconceptions about Need for a power of attorney
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
1.2.4.4 Trading Authorization
Many investment firms will allow their clients to execute a trading authorisation that permits another
person to give instructions regarding the sale and purchase of securities. These are limited powers of
attorneys. Although a trading authorization may permit dealing with investments in an account, it does
not provide the authority to make withdrawals from the investment account. Accordingly if the funds
are required to support the family then during period of incapacity, the trading authorization is not
sufficient.
Termination
12 (1) A continuing power of attorney is terminated,
(a) when the attorney dies, becomes incapable of managing property or resigns, unless,
(i) another attorney is authorized to act under subsection 7 (5), or
(ii) the power of attorney provides for the substitution of another person and that person
is able and willing to act;
(b) Repealed: 1996, c. 2, s. 8 (2).
(c) when the court appoints a guardian of property for the grantor under section 22;
(d) when the grantor executes a new continuing power of attorney, unless the grantor provides that
there shall be multiple continuing powers of attorney;
(e) when the power of attorney is revoked;
(f) when the grantor dies. 1992, c. 30, s. 12 (1); 1996, c. 2, s. 8.
Execution of revocation
(2) The revocation shall be in writing and shall be executed in the same way as a continuing power of
attorney. 1992, c. 30, s. 12 (2).
Provincial legislation requires a power of attorney to be in writing, signed by the grantor, and witnessed
by two persons.
Execution
10 (1) A continuing power of attorney shall be executed in the presence of two witnesses, each of whom
shall sign the power of attorney as witness. 1996, c. 2, s. 6 (1).
Persons who shall not be witnesses
(2) The following persons shall not be witnesses:
1. The attorney or the attorney’s spouse or partner.
2. The grantor’s spouse or partner.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
3. A child of the grantor or a person whom the grantor has demonstrated a settled intention to treat
as his or her child.
4. A person whose property is under guardianship or who has a guardian of the person.
5. A person who is less than eighteen years old. 1992, c. 30, s. 10 (2).
1.3.2 Capacity
Re K. set out a four-part test for continuing powers of attorney. Under the test the grantor must have
the mental capacity to understand the following in order to grant a valid enduring power of attorney:
In Canadian cast Godielie v. Pauli (Committee of) an addition test was added:
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
The degree of capacity required to grant a power of attorney for property is not necessarily the same
degree of capacity required to manage one’s financial affairs.
Third parties will require evidence that the alternate has authority to act. As with springing powers of
attorney, there may be legislation that sets out the requirements for an alternate to prove his or her
authority to start acting.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
- Where one child is appointed as the attorney over a parent’s financial affairs, sometimes that
child develops a sense of entitlement to the parent’s property because the ability of the
attorney has to control it.
- When one children is appoint it may be wise to appoint at least one other child, if only to
alleviate the apprehension that the other children may have with respect to suspicion of the
child who has the sole control of the parent’s assets.
- It is generally accepted that the act of designating a beneficiary designation for a life insurance
policy or a registered plan, such as a RRSP or RRIF or more recently TFSA, is a testamentary
disposition and therefore may not be made by an attorney under a power of attorney
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
1.8.1 Assets Outside the Jurisdiction
- Generally a power of attorney is governed by provincial law where the grantor is resident
- Where the grantor has assets outside the province, particularly real property, it may not always
be possible or practical to deal with those assets with the power of attorney created in the
grantor’s province of residence
- If an individual has property outside the province (particularly real property), it may be prudent
to have a power of attorney prepared in accordance with the laws of the jurisdiction where the
property is located
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
- In Ontario care must be taken as under the SDA a power of attorney revokes any previous
power of attorney even if there is no revocation clause, unless the document specifically permits
multiple powers of attorney
1.8.6 Compensation
- Ontario is unique, providing for a prescribed fee schedule
- If an attorney takes compensation, he or she may be held to a higher standard of care in the
management of the grantor’s assets
- This is specifically provided for in the legislation in Ontario
Standard of care
(7) A guardian who does not receive compensation for managing the property shall exercise the degree
of care, diligence and skill that a person of ordinary prudence would exercise in the conduct of his or her
own affairs. 1992, c. 30, s. 32 (7).
Same
(8) A guardian who receives compensation for managing the property shall exercise the degree of care,
diligence and skill that a person in the business of managing the property of others is required to
exercise. 1992, c. 30, s. 32 (8).
Re Goodman – an attorney who was the son of the grantor was prevented from transferring property to
himself and his sister even though the property was bequeathed to them under his mother’s Will. The
transfer was characterised as an “advance on the inheritance” which was prohibited under the power of
attorney since it was not for the sole benefit of the grantor.
1.102 Gifts to reduce Value of Estate and Reduce U.S. Estate Tax Not Permitted
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
Re Bradley Estate – an attorney was prevented from making fits to the grantor’s spouse and children to
reduce exposure to U.S. estate tax on the basis that the proposed gifting plan would significantly reduce
the value of the grantor’s estate notwithstanding the potential tax benefits.
1.10.3 Estate Freeze Permitted Where it Would Not Reduce the Value of the Grantor’s Estate During
his Lifetime
O’Hagan v. O’Hagan (2000) – Attorney was permitted to undertake an estate freeze of the grantor’s
property where the freeze was structured through a trust and where the grantor was to be the sole
beneficiary during his lifetime. The court permitted the freeze notwithstanding that it was not
necessary for the benefit of the grantor on the basis that there would be no reduction in the value of the
grantor’s assets during his lifetime and that a freeze would result in benefit to the grantor and his family.
1.10.4 Transfer to Inter Vivos trust to preserve assets of an incapable grantor not permitted because
trust benefitted the attorneys
Banton v. Banton – father got remarried, prior to marriage sons used POA to transfer a sum of money to
an irrevocable trust for benefit of father with the sons being the residual beneficiaries after their
father’s death. The court found that:
Notwithstanding the power to create the trust, the court concluded the attorneys breached their
fiduciary duty in the creation of the trust by giving an irrevocable remainder interest to themselves
since:
- It appears the courts will be reluctant to permit an attorney to do any type of estate planning
that potentially diminishes the value of the property that is available to the grantor during the
lifetime of the grantor or restricts control of or access to the property
- At a minimum, any estate planning by the power of attorney must be for the grantor’s benefit
and must be capable of being revoked by the grantor should he or she regain capacity, and the
ultimate disposition of the property upon the death of the grantor should remain undisturbed
by any planning undertaken
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 2 - PERSONAL CARE AND HEALTH CARE DECISIONS
2.1 Introduction/Definition
Personal Directives
- Deal only with the person’s physical environment and physical body and
- Can never be exercised if the individual is capable of making personal or health care decisions
themselves
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
2.3 Why Required
A personal directive permits an individual to ensure that his or her wishes expressed while capable with
respect to personal care are known, and (where enforceable) respected, once they are no longer able ot
make those decisions.
If a proxy/attorney is appointed then the maker/grantor will know that the person they have chosen will
be someone they trust.
With a personal directive, physicians are other health care professionals will not have to wait until a life-
threatening situation arises in order to act in the absence of instructions.
- The maker must understand the nature, effect, and consequences of the personal directive and
that the proxy may be able to make personal care decisions on his or her behalf in the event of
the subsequent incapacity of the maker
- An individual may have capacity to grant a personal directive even if incapable of making
personal care decisions
- A maker need on be 16 years of age in Ontario CHECK THIS
2.8 Formalities
Generally a personal directive should be in writing and signed by the maker and have two witnesses.
Execution
48 (1) A power of attorney for personal care shall be executed in the presence of two witnesses, each of
whom shall sign the power of attorney as witness. 1996, c. 2, s. 31 (1).
Persons who shall not be witnesses
(2) The persons referred to in subsection 10 (2) shall not be witnesses. 1992, c. 30, s. 48 (2).
In Ontario, the Health Care Consent Act lists who may make decisions about or give consent to medical
treatment in an order of priority.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
paragraph does not include a parent who has only a right of access. If a children’s aid society or
other person is lawfully entitled to give or refuse consent to the treatment in the place of the
parent, this paragraph does not include the parent.
6. A parent of the incapable person who has only a right of access.
7. A brother or sister of the incapable person.
8. Any other relative of the incapable person. 1996, c. 2, Sched. A, s. 20 (1); 2016, c. 23, s. 51 (1).
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 3 – THE LAW OF WILLS
3.1.1.2 Intestate
Is an adjective that refers to the state of dying without a Will, as in “an intestate estate”
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
3.3 REQUIREMENTS OF A VALID WILL
3.3.1 Introduction
The law is very strict about the requirements for a Will to be enforceable. These requirements include:
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
Execution
4 (1) Subject to sections 5 and 6, a will is not valid unless,
(a) at its end it is signed by the testator or by some other person in his or her presence and by his or
her direction;
(b) the testator makes or acknowledges the signature in the presence of two or more attesting
witnesses present at the same time; and
(c) two or more of the attesting witnesses subscribe the will in the presence of the testator.
Idem
(2) Where witnesses are required by this section, no form of attestation is necessary. R.S.O. 1990,
c. S.26, s. 4.
The formal requirements must be followed precisely. The courts will insist on strict compliance with the
rules and failure will result in a declaration that the Will is invalid.
A beneficiary or the spouse of the beneficiary under the Will should not be a witness as any gift in the
Will to an attesting witness or his or her spouse will be void.
3.3.4 Capacity
In order for a Will to be valid, a testator must meet an age requirement and must have “testamentary
capacity” which is concerned with the testator’s mental faculties.
Leading case on testamentary capacity is English decision in Banks v. Goodfellow and has been cited in
the Ontario Court of Appeal Re Davis:
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
3.3.5 Undue Influence
- Undue influence is a term that refers to the influence exerted by someone on the testator and
that influence caused the testator to execute the Will or a provision in it.
- Where the testator has been unduly influenced, the Will is not the result of the testator’s
voluntary actions
- If it is showed that the testator was unduly influenced, then the Will or provision in question will
be invalidated.
- Mere influence or persuasion by someone on the testator will not invalidate a Will.
- A will is rendered invalid only where the degree of influence exerted on the testator is so great
and overpowering that it out to be considered undue influence.
- Ordinary influence or a persuasive nature is not sufficient
- There must be an element of force or coercion so great that the testator’s will was not made
freely and voluntarily.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
-
- Factors that might give rise to suspicious circumstances include he following:
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
o i.e. testator revoked a gift because she had received incorrect information that
beneficiaries were dead, then the revocation will not be valid because of the mistaken
belief of facts Campbell v. French
o mistaken beliefs of fact can invalidate a will, whereas a mistaken belief of the legal
effect of the words in a testamentary document will not invalidate it
if the testator had knowledge of the actual contents and wording of the Will and
approved of it then nothing an be done to correct this mistake
the courts will enforce the will as it is written even if the legal effect of the
words fails to accomplish what the testator had intended by the Will
a court could exercise its power of rectification to strike out words that were
inserted by mistake
however a court will only do so if it is shown that the testator did not
approve of the Will’s contents
also the power of rectification generally only allows the court to strike
out certain words inserted in the Wil by mistake, but it does not go so
far as to allow the courts to add more words in the Will
In general, if the testator had read over the Will or if it was read to the
testator by someone else, then the courts will presume that the
contents were approved by the testator
In the Goods of Boebm – example of removing duplicate name but didn’t add
correct name
3.4 Amendment
- An amendment to a Will must be executed in the same manner as a will as a Will to be valid. A
will may be amended by another testamentary document called a codicil. A codicil must
conform to all the requirements of a Will in order to be valid.
- If an alteration is made on a formally executed Will after the execution of the Will, it is of no
effect unless signed and witnessed in the same manner as required for a Will
- Initials are generally acceptable in lieu of full signatures of the testator and witnesses
- Alterations will be effective to the extent that any alterations renders particular words no longer
apparent
3.5 Revocation
A will must be revocation. Revocation must conform to the statutory requirements in the jurisdiction.
Revocation generally
15 A will or part of a will is revoked only by,
(a) marriage, subject to section 16;
(b) another will made in accordance with the provisions of this Part;
(c) a writing,
(i) declaring an intention to revoke, and
(ii) made in accordance with the provisions of this Part governing making of a will; or
(d) burning, tearing or otherwise destroying it by the testator or by some person in his or her
presence and by his or her direction with the intention of revoking it. R.S.O. 1990, c. S.26, s. 15.
Revocation by marriage
16 A will is revoked by the marriage of the testator except where,
(a) there is a declaration in the will that it is made in contemplation of the marriage;
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
(b) the spouse of the testator elects to take under the will, by an instrument in writing signed by the
spouse and filed within one year after the testator’s death in the office of the Estate Registrar
for Ontario; or
(c) the will is made in exercise of a power of appointment of property which would not in default of
the appointment pass to the heir, executor or administrator of the testator or to the persons
entitled to the estate of the testator if he or she died intestate. R.S.O. 1990, c. S.26, s. 16.
Revocation, change in circumstances
17 (1) Subject to subsection (2), a will is not revoked by presumption of an intention to revoke it on the
ground of a change in circumstances.
Holograph wills
6 A testator may make a valid will wholly by his or her own handwriting and signature, without
formality, and without the presence, attestation or signature of a witness. R.S.O. 1990, c. S.26, s. 6.
Revocation by marriage
16 A will is revoked by the marriage of the testator except where,
(a) there is a declaration in the will that it is made in contemplation of the marriage;
(b) the spouse of the testator elects to take under the will, by an instrument in writing signed by the
spouse and filed within one year after the testator’s death in the office of the Estate Registrar
for Ontario; or
(c) the will is made in exercise of a power of appointment of property which would not in default of
the appointment pass to the heir, executor or administrator of the testator or to the persons
entitled to the estate of the testator if he or she died intestate. R.S.O. 1990, c. S.26, s. 16.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
3.5.2.2 Effect of Divorce
In Ontario divorce will revoke any benefits or appointments in favour of the former spouse under any
Will made before the divorce. The divorce decree must be final for this rule to have effect. Separation
or a Decree Nisi is not sufficient. The legislation operates to interpret the Will as if the former spouse
pre-deceased the testator.
3.6.1 Gifts
- Gifts deprives the donor of the enjoyment of the property since a valid gift is irrevocable
- There are a number of drawbacks including:
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
- Never give anything away that may be needed in the future
- Sometimes called a “gift in contemplation of death” is a gift made during the lifetime of the
donor in contemplation of death, although not necessarily in the expectation of death
- Death must be anticipated from an existing peril such as illness, event, or high-risk activity such
as military posting to a war zone
- The git I not valid unless the donor actually dies as a result of the specific clause contemplated
- Brown v. Rotenberg lists the requirements:
o the gift must be made in contemplation of death;
o the property that is subject of the gift must be delivered to the donee, although
“constructive delivery” is sufficient;
o the gift must be made in circumstances that make it clear that the gift is only to take
effect in the event of death; and
o the donor must die from the peril contemplated
- the gift is revocable during the lifetime of the donor and if the giver does not die from the
disorder or event that was contemplated, the gift reverts back to the giver
- a trust arises where one person transfers property to another person with instructions that the
property is to be used for the benefit of a third person
- use of trust can be excellent way of planning for transfer of property in the future, while
dictating the terms and conditions upon which it will be held in the meantime
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
3.6.4 Jointly Held Property with Right of Survivorship
- in an ownership structure known as joint tenancy one or more persons can own property
together
- each person has an interest in the property and if one of them dies their entire interest in the
property reverts by operation of law to the surviving joint owners
- only upon the death of the last surviving owner will property pass through the estate of the
surviving owner since all the survivorship interests of the other pre-deceased joint owners have
been extinguished upon their death
- a joint interest in property with a right of survivorship can be used as a Will substitute because
upon the death of someone who owns property in this way, their share of the property will pass
to the other owners of the property who are still alive
- the income tax consequences of transfers of property on death are not avoided by the use of
joint property with rights of survivorship
- Percore v Pecore and Madsen Estate v. Saylor -two cases from the Supreme Court have recently
altered the nature of property interests held in a joint tenancy on death by finding in some
circumstances that a joint tenancy does not necessarily result in the surviving joint owner having
an absolute interest in property
- Where there is a gratuitous transfer for property into joint names with a right of survivorship to
an adult child, for example, there is a presumption of resulting trust such that the property
remains as part of the estate of the transferor
- Unlike the conventional Will, holograph Wills do not require any witnesses. The only formal
requirements for a holograph Will is that the entire Will must be written in the handwriting of
the testator and signed by the testator.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
3.7.2 Mirror Wills
- Mirror Wills are separate Wills made by two individuals that are identical, except they make
each other the beneficiary with identical gifts over on the death of the survivor.
- Mutual Wills are used by two or more individuals who have agreed to dispose of their property
in a certain way and there is an agreement, implied or otherwise, that the individuals will not
change the terms of his or her Will after the death of the other individual.
In some circumstances it may be appropriate for a testator to make more than one Will to deal with
separate assets of his or her estate.
- A separate Will for property in another country or another province may be the most
expeditious way of transferring such property on death
- Will can be prepared in accordance with the formalities of the other jurisdiction and, if
appropriate, in the language of that country where outside Canada.
- The separate Will avoids the two-step procedure that might otherwise be required to have the
Will probated in the jurisdiction of residence and the procedures to have the original grant
recognised in the other jurisdiction.
- Multiple Wills or dual Wills are sometimes used to limit the value of the estate subject to
probate fees See Chapter 9
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
- A residuary gift is a gift of the residue or residuary property of the estate, which is the portion of
the estate that remains after the payment of debts, taxes, and all the other types of gifts have
been given
3.8.2 Lapse
- Lapse is a legal doctrine that provides that where a beneficiary pre-deceased the testator, the
gift that was intended for the beneficiary will fail to take effect
- This means that the gift will not pass to the estate of the deceased beneficiary but will form a
part of the residue of the testator
- Where the testator expressed an intention in his or her Will that the lapse doctrine is not to
apply, then the testator’s intentions will be respected. A testator can express such an intention
by providing for a substitute or alternate beneficiary for the gift in the event the beneficiary pre-
deceases the testator. This is known as a “gift over.”
- Ontario has also enacted “anti-lapse” legislation that explicitly ousts the lapse doctrine where
the beneficiary of a gift is a close relative of the testator being a child, grandchild, or other issue,
or in some jurisdictions to a brother or sister.31
- Anti-lapse legislation does not apply if there is an intention to the contrary in the Will
Substitutional gifts
31 Except when a contrary intention appears by the will, where a devise or bequest is made to a child,
grandchild, brother or sister of the testator who dies before the testator, either before or after the
testator makes his or her will, and leaves a spouse or issue surviving the testator, the devise or bequest
does not lapse but takes effect as if it had been made directly to the persons among whom and in the
shares in which the estate of that person would have been divisible,
(a) if that person had died immediately after the death of the testator;
(b) if that person had died intestate;
(c) if that person had died without debts; and
(d) if section 45 had not been passed. R.S.O. 1990, c. S.26, s. 31.
3.8.4 Abatement
- The assets of an estate may be insufficient to satisfy all the liabilities of the estate and all gifts in
the Will. When this occurs, the gifts must be reduced to satisfy the payment of debts and
liabilities.
- Where abatement is required, gifts are abated according to the type or category of gift. The
following gifts abate in the following order
For example, suppose that the entire residue must be used to pay liabilities but
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
For example, suppose that the entire residue must be used to pay liabilities but $60,000 of debt must
still be paid. If the Will contains two general gifts, one of $30,000 to Alpha, and one of $90,000 to Bravo,
each gift will be reduced by 50% since the total of general gifts is $120,000 and the amount of the
abatement must be 50% of the general gifts. So Alpha would receive $15,000 and Bravo would receive
$45,000.
In the same example above, assume that the amount of unpaid debt after exhausting the residue was
$200,000, and there was a further gift of the family cottage worth $350,000 to Charlie. The general gifts
would be exhausted completely, and $80,000 of unpaid liability would have to be satisfied from the
specific gift of the family cottage. As a result, the cottage property would have to be sold and Charlie
would receive the balance of the funds or $270,000 after the remaining debt of $80,000 was paid.
3.8.5 Ademption
- “Ademption” refers to situations where a testator gifted some property to a beneficiary by Will,
but for one reason or another, the testator no longer owned the property at the time of death.
The property may have been destroyed, or the testator may have sold the property, or the
property no longer matches the description given in the Will
- In such a scenario, the gift is said to have adeemed and the beneficiary receives nothing. Only
specific gifts (i.e., gifts of specific property), described in the Will, are subject to ademption.
- A class gift is a gift that is made to a defined group of persons, called a “class.” The group is
often a group of persons related to the donor, such as children or grandchildren, but any
defined or otherwise ascertainable group can be the object of a class gift
- It is only when the “class closes” that the actual members of the group who benefit from the gift
can be determined. Until that time, persons who fall within the description of the group are only
potential beneficiaries
Testators generally have the freedom to dispose of their property in any way they see fit. In most cases,
a testator is able to dispose of his or her property as intended. However, testamentary freedom may be
abridged for a number of reasons, such as:
- A court may strike down a condition attached to a gift as invalid if the condition is, in the court’s
opinion, contrary to public policy
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
- In Re Millar Estate the Supreme Court of Canada said that the courts will not enforce a
condition attached to a testamentary gift on public policy grounds when the following wo
conditions are met: 1) the “…prohibition is imposed in the interest of the safety of the state, or
the economic or social well-being of the state and its people as a whole” and 2) “… the harm to
the public must be substantially incontestable, and does not depend on the idiosyncratic
inferences of a few judicial minds.
- In general, conditions are void for public policy reasons where any of the following issues arise:
o the condition requires performance of an illegal or immoral act,
o where it restricts marriage or matrimonial life,
o where the condition limits the rights of the beneficiary to deal with
o the gifted property (restraint on alienation), or
o where it discriminates on the basis of race or ethnicity or other rights protected by
human rights legislation or the Charter.
- The courts will not enforce a condition that would require someone to commit a crime or is
otherwise against the law
- A condition that prevents the beneficiary of the gift from selling or otherwise disposing of the
property is void for repugnancy
- Noik v. Noik Estate - The courts have held that gifts should be given absolutely — that is, the
beneficiary ought to have the right to deal with the property as he or she sees fit
3.9.1.3 Discrimination Contrary to Provincial Human Rights Law and Constitutional Charter Rights
- Where a condition is contrary to the Charter by discriminating on the basis of race, ethnicity,
sexual orientation, or religion, then the courts will not enforce that offending condition. Each
province has similar human rights legislation that also sets a standard by which to judge public
policy
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
- Generally it is possible to have a condition that benefits particular beneficiaries based on
religion or some other human rights protected criteria as long as the reason is not hateful or
prejudiced per se. So a bursary for Protestant students would be acceptable
- Canada Trust Co. v. Ontario Human Rights Commission - a scholarship that was based on
blatant religious supremacy and racism excluding “all who are not Christians of the White Race,
all who are not of British Nationality or of British Parentage, and all who owe allegiance to any
Foreign Government, Prince, Pope, or Potentate” was found to be offensive and the condition
was struck
- In Ontario, dependant relief legislation has been enacted that allows persons classified as
dependants to apply for support and maintenance out of the estate where the deceased was
under a duty to support the dependant in question.
- Dependants include the spouse and minor children and, depending on the jurisdiction, may also
include common-law partners and adult children
- In addition to claims under dependant relief, in most jurisdictions the spouse of the deceased
can also make a claim for division of property under family property legislation
- Family property legislation is based on the premise that marriage is an economic partnership
and the contribution of both parties to that partnership, whether pecuniary or otherwise (such
as homemaking, child rearing, or other family activities), should be recognised as having equal
value.
- Thus, when the marriage ends as a result of divorce or death, a spouse is generally entitled to
50% of the property acquired during the marriage and the amount of appreciation in property
that was acquired by either spouse before the marriage (although the definition of what is or
isn’t shareable family property can differ greatly between the jurisdictions).
- A testator’s plans as laid out in his or her Will may be thwarted by the choices of others.
- In cases of gifts, the beneficiary is entitled to disclaim the gift — that is, the beneficiary can
refrain from taking the gift.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
3.11 When Minors May Make A Will
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 4 – WILL PREPARATION
Will preparation is considered part of the practice of law, and anyone preparing a Will for another
person who is not a solicitor may be subject to sanction or prosecution by the body responsible for
regulating the legal profession in the province
1. Duty to ensure the testator has capacity and is not subject to undue influence.
2. Duty to prepare the Will.
3. Duty to ensure the Will gives legal effect to the instructions of the testator.
4. Duty to ensure the Will is validly signed and witnessed.
5. Duty to advise against accidental revocation.
6. Where appropriate, maintain custody of the Will.
- Ideally the solicitor should meet with the client when taking instructions.
- At the meeting with the client it is the solicitor’s responsibility to be satisfied that the client has
testamentary capacity.
- The solicitor should make sufficient inquiry into the testator’s assets and family to ensure no
obvious beneficiary has been omitted and that the client appreciates the nature and extent of
the estate.
- In order to guard against undue influence, the solicitor should obtain instructions, or confirm
the instructions, in a private meeting without any beneficiary or other interested party being
present
- an interpreter is required, a disinterested party should translate.
- Where the client has capacity, the solicitor has a clear duty to prepare the Will
- If capacity is uncertain, and the time frame does not allow for further inquiries or a medical
assessment, the duty of the solicitor may be to proceed rather than to refrain from taking
instructions and preparing and attending to execution of the Will.
- Hall v. Bennett – the solicitor visited a terminally ill client in the hospital. The client was lucid, at
least temporarily, but the lawyer decided not to follow the client’s instructions because of
concerns regarding capacity. The client died later the same day, and the prospective beneficiary
under the client’s instructions sued the lawyer.
o The Court of Appeal decided that the issue was not whether or not the client had
testamentary capacity but “whether a reasonable and prudent solicitor in those
circumstances could have concluded that the client did not have such capacity.”
- The court recognised the dilemma facing a solicitor who has reservations about capacity, noting
that it is a no-win situation. If the solicitor fails to prepare the Will, there may be liability to the
prospective beneficiaries under the proposed Will; but if the Will is prepared, the solicitor may
be exposed to liability to the personal representatives of the estate for costs incurred by the
estate in determining that the testator lacked capacity.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
o In the result, the court found that the solicitor did fulfill his obligation to the client, and
since there was actually no retainer to prepare a Will, he owed no duty to the
prospective beneficiary.
It is now clear that a solicitor may be liable to a disappointed beneficiary. The leading case is the 1995
English House of Lords decision in White v. Jones,8 subsequently followed and now the law in Canada.
Earl v. Wilhelm, - the Saskatchewan Court of Appeal found a solicitor liable to the beneficiary of a farm
property that had been transferred by one of his law partners to a corporation.
Whittingham v. Crease - the solicitor was found to be liable to the beneficiary whose wife witnessed
the Will at the request of the solicitor.
- A conflict of interest may arise where there is a joint retainer, such as for both husband and
wife, to prepare Will
- A as a general rule, the solicitor cannot keep any matter confidential as between the two clients
where there is a joint retainer.
- Wills are prepared under a joint retainer, no subsequent Will can be prepared for one of the
parties without the knowledge and consent of the other. If consent is not given, the solicitor
must refuse to act in the preparation of a subsequent Will.
- A conflict of interest may also arise where a solicitor acts for a family member in preparing a Will
or where the solicitor is a beneficiary under the Will
- reasons for any unusual dispositive provision, such as a dependant or spouse being excluded
from the Will;
- any advice given that the client refuses to follow, such as providing for dependants or obtaining
tax advice, confirmed in writing with the client;
- reasons for any dramatic change in instructions as compared with the previous Will; and
- any concerns the solicitor has regarding the testamentary capacity of the client.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
A statement of net worth should be prepared that includes:
• all property owned by the testator;
• all property held jointly with or without a right of survivorship;
• all insurance policies, with details of beneficiary designations;
• all pension plans and registered plans, with details of beneficiary designations; and
• liabilities, including mortgages and any other liabilities secured against property.
- It may be appropriate to verify the information provided by the testator. Copies of insurance
policies, investment statements, beneficiary designations, and title deeds may be requested.
- The solicitor should make reasonable inquiries into the actual title of assets being disposed of in
the Will, particularly if they are the subject of specific gifts. An independent subsearch to
confirm the title or ownership of real propertymay be appropriate.
- Failure of the solicitor to verify the ownership of property may lead to liability in respect of a
claim from a disappointed beneficiary.
- Earl v. Wilhelm- the solicitor prepared a Will on the instructions of the testator to leave the
farm property to a particular beneficiary. At the time the Will was prepared, another lawyer in
the same fi m had acted for the testator in the transfer of the farm property to a corporation.
The named beneficiary in the Will successfully sued the lawyer for failure to ensure that the
farm property passed to the intended beneficiary.
The solicitor should consider a number of questions with regard to dependants and family members.
4.2.4.1 Attributes
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
It is common to have a general gift as to personal effects that provides any or a
combination of the following:
• beneficiaries may agree among themselves as to the distribution, with any items over which
there is a dispute to be sold and the proceeds falling into residue,
• the executor has discretion to distribute among named beneficiaries or a class of beneficiaries,
or
• division of personal effects into lots by the executor with beneficiaries choosing lots.
Powers of the executors are granted usually to provide maximum flexibility and discretion to executors
in dealing with the assets as part of the administration of the estate
• protection for executors from liability for any loss if acting in good faith,
• permission for executors to purchase property from the estate,
• the right for professional advisors who are executors to take their normal professional fees,
• the ability to operate spousal trusts to preserve the spousal rollover (i.e., refrain from loans that
could taint the tax status),
• family law provision — for example, in Ontario, such provision may protect the income from any
inheritance from becoming subject to the equalisation of property with the spouse of a
beneficiary,
• custody of person and property of minors (i.e., guardians),
• donation of body and organs,
• funeral and burial instructions, and
• governing law.
4.4 Specific Drafting Issues
Care must be taken to provide for survivorship in the event one spouse dies within close proximity in
time to the other, such as in the case of a common accident
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
- A statement in the Will may be made to clarify the testator’s intention regarding property
transferred gratuitously into joint names with a right of survivorship
- In addition, where it is intended that the surviving joint owner hold the property in trust on
behalf of the estate, including a statement of intention to that effect, the Will may serve to
protect the estate beneficiaries by recording the obligation of the surviving joint owner to
account to the estate
In order to discourage beneficiaries from litigation, a testator may want to include a gift that is
conditional on the beneficiary not taking any action to challenge the validity of the Will or any provision
in the Will.
Generally at common law such clauses were thought not enforceable because the courts had considered
they were intended only to threaten rather than actually disinherit the beneficiary. However, such
clauses may be enforceable under the circumstances below.
• The conditions are limited to challenges to the validity of the Will and do not attempt to oust
the jurisdiction of the court to interpret the Will or related matters over which the court has
exclusive jurisdiction.
• There is a specific gift over or alternate gift in the event the beneficiary challenges the Will (i.e.,
the gift cannot simply fall into residue or increase the share of other residual beneficiaries but a
direction that this is to occur is sufficient).
As an alternate to the requirement for a specific gift over, there may be another gift for that beneficiary
expressed to be effective whether the condition is complied with
or not.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
- A gift of specific property will adeem if the particular property is not owned at the date of death.
The testator may wish to replace the gift with another if that property is no longer held by the
testator at the time of death, and instructions should be obtained.
- The alternate gift could be for a fixed sum or, if the proceeds are segregated in an investment
account, a gift of the proceeds.
- Specific gifts of shares of public or private corporations should be carefully drafted to address
future corporate reorganisations whereby the particular shares are no longer owned at death
but replaced by shares in a successor corporation.
A per stirpes division is a manner of dividing a particular gift or fund among the issue (meaning,
descendants) of an individual by “stocks” or by roots. It is also sometimes described as a division “by
representation.” A per stirpes distribution can only be made to issue because the nature of the division
is that a share of a pre-deceased descendant who has issue surviving is always re-distributed among
those surviving descendants of more remote degree
In a per stirpes division, at each degree of lineage, there is a division into equal shares
for:
1. each living individual: each individual at that degree of lineage who survives the decedent; and
2. each pre-deceased person who has issue surviving: each person at that degree of lineage who
dies before the decedent but who has issue who survive the relevant decedent.
- Per capita is a method of dividing a gift or fund among a number of individuals. Per capita is
Latin for “by head” and essentially means that each person who is in the described group will
receive an equal share. A per capita division differs from a per stirpes division in that there is no
re-division of any share among the issue of a predeceased beneficiary. The division takes place
once in equal shares among all the persons entitled without regard to their degree of
relationship.
- A gift to be divided in equal shares per capita among a class of beneficiaries all at the same
degree of lineage from the testator, such as grandchildren, will be divided in equal amounts and
each member of that class will receive the same amount regardless of the number of brothers
and sisters each member of that class has
4.5 Execution
In addition to ensuring that the Will is validly signed and witnessed, and intestacy avoided, executing a
Will with a solicitor’s supervision has several other benefits:
• the solicitor will have the opportunity to confirm the capacity of the testator,
• the solicitor can review the final contents of the Will with the testator,
• the solicitor can ensure that the testator’s instructions are reflected in the Will,
• the solicitor can answer any questions that arise,
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• the solicitor can ensure the Will is signed voluntarily by the testator, and not under duress or in
circumstances that could suggest undue influence, and
• the solicitor can make last-minute changes where there has been any misunderstanding or the
testator has altered the instructions. See 3.3.2 for Formalities of a will
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 5 – INTESTACY
Estates Act
29. (1) Subject to subsection (3), where a person dies intestate or the executor named in the will refuses
to prove the will, administration of the property of the deceased may be committed by the Superior
Court of Justice to,
(a) the person to whom the deceased was married immediately before the death of the deceased or
person with whom the deceased was living in a conjugal relationship outside marriage immediately
before the death;
(c) the person mentioned in clause (a) and the next of kin,
as in the discretion of the court seems best, and, where more persons than one claim the administration
as next of kin who are equal in degree of kindred to the deceased, or where only one desires the
administration as next of kin where there are more persons than one of equal kindred, the
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
administration may be committed to such one or more of such next of kin as the court thinks fit.
5.2 BARRIERS TO WILL-MAKING AND CONSEQUENCES OF INTESTACY
5.2.3 Cost
The cost of hiring a lawyer to prepare a Will may be seen as an expensive exercise for many.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
The additional steps required to administer an intestate estate and the complexities that arise will add
to the cost of the administration of the estate and delay the ultimate distribution of assets to the
beneficiaries. In Ontario, no distribution may be made until one year after death.
In the case of probate fees, a number of strategies are available to reduce or defer probate fees, which
will not have been explored or implemented
5.3.3 Everything Will Pass Outside the Estate to My Spouse Even Without a Will
This may be technically true on the death of the first spouse, providing that the individual does
not want to provide for any beneficiary except the surviving spouse and is comfortable leaving
the ultimate disposition of his or her wealth in the sole discretion of the surviving spouse. This
may not always be the case.
This plan will result in an intestacy on the death of the second (surviving) spouse. If there are no
children or other issue, the combined wealth of the couple will be distributed to the family of
the spouse who dies last. If the husband and wife die in a common accident, there would be no
surviving spouse, and no time to make a Will.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
Generally the courts will interpret a Will so as to avoid intestacy wherever possible. There is a
presumption against intestacy in interpreting a Will. However, even where the individual has a Will,
intestacy may result if not all the estate has been disposed of in the Will or the Will is invalid. For
example, a Will may be found invalid if:
Where a family member of a deceased is entitled to a distribution under the Will and, in addition, is
entitled to a share of distribution in respect of an amount on intestacy, the beneficiary may generally
“double dip,” subject to adjustment under the particular legislation of the jurisdiction. For example, in
Manitoba and Ontario, the preferential share of the surviving spouse on a partial intestacy will be
reduced by any benefit received under the Will.
The portion of the estate in excess of the preferential share for the surviving spouse is called the
“distributive share.” The division of the distributive share between the surviving spouse and issue varies
by how many children either survive the intestate or die before the intestate with issue surviving.
The surviving issue of the intestate will be entitled to the remainder of the distributive share, or if there
is no surviving spouse, he or she will be entitled to the entire estate of the intestate
In Ontario, the formula for distribution to issue of the intestate is a combination of per stirpes and per
capita distribution.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
issue, the spouse is entitled to the property absolutely. R.S.O. 1990, c. S.26, s. 44.
Preferential share of spouse
45 (1) Subject to subsection (3), where a person dies intestate in respect of property having a net value
of not more than the preferential share and is survived by a spouse and issue, the spouse is entitled to
the property absolutely. 1994, c. 27, s. 63 (1).
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
In Ontario, the distribution among surviving issue is similar to that of Manitoba, but not identical, as
descendants of the same degree may not necessarily receive an equal share. The estate is divided per
capita at the generation closest to the intestate that has a surviving member, with an equal share also
being created for any pre-deceased descendant of the nearest degree who has issue surviving. This first
division is the same as the division for Manitoba in point 1 above.
Next, the share of any pre-deceased descendant is distributed in a similar manner as if that pre-
deceased descendant was intestate (i.e., the share in the first division created in respect of a deceased
descendant is divided into equal shares for the surviving descendants of that pre-deceased descendant).
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
5.5.7 Rules Where No Spouse, Children, or Issue
• Parents: In all provinces but Quebec, parents will take next in equal shares or all to a sole
surviving parent.
• Siblings: In every province except Manitoba and Quebec, brothers and sisters will take after
parents.
• Nieces and Nephews: In every province but Quebec, nieces and nephews take after brothers
and sisters.
• More Remote Next of Kin: In all provinces, once all these relatives are exhausted as potential
beneficiaries on intestacy, more remote relatives of the deceased person who are the closest
surviving next of kin will inherit the estate on an intestacy. This will be based on “degrees of
consanguity,” or how closely related by blood one person is to another.
• Last Resort Escheat: In all provinces, in the event no such next of kin exist or can be discovered,
the estate of the intestate will escheat to the Crown. Essentially this means that the provincial
government will inherit the assets of the deceased.
5.5.8 Calculation of Spousal Share where Children have Pre-deceased the Intestate
Where a child has died before the intestate with issue surviving, that child will be considered alive for
the purpose of determining the spousal share
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
her net family property will include the home’s entire value, not just its change in value during the
marriage.
5.5.10 Rights of Common-law Spouses
Common law spouses are not entitled to distribution on intestacy in Ontario.
Each jurisdiction has rules that set out who may be appointed to administer the estate of an intestate
Generally the persons who have priority to be appointed follow the same ordering as the rights to
distribution on an intestacy. Generally the following family members have priority to be appointed and
are ranked by priority as follows:
Where the order of death can be ascertained, and the second to die is a beneficiary of the estate of the
first to die, the assets of the individual who died first will go through two estates before being
distributed to a beneficiary and potentially subject to probate fees twice. In addition to the double
probate fee burden, in some circumstances seemingly inappropriate results with respect to the
distribution of property can result.
Where the order of death cannot easily be determined, forensic evidence may be used to obtain a
declaration as to which of two persons died first. In Adare v. Fairplay, a husband and wife died in their
home of carbon monoxide poisoning caused by a broken gas main in front of their home. It was found
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
that the husband died first based on autopsies establishing the onset of rigor mortis. The statutory
presumption, discussed below, did not apply since the order of death could be ascertained on the
evidence.
Where the order of death cannot be determined, a survivorship rule may be relied upon in the
provincial statutes. The older person is deemed to have died first
In Ontario, where property is held jointly with a right of survivorship and the joint owners die in
circumstances where the order of death is unknown, the joint tenancy is deemed to be severed and is
treated as a tenancy in common so that each deceased owner’s share is distributed through that
owner’s estate.
In Leach v. Egar (1990), 38 E.T.R. 65 (B.C. C.A.), following her divorce and division of assets, the former
wife and her children were lost at sea and presumed dead. The former wife and the children all died
intestate. The presumption of death in order of seniority applied. Since the wife is deemed to have died
first, her estate devolved to her children, and since they died intestate as well, their estate devolved to
their father. Consequently, the wife’s estate was inherited by her ex-spouse, and her other family
members were not entitled to anything.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
5.12 DEFINITION OF SPOUSE AND COMMON-LAW SPOUSE FOR PURPOSES OF INTESTATE SUCCESSION
(BY JURISDICTION)
1(1) “spouse”, except in Part V, has the same meaning as in section 1 of the Family Law Act; (“conjoint”)
(b) have together entered into a marriage that is voidable or void, in good faith on the part of a person
relying on this clause to assert any right. (“conjoint”) R.S.O. 1990, c. F.3, s. 1 (1); 1997, c. 20, s. 1; 1999,
c. 6, s. 25 (1); 2005, c. 5, s. 27 (1, 2); 2006, c. 19, Sched. C, s. 1 (1, 2, 4); 2014, c. 7, Sched. 9, s. 1.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 6 – CLAIMS AGAINST ESTATES BY FAMILY MEMBERS
6.1 Introduction
In addition to creditors for debts of the deceased and the estate, family members may have an
enforceable right to make a claim against an estate. Good estate planning will take potential claims of
family members into consideration. The estate’s legal costs of dealing with a claim and those of a
successful claimant may reduce the assets available for distribution.
Priority may be given to specific rights in the legislation, For example, spousal rights in Ontario to net
family property and in Quebec to family patrimony take precedence over any distribution in the Will or
on intestacy, but “double dipping” with rights under the Will is not permitted in Ontario, whereas it is in
Quebec.
Although property rights may take priority, the right to dependant relief may exist in addition to the
spousal right to property where the result is inadequate. For example, in Ontario, it is possible to make a
claim for property and make a further claim for dependant relief with the result that a surviving spouse
may be entitled to no less than the provincial formula for property but may be entitled to an additional
amount under dependant relief.
A spouse and dependent child and certain other family members may also have rights to support that
are enforceable during lifetime or on death. The right in respect of support from a deceased person is
generally available under dependant relief legislation.
In Ontario, the claim in respect of property is subject to a specific formula that can be deviated from
only at the discretion of the court where there are special circumstances.
6.3.4 Ontario
Definition of Spouse: Persons who are legally married. Common-law spouses are not recognized for
purposes of this statute.
Limitation Period: Six months from the date of death. If an election is not made, the surviving spouse is
deemed to have elected to take under the Will or intestate provisions.
FLA Election
Spouse’s will
6 (1) When a spouse dies leaving a will, the surviving spouse shall elect to take under the will or to
receive the entitlement under section 5.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
Rights: Upon death, whether the deceased left a Will or the estate is distributed under the intestacy
rules, the surviving spouse may elect to take his or her entitlement under the Will or intestacy, or take
an equalization payment under the Family Law Act.
Property Included: Net family property includes all property owned at the date of death unless
excluded. If property was owned prior to the marriage, the increase in value is included. The
matrimonial home, or homes, will be net family property no
matter how or when acquired.
Property Excluded: Net family property excludes the value of property that can be traced to a gift or
inheritance received during marriage. If a gift or an inheritance is spent or mixed with other family
funds, the protection may be lost. If a beneficiary wants to protect the amount received by inheritance
from the potential claims of a spouse, it is important that the inheritance be preserved in some form
and kept in a separate account so that it is not mixed with other family funds or assets.
Principle of Division: On marriage breakdown or death, there is a right to an equalization payment for
net family property on a 50/50 basis.
Priority: The spouse’s entitlement is in priority to gifts under the Will, intestate beneficiary rights, and
orders for the support of dependants, except for an order in favour of a child of the deceased.
6.4.1 Exceptions for Inherited Property, Gifts, and the Family Home
Generally each province has laws that may limit the right of a spouse to make a claim against inherited
property on marriage breakdown or death. It may be necessary to keep the inheritance separate from
other property since the protection can be lost if the inheritance is mixed with family assets or
otherwise used to support the family.
Any property used as a residence, including a recreational property, may be subject to special rights that
attach to a matrimonial home.
In some cases the individual may want to take steps to minimise the impact of such a claim. This may be
possible by entering into a marriage contract (sometimes called a “domestic contract” or a “pre-nuptial
agreement.
A marriage contract may be set aside on any number of grounds, including lack of independent legal
advice, undue influence, and failure to fully disclose financial information
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
The use of an inter vivos trust may also be effective to shelter assets from a claim since generally the
assets in the trust will not form part of the estate. Beneficiary designations for insurance and registered
plans and the use of jointly held property with a right of survivorship may also keep assets outside the
estate of the deceased spouse and provide some insulation from a claim
If a parent is seriously concerned about the potential claim of a child’s spouse on marriage breakdown,
or that the child needs to be protected from voluntary sharing with the spouse, a protective
testamentary trust may be appropriate. For example, a trust for the child’s benefit during his or her
lifetime with a gift over to grandchildren or other beneficiaries on his or her death will preserve the
estate for the benefit of these other beneficiaries and still give the testator’s child access to the funds
during his or her lifetime
A child or spouse of the deceased, and certain other family members to whom the deceased may have
had a support obligation, may be entitled to make a claim against the estate under dependant relief
legislation for support or maintenance.
Relief is available if the person qualifies as a dependant under the relevant provincial (or territorial)
legislation and if the deceased individual dies without making adequate provision for such person
“dependant” means,
(a) the spouse of the deceased,
(b) a parent of the deceased,
(c) a child of the deceased, or
(d) a brother or sister of the deceased,
to whom the deceased was providing support or was under a legal obligation to provide support
immediately before his or her death; (“personne à charge”)
The required duration of a relationship ranges from twelve months to three years. The period of
cohabitation is reduced where there is a child of the relationship.
The rights of children may also depend on whether the child is a minor or an adult. Adult children are
often excluded unless the child is dependant on the deceased in some way
6.5.5.1 Minors
In all jurisdictions minor children of the deceased are considered dependants and eligible for dependant
relief.90 Applications for a minor may often be made by a public official on behalf of the minor. Some
jurisdictions permit the parent to make the application for the minor child.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
Ontario: An adult child may qualify for dependant relief if the child is a full-time student and has not
withdrawn from parental control or the deceased parent was actually providing support immediately
before death.
Ontario: A brother or sister, parent, grandparent, or grandchild of the deceased may apply if the
deceased was actually providing support immediately before death.
Ontario: The legislation specifically makes the waiver of statutory dependant relief rights invalid.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• Determination of amount
• 62 (1) In determining the amount and duration, if any, of support, the court shall consider all the
circumstances of the application, including,
Ontario: Section 72 of Ontario’s Succession Law Reform Act casts a broader net and deems the following
to be included in the estate of the deceased and available to be discharged for payment of a dependant
relief order:
• gifts mortis causa (made in anticipation of and condition on the donor’s death);
• deposits in the name of the deceased in trust for another, or in joint names with the deceased,
including those in a bank, savings office, credit union, or trust company;
• property transferred by the deceased into joint tenancy and owned at death;
• property transferred by the deceased in trust or to another where the transfer was revocable by
the deceased;
• life insurance proceeds on any policy owned by the deceased; and
• pension benefits or rights, including RRSPs and RRIFs passing under a beneficiary designation.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
s. 72 (1); 1999, c. 12, Sched. B, s. 17.
Ontario: Government agencies may apply to recover the cost of benefits, assistance, or other support or
maintenance provided to a dependant.
In Tataryn v. Tataryn Estate, the Supreme Court found that dependant relief legislation must be
interpreted according to contemporary standards and read in the light of modern values and
expectations and that what is “adequate, just and equitable” must be viewed in the light of current
societal norms.
6.7.1.4 Ontario
In Ontario, the Cummings decision of the Ontario Court of Appeal examined Tataryn, finding that
“adequate provision” was not limited to a needs-based economic analysis in determining a dependant
relief application and that the moral duty was a relevant consideration in Ontario. The applicants were
the two children of the deceased. The children were in need of support, but the court refused to set
aside the second wife’s beneficial ownership in the matrimonial home, even though the wife was not in
need of support, on the basis of a moral obligation to the wife. The question of moral obligation was to
be examined in the light of society’s expectations of what a judicious person would do in the
circumstances.
The court observed that society’s expectations are that in addition to support for children and spouses,
spouses will share in each other’s estate when the marriage is over, and that in examining the reasoning
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
in Tataryn, these expectations were not confined to British Columbia. This case is interesting in that the
finding of a moral obligation to another person was the reason for denying relief to the applicant
children rather than being a reason to grant relief.
Nature of entitlement: If the deceased has not made adequate provision for the proper support, the
court may order that such provision as it considers adequate be made out of the estate of the deceased
for the proper support of the dependants. The application may be made on behalf of a dependant by
the dependant’s parent. Certain government agencies who have been providing certain benefits to the
dependant may also make the application on behalf of the dependant (SLRA-O, s. 58(1)-(3))
Ontario: A court can also make an order for the testator’s estate to repay the dependant’s debts. The
legislation (s. 63(2) of the SLRA-O) states that provision may be made out of income or capital or both
and an order may provide for one or more of the following, as the court considers appropriate,
a. an amount payable annually or otherwise whether for an indefinite or limited period or
until the happening of a specified event;
b. a lump sum to be paid or held in trust;
c. any specified property to be transferred or assigned to or in trust for the benefit of the
dependant, whether absolutely, for life, or for a term of years;
d. the possession or use of any specified property by the dependant for life or such period
as the court considers appropriate;
e. a lump sum payment to supplement or replace periodic payments;
f. the securing of payment under an order by a charge on property or otherwise;
g. the payment of a lump sum or of increased periodic payments to enable a dependant
spouse or child to meet debts reasonably incurred for his or her own support prior to an
application under this Part;
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
h. that all or any of the money payable under the order be paid to an appropriate person
or agency for the benefit of the dependant;
i. the payment to an agency referred to in subsection 58 (3) of any amount in
reimbursement for an allowance or benefit granted in respect of the support of the
dependant, including an amount in
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 7 – QUEBEC ISSUES FOR CANADIANS OUTSIDE QUEBEC
The current Civil Code integrates some elements of common law, including the law of trusts, and
contains 10 books. The primary source of law is the code, which is organised in a systematic fashion and
covers a broad area of law.
Only lawyers may litigate (i.e., appear before the courts) to resolve a dispute. Lawyers act in an
adversarial environment, whereas notaries must provide information and advice to all parties in a
matter or transaction.
Both lawyers and notaries have legal training and attend law school for three years. However, lawyers
proceed to bar admission school and notaries pursue notarial studies at university for an additional year.
Notaries can give legal advice to all parties or sides in a matter, draft legal documents, authenticate
those documents, and keep formal records of transactions that can be relied upon in future. A large part
of a notary’s practice consists of transferring real property, called “immovables” in Quebec, and a
secondary area of practice is Wills, successions, and estate planning.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
individuals to review their Wills, powers of attorney for property, and personal care and health care
directives with a lawyer in the new jurisdiction to determine whether changes need to be addressed.
Individuals who formerly lived in Quebec may have insurance policies issued in Quebec. Insurance
policies issued in Quebec have unique characteristics that should be examined. In addition, there may
be a marriage contract made under Quebec law that could affect the devolution of the estate.
In general, civil law does not recognise trusts and there is no concept in civil law of the separation of
legal and beneficial ownership of property.
A trust is conceived as a “patrimony by appropriation.” Essentially the “trust patrimony” consists of the
property transferred in trust. The concept of “patrimony” is key to the Quebec trust. Inherent in the
concept of patrimony is that it constitutes a fund comprised of assets and related liabilities that
fluctuate over time.
Trusts cannot be created by unilateral declaration in Quebec. They may be created by contract, by gift,
by Will, or under a specific provision of the law. Quebec trusts do recognise the triangular relationship
between the settlor, the trustee, and the beneficiary (described as dedication or appropriation to a
defined purpose), as well as the assets that form a patrimony separate from that of the settlor,
beneficiary, or trustee. In addition, as in the common-law jurisdictions, the court has the role of being
available to enforce performance of the trust.
Beneficiaries of Quebec trusts are protected from third party claims of creditors and others in respect of
the patrimony unless there is fraud. The property of the trust does not form part of the settlor’s
patrimony and is not available to the settlor’s creditors. In addition, like the settlor, the beneficiary has
no real right in the trust property, and trust property is a distinct and separate patrimony from that of
the beneficiary. The beneficiary does have a personal claim against the trust for payment of his or her
interest, and it is possible for a creditor to seize this interest that a beneficiary has in the trust. However,
the creditor cannot have any greater rights than the beneficiary to enforce rights against the trusts.
While those in a civil union have identical rights to family patrimony, distribution on an intestacy, and
dependant relief, there are some differences. Civil union is dissolved by agreement made before a
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
notary, not divorce. In addition, although couples married in Quebec will be recognised as married in
other provinces in Canada, a civil union may not be recognised as a marriage per se, and this may have
consequences where the parties own property outside Quebec in jurisdictions where their status may
be uncertain. However, persons in a civil union may qualify to be recognised as common-law couples
where these are recognised in other provinces or territories in Canada.
The calculation of the value of family patrimony is similar to the manner in which net family property is
equalised under Ontario law. The value of family patrimony that each spouse owns at the relevant date
for division (whether the date of separation, divorce, or death) is added together and divided by two.
The value of family patrimony owned individually by each spouse is then compared. The spouse who has
less than one-half of the aggregate family patrimony owned by both is entitled to a payment from the
other or from the estate in the case of death.
There is no specific right in the division of specific property per se. Rather, the spouse entitled to a
payment becomes a creditor of the other spouse, or the estate, for the amount of the shortfall.
In Ontario, and all other common-law jurisdictions except Newfoundland and Labrador, only the
surviving spouse may make a claim in respect of property on death. However, in Quebec (and
Newfoundland and Labrador), either the surviving spouse or the heirs of the deceased can make a claim
in respect of family patrimony. This could result in the surviving spouse being entitled to a payment or
transfer of property from the heirs or the heirs of the deceased being entitled to a transfer of property
from the surviving spouse.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
7.3.6 Probate
In Quebec, the object of probate is limited to proving that the testator has in fact died, that he or she
was the person who executed the Will, and that the Will is valid as to form. The scope of the court’s
jurisdiction in matters of probate in Quebec is quite narrow and does not extend to hearing grounds of
nullity, such as lack of capacity or undue influence. The court does not confer authority on liquidators or
executors; their authority derives from the Will and the law. Furthermore, there are no probate fees
levied on the value of the estate assets. In addition, probate is only required for holograph Wills and
Wills made in the presence of two witnesses; it is not required if the Will has been prepared by a notary.
The Will registry also records any testamentary disposition made in a marriage contract since 1994,
along with the name of the notary or lawyer who has retained the original document. Marriage
contracts in Quebec must be notarised and registered and, as for Wills, it is possible to conduct a search
to determine if any document exists in respect of a particular individual.
In circumstances where an individual appears to have died intestate, but once lived in the province of
Quebec, a search should be done to determine if a Will has been registered in the province or a
marriage contract exists that contains a testamentary disposition.
Where an individual is resident and domiciled in Quebec, it is not possible to name as beneficiary of an
RRSP, RRIF, TFSA, or RDSP even a beneficiary who is living outside Quebec. However, it is possible for an
individual resident and domiciled outside Quebec to name a resident of Quebec as a beneficiary of his or
her registered plan.
The absence of any rights on death for de facto couples makes it extremely important for individuals in
such a relationship to plan their estates to ensure the result on death is according to each party’s wishes
and that the surviving partner is adequately provided for. The lack of legal rights for de facto couples
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
who fail to get advice and do estate planning is potentially more severe in Quebec than it might be in
other provinces as there is no survivorship feature of joint ownership, nor can any beneficiary
designations be made for RRSPs or RRIFs.
De facto couples who fail to make Wills may face considerable difficulty on the death of the other
partner. For example, even if the home is owned jointly, this will be without a right of survivorship and
the heirs of the deceased partner could force the surviving partner to vacate the family home.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 8 – OBTAINING THE GRANT OF PROBATE
The authority of the executor appointed under the Will arises immediately upon death of the testator
and derives from the Will itself. However, in many cases it will be necessary for the executor to obtain
Letters Probate in order to deal with the assets of the estate and carry out the duties of the
administration of the estate.
Similarly, where there is no Will, the administrator of the estate must obtain Letters of Administration in
order to be appointed as administrator. Unlike the executor under a Will, no administrator exists until
appointed by the court in the Letters of Administration. The administrator of an estate has no authority
until the grant of Letters of Administration is given by the court. Until an administrator is appointed, the
authority to manage the estate is lodged with the court.
In Ontario, the process of obtaining probate is called obtaining a “Certificate” and Letters Probate or
Letters of Administration are called a “Certificate of Appointment of Estate Trustee with a Will” or
“Certificate of Appointment of Estate Trustee without a Will,” respectively.
In some cases, it may be possible to administer an estate without the grant of probate. However, there
may be very good reasons for doing so even where it is not absolutely necessary.
Potentially the executor, the beneficiaries, and any undistributed assets of the estate or any trust
created under the Will could be subject to liability. The executor may be able to reduce the risk of
liability with releases.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
8.1.4.2 To Deal with Real Property
Title to real property, any mortgages or other loans or guarantees secured with real property, or any
other liens against real property are subject to the land registration system under provincial legislation.
It is usually not possible to transfer, encumber, or otherwise deal with real property of a deceased
person without the grant. In Ontario, it may be possible to deal with real property under the Registry Act
without a Will. However, this is becoming less frequently possible as the registration of land in Ontario is
being transferred into the electronic registration system. Where the real property is located outside the
province where the testator resides, it may still be necessary to obtain a grant of probate in the other
jurisdiction. This can be done by a resealing or, in appropriate circumstances, by an original grant in the
other jurisdiction.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• the testator was subject to undue influence or fraud with respect to the document; or
• there were errors of execution that cannot be repaired by the court under substantial
compliance legislation, where available.
Where probate has been granted, the Will is presumed to be valid and third parties may rely on the
grant unless it has been revoked. When the application is made for probate, the validity of the Will may
be formally challenged and the grant will not be made until the challenge is either withdrawn or
adjudicated upon.
Probate fees must be paid and the original Will must be located before the grant can be obtained. This
potentially produces a catch-22 situation where the executor needs the grant to open a safety deposit
box or to access accounts in a financial institution.
Many financial institutions will deal with the executor on a limited basis before the grant is issued. For
example, the financial institution may agree to draw a cheque payable to the funeral home or payable
to the Treasurer of the province drawn on the account in order that the funeral expenses and probate
fees may be paid.
Before the grant is issued the executor may want to manage any investment accounts with brokerage
firms or investment companies. Without the grant, this may pose some problems. However, if the
instructions are conservative, designed to preserve capital, or the investments are only being managed
in the ordinary course, the financial institution may permit the executor to give instructions and manage
the accounts on an interim basis until the grant is issued. Conditions may be imposed similar to those
that might be required in order to waive probate.
Where the estate is small or the account with a particular financial institution is under a certain dollar
limit, it may be possible to deal with the estate assets without probate. Most financial institutions in
Canada will agree to transfer assets without probate, but the conditions may vary and may include
specifics as outlined below.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• The account is under a certain dollar limit. As a rule of thumb, banks may waive probate where
the accounts do not exceed $30,000 as a maximum amount.
• For Canada Savings Bonds, if they do not exceed $20,000 and if the individual applicant is
entitled to the entire estate or if the estate passes to the surviving spouse, the limit is $75,000.
Probate is not required to transfer these assets
• In other situations, where the amount is over the institutional dollar limit, waiver may be
granted on additional terms, such as providing security, indemnities, and/or retaining the funds
or investments at the financial institution.
8.2.1 Province and Judicial District Where Application for Grant Is Filed
The application for probate is normally made in the province where the deceased resided at the time of
death or was domiciled3 at the time of death
Once the application is complete and errors or deficiencies addressed, a judge will normally review the
application and sign the order to issue the grant on an in camera basis — that is, without any public
hearing or even the requirement that anyone appear in person before the judge. This non-contentious
process of obtaining a grant is called “proving the Will in common form.”
8.2.4 Proving the Will in Common Form and Proving the Will in Solemn Form
Where the Will is proved in common form, it is valid and third parties may rely on the authority of the
grant unless it is subsequently revoked. A grant proved in common form may be subject to challenge at
a subsequent time by a formal action brought to revoke the grant of probate on the basis that the Will
was not valid. A Will may also be proved in solemn form, in which case it cannot be challenged
subsequently except in limited circumstances. This normally occurs only where there is a dispute over
the validity of the Will or there is some question as to the validity of the Will that the executor wants
reviewed by the court
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
Proof in solemn form protects the Will from a later action to revoke the grant unless it is discovered that
the Will was revoked or the grant in solemn form was obtained by fraud. Due to the permanent nature
of the grant proved in solemn form, the process is more formal.
Letters of Administration is the name of the grant to an administrator where there is no Will.
In Ontario, “estate trustee” is used to describe an executor or an administrator whether male or female,
eliminating the now archaic and awkward Latin terms “executor,” “executrix,” “administrator,” and
“administratrix.”
8.3.1 Letters Probate (in Ontario, Certificate of This is a grant given by a court certifying that the
Appointment of Estate Trustee with a Will) Will that is attached to the grant has
been duly proved and registered with the court
and verifying the executor’s authority
named under the Will.
8.3.2 Letters of Administration (in Ontario, This is a grant where the deceased died intestate.
Certificate of Appointment of When issued, this grant authorises
Estate Trustee without a Will) the person appointed, called the “administrator”
(or, in Ontario, the estate trustee without a Will),
to administer the estate.
8.3.3 Letters of Administration with Will Annexed This is similar to Letters Probate since there is a
(in Ontario, Certifi cate of Will but made to a person other than an executor
Appointment of Estate Trustee with a Will) named in the Will. This may be required if the
executor has died, is unable to act, or has
renounced his or her appointment.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
Appointment of Succeeding Estate Trustee with a court will appoint another person to administer
Will) the estate. This grant is not issued if the executor
dies before Letters Probate were obtained, in
which case Letters of Administration with Will
Annexed should be issued (see 8.3.3, Letters of
Administration with Will Annexed (in Ontario,
Certificate of Appointment of Estate Trustee with a
Will)).
8.3.6 Letters of Administration Pendente Lite (in This is a grant of probate made by the court in
Ontario, Certificate of Appointment of Estate order to preserve the assets of the estate when
Trustee during Litigation) there is a legal action to resolve a dispute over the
validity of the Will. Pendente lite means “during
litigation.”
8.3.7 Ancillary Letters Probate (in Ontario, Appointment of Estate Trustee with a Will)
Certificate of Ancillary Ancillary Letters Probate are issued where the
original grant has been issued by a foreign non-
British court and the deceased owned property in
the province. This grant is required in order to
administer the assets located in the province.
8.3.8 Resealing
Where a grant is made by a British court or another province or territory in Canada, the original grant
given in a particular province may be resealed in another province. This permits the transfer of property
outside the jurisdiction where the grant was originally made. Where the grant is resealed, it has the
same force and effect as if it had been originally granted in that jurisdiction.
Generally probate fees or probate taxes must be paid in order for the grant to be issued.
It may be necessary to obtain probate (or a resealing of the original grant) and pay probate fees or taxes
in another jurisdiction if the deceased owned property, especially real property, outside
the province or territory of residence.
However, in Eurig, the constitutionality of the Ontario probate fees was challenged on the basis that
since the amount of the fee bore no relation to the service provided (i.e., they were not a flat rate but
rather were based on the value of the estate), the fees were actually a tax.
The Supreme Court of Canada agreed but permitted retroactive amendment to the legislation in order
to permit the province to incorporate the fees into the actual statute. Other provinces followed suit,
with the result that in Ontario “probate fees” are now called “estate administration taxes,” although in
other provinces they are still commonly referred to as “probate fees.” In this chapter they are referred
to variously as probate fees or probate taxes, although technically they are only fees in the provinces
that charge nominal amounts.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
The assets that are subject to probate are only those that pass through the estate and under the
administration of the Will or under the administration of the grant without a Will.
As a matter of jurisdiction, real property located outside the province is generally excluded from the
calculation of probate fees since levying probate fees on real property outside the province would be
beyond the powers of the province under the rules relating to conflicts of laws and under Canada’s
Constitution.
Assets not subject to probate should not be confused with assets that do not require probate to be
administered or managed by the executor or administrator. If probate is required, the value of all assets
of the estate, even those that do not require probate in order to transfer title, must be included in the
value of assets of the estate upon which the fees are calculated.
Normally liabilities of the deceased are not deducted from the value of the estate in determining the
amount of probate fees. However, there are exceptions. Usually any amount that is secured against real
property may be deducted.
In Ontario, the forms specifically indicate that “insurance payable to a named beneficiary or assigned
value if a property held jointly and passing by survivorship, or real estate outside Ontario” will be
excluded.
In addition, in Ontario, the value of the estate is subject to the estate administration tax reduced by “the
actual value of any encumbrance on real property that is included in the property of the deceased
person.”5 Similar and other exclusions exist in other jurisdictions.
The estate solicitor will attend to preparing the necessary documents, sending notices and filing the
required documents with the court. If the executor is a corporate trustee, or has retained a corporate
trustee as agent for the executor, the corporate trustee will usually attend to sending the required
notices and preparing the inventory of assets.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• proof of bond or security if the executor is resident outside Canada, and/or
• payment of the relevant probate fees or taxes.
Ontario: An Estate Information Return must be fi led with the Ministry of Finance within 90 calendar
days following the issuance of the Certificate of Appointment of Estate Trustee.
It is necessary to fi le the original signed Will in order to obtain probate. However, if the original cannot
be found, the rules usually provide for proving a lost Will, although this will require additional steps and
paperwork.
In some provinces, the solicitor who prepared the Will prepares an Affidavit of Execution shortly after
the Will has been executed and keeps it with the original Will. If this has not been done, the Affidavit of
Execution may need to be obtained prior to obtaining the grant. Special rules exist in the event the
Affidavit of Execution cannot be obtained from the witness.
Legislation sets out the information that must be included in the notice. This will often include a copy of
the Will. In some jurisdictions, if the beneficiary is only entitled to a legacy, the information required
may be limited to an excerpt from the Will setting out the entitlement.
Although anyone can apply for a grant of administration, legislation usually sets out a
hierarchy based on family relationships (e.g., spouse, children, siblings, etc.).
If an application for a grant of administration is required, much of the same information is required as
for a grant of probate. Requirements include:
• an affidavit stating that a Will could not be located, with applicable evidence of efforts made,
and explaining the applicant’s relationship to the deceased;
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• where the named executor has renounced, a renunciation signed by the executor or evidence as
to why a named executor is not able to accept the appointment;
• renunciation by those with priority over, or equal priority to, the person applying for the grant;
• confirmation that notices have been delivered to all intestate beneficiaries entitled to share in
the estate (see Chapter 5) and others as required by the applicable legislation;
• asset, liability, and beneficiary information as above;
• proof of bond or other security if applicable; and
• payment of the relevant probate fees or taxes.
Security may be in the form of a bond, or other arrangements may be possible depending on the assets.
If the beneficiary(ies) include minors or an incapable adult, security will usually be required.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 9 – PROBATE FEE PLANNING
9.1 INTRODUCTION
An examination of the table of provincial probate fees in Chapter 8 (see Figure 8.2) will demonstrate the
motivation for engaging in probate fee planning. Generally probate fees will not be a planning priority in
Alberta, Quebec, Yukon, the Northwest Territories, and Nunavut. In these jurisdictions the fees are
nominal. However, if an individual lives in one of these jurisdictions but has real property in one of the
other provinces that impose higher fees (i.e., “probate tax”), some consideration may be given to
probate fee planning regarding that extra-provincial property.
9.1.1 Caution, Caution, Caution: Probate Fee Planning Is Only Part of the Planning Process
Probate fees are easily understood, as they are similar to sales tax. They represent a flat rate — or
almost flat rate — upon the value of an estate
Many probate fee planning strategies can be implemented easily and without the benefit of a solicitor
or legal advice (perhaps with the exception of transfers of real property). These include making
beneficiary designations and transferring property into joint names
9.1.2 Example of Consequences of Bad Planning with Jointly Held Property and Elderly Parents
If nothing goes wrong, that is, no child dies before the parent, and the parent dies within the year rather
than living for a number of years, the planning may not have any harmful effects
However, few professionals would implement an estate plan that could potentially lead to the following
results:
more income tax being payable than probate fees are saved and
the client’s indented distribution of wealth will be thwarted if certain future events intervene
before he or she dies.
If the principal residence has been transferred, the principal residence exemption may be compromised
since there are now multiple owners who must claim the exemption for the years of ownership to the
exclusion of any other property if the entire gain is to be sheltered. If children have their own
residences, they may be giving up the exemption on their own property for some years, or the gain on
the home previously owned solely by the parent will not be fully sheltered.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
9.1.4.2 Jointly Held Property
With jointly held property it is not possible to provide for succession as it is in a Will. In a Will, if the
intended beneficiary dies before the testator, provision may be made for a gift over to other
beneficiaries. If the intended beneficiary is a child, the gift over is often to the surviving issue of the
deceased child. However, if the property is jointly held, and the intended beneficiary dies, the property
will always pass by operation of law to the other surviving joint owner or owners. This may not always
be the result intended if there is an “out of order” death (i.e., a transferee joint owner dies before the
original sole owner of the property).
Reducing the value of the estate, or structuring one’s affairs to avoid probate altogether, has potential
benefits other than probate fee savings. These include the following:
- privacy,
- executor fees savings,
- savings on legal fees,
- protection from claims of spouses in respect of property and dependant relief, and
- protection from creditors.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
9.2.1 Privacy
The application for probate, including the supporting documents that show the value of the estate and
the contents of the Will, are a matter of public record. Obtaining probate exposes the entire contents of
the Will and the value of the assets of the estate to public scrutiny. Even in jurisdictions where probate
fees are not a factor, inter vivos trusts and other Will substitutes may be used by wealthy families or
those for whom privacy is a priority to transfer assets on death outside the estate.
Corporate executors (i.e., trust companies), who agree with the testator to be appointed as the executor
during the testator’s lifetime, will usually enter into a compensation agreement that provides for a
declining rate of fees based on the value of the estate. For example, the fees on the first $1,000,0000 of
value may average out to 4.5%, may decrease to 3% on the next $1,000,000, and reduce to 2% of the
value on the balance of the value of the estate.
9.2.4 Protection from Claims of Spouses in Respect of Property and Dependant Relief
An individual may wish to reduce the value of his or her estate to shelter assets from the claims of a
spouse in respect of property or for a claim in respect of dependant relief. However, it should be noted
that the clawback of certain assets is specifically provided for in some provinces. Dependant relief
legislation in Ontario, Prince Edward Island, the Northwest Territories, and Nunavut gives the courts
authority to access insurance and lump sum pensions in order to make an appropriate award.
Since probate fees are levied on the value of the estate, almost all probate fee planning
strategies are designed to accomplish either of the following objectives:
• reduce the value of assets in the estate subject to probate or
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• have all assets that require probate pass outside the estate so that probate is not required at all
on death.
There are many assets that do not require probate, and it is possible to arrange one’s affairs to remove
certain assets from the estate. However, it is important to realise is required in order to transfer those
particular assets or not, must be included in the value of the estate for the purpose of calculating
probate fees that once probate is required, the value of all the assets in the estate, whether probate is
required in order to transfer those particular assets or not, must be included in the value of the estate
for the purpose of calculating probate fees. The only exception to this “all or nothing” rule is where
multiple Wills are used to divide the assets of the estate into a probatable estate and a non-probatable
estate.
In addition, multiple Wills can be used in some provinces to isolate assets passing
through the estate that do not require probate in a separate Will.
9.3.3.3 Liquidity
Beneficiaries will receive the funds quickly and not be tied up with the delays and procedures required
in the administration of the estate. Funds will be available immediately to support any of the
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
dependants of the deceased. The funds may also be used to provide liquidity for estate expenses,
including funeral and burial costs, probate fees, and income taxes for the terminal return. However, care
should be exercised in using insurance proceeds to pay the debts of the deceased or the estate since the
funds legally belong to the beneficiary. Payments by the beneficiary may not be repaid if the estate
turns out to be insolvent. In addition, payments on behalf of the estate may taint the testamentary
status of the estate or any trust created in the Will, and tax advice should be obtained.
If the designation is in the Will and the insurance proceeds are to be held in trust, care must be
exercised to keep the insurance proceeds outside the estate.
This requirement was litigated in the unreported Ontario decision of Rozon v. Transamerica Life
Insurance Co. of Canada.1 The court found that the insurance company did not have the right to require
Letters Probate as a condition of payment. The insurance company was protected from subsequent
liability under the wording of the Ontario insurance legislation as long as it had no actual notice of a
competing claim to the insurance proceeds at the time of the payment. The liability in respect of the
insurance proceeds if there was a subsequent claim would be that of the payee executor under the
invalid Will.
While the Rozon case may enable some estates to avoid probate fees, it also demonstrates the
difficulties executors face. Without Letters Probate, executors may be exposed to liability if the Will is
challenged. The preferred strategy would be to name a beneficiary wherever possible.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
However, RRSPs and RRIFs are fully taxable on death unless a rollover to a qualified beneficiary is
available. The plan proceeds must be reported on the terminal tax return, and the resulting tax is a legal
liability of the estate as a debt of the deceased. The plan proceeds on death will be paid to any named
beneficiary in full without any deduction or withholding taxes.
The inherent tax liability in making beneficiary designations for registered plans must be taken into
account when the beneficiary designation is made. It is a common misconception that the tax is a
liability of the beneficiary. Failure to understand the tax treatment of the plan proceeds could result
in unintended consequences, including:
• an unintended windfall for the beneficiary who received the plan proceeds on a gross basis,
• depletion or elimination of the interest of a beneficiary under the Will due to the tax liability on
the plan payable by the estate,
• personal liability for the executor or administrator in respect of unpaid tax liability if he or she
makes a distribution without a clearance certificate, and
• surprise collection assessment on the beneficiary by the CRA if the estate does not pay the tax.
Since the proceeds do not pass through the estate, the executor may not even be aware of the payment
and must make inquiries as part of the administration process to determine if there are any tax
consequences to the estate.
Where the trust is created in a beneficiary designation in a Will, there is a risk that the proceeds may be
considered part of the assets of the estate even where there is a specific statement that it is intended
that the assets will be held in a separate trust. This could have serious consequences, including not only
additional probate fees but also loss of creditor protection (particularly for insurance, where creditor
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
protection is available across Canada), a potentially even more serious result as the latter could result in
a much greater loss.
Two decisions from Saskatchewan, Re Carlisle Estate4 and Sun Life Assurance Co. of Canada v. Taylor,5
have resulted in debate among practitioners as to whether a beneficiary designation for life insurance
will cause the policy proceeds to be included in the assets of the estate
1. Revocation clauses must ensure that the Wills do not revoke each other. Sometimes mutual
non-revocation clauses are included. More caution may need to be exercised in preparing a
codicil where multiple Wills are in use. In some circumstances it may be preferable simply to re-
execute multiple Wills rather than do codicils.
2. In applying for probate, it may be necessary to prove that the secondary Will did not revoke the
primary Will. Generally this can be done by fi ling an affidavit.
3. It may be necessary to use crossover debt clauses so that the assets under one Will can be used
to pay liabilities arising in respect of property in the other. For example, if a residence or
vacation property is mortgaged and it is intended that clear title will pass to a beneficiary, it may
be necessary to provide for the assets of the other Will to be utilised to pay the mortgage.
4. Similarly, if shares of a private corporation pass under the secondary Will to a family member,
the assets governed by the primary Will may be needed to pay the income tax in respect of
those shares.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
9.3.7 Property Held Jointly with a Right of Survivorship
There are two types of joint ownership — with and without survivorship. With a right of survivorship,
the property passes to the surviving owner or owners on the death of a joint owner. Property held
jointly with a right of survivorship passes outside the estate to the surviving joint owners by operation of
law. Joint ownership with a right of survivorship does not exist in the province of Quebec. Joint
ownership without a right of survivorship is treated as a partial ownership of property. Each joint
owner’s share becomes property of his or her estate on death and is dealt with under the terms of the
Will. If the property is real estate, title is taken as “tenants-in-common.”
9.3.7.2 Joint Ownership with a Right of Survivorship and Probate Fee Planning
Individuals often hold property jointly with a right of survivorship to avoid probate fees on death
because such property passes outside the estate of the deceased joint owner to the surviving owners. If
the intention is for the surviving joint owner to transfer the property to the estate trustee to be divided
and administered as part of his or her estate, the property is technically subject to probate fees, if the
estate requires probate. There may also be no way to ensure the surviving joint owner will fulfi ll his or
her obligation to dispose of the property as intended.
This is a very convenient way for couples to pass property to the surviving spouse. A minimum of
paperwork is required and probate fees can be avoided because the property does not pass through the
estate of the first spouse to die. In addition, there are no Canadian income tax consequences to
transferring ownership of property between spouses — either into joint names or from one spouse to
another,9 including common law and same-sex spouses who are treated identically to married spouses
under the Income Tax Act after at least 12 months of cohabitation. However, it may not be appropriate
where there are other beneficiaries, such as children of a first marriage.
The income tax consequences of a transfer of survivorship only under the new concepts created by the
Pecore and Madsen decisions are not clear (see 9.3.8.3, Effect of Pecore and Madsen on Presumption of
Resulting Trust). The CRA’s position may remain the same as for other transfers into joint names even
where only a right of survivorship passes on death. However, it may be possible to argue that the
disposition, if any, on the creation of this type of joint account should be for a lesser value (potentially
zero), with the capital gain being realised upon the death of the original owner.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
estate rather than passing to the surviving owner and often argue there should be a resulting trust (see
9.3.8.1, The Presumptions).
9.3.7.7 Other Problems with Jointly Held Property with a Right of Survivorship
In addition to the potential conflicts discussed above, there are a host of other problems that may arise,
and it’s important to be aware of all potential consequences. In general, property should be transferred
into joint names with a right of survivorship only when an immediate gift is intended. There are many
considerations.
• All joint owners may have immediate and full access to the property.
• Assuming a “right of survivorship” the property passes to the surviving owners on the death of
one joint owner, bypassing the deceased’s estate and possibly conflicting with distribution plans
in their Will. The property may become part of the estate if the status of the joint account is
challenged
• If property is held jointly with a right of survivorship with children and there is an “out of order
death,” family members may be disinherited. For example, a person’s grandchildren will not
receive the share of property owned jointly by the person and his or her children if one of the
children dies first. On the death of the parent, the property will pass only to the surviving
children.
• The property may become subject to the claims of creditors of all joint owners.
• The property may become subject to the claim of a spouse of a joint owner if there is a marriage
breakdown.
• A transfer into joint names, unless to a spouse, creates a “deemed sale” for income tax purposes
on the portion passed to another joint owner. The death of a joint owner generates another
deemed disposition on the accrued gain on that person’s share.
• All joint owners must declare their portion of the income and capital gains from the jointly held
property.
• A portion of the “principal residence exemption” will be lost if the jointly owned property is a
principal residence and other joint owners have their own residence on which they will claim the
exemption.
• Special caution must be exercised if any of the joint owners is a U.S. citizen, U.S. resident, or
green card holder because of the potential liability for U.S. gift tax and U.S. estate tax.
• The co-operation and signature of all joint owners may be required to make any change in
ownership.
• Where there is a joint account with a parent and children, when the parent passes away the
account will remain joint with a right of survivorship unless the property is transferred into
ownership without a right of survivorship.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
9.3.8 Effect of Presumption of Advancement and Presumption of Resulting Trust
At common law, the presumption of a resulting trust applied to the gratuitous transfer of property
unless the presumption of advancement applied. As a result, when the donor died, the executor or
others having an interest in the estate could argue that the property was held in trust by the recipient
owner for the benefit of the estate and that the property should pass to the heirs of the donor.
The presumption of advancement has been altered by statute in many provinces. For example, in
Ontario and also in Nova Scotia, the presumption of advancement between spouses has been abolished
except with respect to property held as joint tenants or monies held on deposit in both names.
These cases, Pecore and Madsen, have abolished the presumption of advancement between a parent
and an adult child but preserved the presumption for transfers by a parent to a minor child. Where
jointly held property passes to the child upon the death of the parent, the child will be holding that asset
in trust for the estate of the parent, and therefore the asset is to be distributed according to the
parent’s Will.
In addition, the nature of property interests held in a joint tenancy have been altered by Pecore and
Madsen. The Supreme Court found that when property is transferred gratuitously into joint names with
a right of survivorship, there could be a gift at the time of the transfer (this is consistent with the law
before these decisions) or there could be a gift only of survivorship that takes place upon the death of
the transferor
9.3.8.4 Probate Fee Planning Causes Litigation Where Intention of Deceased Ambiguous: Neufeld and
the Doctrine of Resulting Trust
The Neufeld decision is a prime example. The court considered the plaintiff’s argument that the
deceased, who knew she was terminally ill, carried out an estate plan designed to avoid payment of
probate fees and taxes. The court found that this was the intention of the testator based on the
evidence and that the defendant had not provided sufficient evidence to rebut the presumption of
resulting trust. The court found that the presumption of resulting trust applied not just to the jointly
held property but also to the beneficiary designation of the RRIF. In the result the assets in dispute were
held by the defendant brother in trust for the estate of the deceased.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
9.3.9 Alter Ego Trusts and Joint Partner or Common-law Partner Trusts
Individuals who have attained age 65 may settle a trust on a rollover basis where the settlor is entitled
to the net income during his or her lifetime and no one other than the settlor is entitled to the capital
during his or her lifetime. Generally these trusts do not have any income tax benefits. However, they are
very effective for probate fee planning as any property in the trust passes to the beneficiary of the trust
on the death of the settlor and not under the settlor’s Will.
Other benefits of alter ego trusts may include privacy, protection from creditors, claims of family
members, or as a convenient alternate to managing property under a power of attorney, particularly
where the settlor has been diagnosed with a debilitating mental condition such as Alzheimer’s disease
However, it should be pointed out that an alter ego trust is not generally recommended for a U.S. citizen
because of the adverse U.S. tax consequences.
Charitable giving through an alter ego trust is problematic. A limited donation credit may be available if
the trust qualifies as a charitable remainder trust; this requires that there be no right to encroach on
capital during the lifetime of the settlor.
It is also possible to set up a joint partner trust or common-law partner trust for the benefit of the
settlor who is over 65 and his or her spouse, including a commonlaw spouse for income tax purposes (12
months’ cohabitation). Where both spouses want to set up joint partner trusts, they can settle one trust
with both of them as beneficiaries as long as they are both at least 65 years old.
In general the income tax consequences of an alter ego trust are outlined below.
• There is a rollover on transfer of property to the trust on settlement of the trust as long as the
settlor is 65 years of age or over.
• The 21-year deemed disposition rule does not commence until the death of the settlor, or the
last death of the settlor and his or her spouse in the case of a joint partner trust.
• There is a deemed disposition at fair market value of all property on the death of the settlor, or
the last death of the settlor and his or her spouse in the case of a joint partner trust.
• The trust will be subject to the top marginal tax rate on any income taxed in the trust. This will
apply, for example, on the deemed disposition occurring on the death of the settlor and/or his
or her spouse.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• The trust is a separate taxpayer, and this may result in a mismatch as between the trust and the
settlor or his or her spouse in relation to various credits and other tax attributes and accounts
and may complicate or compromise loss utilisation.
Using a corporation to hold assets has many consequences that are not discussed here. These include
legal consequences, rights of shareholders, tax implications, and costs of professional fees and
corporate and tax compliance.
The transfer of property to the corporation may be done on a rollover basis by making an election
under section 85 of the Income Tax Act as long as shares are taken back as consideration and the value
of other non-share considerations, including any assumption of debt, does not exceed the tax cost of the
property transferred. If the property transferred includes shares of a private corporation, the value of
non-share consideration cannot exceed the tax paid up capital of the shares transferred to the
corporation. Tax advice is essential. The use of a corporation may create double tax on the assets in the
corporation and on the shares held in the transferee corporation. Although there are strategies to
reduce or eliminate this potential double tax burden, they are complex, expensive, and not always fail-
proof.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• will there be sufficient assets after the gift in the event of an emergency, change in financial
position, or change in health condition;
• the property will be exposed to the creditors of the recipient;
• the property may be subject to claims of a spouse under family law;
• if the recipient dies, the property will pass under his or her estate and be subject to the claims of
the recipient’s family members;
• the gift will be a disposition at fair market value for Canadian income tax purposes unless it is to
a spouse or common-law partner;
• there may be U.S. gift tax if the donor is a U.S. citizen (or if the property is U.S. real property, but
this would not be subject to probate fees or taxes in any event);
• there may be legal fees and other transfer costs;
• the effect of the gift on distribution of the estate both in the Will and outside the estate; and
• the effect of the gift on the recipient.
Family members will not have to wait until the donor is dead to enjoy the benefits and the donor can
see and appreciate the enjoyment of others that is made possible by his or her bounty
9.3.11.2 Inter Vivos Trusts Other than Alter Ego or Joint Partner or
Common-law Partner Trusts
Providing the inter vivos trust is not an alter ego or joint partner or common-law partner trust, and the
attribution rule in subsection 75(2) of the Income Tax Act does not apply, the following are some of the
more important tax consequences:
• there will be no rollover on transfer of property into the trust,
• the trust will be subject to the 21-year deemed disposition rule,
• there will be no disposition on transfer of property to a Canadian resident beneficiary, and
• there will be no disposition on the death of the settlor.
•
9.3.12 Eliminating the Need for Probate
In some cases it may be possible to have all assets otherwise requiring probate pass outside the estate.
This strategy has its limitations and may only be appropriate where the value of wealth is modest and
the plan of distribution is simple. The individual should still have a Will as a backstop to deal with:
There are some drawbacks to this strategy. If the estate is stripped of most of the wealth, or consists of
assets that are intended to be distributed in specie, or are not liquid (such as shares of a private
corporation), how will expenses normally paid by the estate be funded? Expenses will include:
• income taxes on registered plans passing outside the estate,
• income taxes on the deemed disposition of jointly held property,
• other income taxes payable in the terminal return,
• funeral and burial costs, and
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• debts owing by the deceased at the time of death.
9.4 USING A HOTCHPOT CLAUSE TO ADJUST FOR DISTRIBUTIONS OUTSIDE THE ESTATE
The use of hotchpot clauses is discussed at 4.3.6.7, Hotchpot Clause. These can be very effective in
probate fee planning to ensure that the plan of distribution intended by the estate is effective whether
property passes through the estate or outside the estate. Hotchpot clauses may be included in Wills and
inter vivos trusts. A hotchpot clause can only adjust the share of any beneficiary to the extent they are
assets of the estate. Where the majority of the assets are passing outside the estate, a hotchpot clause
may not be able to fully remedy any disproportionate distribution. Perhaps running through an example
would be useful.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 10 – ADMINISTRATION OF TRUSTS AND ESTATES
An executor who is appointed in a Will has no obligation to accept the appointment. When the
application for the grant is made, any executor named in the Will who does not wish to accept the
appointment may renounce his or her appointment. If none of the executors wish to act, another person
will have to apply, although the provisions of the Will should be examined to determine if alternate
executors have been named.
Once an executor has commenced to act, however, even before the grant is issued, renunciation can
only be made with the approval of the court. The executor should be warned to not deal with the assets,
represent themselves as the executor, or ask others to act on his or her authority as executor until the
decision has been made to act. Otherwise, the unconditional right to renounce is forfeited and personal
liability may result from losses relating to administration of the estate.
A person may wish to renounce at the outset, for example, if the estate is insolvent, or if the person
intends to make a claim against the estate, in which case he or she should not continue to act in any
event because of conflict of interest.
Another factor in considering whether to accept the appointment is the ability to cooperate and work
with the other executors. Unless the Will states otherwise, or there is a tie-breaker rule under the
provincial statute, executors must make decisions unanimously. Generally courts will not break a
deadlock where executors do not agree and the only remedy may be to find a compromise unless the
conduct of the co-trustee warrants his or her removal. A court will generally refuse to remove an
executor on the grounds of a poor or hostile relationship with a co-executor or beneficiary even where
the administration of the estate is stalled, unless there is specific malfeasance on the part of the
executor.
The executor’s role is mainly administrative, particularly in an immediately distributable estate. Where
ongoing trusts are created in the Will such as for minor children or a surviving spouse or otherwise, the
executor may also be the trustee of these testamentary trusts
In carrying out his or her duties, the executor has a fiduciary duty. This means the executor must always
act in good faith for the best interests of the beneficiaries.
The executor need not carry out all his or her administrative duties personally. The Will may also provide
authority for the executor to delegate some of his or her duties, such as the authority to manage
investments that cannot normally be delegated. Professionals may be retained to carry out or assist with
some of the tasks. These might include the following:
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• a lawyer to obtain the grant of probate, advise the executor, handle the sale or transfer of
certain assets, maintain estate accounts, and assist with passing of accounts;
• a tax advisor (lawyer or accountant) to advise on the tax aspects of estate administration, do
post-mortem tax planning, and advise regarding the clearance certificate;
• an accountant to assist with financial statements and tax returns for any corporations held by
the deceased, prepare tax returns for the deceased and the estate, and any alter ego or joint
partner trust;
• an appraiser to provide valuations for real estate and other assets; and an agent for executor
(usually a trust company) to carry out some of the administrative duties.
Notwithstanding the ability of the executor to delegate administrative tasks and seek advice, the
executor cannot delegate his or her decision-making obligations. This would include the power to
exercise discretion to distribute income or encroach on capital, or whether to sell property or distribute
in specie, or to decide what price should be accepted on a sale. The executor must select and retain
professionals or agents who have the appropriate expertise and must supervise their work. In Wagner
v. Van Cleef, the administrator of an estate delegated all the responsibilities of estate administration to
a solicitor who misappropriated a substantial sum. The court found the administrator was personally
liable for the lost funds.
To the extent that the executor delegates administrative duties, there may be a reduction in executor
compensation. Record keeping, preparing an inventory of assets, opening bank accounts, preparing
reports for beneficiaries, determining liabilities of the deceased, and arranging for payment of debts of
the deceased and the estate are administrative duties that would normally be carried out by the
executor. A reduction will not apply to all costs incurred. For example, the following would generally not
reduce executor compensation:
Executors may wish to save the cost of professional advisors, but they run a very high risk that costly
mistakes may be made. In addition to personal liability, the executor may be risking his or her own
inheritance if he or she is a beneficiary. The executor will be personally liable for the value of any
distribution made to a beneficiary without having first obtained a tax clearance certificate under the
Income Tax Act.
An executor may also be personally responsible for any loss or failure to minimise liability if tax advice is
not obtained. There are multiple tax planning opportunities associated with the tax consequences of
death, the tax returns available in the year of death, and post-mortem tax planning. In addition, dealing
with non-residents or distributions to non-residents can create tax obligations. If the deceased owned
U.S. real property or securities of a U.S. issuer with a value in excess of $60,000US, a U.S. Estate Tax
Return is required and U.S. estate tax may be payable.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
10.2.4 Conflicts of Interest
As a fiduciary, an executor must avoid placing him- or herself in a position of conflict of interest.
There is a direct conflict of interest if an executor makes a claim against the estate, as might be the case
where the executor/spouse makes a claim in respect of property under family law or a dependant relief
claim. In such a case, the executor must cease to act, and if there are no co-executors, an administrator
ad litem must be appointed.
The rule most often arises with respect to the exercise of any discretion during the administration of a
trust that may favour one class of beneficiary over another, such as a life tenant versus a remainderman,
or other successive interest or residual beneficiary. The executor must not favour one over the other.
Generally an executor is held to a high standard of care but will not be liable for honest mistakes. An
executor who is an individual who is not a professional will be held to an ordinary standard of care. A
lawyer or accountant who acts as executor as part of his or her practice or a trust company will be held
to a higher standard of care. These different standards of care for non-professionals apply whether or
not they take compensation.
Provincial law sets out the requirements for investments by trustees. All provinces have a form of the
“prudent investor rule,”
One common principle, for example, is diversification, known popularly as not “putting all your eggs in
one basket.”
The Will may also permit delegation of investment-making powers, and provincial legislation may permit
delegation of investment powers as well. The legislation of most jurisdictions specifically states that
investing in a mutual fund is not considered an improper delegation of decision making over
investments, even if the fund is managed by an external money manager (however, the executor must
still decide whether investing in any particular mutual fund would be considered a prudent investment).
Where the deceased was carrying on a business, the executor must act to preserve the interest of the
estate in the business. If the deceased was a sole proprietor, the executor may have to wind up the
business if it cannot be sold or a family member does not want to continue the business. If immediate
sale of the interest in the business is not possible or practical, it may be appropriate to arrange for
continuation of the business until a sale can be made. The executor would not be expected to carry on
the business personally.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
The executor should make inquiries to determine if the deceased made any succession plans. Potential
purchasers for a business usually include family members, employees, other partners or shareholders in
the business, competitors, or suppliers
10.2.9 Problems with Closely Held Corporations
The executor may act as shareholder of the corporation, but this may not necessarily permit the
executor to control the corporation unless he or she is elected as an officer and/or director of the
corporation.
The general advice is that the executor should seek to be appointed as a director and officer of the
corporation so that the corporation may be managed in the best interests of the beneficiaries.
This places the executor in a position of conflict because as executor the obligation is to the
beneficiaries; whereas as a director or officer, there is a primary obligation to act in the best interest of
the corporation. The legal obligations of a director trump those of the executor with respect to
corporate decision making.
Where there is an ongoing trust with an income beneficiary, there is always a question as to whether
dividends should be declared and, if so, the quantum of such dividends. . However, the declaration of
dividends by a corporation is always discretionary. The executor may have to contend with other
shareholders and directors regarding the payment of dividends.
10.2.10 Interpreting the Will and Obtaining Advice and Direction of the Court
Provincial rules generally permit an executor to apply to the court for advice and direction of the court
with respect to any questions that arise in respect of the administration of the estate. For example,
section 60 of the Trustee Act of Ontario provides:
A trustee, guardian or personal representative may, without the institution of an action, apply to the
Superior Court of Justice for the opinion, advice or direction of the court on any question respecting the
management or administration of trust property or the assets of a ward or a testator or intestate.
Generally the courts will not permit these applications to be used to substitute the decision of the court
for one that should be made by the executors. So, for example, the court will not intervene to break a
deadlock between co-executors who cannot agree. Nor will the court entertain an application to ask
how the executors should exercise their discretion or to approve a decision to exercise a discretion that
is clearly authorised under the Will, since such approval is not necessary.
The role of the executor in making such an application should be neutral. The executor cannot be an
advocate for a particular beneficiary or a particular outcome. The executor’s responsibility is to
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
determine the appropriate interpretation of the Will in order to discharge the obligations of an
executor.
One choice an executor may make to relieve some of the work and anxiety associated with estate
administration is to hire an agent for executor, usually a trust company. Often there is a clause in the
Will specifically authorising an agent for executor. However, a specific clause may avoid criticism by
beneficiaries or persuade co-executors that this is appropriate. Hiring an agent for executor has a
number of advantages.
• The agent can carry out only those administrative duties assigned by the executor, whether
limited or comprehensive.
• The fee arrangement is flexible so that only those services provided are included in the fee.
• The executor is relieved of much of the “legwork” involved but still must make all decisions.
• The executor and beneficiaries can be confident (assuming a trust company or other
professional such as an estate solicitor is hired) that the administration is being carried out by
professionals who have expertise in estate administration.
The fees for agent for executor are generally deducted from any compensation that the executor may
claim. The cost of hiring an agent for executor is sometimes seen as an unjustified expense or a drain on
the assets of the estate. However, the compensation that may be claimed by an executor is not any less
than may be charged by an agent for executor for the same work even if the executor is a family
member
The executor should retain a solicitor to provide advice pertaining to the executor’s duties, the
interpretation of the Will, and any legal matter that arises during the administration of the estate. In the
usual case, the solicitor normally carries out the following functions:
Where the executor does not wish to carry out all his or her duties personally — either due to
availability, lack of expertise, inconvenience, or for any other reason — the solicitor may be requested
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
to carry out all the administrative duties on behalf of the trustee. In addition to the above, these might
include:
As discussed above, the executor must still make all decisions and must oversee the work done by the
solicitor.
The fees charged by the solicitor to perform administrative duties of the executor will be deducted from
the executor’s compensation. The solicitor should keep a separate record of the time and charges
related to executor’s duties for this purpose, even where the solicitor is the executor.
Generally an executor cannot be forced to make any distribution or any payment of income during the
first year of administration of the estate. The basis for the rule is that until the assets and liabilities are
determined, the executor will not be in a position to determine what funds, if any, are available. In
addition, to some extent the Canada Revenue Agency (CRA) recognises the executor’s year and in most
circumstances will permit any income earned by the estate in the first year to be taxed in the estate
return even if income is payable to the beneficiary under the terms of the Will.
The administration of an insolvent estate is particularly difficult. The executor must exercise care in all
his or her actions as he or she may be called to account to creditors as well as beneficiaries. “Insolvent”
generally means the inability to pay one’s debts as they fall due. An estate will be insolvent when all the
debts, liabilities, and expenses exceed the realisable value of estate assets.
However, most of the other requirements and duties of an executor are identical to those of any trustee
of a trust. These include, but are not limited to, the following:
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• the distribution of income and/or capital in accordance with the terms of the trust,
• the final distribution of trust property,
• preparing and presenting accounts and passing them before the court if required, and
• the risk of personal liability where distributions are made without a tax clearance certificate.
Where there is an ongoing trust created in the Will (i.e., a testamentary trust), the role of the executor
in administering the “estate” may shift from the role of estate administration to administering the
testamentary trust created in the Will. This shift normally takes place once all the estate matters have
been settled
The period of administration of a testamentary trust begins only after the estate has been administered
and the assets or fund that is directed in the Will to be paid to the trust has been distributed to the trust
by the executor or administrator. This may be confusing where the testamentary trust comprises the
residue of the estate because there may appear to be a seamless transition from the administration,
gathering assets and paying liabilities, and the commencement of the residual trust.
• Accounts may be passed before transfer to the testamentary trust. This protects the executor
and trustees of the trust.
• A clearance certificate should be obtained since the funding of the testamentary trust is a
distribution by the estate.
• The rights of beneficiaries to distribution under the trusts may not commence until the trusts
are funded by the estate.
• The trust may have trustees who are not the same persons as the executors.
The T3 Trust Income Tax and Information Return is fi led by trustees for inter vivos and testamentary
trusts. The T3 return is also used to report income earned by an estate after the date of death. It is fi led
by the executor annually until the administration and distribution of the estate assets has been
completed.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 12 – ADMINISTRATION OF PROPERTY HELD FOR OTHERS UNDER STATUTORY AUTHORITY
12.1 TERMINOLOGY
Pass Accounts: The process by which formal accounting records for the assets of a trust or estate,
including the “estate” of a living person, are submitted by the trustee, attorney, guardian, or other
person in charge of managing the financial affairs and property on behalf of another person to the court
for approval.
Public Trustee: The public official who is charged with the responsibility of protecting the interests of
vulnerable and incapable persons under provincial law. This office is sometimes called the Public Trustee
or the Public Guardian and Trustee,
Grantor: The grantor is the individual who makes a power of attorney for property.
Guardian: The person appointed by the court to manage the financial affairs of an incapable person is a
guardian
If a power of attorney for property has been granted, the person appointed in the power of attorney
document will have the authority to act.
If the individual has transferred all or a portion of his or her property to an alter ego or other self-benefit
trust, the trustee of the trust will be governed by the common law of trusts and the provisions of the
Trustee Act of the particular jurisdiction.
If no arrangements have been made to manage the financial affairs of an incapable person, generally
the courts will have the jurisdiction granted under provincial law to appoint someone, called a guardian.
Alternatively the public trustee or other provincial official may have the authority to manage the affairs
of the incapable person.
An application for guardianship will be subject to the requirements set out in the relevant provincial
legislation The applicant may have to give notice of the application to interested parties such as to
family members and/or the public trustee. The legislation may set out who has priority in making an
application for guardianship, similar to the priority for appointing an administrator of an estate. The
statutory regime may include the following requirements:
• posting a bond or other security equal to the value of the assets of the incapable person,
• a management plan setting out the manner in which the assets will be invested and managed,
• regular reporting and accounting to the public trustee,
• an assessment of capacity if a finding has not already been made,
• notice to and consent of relatives and third parties including the public trustee, and
• relationship to the incapable person and reasons he or she should be appointed.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
12.2.2 Assessments of Capacity
Generally an assessment of capacity is required in order to establish whether an individual is capable of
managing his or her financial affairs. Provincial law will set out the procedure for an assessment of
capacity. The persons entitled to make an assessment of capacity may include physicians, psychologists,
social workers, and other health care professionals. Specific certification or training as an approved
assessor may be required. Consent to the assessment may be required by the person to be assessed,
although the law of the particular jurisdiction should be examined to determine if it is possible to do an
assessment or obtain a court order for an assessment without consent.
Under a power of attorney, the terms of the document will determine when the authority commences.
If the document has no condition, it will be effective immediately whether the individual is capable or
not. However, the attorney may not have any obligations or duties until he or she commences to act as
attorney. There may also be a shift in the nature of the obligations once the grantor becomes incapable.
Generally an attorney is an agent during the capacity of the grantor and is accountable to the grantor.
However, once the grantor becomes incapable, the statutory regime will dictate the duties and
obligations and the attorney may have additional duties and obligations more in the nature of a
fiduciary if such duties have not already arisen or been imposed.
The duties of an attorney acting for incapable persons and of court appointed guardians will be set out
in the provincial legislation. Generally both have a fiduciary duty to act in the best interest of the
incapable person and to account for their management of property.
An attorney has a duty to account and during incapacity may be compelled by a third party to prepare
and pass accounts, such as the executor or relative of the incapable person. An attorney may also be
required to pass accounts by the grantor.
A guardian is under no duty to preserve the capital of the estate of the incapable person for the benefit
of potential estate beneficiaries. Re Vickers Estate
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
Under provincial law, a person may apply to the court under the relevant legislation to have a person
declared missing, and the court may appoint a person to manage the financial affairs of such person.
The public trustee may also be appointed to manage the property of an absentee. The person appointed
has powers, duties, and obligations as set out in the provincial statute and may be the same or similar to
that of court appointed guardians or trustees, although not necessarily identical.
In some cases the Trustee Act or Public Trustee Act of the province may provide for the administration
of the property of a missing person.
Absentee legislation or related legislation may also provide for an application for presumption of death.
Usually such application may be made after a prescribed period of absence, but it may also be possible
to apply for such an order in special circumstances of peril, such as a plane crash, 9/11-type disaster, or
other criteria that make it reasonable to conclude that the missing person is deceased. If the application
is granted, the estate of the absentee may be administered and distributed as if the person were
deceased. The order as to death must specify the date on which the person is presumed to have died.
The legislation may also permit payment of life insurance proceeds, but the specific presumption of
death legislation and provincial insurance legislation should be examined
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 13 – ESTATE AND TRUST ACCOUNTS
13.1 INTRODUCTION
The obligation to keep records and any requirement to pass accounts extends to all trusts, not just
estates, and extends to trustees and other fiduciaries as discussed.
The duty to keep adequate records and accounts is a paramount responsibility of an executor or trustee.
Under provincial legislation, financial records and accounts must be maintained by trustees and other
persons managing property in a fiduciary capacity. The records and accounts must be produced for
inspection to those entitled under provincial law upon request. Any expense incurred by the trust,
estate, beneficiaries, or other fiduciary caused by the failure to provide accounts will be the personal
expense of the trustee or other fiduciary.
The obligation to keep accounts is also founded on the fiduciary obligation to act in the best interest of
the beneficiary. If called upon, a trustee must be able to demonstrate he or she has managed property
responsibly, in the best interests of the beneficiaries, in accordance with the terms of the trust, and not
committed any fraud or other misappropriation. This can only be done if proper financial records and
accounts are kept.
In addition to the legal requirement to keep accounts, there are a number of benefits to keeping
accounts and providing regular, informal financial reports to beneficiaries, including:
• issues can be dealt with before they grow to become problems by permitting inquiries to be
made and answers given during the administration of an estate
• an environment of trust and co-operation is created from a transparent administration of the
trust property that demonstrates fair treatment of beneficiaries, value for assets sold, and
sound investment of trust funds;
• reduce the risk that beneficiaries will
o refuse to approve informal accounts,
o demand passing of accounts, or
o raise objections upon passing of accounts;
• protect the trustee from accusations of impropriety;
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
• assist with the preparation of tax returns; and
• keep a record of financial information that may be the basis for trustee compensation.
Trustees do not have an obligation to volunteer information. However, they must provide it if requested
by a beneficiary or others as provided by statute.
However, it may be a good policy for a trustee to provide information voluntarily and make regular,
informal reports for the reasons stated above.
In some cases, persons other than beneficiaries may have a right to information or accounts if they have
an interest in the estate. These individuals may include creditors or the public trustee on behalf of a
minor, incapable person, or charity. Such persons may also have a right to compel passing of accounts.
The Will or trust indenture may also set out specific requirements regarding accounts, providing
information to beneficiaries and others, and passing accounts. However, as a general rule, the Will or
trust document cannot relieve the executor or trustee of the obligations to maintain proper records and
accounts or pass accounts.
Trust accounting is “cash accounting.” All financial transactions are categorised as either income
(revenue) or capital, and as either receipts or disbursements.
In categorising a receipt as capital or income, trust principles, not tax principles, are used. So if a capital
asset, such as shares of a corporation, is sold at a gain, the entire proceeds are recorded as capital, even
though for income tax purposes a portion of the receipt would be included as income.
No specific form of accounts is required unless the accounts are to be passed, in which case they must
be prepared in “court form” under provincial rules. It is important to obtain experienced estate
accounting help to ensure compliance with the formal court rules for trust accounts. Generally accounts
must include the following statements:
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
13.4 PASSING ACCOUNTS
The requirement to pass accounts is like an audit of the financial records of the trust or estate. It is the
process by which formal accounting records for the assets of a trust or estate, including the “estate” of a
living person, are submitted by the trustee, attorney, guardian, or other person in charge of managing
the financial affairs and property on behalf of another person to the court for approval.
In Ontario, for example, there is no obligation to pass accounts. Where not obligatory, it is generally
done only at the request of a beneficiary due to conflicts or where there are minor or incapable
beneficiaries.
Where passing accounts is not obligatory, the trustee may voluntarily decide to pass accounts even if
not requested to do so by a beneficiary or other interested party. If the trustee decides that a passing of
accounts is not necessary for protection from liability, and the beneficiaries do not insist, an estate or
trust can be administered and fully distributed without passing accounts. As an alternative to passing
accounts, the trustee may request the beneficiaries to sign releases and approvals of the accounts.
If beneficiaries refuse to sign releases and approvals, the trustee must pass accounts, and the additional
cost of the application, assuming there is no wrongdoing on the part of the trustee, will generally be
paid out of the trust or estate. It may also be necessary to pass accounts to discharge any bond or other
security required to be posted by an executor or trustee.
Passing accounts is strongly recommended if the estate is insolvent or if there is a deficiency in assets
resulting in abatement
Accounts may be passed at intervals during administration of an estate or trust or only upon
termination. There is no set time period for passing accounts, but in order to limit the development of
potential problems and make the task less onerous, it may be prudent to pass accounts every few years.
Many types of objections may be made. The most common ones include the following:
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
Where a beneficiary or other person entitled to pass accounts has an objection, there is a formal
process to fi le a notice of objection after the application to pass accounts has been served.
Beneficiaries and other interested parties must be given notice of the request to pass accounts and may
object to the passing of the accounts. Special rules may apply with respect to notice to minors, incapable
persons, and charities. If there are no objections, the accounts may, in some jurisdictions, be passed
“over the counter” at the court office without a hearing, although the court will not pass the accounts
without being satisfied that they are in order and there are no deficiencies or irregularities. Upon an
application to pass accounts, the court has the discretion to inquire into any matter with respect to the
administration of the estate, including any alleged misconduct of the trustees, and provide for relief.
Once the accounts are passed, the court will issue an order approving the accounts.
An order passing accounts will bind the beneficiaries with respect to any objections for the accounting
periods covered by the order. The order will also relieve the trustee of any future liability with respect to
trust property for that period except in the case of fraud, mistake, or non-disclosure.
Because passing accounts brings closure to any objections and relieves the trustee of liability, trustees
often pass accounts voluntarily to ensure contentious issues or decisions regarding complex assets or
large estates are not re-opened at a later date. Passing of accounts is often done when new trustees are
appointed, either as a condition of court approval for a retiring trustee or to protect the new trustee
from liability arising from any acts taking place prior to his or her appointment. Trust companies
routinely have accounts passed as a matter of policy and risk management.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
13.5 EXECUTOR COMPENSATION
One of the potentially most contentious issues for beneficiaries is executor compensation. Beneficiaries
often do not appreciate the time, responsibility, and extent of the duties that are involved in
administering an estate and any testamentary trusts. Beneficiaries may expect family members to act
for free, assuming that this is appropriate.
When final accounts are prepared, a statement of trustee compensation should be included. Generally
the executor may not take compensation without approval by the beneficiaries. If beneficiaries do not
approve, or cannot approve due to incapacity, the executor will be forced to pass accounts to authorise
the amount of compensation.
If a trustee seeks compensation from a trust, the trustee is in a conflict of interest. There are three
exceptions to this rule.
1. The Trust Has a Charging Provision: The settlor can permit a conflict of interest in the trust
document by explicitly providing for the trustee to be paid compensation.
2. Beneficiaries Consent: If all the beneficiaries are adults and have full legal capacity, the
beneficiaries may consent.
3. Court’s Inherent Power: The courts have an inherent power to allow remuneration. However,
this is rarely used given the statutory power that is now provided for in all jurisdictions.
Re Bryant Isard The provision must be clearly spelled out in order to be binding.1 A provision that
authorises compensation, or authorises a trustee or executor who is also a professional to charge
professional fees for professional services provided to the estate or charge, is sometimes referred to as
a “charging provision.”
The second approach, often used by corporate executors and trustees, is to enter an agreement with
the testator or settlor setting out a detailed fee scale. The signed agreement is then incorporated by
reference into the Will.
The Trustee Act of each jurisdiction provides for a court to allow compensation to an executor or trustee
that is “a fair and reasonable allowance for the care, pains and trouble and the time spent in
administering the estate or trust.” It is important to note that the legislation suggests the general
criteria or factors to be considered are care, pains, trouble, and time spent
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
13.9 APPROVAL TO COMPENSATION
Subject to a compensation agreement in a trust or Will, an executor or trustee must obtain approval to
the proposed compensation before charging the fees to the trust or estate. There are two ways to
obtain approval — from the beneficiary(ies) or from the court.
If all the beneficiaries of the estate are adults and have legal capacity, they may approve an executor’s
compensation.
This rule also applies to the approval of a trustee’s fees. However, when a trustee of a continuing trust is
requesting approval to fees for services to date, and not at the time of final distribution, beneficiary
approval is only possible if all current, future, and contingent beneficiaries consent. As a result, it is less
likely for a testamentary trustee to be able to rely on this process.
Where beneficiary approval is possible, the executor or trustee will set out the request for approval in
writing. The request should set out the details supporting the calculation of the compensation to ensure
that the beneficiary understands how the fees are calculated. The written consent should be retained on
file.
When it is not possible to obtain beneficiary consent, or all beneficiaries do not consent, the executor or
trustee can apply to the courts to pass the accounts and seek approval to the compensation claimed.
Disputes about the accounts, including expenses, are addressed during the passing. Once disputes are
resolved, if there are any, the court will consider the question of the compensation.
Legislation in each jurisdiction provides no further guidance on how to calculate executor or trustee
compensation. As a result, a percentage-based approach for determining an appropriate fee for
executor and trustee fees has evolved. However, although these “usual percentage” calculations may
provide a starting point, the courts have ruled that the resulting calculation must be assessed against a
set of criteria that has been laid down in the case law. This two-step process is summarised at 13.10.1,
Calculating Executor Compensation Using “Percentage Guidelines.”
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
13.10.1.1 Ontario Practice (No Compensation Agreement)
In Ontario, where there is no compensation agreement, a different approach is used to calculate the
fees. Rather than charging a single percentage against capital and revenue as set out above,
- the general rule is to charge up to 2.5% on the value of the asset or cash received, including
revenues, and
- 2.5% on the value of the asset or cash distributed.
-
Because the initial charge to the capital is based on the date of death value of an asset, if the asset is
sold at a gain, an additional fee is charged against the gain when it is realised.
- $1M estate
- $250k paid out for expenses and $750k left
- Estate earned $10k in interests and dividends
As a result, a percentage tariff calculation has been developed through case law, which now serves as
the baseline for the calculation of executors’ compensation. The tariff sets claimable executor’s
compensation at 2.5% of the value of each of the capital receipts, income receipts, capital
disbursements and income disbursements, and also permits an overall care and management fee of 2/5
of 1% of average annual value of the assets. (.4%)
Once the usual percentages are applied, it is necessary to review the final amount and consider the five
factors set out in the case law to determine what is fair and reasonable in the circumstances. In
assessing the reasonableness of the remuneration, courts consider: Re Jeffrey Estate/Toronto General
Trusts Corp. v. Central Ontario Railway
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
An executor’s compensation may be disallowed where the trustee has been guilty of serious
misconduct.
Compensation might also be disallowed if the work was totally unnecessary or if the executor or trustee
agreed to accept the role for no compensation.
Compensation may also be reduced by the amounts paid to agents who assisted the executor and
carried out tasks that the executor could have performed personally unless the Will specifically
authorised the agent to be hired.
Generally compensation may not be charged until it has been approved by the beneficiaries or the
court. Where the executor or trustee pre-takes compensation, he or she may be ordered to repay the
amount in excess of the amount finally approved, with interest, from the time of pre-taking.
It has been suggested that the courts in Ontario have returned to a hard line on pretaking.
• View #1: The rule is strict — pre-taking is not permitted and is a breach of trust. The amounts
should be repaid, with interest, until determined by the court.
• View #2: There will be an exception to pre-taking in limited situations. Where permitted, as long
as the fees taken do not exceed the final amount approved, there is no breach. If the amount
taken exceeds the amount approved, the excess must be repaid to the trust plus interest.7 An
example where this may be permitted is when a trustee wishes to claim the annual care and
management fee. In the William George King Trust case, Misener J. noted on the burden of the
cost to trust if annual applications are made each year to pass accounts and obtain approval to
the fees.
Corporate trustee compensation agreements specifically address the timing for payment of
compensation to avoid these issues.
When dealing with executor compensation, the courts look at the compensation to be awarded
generally for the work done. The court does not become involved in the division of the compensation
among trustees. A dispute between executors and trustees will likely be a separate action and because it
does not affect the estate or trust, all costs incurred in the dispute will likely be paid for by the parties
personally.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
Compensation agreements with corporate trustees generally deal with the corporate trustee’s
entitlement to compensation. Payment to other co-executors and co-trustees may or may not be
addressed. If additional fiduciaries have been appointed and they wish to seek compensation, legal
advice may be required. It may be necessary to obtain consent from the beneficiaries or apply to court.
While care and management fees and revenue collection fees may be included in a compensation
agreement, the approach to charging capital fees may vary.
If an executor or trustee charges compensation, the amount received is treated as taxable income. If the
executor or trustee is an individual and does not include the compensation as business income, it is
treated as income from an office or employment. All applicable taxes must be charged, including
GST/HST if applicable, and withholdings from the fees may be required, including Canada Pension Plan
(CPP) premiums.8
If a Will leaves a legacy to the executor, there is a rebuttable presumption that the legacy was intended
to be in lieu of compensation. Unless the Will specifically indicates that the legacy is in lieu of
compensation, an executor who wishes to claim compensation must rebut the presumption by
providing evidence to show that the legacy was intended to be in addition to compensation.
Although it is not difficult to rebut the presumption, the executor’s success will depend on the facts.
Factors include the relationship of the executor to the testator, the amount of the legacy, gifts to other
beneficiaries, and the wording used.
The common law recognises that an executor or trustee should be reimbursed for proper expenditures
required in the administration. The right to reimbursement is also referred to as the right of
indemnification. Legislation also recognises this entitlement to reimbursement.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
13.15.1 Court Review of Proper Expenses
Expenditures and payment of estate liabilities will be reflected in the estate and trust accounts provided
to the beneficiaries. If the beneficiaries dispute any aspect of the accounts, it will be necessary to
resolve the dispute in a court passing. Disputes may relate to expenses incurred, the amount of the sale
proceeds received or the appropriateness of the sale price, or any other transaction that affects the
amount that a beneficiary might receive.
Generally, if the executor or trustee incurs the expense in good faith and the expenditure benefits the
estate or trust, it will be approved. However, the general duty of care always applies.
The rule is fairly simple: a trustee will be indemnified in respect of expenses properly incurred in the
context of an administration. The difficulty, however, lies in the fact that the propriety of a given
expense will often be judged by the beneficiaries after the event and in light of its outcome. A trustee,
however, does not have the benefit of hindsight.
When an executor or trustee enters a contract to deal with third parties, it is important to recognise the
executor’s or trustee’s legal position. Generally, an executor or trustee enters contracts personally and
not as an agent of the estate, trust, or beneficiaries. Where the contract is properly entered, the
executor or trustee is entitled to indemnification if the executor or trustee is liable for any losses or
liabilities arising under the contract.
When an executor or trustee is also providing legal services to a trust, it is necessary for the Will or
trustee to specifically permit the executor or trustee to charge his or her professional fees for those
services. Where an executor or trustee is providing legal services in addition to executor or trustee
services, the legal services should be identified separately from executor and trustee services to avoid
any confusion as to the basis for the expense and the methods used to determine the
amount due.
The Trustee Acts in these jurisdictions specifically permit a barrister and solicitor to charge for
professional work done in connection.
Substitute decision makers for financial affairs are allowed to be reimbursed for their proper expenses.
The entitlement to compensation, however, is less consistent across jurisdictions.
The legislation that provides for the appointment of a property guardian addresses the right to
compensation.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
Compensation is usually fixed at the time the accounts are passed. In most if not all jurisdictions, the
approach to compensation is similar to that used for executors and
.
Ontario: Ontario has established a prescribed fee scale for substitute decision makers
under the Substitute Decisions Act, 1992.13 Property guardians and attorneys acting
under a continuing power of attorney may charge the following without approval:
The guardian or attorney may apply to the public guardian and trustee for an additional allowance.
Ontario: See 13.16.1, Property Guardians, for the allowance permitted for an attorney
acting under a continuing power of attorney.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
CHAPTER 14 – FOREIGN PROPERTY, MUTIPLE JURISIDCTIONS AND SUCCESSION
In Canada, when can the laws of a province or territory other than that of residence may apply. 14.2
- there is property in another jurisdiction
- there is a dependant or beneficiary in another jurisdiction, or
- the individual is domiciled outside the province or territory of residence
When may the laws of a foreign jurisdiction apply even when an individual is reside of Canada? 14.2
- the individual has his or her domicile in another country even though resident in Canada
- the individual is a citizen, sometimes called a “national” of another country, or
- property is located in another jurisdiction
1. The domicile of origin is determined at birth by the place of birth and will continue to be the
domicile of an individual throughout his or her life unless one of the other domicile rules
subsequently applies.
2. Domicile of choice is the place where an individual, after attaining the age of majority, takes up
residence with the intention of remaining indefinitely.
3. Domicile of dependency is conferred by operation of law upon those persons who, by reason of
legal or mental disability, are unable to acquire a domicile of choice, including minors and
certain mentally incapable persons.
Domicile may be the place where the person has his or her residence or the place where the person has
the centre of his or her affairs, the seat of his or her wealth, and the affection of his or her family.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
Immovable property includes real property, anything permanently affixed to real property, or any
interest in real property. Immovable property includes land, buildings, mining rights, leaseholds, and
rights to receive rent or income from real property. The situs of property is the location of property for
legal purposes, such as taxation.
Application of Law Governing Succession The choice of law that applies for the purposes of
succession depends on whether the property is
Canadian courts generally takes the position that movable or immovable
they have no jurisdiction with respect to land or
real property outside Canada For movable the law of domicile governs
The courts have resisted this result, tending to Movable: the law of domicile applies to movables
avoid “double dipping” by restricting the
aggregate preferential share to the highest Immovable: the last of the situs will apply
amount available among the relevant jurisdictions.
Testamentary Succession within Canadian The law of testamentary succession includes the
Jurisdiction formal validity of a will, capacity, essential validity
of the Will, and interpretation of the Will Essential
validity of a will includes questions such as the
validity of gifts to witnesses or relatives of
witnesses, forced heirship, compliance with the
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
RAP, and accumulations, the validity of charitable
gift, testamentary capacity, and whether a will was
a free and voluntary and not subject to fraud,
mistake or undue influence.
Dependant Relief in Canada The ability to make a claim for dependant relief
within Canada, in terms of the court’s jurisdiction,
is not necessarily confined to the laws of the
jurisdiction in which the deceased was domiciled.
Generally the applicable legislation contains no
conflict of laws rules. An award for relief affects
testamentary freedom. In Corlet, a widow who
had resided with her husband in Alberta at the
time of his death was not entitled to make a claim
for dependant relief in Alberta because her
husband was domiciled outside the province at the
time of death and all property consisted of
movables, which as a result were not considered
to be property located in Alberta or subject to
such claims.
Question 3 in example
- Beatrix died domiciled in Ontario
- Testate/intestate
o Horses in Utah
o Home in Italy
o Paintings in Italy
o Lives in Toronto
o Problem interpreting her will – domicile in Ontario so governed by Ontario
o Questionswhether she was capable when it was executed – domicile in Ontario
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.
THESE NOTES WERE PREPARED BY LANDON HANG FOR THE PURPOSE OF THE STEP TEST OF WILLS,
TRUSTS AND ESTATE ADMINISTRATION.