Posts tagged ‘wills’

June 1, 2015

Dangers of Fraud/Forgery in Wills

I came across an interesting case recently from the Ontario Superior Court of Justice that should be a warning for everyone involved in the administration of wills.

In Paton Estate v. Ontario Lottery and Gaming Commission (“OLG”), two estates sued OLG for damages resulting from a loss of assets defrauded from the estates and gambled away in casinos operated by OLG.  The proceeding before the court was a motion to dismiss the action as disclosing no reasonable cause of action.  The motion succeeded and the action was dismissed as the court found that no duty at law exists in a casino to prevent problem gamblers from losing money.

What was striking about the case though was how the funds appear to have been stolen from the estate.  The fraudster was a clerk in the office of a lawyer assisting with real estate transactions and the administration of estates. Her actions are well known locally but primarily related to fraudulent real estate transactions, for which she was ultimately convicted on criminal charges.  On the facts as related in this action, she forged the name of at least one testator on a  will naming her as estate trustee.  She managed to sell two properties and gain access to $1,500,000.  Apparently, she also defrauded other estates amassing estate losses of over $4,000,000.  This was an extreme case and there was admitted professional misconduct by the overseeing (or rather not overseeing) lawyer for which he was disciplined.  Nonetheless, the case illustrates that estates are not immune from the frauds that have plagued real estate and mortgage lending lawyers for years.

While oversight of the clerk was clearly lacking and the lesson for lawyers is obvious, less obvious is the question of the care that should be taken by a prospective estate trustee to guard against potential frauds of this type.  I do not know many of the facts of this particular situation so make no comment on the actions of anyone involved with the estates.  It would appear though that the fraudster had to apply for and obtain a certificate of appointment of estate trustee before selling the estate properties.  Obtaining the appointment, listing and selling the properties takes time.  If a person knows that she or he has been named in the will as estate trustee and has accepted that role, what can they do to avoid potential fraud?

While the named trustee is entitled to rely on counsel representing the estate, his or her duty to the estate may require that she or he make reasonable inquiries of counsel regarding the status of the appointment and procedures going forward.  If it does not appear that progress is being made, or instructions do not appear to have been followed, closer examination of the actions of counsel may be required.  While it is unlikely that a prospective estate trustee will be able to root out a good fraudster, care should be taken at all steps of the administration process to reduce the risk.

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.

December 5, 2013

Do Will Beneficiaries Claiming to Have been Wronged Have an Interest in Land?

The transfer of property from a parent to an adult child gives rise to a rebuttable presumption that the child holds the property in trust for the parent. If the parent dies and the child sells the property, using the proceeds to purchase another property, can sibling beneficiaries under the parent’s will obtain and order for the issuance a certificate of pending litigation (CPL) against the new property? An Ontario court says yes.

In Jordan v. Jordan, the Superior Court of Justice was asked to grant leave to certain siblings to issue a CPL over property owned by another sibling that he purchased with proceeds of two properties transferred to him by the mother before her death. One property was purchased for nominal consideration and the other allegedly far below market value. The siblings’ claim appears to be that the child holds the property as trustee for the mother’s estate as traceable proceeds of the maligned transfers. The issue on the CPL motion was whether the moving siblings had claimed a sufficient interest in the property to permit a CPL to issue. The siblings argued that they did not need to show a claim to an interest themselves in the property. Because there is a rebuttable presumption of a trust for the benefit of the parent and an allegation of dependence by the parent on the child, they argued such should be sufficient to show that title to the original property was at issue and therefore that a CPL should issue.

While not giving significant analysis to the issue, the court accepted this position while relying on other factors as well, including a finding that no third party would be prejudiced by the issuance of a CPL. However the concept is interesting as the court seems to have accepted the principle that a party does not need to claim a direct interest in property (or perhaps more properly the proceeds that purchased the property) but need only show that beneficial title is in issue by way of the presumption of trust. I would venture that the siblings, as beneficiaries of the parent’s will, did have a claim to an interest in the property/proceeds but that does not seem to have been the deciding factor for the judge.

February 7, 2013

Estates and the Indian Act (Canada)

For a lawyer dealing with the estate of a person registered under the Indian Act (Canada), the law regarding the jurisdiction and role of the courts concerning wills, intestacy and the administration of estates differs from Provincial legislation and the common-law, and sometimes the jurisdictional lines are not entirely clear.

Sections 42 through 46 of the Indian Act deal with descent of property and wills of persons registered under that Act. At first instance, jurisdiction and authority is given to the federal government, as opposed to the courts. Section 42 of the Act states that “all jurisdiction and authority in relation to matters and causes testamentary, with respect to deceased Indians, is vested exclusively in the Minister and shall be exercised subject to and in accordance with regulations of the Governor in Council”. While that jurisdiction can be conferred on a Court, such requires the consent of the Minister.

While the Act states specifically that it does not prevent a registered person from devising or bequeathing his or her property by will, s. 45 does state that no will executed by a registered person is of any legal force unless approved by the Minister or probated by a Court (where the Minister has consented to the Court’s jurisdiction). Section 46 of the Act also bestows on the Minister the jurisdiction to declare a will void for many of the same reasons as a Court at common law might do – duress or undue influence, lack of testamentary capacity, considerations of dependants, vagueness or uncertainty.

Section 43 of the Act also gives the Minister the authority to appoint and remove executors of wills and administrators of estates and to provide orders and directions to an executor regarding testamentary matters. This section was recently the subject of litigation because of s. 4(3) of the Act, which states that none of the sections described above apply to any registered person “who does not ordinarily reside on a reserve or on lands belonging to her Majesty in right of Canada or a province”. In Re Dickson Estate, the deceased died intestate. She was registered under the Act and had lived on reserve until 2009 when she was moved to a long-term care facility off reserve. She died intestate about 21 months later. Without first obtaining the consent of the Minister, the deceased’s sister applied to a Court for letters of administration, which were granted. The federal government sought to set aside the letters of administration claiming that the Court did not have jurisdiction to grant same without the consent of the Minister. The issue was whether the federal government did or did not have jurisdiction. That question relied on a determination of whether the deceased was “ordinarily resident” on a reserve.

The Court hearing the matter granted the federal government’s application finding that, despite the deceased having lived for almost two years off reserve, she nonetheless met the definition of ordinarily resident on reserve. In reviewing the law, the Court found that “ordinarily resident” means “residence in the course of the customary mode of life of the person concerned, and it is contrasted with special or occasional or casual residence”. The determination must be made by reference to all facts of the case. Other Courts had found that “residence in a medical facility is not a customary mode of life but rather is a special residence”. Applying this rationale, the Court found that the deceased’s residence in a long-term care facility constituted special circumstances and did not affect her ordinary residence on reserve. Therefore, the Indian Act applied and the federal government retained jurisdiction over the appointment of an administrator.

September 11, 2012

What is the Status of a General Power of Appointment in a Will?

A recent British Columbia case has considered the validity of a general power of appointment in a will.  The Court conducted a thorough review of the law in this area, concluding that a general power of appointment is not void as a delegation of testamentary power but amounts to a disposition of a testator’s property directly to his or her executor.

In Pearson Estate v. Pearson, the British Columbia Supreme Court considered wording in a will whereby the testator appointed her son, Ronald, as executor.  Should Ronald predecease her, the testator appointed as executrix her granddaughter, Krista (not a daughter of Ronald).  The only dispositive portion of the will stated “I devise all the residue of my estate to be distributed as seen appropriate by my executor”.  The will then went on to state, in apparent contradiction,  “Beneficiary of this my will is my son Ronald Wesley Pearson”.

Ronald predeceased the testator and Krista was therefore appointed as executrix.  She took the position that under the general power of appointment, she was entitled to the benefit of the estate.  Ronald’s children took the position that the general power of appointment was void as infringing a rule against delegation by a testator of her power of disposition by will.  Alternatively, they took the position that the intention of the will was that Ronald should benefit and, as his issue, the gift to Ronald does not fail as a result of his predeceasing the testator, but passes to them.

The Court reviewed over a century of case law and commentary in Canada and other Commonwealth countries regarding the validity of a general power of appointment to an executor.  The Court concluded that there is no rule preventing a testator from giving such power to an executor provided such is not void for uncertainty.  As a result, a general power of appointment is considered to be equivalent to the testator devising his or her property directly to the executrix, therefore to Krista, subject to any contrary intention in the will.

Ronald’s children contended that a contrary intention did exist in that the will stated that Ronald was to be the beneficiary of the will.  They took the position that this indicated an intention to benefit Ronald and that, as he had predeceased the testator, the intended devise did not lapse but by statute fell to his issue.  The Court noted that the statutory rule that a gift to a predeceasing beneficiary leaving issue should not fail is subject to a contrary intention.  Here, the Court found such an intention.  It allowed extrinsic evidence as to the intention of the testator on grounds that the will was ambiguous.  The Court held that the testator intended that her estate devolve to Ronald under the general power of appointment but, if Ronald predeceased her, the estate should devolve to Krista under the same power.  The beneficiary provision was found to be redundant as concerns Ronald and not intended to bestow an additional benefit on him (and thus his issue).

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