Archive for ‘Dependents’

January 23, 2016

Don’t spend that life insurance money too quickly!

Life insurance can be an effective way to leave a legacy.  It allows you to benefit a loved one and, unless the insured’s estate is the beneficiary, avoids the requirement that funds pass through probate.  However, life insurance proceeds are not entirely free and clear of estate obligations in Ontario – so beware before spending that money (and do not disregard notice of court proceedings) – as one man’s daughter learned in the recent case of Bormans v. Bormans Estate.

Sections 72(1) (f) and (f.1) of the Ontario Succession Law Reform Act deem life insurance proceeds to be an estate asset for the purpose of determining the rights of a dependant to support from the estate.  Insurance proceeds therefore may be available to pay support if the other assets of the estate are insufficient to do so.  In Bormans, Mr. and Mrs. Bormans divorced after 38 years of marriage.  Mr. Bormans was to pay support to Mrs. Bormans and warranted to her that she was named as beneficiary of his company life insurance policy.  When he died, without assets, Mr. Bormans was in arrears of his support obligations.  To Mrs. Bormans’ surprise, the company policy had been cancelled but Mr. Bormans had purchased another life insurance policy, naming his daughter as beneficiary.  The proceeds of that policy had been paid to the daughter.  The daughter, despite notice of a  court application by Mrs. Bormans for dependant’s relief, proceeded to dispose of most of the insurance proceeds.

The Court found that Mrs. Bormans was a dependant of Mr. Bormans’ estate.  As a result, the Judge determined that most of the policy proceeds paid to the daughter should have been available to satisfy the estate’s support obligations to Mrs. Bormans.  The Court placed emphasis on the fact that Mr. Bormans had warranted that Mrs. Bormans was the beneficiary of a life insurance policy.  The daughter was ordered to pay to Mrs. Bormans most of the insurance proceeds, with the exception of some amounts spent prior to her receiving notice of the court application.  As the daughter had already used a large part of these proceeds, she became personally liable to repay these amounts.

May 23, 2014

Whither Walt Disney’s Fortune: I don’t think Mickey would approve

According to the Hollywood Reporter, the real-life Walt Disney World may not be the happiest place on earth.

October 17, 2012

A Lesson for Executors Regarding Costs

In an earlier post, we looked that a situation where a dependant sought severance of a joint tenancy in connection with a claim for dependant’s relief under Ontario’s Succession Law Reform Act.  The dependant was unsuccessful in a claim under s. 72 of the Act (which allows for a form of statutory severance of a joint tenancy for the narrow purpose of making assets available for dependant’s relief claims) because his application was brought outside of the six-month limitation period under the Act.

The issue of costs of the dependant’s relief application and other litigation involving the estate was the matter of reasons of the Court released earlier this month and include a lesson for all executors and their legal counsel.

The successful executor claimed costs in the total amount of $127,872 on a partial indemnity basis.  However, one of the dependant’s objections to the claim for costs was disclosure by the executor at a very late date that the estate did not have sufficient assets to satisfy a dependant’s relief claim, if successful.  The Court found that the executor had previously advised the dependant that the estate did have sufficient funds to satisfy his claim.  However, shortly prior to the hearing, the executor raised as a defence a paucity of assets.  The Court did find that there were insufficient assets to satisfy a claim, but found that had proper disclosure of the assets of the estate be made earlier, the dependant may have chosen not to pursue his claim.  As a result, while it appears the Court may have been willing to grant the costs sought by the executor, it reduced the fees claimed by 50% as a result of the late disclosure.

While it goes without saying that it is expected and imperative that an executor maintain proper accounts and records of assets, the failure to do so can result in significant and personal consequences.  It is not clear in this case whether there were assets in the estate to pay the legal fees of the executor as incurred.  If there were not, the executor may bear those costs personally.

April 10, 2012

Joint Tenancy and Dependant’s Relief Claims

In two previous posts, we looked at specific situations where parties have unsuccessfully argued for severance of joint tenancies; in the context of an estate in bankruptcy and in the context of separation of spouses prior to death.  Today, we look at a recent case where a claim of severance was made, again unsuccessfully, in the context of a dependant’s relief claim.

In Su v. Lam, the Ontario Superior Court of Justice found that Mr. Su, a common-law spouse of the deceased, was a dependant for the purposes of a dependant’s relief claim under the Succession Law Reform Act (the “Act”).  Mr. Su was not named as a beneficiary in the will of the deceased.  The man to whom the deceased was still legally married at the date of her death was named as estate trustee.  As of the date of death, the deceased and the estate trustee still owned two properties in joint tenancy.  Mr. Su made an application against the estate for dependant’s relief.  The case centred on the availability of these properties to satisfy Mr. Su’s claim.

Section 72 of the Act provides for a form of statutory severance of a joint tenancy for the narrow purpose of making assets available for dependant’s relief claims.  Specifically, the capital value of any disposition of property held by the deceased and another as joint tenants at the date of death shall be included as testamentary dispositions as of the date of death and shall be deemed to be part of the deceased’s net estate for purposes of ascertaining the value of his or her estate, and is available to be charged for payment in satisfaction of an order for dependant’s relief.  Therefore, for the purposes of a dependant’s relief claim only, the survivor of a joint tenancy may not have an absolute right to ownership of property.

Unfortunately for Mr. Su, the Court found that the provisions of s. 72 only apply if an application for dependant’s relief is made within six months of the issuance of a certificate of appointment of estate trustee, as required by s. 61(1) of the Act.  The Court held that, after the expiry of this limitation period, the ability under the Act to treat jointly held property as estate assets lapses.  Mr. Su did not make his application within the required six months. 

However this was not the end of the story.  If an application is made more than six months after the certificate is issued, s. 62(2) of the Act allows a court, “if it considers it proper”, to make an order for dependant’s relief “as to any portion of the estate remaining undistributed at the date of the application”.  However, the Court held that in such circumstances, the party seeking relief would have to show that there were undistributed assets as of the date of his or her application.  Therefore, Mr. Su would have to show that there was a severance of the jointly held property at common law while the testator was alive.  Otherwise, the property would devolve to the survivor upon death and would therefore not be property of the “estate remaining undistributed”.

As in Hewson, the Court noted that at common law, a joint tenancy could be severed in one of three ways.  Firstly, where a party unilaterally acts on one’s own share, such as by selling or encumbering her or his interest.  Secondly, where there is a mutual agreement between the co-owners to sever.  Thirdly, where there is any course of dealing sufficient to intimate that the interests of the co-owners were mutually treated as constituting a tenancy in common.  Finding that neither the first or second circumstances applied, this case turned on an application of this third “course of dealing” rule.

The Court found that Mr. Su had not met the onus on a party seeking severance of a joint tenancy.  The Court found that while the estate trustee and the testator were separated, mere separation is insufficient to establish severance.  The Court required more – some course of dealing showing that the parties intended to treat their interests as separate.  The Court was not able to find evidence of such dealings.  What it did find was that the deceased and the estate trustee appeared to have had little contact regarding the jointly held properties after separation.  The lack of dealing showed a lack of intention to deal with their interests separately.

Of course, the biggest issue here is the six-month limitation period.  For a party seeking dependant’s relief, it is crucial to meet this deadline.  If the application is made in accordance with the Act, a party benefits from the statutory inclusion in the estate, not only of jointly held property, but of certain gifts, money held in joint accounts, certain monies and property held in trust and life insurance proceeds.

DON’T DELAY.

January 28, 2011

Dependents Relief Claims: You Can Have Two Spouses

Canadian jurisdictions allow the spouse of a deceased to make claims against the estate for support and interim support provided the test for entitlement and need are met. In Ontario, a “dependent” is defined by the Succession Law Reform Act to include a “spouse”, defined in part as either of two persons who are not married but have co-habited continuously for a period of not less than three years. But can a person have two such spouses?  Yes, according to a recent decision of the Ontario Superior Court of Justice. The court found that evidence that a deceased may have co-habited with two women in different homes for periods of time that overlap did not require the court to determine that one was a spouse and the other was not for purposes of support. Both could qualify.

Blair v. Cooke Estate