*CLE16-0090801-A-PUB*

chairs

John Clark Clarks LLP

Suzana Popovic-Montag TEP

Hull & Hull LLP

September 20, 2016

PROBATE ESSENTIALS 2016

Practice Gems

DISCLAIMER: This work appears as part of The Law Society of Upper Canada’s initiatives in Continuing Professional Development (CPD). It provides information and various opinions to help legal professionals maintain and enhance their competence. It does not, however, represent or embody any official position of, or statement by, the Society, except where specifically indicated; nor does it attempt to set forth definitive practice standards or to provide legal advice. Precedents and other material contained herein should be used prudently, as nothing in the work relieves readers of their responsibility to assess the material in light of their own professional experience. No warranty is made with regards to this work. The Society can accept no responsibility for any errors or omissions, and expressly disclaims any such responsibility.

© 2016 All Rights Reserved

This compilation of collective works is copyrighted by The Law Society of Upper Canada. The individual documents remain the property of the original authors or their assignees.

The Law Society of Upper Canada 130 Queen Street West, Toronto, ON M5H 2N6Phone: 416-947-3315 or 1-800-668-7380 Ext. 3315Fax: 416-947-3991 E-mail: cpd@lsuc.on.ca www.lsuc.on.ca

Library and Archives Canada Cataloguing in Publication

Practice Gems: Probate Essentials 2016

ISBN 978-1-77094-770-2 (Hardcopy)ISBN 978-1-77094-771-9 (PDF)

1

Chairs: John Clark, Clarks LLP

Suzana Popovic-Montag, TEP, Hull & Hull LLP

September 20, 2016 9:00 a.m. to 12:00 p.m.

Total CPD Hours = 2 h 30 m Substantive + 30 m Professionalism

The Law Society of Upper Canada 130 Queen Street West

Toronto, ON

CLE16-00908

Agenda 9:00 a.m. – 9:05 a.m. Welcome and Opening Remarks

John Clark, Clarks LLP Suzana Popovic-Montag, TEP, Hull & Hull LLP

9:05 a.m. – 9:25 a.m. What Constitutes a Will?

Mary-Alice Thompson, C.S., TEP, Cunningham, Swan, Carty, Little & Bonham LLP

9:25 a.m. – 9:45 a.m. Interpretation Issues that Arise During the Probate Process

Andrea Hill, Evans Sweeny Bordin LLP

PRACTICE GEMS:

PROBATE ESSENTIALS 2016

2

9:45 a.m. – 10:05 a.m. Finding Lost Beneficiaries

Ian Hull, C.S., Hull & Hull LLP

10:05 a.m. – 10:25 a.m. Dealing with Foreign Testamentary Documents

Jenny Pho, Dale & Lessmann LLP

10:25 a.m. – 10:35 a.m. Question and Answer Session 10:35 a.m. – 10:50 a.m. Coffee and Networking Break. 10:50 a.m. – 11:10 a.m. Addressing Rectification Issues

Craig Ross, Pallett Valo LLP 11:10 a.m. – 11:25 a.m. Joint Tenancies

John Clark, Clarks LLP 11:25 a.m. – 11:50 a.m. Succession Planning for Your Legal Practice (25 minutes ) Alexandra Mayeski, Mayeski Mathers LLP Kathleen McDormand, Borden Ladner Gervais LLP 11:50 a.m. – 12:00 p.m. Question and Answer Session (5 minutes ) 12:00 p.m. Program Ends

September 20, 2016 SKU CLE16-00908

Table of Contents

TAB 1 What Constitutes a Will? …………………………………………….. 1 - 1 to 1 - 21

Mary-Alice Thompson, C.S., TEP, Cunningham, Swan, Carty, Little & Bonham LLP

TAB 2 Will Interpretation Issues that Arise During the Probate

Process ……………………………………………………………………… 2 - 1 to 2 - 11

Andrea Hill, Evans Sweeny Bordin LLP TAB 3 Locating Missing Beneficiaries ……………………………………… 3 - 1 to 3 - 13 Ian Hull, C.S., Hull & Hull LLP Laura Betts, Hull & Hull LLP TAB 4 Estate Administration in Ontario with Foreign

Testamentary Documents …………………………………………….. 4 - 1 to 4 - 10

Jenny Pho, Dale & Lessmann LLP

PRACTICE GEMS: PROBATE ESSENTIALS 2016

TAB 5 The Rectification of Wills in Ontario ………………………….. 5 - 1 to 5 - 10

Craig Ross, Pallett Valo LLP Jaspal Sangha, Pallett Valo LLP

TAB 6 Joint Tenancy and Estate Administration Tax ………………… 6 - 1 to 6 - 10

John Clark, Clarks LLP

TAB 7 LSUC The Contingency Planning Guide For Lawyers ………. 7 - 1 to 7 - 48

Alexandra Mayeski, Mayeski Mathers LLP Kathleen McDormand, Borden Ladner Gervais LLP

TAB 1

What Constitutes a Will?

Mary-Alice Thompson, C.S., TEP Cunningham, Swan, Carty, Little & Bonham LLP

September 20, 2016

Practice Gems:

PROBATE ESSENTIALS 2016

PRACTICE GEMS: PROBATE ESSENTIALS What Constitutes a Will?

September 2016 Mary-Alice Thompson, TEP, C.S.

Cunningham Swan, Carty Little & Bonham LLP

“51 Let me hypothesize. A deceased person - an elderly widower, house-bound and in declining health - was

befriended by his caregiver who came to provide care for him on a regular basis. Although his mental powers were

reduced by his advanced old age, the deceased was neither delusional nor suffering from senile dementia or

Alzheimer’s disease. He was, however, upset by the infrequency of the visits of his children and, particularly, of his

grandchildren upon whom he and his wife had doted as they were growing up. After his death, the caregiver claims

the very sizeable estate of the deceased, and presents to the court … his own hand-written note of the deceased’s

statement to him some months before his death:

You’ve been so kind to me these past few months. My family doesn’t care about me; they have all forgotten me.

I’m going to die soon, and when I do I want you to have everything I own.

52 ”Those were his exact words,” the caregiver testifies, “I wrote them down right then and there.””1

The venerable Theobald on Wills2 begins its over 900 pages on the Law of Wills with this

statement: “It is not at all easy to formulate a comprehensive definition of a ‘will’,….” This

paper has no such ambition; rather it seeks to explore some of the cases in Ontario and elsewhere

that raise the question of whether a given document is or is not a will, and to review the law that

may help a practitioner presented with such a document to advise her client.3 Theobalds goes on

to say that the courts and legislature have eschewed defining a will, but in Ontario, there are

statutory conditions that outline part of the requirements for a document to constitute a valid will.

Pursuant to s. 1(1) of the Succession Law Reform Act, RSO, 1990, c. S26,4 a ‘Will’ may take the

form of:

a) A testament,

b) A codicil,

c) An appointment by will or by writing in the nature of a will in exercise of a power, and

d) Any other testamentary disposition.

Further, a valid will must be in writing (s. 3.). That given, there are essentially four kinds of wills

possible in Ontario. From greatest to least level of formality, they are: international wills, formal

1 Philps J in George v. Daily, 1997 CarswellMan 57, [1997] 3 W.W.R. 379, [1997] M.J. No. 51, 115

Man. R. (2d) 27.

2 Martyn, Oldham, et al.; 17th ed. (Sweet & Maxwell, 2010).

3 See Jordan Atin et al., “Is That a Will? Holograph Writings and Testamentary Intent,” LSUC, 13th

Annual Estates and Trusts Summit, November, 2010. 4 Succession Law Reform Act, RSO 1990, c S26 at s 1(1) (Succession Law Reform).

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witnessed wills, holograph wills, and wills of those on active service in the armed forces. Since

the issue of whether the document is actually a will does not arise (unless there are concerns

about capacity or undue influence) where the document is formally witnessed, and wills for those

on active service are relatively rare, it is with holograph wills that this paper is largely concerned.

Further, in order to constitute a valid will, the document must be testamentary in character. The

essential quality of this is that the document in question expresses a “deliberate or fixed and final

expression of intention as to disposition of property upon death”.5 In order for a document to

constitute a valid will, the will-maker must have intended that the will not take effect until death.

This threshold may be interpreted from the document itself, or require extrinisic evidence.

Further, even where the formal requirements of a testamentary instrument are met, a document

may not be admitted to probate if the document fails to dispose of any of the will-maker’s

possessions.6

In addition to the formalities of execution, the will must have been freely made by a will-maker

with the requisite capacity, who knows and approves of the contents. The requirement for

knowledge and approval is generally established in a formal witnessed will by the fact of signing

in front of witnesses, and as long as the formalities have been met, capacity will be presumed.7

Formal Wills

Under the SLRA, 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 time; and

c) Two or more of the attesting witnesses subscribe the will in the presence of the testator

(section 4(1)).

5 Bennett v Toronto General Trusts Corp, [1958] SCR 292 1958 CarswellMan 66 at para 5 (Bennett v

Toronto). 6 Re Blow (1977), 18 OR (2d) 516 at para 28 (H Ct J).

7 Vout v. Hay, [1995] 2 SCR 876, 1995 CanLII 105 (SCC), 125 DLR (4th) 431; 183 NR 1; 7 ETR (2d)

209; [1995] CarswellOnt 186; JE 95-1367; [1995] SCJ No 58 (QL); [1995] ACS no 58;55 ACWS (3d)

1101; 82 OAC 161.

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The actual position of the signature on the document is important. The Act stipulates that a will is

valid where the signature is “placed at, after, following, under or beside or opposite to the end of

the will so that it is apparent on the face of the will that the testator intended to give effect by the

signature to the writing signed as his or her will”.8

Holograph Wills

The Succession Law Reform Act also allows holograph wills, that is, those that are made wholly

by the will-maker’s “own handwriting and signature, without formality, and without the

presence, attestation or signature of a witness”.9 In order to be valid, the first requirement of a

holograph will is that it be wholly in the handwriting of the will-maker. The document must then

be signed by the will-maker.

There is no requirement for a holograph will to be witnessed by another party. A holographic

paper will be deemed a testamentary document if it expresses a deliberate or fixed and final

intention to dispose of property upon death.10 The intention can be determined from the contents

of the paper itself or from extrinsic evidence. The parties relying on the paper as testamentary

have the burden to show from the contents of the paper itself or by extrinsic evidence that the

paper is of that character and nature.

Bennett v Toronto General Trusts Corp is the leading Canadian case outlining the law for

determining whether a document constitutes a holograph will. In this case there was no question

that the document was solely written by the will-maker, but the question remained whether it was

testamentary in character. The determination of whether a document embodies the requisite

testamentary intent goes toward the interpretation of the language used in the document.

In this case, the deceased had an existing formal will when she wrote a letter to her solicitor

setting out and discussing several bequests. During the three and a half years between the writing

8 Succession Law Reform, s 7(1). The holograph will does not require the signature of witnesses, but the

presence of witness signatures, even where they are beneficiaries under the will, does not invalidate the

will. See Re Eames Estate, 1934 CarswellMan 77, [1934] 3 W.W.R. 364, 42 Man. R. 474. 9 Succession Law Reform, supra note 1 at 7(1). 10 Bennet v Toronto, supra note 4 at para 5.

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of this letter and the deceased’s death, no changes were made to the formal will. The court

considered several factors, including that no executor of the estate was mentioned. There were

also relevant extrinsic facts, including that the deceased had many opportunities to meet with her

lawyer and complete the changes noted in her letter, and that she changed her mind with respect

to many beneficiaries following the drafting of the letter. These factors led the court to conclude

that the deceased had not finalized her wishes, and that therefore the letter did not “contain a

deliberate or fixed and final expression of intention as to the disposal of property upon death.”

The court held that the letter was “nothing more than a preliminary to a will”.

In Canada Permanent Trust Co v Bowman, 11 the Supreme Court revisited the question of

holograph wills. Although the deceased did not have a formal will, a few handwritten documents

were found in a cardboard box in her home that listed various people and dollar amounts or items

beside each name. The Court in finding that the document contained the requisite intent held that:

The wording of the document is a statement of the wishes of the deceased respecting the

disposal of her property and it is implicit in the document read as a whole that she wished

such disposition to be made following her death.

Unlike the holding in Bennett, the court found that these documents did constitute a will. Even

though the document did not appoint executors nor did it refer to the disposition of the residue of

the estate, the document did dispose of all the assets the deceased held at the time the document

was created. Further, the Court noted that the use of the word “bequests”, following the

disposition of her possessions, is a term ordinarily applicable to property taken by will. This

therefore indicated “a deliberate, fixed and final expression as to the disposition of the property

of the deceased on her death and that it is a valid holograph will.12

The above two cases have been discussed in numerous decisions throughout Canada. In Caule v

Brophy, the Newfoundland Supreme Court distinguished the situation from Bennett on the

grounds that the letter appointed an executor, dealt with the residue of the estate, and that there

was no indication that the deceased later changed his mind.13 An important contextual factor was

11 Canada Permanent Trustco v Bowman, [1962] SCR 711. 12 Canada Permanent.

13 Caule v Brophy (1993), 50 ETR 122 at para 42 (Nfld SC (TD)).

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considered, which was that in later discussions with his solicitor, the deceased indicated that

“one of the beneficiaries is dead”, referring to one of the individuals named in the letter. These

factors led the court to determine that the deceased believed the letter to be a “clear statement of

his will.”

In Komonen v Fong, the Nova Scotia Supreme Court held that an incomplete printed will form

comprising both pre-printed and handwritten pencil writing was “nothing more than an

unfinished draft of a possible will.”14 There were a number of contextual factors that allowed the

court to come to this conclusion, including that the deceased made prior statements indicating

that the document was a “sketch of his will” and that he “hadn’t made any firm decisions yet”

and that he had not completed making a will. The deceased also owned a book on will drafting

and was therefore well aware of the formalities required to make a valid will. The court also

listed the factors that were indicative of the fact that the document was a will, including that it

was on pre-printed form rather than a piece of paper, that it was signed and dated, and that it

referred to funeral arrangements.

In Re MacLennan Estate, the Ontario Court dealt with whether a “note” constituted a valid will

or codicil under the Succession Law Reform Act. 15 The deceased had been discussing the

creation and execution of his will with his solicitor prior to his death. There had been two draft

wills prepared by the solicitor prior to this “note” written by the deceased. The deceased, after

both wills had been drafted, attended his solicitor’s office and left the note in question at his

solicitor’s office. There was no additional meeting and no formal will was executed. It was held

that the note satisfied the basic formal requirements of a will, however whether the note was

intended as a testamentary instrument was the subject of the court’s assessment. In finding that

the note constituted a valid holograph codicil, the court referred to the following factors to

support this finding:

The note was signed at the end by the deceased even though it was also identified at the

beginning as being concerned with the will of the deceased.

14 Komonen v Fong, 2011 NSSC 315. 15 Re MacLennan Estate (1986), 22 ETR 22, 1986 CarswellOnt 653.

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The dispositive terms of the note were substantially different from the terms of the will

thus indicating decisiveness on the part of the deceased.

The use of the words “nominate” and “bequeath” are more indicative of a fixed and final

intention on the part of the deceased.

There was also a provision regarding the appointment of estate trustees, and while there

were no provisions regarding the residue of the estate, the note disposed of all of the

deceased’s assets.

The deceased told his common-law spouse he had made a will.16

In the recent Nova Scotia case, Casavechia v Noseworthy, it was pointed out that the deceased,

in the document she left, used the words “gift” and “leave” instead of the words “bequest”,

“will” and “devise.”17 Therefore, unlike in Bowman, the deceased did not use terms ordinarily

applicable to dispositions by will. However, the court noted that the deceased “was not a lawyer”

and that it was “not surprising that his letter did not use words and phrases that a lawyer, or

perhaps a person more familiar with legal terminology pertaining to wills and estate, might have

chosen.” The court then emphasized that “the fact that the document did not contain precise legal

terminology, or expressly refer to an existing will, was not determinative”. Regardless of the

formalities and language of the document, the intention of the part of the will-maker for the

document to take effect after his death was sufficient for the court that the document “contains a

fixed and final expression of his intentions as to the disposal of the waterfront lot in the event

that the Property was not sold before his death.”

In Rudolph v Alberta, a document written by the deceased was not found to be a holograph

will.18 The court emphasized that while the note left was undoubtedly entirely in the handwriting

of the deceased and in a valid form, it however lacked, “one characteristic without which it was

impossible to pronounce in favour of it as a will: it contained no words indicating a disposition

or direction as to how the residue of the estate should be divided.” This, combined with the fact

16 Re MacLennan. 17 Casavechia v Noseworthy, 2015 NSCA 5. 18 Rudolph v Alberta, [1972] WWR 248.

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that the note dealt only with a select few of the deceased’s assets, allowed the court to conclude

that the note was not a holograph will.

In Niziol v Allen, a document written by the deceased was found to be a will. The document was

entirely in the deceased’s handwriting, was signed, and dated. The court noted that the following

factors demonstrated that the document was a will:

The introductory language of the document (“I Glenda Niziol”) was consistent with the

way in which will-makers ordinarily identify themselves when making a will;

The document went as far as to create a testamentary trust;

The document contained words like “everything I own”, “I leave my estate”, and “upon

my death”. Such language was evidence of a testamentary intention;

The document specified the parties to whom the assets of the deceased were to go; and

While the document did not contain explicit clauses dealing with the residue or

appointing an estate trustee, it disposed of all of the deceased’s assets.19

Fixed and Final Intention

Multiple Documents

Sometime the issue is not just whether the document in question is a will, but its relationship to

another document or documents. Is it a codicil to an existing will, does it revoke a previous will,

or is it part of a single document created over a period of time?

In Currie v Potter, it was determined that a document written entirely in the will-maker’s hand

was one continuous document, as it was “written in one sitting and was not something drawn in

part, laid aside and then returned to for additions and alterations after a delay of some

measurement.”20 Written on one side only of three sheets of plain paper found together, the

document opened with the date and then fifteen numbered paragraphs followed. A forensic

consultant was engaged, who determined that the characteristics of the ink, writing instrument,

19 Niziol v Allen, 2011 ONSC 7457.

20 Currie v Potter, [1981] 6 WWR 377 (Man QB).

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positioning of the writing etc… disclosed that the same writing instrument was used to execute

all of the material, and that it was written in the same time frame.

The idea that a document must be prepared in a “single sitting” is sometimes applied very

loosely. It is arguable that such a requirement was not imposed in the Currie decision. Rather,

the decision seems to interpret the term “single sitting” more broadly, emphasizing that a

document will be considered continuous unless it is set aside and then returned to after “a delay

of some measurement.”

In Sharpe’s Estate v Sharpe et al a handwritten document was signed only on the first page by

the will-maker and only page one was dated.21 The court held that the fact that the document was

clearly written entirely by the will-maker and that all three pages were found together in an

envelope with numbered pages was sufficient to conclude that all three pages formed one

continuous holograph will.

There are also cases that indicate that whether or not pages are written on separate dates within a

close time span is not fatal to the argument that a written document is continuous. In Re

Letwinetz Estate it was held by the court that the fact that a document written entirely by a

deceased had three signatures and two different dates throughout was irrelevant and presented no

problem to the finding that the document was one holograph will.22 In Simms Estate v King the

pages of the document were all dated November 21st 1986, and November 22nd 1986, were not

numbered, were all in the handwriting of the will-maker, and were all entitled “Last Will and

Testament.”23 It was concluded that the pages formed one holograph will.

Overall, the cases seem to indicate that where all the pages of a document were written by the

deceased, they constitute one continuous document.

While all the cases above have slightly different facts, there are some patterns that can be

ascertained. It seems that if a document is missing both provisions regarding the residue of an

estate and the appointment of an estate trustee, it is more difficult to demonstrate on the balance

of probabilities that it constitutes a holograph will. Often under such circumstances, the

21 Sharpe’s Estate v Sharpe et al, [1985] NJ No 285 (Nfld SC (TD)).

22 Re Letwinetz Estate. [1983] 27 Sask R 59 (Sask Surr Ct)

23 Simms Estate v King (1995), 132 Nfld & PEIR 110 (Nfld SC (TD)).

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document must contain provisions disposing of a majority of the deceased’s assets and strong

testamentary language, such as the regular use of the terms “bequest”, “gift”, “leave my estate”,

and “upon my death.” The cases also mention that whether or not funeral arrangements are

considered in a document written by a deceased is a factor to be considered as well.

Immediate Application - Powers of Attorney

Some cases indicate that a reference to arrangements while the writer is still alive demonstrates

that there was no final testamentary intention. For example, in Rudolph the court seems to find

that the inclusion of the words “Power of Attorney” in the document assisted in revealing that the

required testamentary intention was not present. The court stated:

The words used by the deceased might constitute the grant of a power of attorney to

Louis Rudolph as his agent to choose his beneficiaries. But a power of attorney

terminates with the death of the principal. It is doubtful if those words constitute the

appointment of an executor…there are no words indicating a disposition or direction as to

how [the estate] should be divided. [The will-maker] merely says “as far as Morey please

do the best you can. I give you the Power of Attorney”…The words, in my respectful

opinion, are not such as to convey the estate to an executor and with a power of

appointment and distribution among the beneficiaries.

Also, in Children’s Aid Society of Halton (Region) v R(CJ), in discussing the factors it

considered for determining why the relevant document was not a holograph will, the court

mentioned that the document spoke “about giving Mrs. Patricia E power of attorney, which is

different from a will.”24

Hesitation - Finality

In Oliver Estate v Reid (1993), a handwritten document contained various incomplete

provisions.25 The court held that such incompleteness indicates that further thought on behalf of

24 Children’s Aid Society of Halton (Region) v R(CJ), 2005 ONCJ 514.

25 Oliver Estate v Reid (1993), 334 APR 32 (Nfld SC (TD)).

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the will-maker was necessary, and suggested that, viewed as a whole, the document was not a

final expression of the will-maker’s wishes.

In Popke v Bolt, a factor that the court considered in determining whether the written document

constituted a valid holograph will was whether there was any hesitation or uncertainty observed

by the will-maker.26 In that case, the court confirmed that such hesitation did not exist through

oral testimony by a witness.

In Komonen, the court considered the following statements made by the deceased as an

indication that the document in question did not constitute a will but was rather notes in

preparation for a will:

The deceased had indicated that the document was a “sketch of his will”;

The deceased indicated that he hadn’t made any firm decisions yet;

The deceased stated that he had not completed making his will;

It should be noted that the cases do provide a reminder that references to a future will are simply

one of many factors to be considered. For example, in Goodman v Goodman the court provided

that there is “ample authority for the proposition that a document which is in terms an instruction

for a more formal document may be admitted to probate if it is clear that it contains a record of

the deliberate and final expression of the will-maker's wishes with regard to his property.”27 In

Goods of T. Fisher a paper headed "Instruction for my Last Will and Testament" was ruled to

have testamentary effect even though the writer may have intended at some future period "to

execute it in more regular form."28 Also, in Hattot v. Hattot a paper executed many years prior to

the death and described as "a sketch of my will, which I intend making on my return home" was

pronounced as the deceased's will and probate was decreed.29

Notwithstanding that a later will may contain no clause of express revocation, if the words of the

later instrument indicate an intention to dispose of property in a different manner than that of the

26 Popke v Bolt, 2005 ABQB 214.

27 Goodman v Goodman, [1920] P 261 (CA); referenced in Oliver Estate v Reid, [1994] NJ No 318.

28 Goods of T. Fisher (1869) 20 L.T. 684.

29 Hattot v. Hattot (1882) 162 E.R. 1424.

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earlier, the earlier may be revoked.30 Nevertheless, a prior disposition will not be disturbed any

further than is absolutely necessary to give effect to a later one. In the case of an inconsistency,

however, the later instrument will revoke the earlier only to the extent that the two cannot stand

together.31

Substantial Compliance

The Succession Law Reform Act contains no substantial compliance provisions. Since the

publication of Professor John Langbein’s influential article, “Substantial Compliance with the

Wills Act”,32 however, common law jurisdictions have been experimenting with forms of

legislative reform that would allow a variety of documents that satisfy the court that they

embody the requisite testamentary intention, to be recognized as wills. South Australia and

Queensland made changes in the early 80s, and since then every state in Australia has introduced

some form of substantial compliance. In Canada, Manitoba led the way (1980), followed by New

Brunswick (1997), Saskatchewan (2001), and Nova Scotia (2006). Quebec courts, too, have a

dispensing power, which has resulted in the only case in Canada where a computer disk was

admitted to probate. Most recently, both Alberta (2015) and British Columbia (2016) have

reformed their wills statutes, and now have forms of substantial compliance legislation. Ontario

is now in the minority in this regard, and inevitably there is discussion about the value of having

some form of substantial compliance legislation here.

Although in Sisson v. Park Street Baptist Church , 33 the Ontario court was able, using the

current legislation, to admit a will that fell short of complete compliance with the formalities in

the Act – it had only one witness’s signature – the case has not been followed. A dispensing

power would assist where the deceased has completed and signed a stationer’s form will, but

without having it properly witnessed, or it might assist with those cases where a couple

30 Dempsey v Lawson (1877), LR 2 PD 98 (Eng Prob Ct); McPherson v Canada Trust Co (1941), [1941]

OWN 65 (Ont HC).

31 Edwards v Findlay (1894), 25 OR 489 (Ont Ch); Re Fitzsimmons Estate (1939), 1939 CaswellNS 5

(NSSC).

32 (1975-75) 88 Harv. L. Rev. 489.

33 (1998), 24 E.T.R. (2d) 18, [1998] O.J. No. 2885 (Gen. Div.).

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inadvertently signs each other’s wills.34 In those jurisdictions that do have substantial

compliance, there is a line of cases dealing with what are referred to as “third party” wills: those

documents that do not qualify as holograph because they are not entirely in the handwriting of

the deceased, but for which there is strong evidence of a testamentary intention that is fixed and

final. At its most extreme, this would provide relief for situations such as those in Sugden v.

Lord St. Leonards 35 where the deceased’s daughter prepared a memorandum of her recollection

of the contents of a will which was admitted to probate when the will was lost. More cases

concern various forms of motes taken on behalf of the deceased, and with varying kinds and

strength of supporting evidence as to the extent to which they capture the fixed and final

testamentary intention of the deceased. In these cases, proof of knowledge and approval are

critical.36

George v. Daily, an early case under the revised Manitoba statute is illustrative. In this case, the

deceased had met with his accountant and indicated that he wished to change his will. In

particular, he did not want his children to inherit, since they had been neglecting him, and he

believed they were just waiting for him to die so they could collect the inheritance. He gave

detailed instructions as to how he wished his assets disposed of. He asked the accountant to be

his executor, but the accountant declined. Instead, he wrote a letter to the deceased’s lawyer

setting out in detail Mr Daily’s will instructions. The lawyer met with Mr Daily and confirmed

each of the points with him, including his own willingness to act as executor, but told him that he

would need to have a doctor opine on his capacity before the will was signed. Two months later

34 McDermid Estate, Re, 1994 CanLII 4950 (SK QB), [1995] 1 WWR 366; 122 Sask R 232. See also Re

Malichen Estate (1994), 6 E.T.R. (2d) 217 (Ont. Gen. Div.).

35 (1876), 1 P.D. 154 (C.A.) [1874-80] All E.R. Rep. 21. Note, however, that this did not require a

dispensing power for the court to admit it!

36 See Philps J: “At the very least, a third-party document would have to be one that had been made at the

request of the deceased, or with his/her knowledge; and, in any event, with his/her awareness that the

document recorded the deliberate and final expression of his/her wishes as to the disposition of his/her

property on death. Another of the principles which have survived the enactment of s. 23 is that the court

must be satisfied that the deceased knew and approved of the contents of the document which is presented

for probate. Guardhouse v. Blackburn (1866), L.R. 1 P. & D. 109 (Prob.), which has not been overruled

by the enactment of s. 23, is authority for that principle. Although this has been considered as a question

of evidence rather than of substantive law, the rule takes on a heightened significance when the document

is a third-party one.” George v. Daily.

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– not having met again with either accountant or lawyer, nor apparently having taken any steps

to meet with a doctor – Mr Daily died.

The section considered by the court, when it was asked to admit the accountant’s letter as the

will of Mr Daily, reads as follows:

Dispensation power

23 Where, upon application, if the court is satisfied that a document or any writing on a

document embodies

(a) the testamentary intentions of a deceased; or

(b) the intention of a deceased to revoke, alter or revive a will of the deceased or the

testamentary intentions of the deceased embodied in a document other than a will;

the court may, notwithstanding that the document or writing was not executed in

compliance with any or all of the formal requirements imposed by this Act, order that the

document or writing, as the case may be, be fully effective as though it had been executed

in compliance with all the formal requirements imposed by this Act as the will of the

deceased or as the revocation, alteration or revival of the will of the deceased or of the

testamentary intention embodied in that other document, as the case may be.

The italicized words had recently been added, and the title of the section changed from

“substantial compliance” to “dispensing power”, to clarify that even where there was no

compliance with the statutory formalities, the court could exercise its power. Nevertheless, the

document was not admitted to probate. There was no indication that the deceased had seen his

accountant’s letter, that he knew the contents or the letter or approved them. His lack of action

might have indicated a change of mind, or just an uncertainty – a lack, in other words, of a fixed

and final intent.

The case put at the beginning of this paper is posited by the court in George, and raises the

concern that judges must deal with about determining the intention of a deceased when the

formalities of a will are not present or only partially so. After all, the point of the formalities, as

so well summarized by Professor Langbein are:

(1) the “evidentiary” and “cautionary” functions in which the requirements of writing,

signature and attesting witnesses impress the participants with the solemnity and legal

significance; and provide the court with reliable evidence of testamentary intent and of the

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terms of the will; (2) the “channelling” function, in which the formal requirements result in a

degree of uniformity in the organization, language and content of most wills; and (3) the

“protective” function in which the formal requirements may protect the testator from

imposition or fraud.

Electronic Wills

Substantial compliance regimes were largely begun before the widespread availability of

electronic document creation. In those jurisdictions having some form of substantial compliance

regime, the use of electronic wills has steadily increased in recent years.

In Quebec, a document existing only on a computer diskette has been admitted to probate. In

Rioux c. Coulombe,37 the deceased had committed suicide, and left a note on her person directing

police to an envelope containing a computer diskette marked "this is my

will/Jaqueline Rioux/february 1, 1996". The diskette contained only one file, which when later

printed out, contained unsigned directions for the disposition of her estate. She had also made a

note in her diary for the same day as the computer file was created that she had written her will

on a computer.

The court found that s. 714 of the Civil Code of Québec (1980), SQ 1980, c 39 allowed the

diskette to be admitted as the deceased’s will. The section reads:

714. A holograph will or a will made in the presence of witnesses that does not fully meet

the requirements of that form is valid nevertheless if it meets the essential requirements

thereof and if it unquestionably and unequivocally contains the last wishes of the

deceased.

The court found that there was no doubt that the diskette and the text printed therefrom

constituted the will of the deceased. Moreover, even though the document was not signed, the

diskette was, and the signed diskette met the signature requirements of the Code.

37 Rioux c. Coulombe, 1996 CarswellQue 1226, 19 E.T.R. (2d) 201, J.E. 97-263, EYB 1996-87749.

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Not surprisingly, an increasing number of authorities in Australia have ruled on the validity of

electronic wills. The validity of such wills turns primarily on the testamentary intention of the

will-maker in these instances.

In the case of the Estate of Roger Christopher Currie, the brother of the deceased sought letters

of administration.38 A distant relative, however, sought probate of a document found on the

deceased’s computer (the “Computer Document”), relying on the dispensing power under the

New South Wales Succession Act.39 The computer document was last modified in April 2009

and last accessed in May 2012, about nine weeks before the death of the deceased. The definition

of a document in the New South Wales Interpretation Act included “anything from which sounds,

images or writings can be reproduced with or without the aid of anything else.”40 The Court in deciding

that the Computer Document was a valid will considered the following factors:

38 The Estate of Roger Christopher Currie, late of Balmain, [2015] NSWSC 1098 at para 1 (Estate of

Roger Christopher). 39 The section in question reads:

8 When may the Court dispense with the requirements for execution, alteration or revocation of wills?

(1) This section applies to a document, or part of a document, that:

(a) purports to state the testamentary intentions of a deceased person, and

(b) has not been executed in accordance with this Part.

(2) The document, or part of the document, forms:

(a) the deceased person’s will-if the Court is satisfied that the person intended it to form his or her will, or

(b) an alteration to the deceased person’s will-if the Court is satisfied that the person intended it to form

an alteration to his or her will, or

(c) a full or partial revocation of the deceased person’s will-if the Court is satisfied that the person

intended it to be a full or partial revocation of his or her will.

(3) In making a decision under subsection (2), the Court may, in addition to the document or part, have

regard to:

(a) any evidence relating to the manner in which the document or part was executed, and

(b) any evidence of the testamentary intentions of the deceased person, including evidence of statements

made by the deceased person.

(4) Subsection (3) does not limit the matters that the Court may have regard to in making a decision under

subsection (2).

(5) This section applies to a document whether it came into existence within or outside the State.

40 In the Interpretation Act 1987,

"document" means any record of information, and includes:

(a) anything on which there is writing, or

(b) anything on which there are marks, figures, symbols or perforations having a meaning for persons

qualified to interpret them, or

(c) anything from which sounds, images or writings can be reproduced with or without the aid of anything

else, or

(d) a map, plan, drawing or photograph.

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The deceased had informed a close friend that he had created an encrypted will on the

computer.

The deceased was worried about his health and an upcoming surgery as well as the fact

that the deceased had some experience with estate matters, specifically that an informal

document could be viewed as a will.

The deceased was careful to identify with precision those items that he had decided to

“leave” to the named persons in the Computer Document.

He was careful to deal with the residue of his estate and to provide a choice of items to

the named beneficiaries.

He went further and set up a mechanism to resolve any disputes about the choices to be

made in respect of the items by fixing the criterion of “the greatest financial need.”

The deceased was also careful to provide reasons why his siblings and his nephew were

not named as beneficiaries in the document.

Additionally he provided that the document was “signed” by him on 1 April 2009.

From these factors, the court was satisfied that the deceased intended the computer document to

act as his will.

In the case of The Estate of Wai Fun Chan, the court dealt specifically with a digital video

recording of an oral statement. The deceased had signed a formal will, drafted by a solicitor, on 6

March 2012. Following changes in her circumstances after the signing of the will, however, she

then made a short oral statement, recorded by one of her eight children, two days after the formal

execution of her written will. The applicants, the children of the deceased, applied to have both

the formal will and the video will probated together. The Court in assessing whether the video

constituted a valid will noted that:

Although, as a matter of jurisdiction, a testamentary statement in the form of a video will

satisfies the requirements of section 8 [Succession Act, 2006], the nature of the

informality attending an oral statement of testamentary intentions might, in practice,

present an impediment to the Court being satisfied that the requirements of the section

have been met.

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The Court noted that substance should take precedence over form in the administration of

probate. In addressing whether a document should be admitted to probate in whole or in part, the

essential question is “whether it was the last will of a free and capable testator”. The Court in

finding that the video will constituted a codicil to the formal will found the following factors

important in this decision:

The testatrix manifestly knew and approved of the disposition made by her in recording

the DVD, and those dispositions were plainly given or made freely and voluntarily by

her;

The testatrix could have recorded an oral statement that would not take legal

consequences, however the court found that she wanted to grant a legacy to each of her

children “over and above any provision made for them in her formal will of two days

earlier”;

Although the video will was not in writing and signed by the testatrix or signed by

accompanying witnesses, it was a document within the very liberal terms of the New

South Wales Interpretation Act; and

In the video the deceased expressly claimed to be “of a clear and sound mind”.

The Court found in cases where a video will is under scrutiny, a transcript of the video is

necessary, especially for those who are not privy to the actual video. Further, where a video will

is recorded in a language other than English a verified transcription of the translation into

English is required.

Re Trethewey,41 is another Australian case, this time from Victoria, where a search of the

deceased’s computer hard drive produced a file entitled “Will,” which the court found to be a

“document” under the Victorian Interpretation of Legislation Act 1984, since it embodied

“sounds or other data” which were “capable (with or without the aid of some other equipment) of

being reproduced therefrom.” The Court held that the document did not require a signature, but

viewed the typed name of the will-maker at the end of the document to be the equivalent of a

signature. The Court ultimately allowed the probate of the will, which was to comprise “a printed

41 In the will of Mark Edwin Trethewey [2002] VSC 83 (14 March 2002).

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copy of the contents of a computer file dated May 1998 on the hard disc of a desk top computer,

being the property of the Victorian University technology, be granted to Marian Grace Burford,

the executor according to the tenor of the said will.”

In the case of Mahlo v Hehir, from Queensland, the deceased typed on her home computer a

document in the form of a will, approximately two weeks before her death.42 No paper version of

the document could be produced for the court, although there was evidence that she had printed

and signed the computer document. The deceased had a prior will drafted approximately four

months prior to the creation of the electronic file. The document in question was a Microsoft

Word Document entitled, “This is the last will and testament of Karen Lee Mahlo.docx”. The

deceased’s brother brought an application to have the electronic document probated, while the

deceased’s former partner, Mr. Hehir was attempting to have a previously drafted written will

probated.

There was a question as to whether the will-maker had actually created the document.

Ultimately, looking at the totality of the evidence, the Court determined that she did create the

electronic document in question, but was not satisfied that she intended that it to be her will. The

essential reasons for that conclusion were that the deceased:

Knew that in making a new will, she had to do more than type or modify a document

upon her computer;

The deceased had signed a paper version of the electronic document, which she described

to her father as her new will;

The deceased had recent experience in drafting a will and knew of the necessity in

signing such a will for it to be valid; and

The electronic document had designated areas for signatures, which went toward the

intention on the part of the deceased that the will was to be signed by her.

Since the signed paper copy of the document was deceased’s last will, but could not be found,

the Court reluctantly found that the electronic file could not constitute the deceased’s will.

42 Mahlo v Hehir, 2011 QSC 243 at para 1 (Mahlo).

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Even under the current legislation, courts may feel increasingly compelled to recognize

electronic and other unconventional forms of wills. Such documents are certainly being made,

and almost certainly there are would-be will-makers who believe they suffice. Any practitioner

presented with a suicide note, a memorandum of property to be given to particular people, or a

letter to a lawyer will have to consider whether it is, in fact, a will. We should also remember

that, even now, in many parts of the world, there are well-established regimes where a computer

file may be admitted to probate. Moreover, although substantial compliance or dispensing power

regimes were not created to accommodate electronic wills, if Ontario adopts such a regime, it is

inevitable that electronic wills, and how to evidence whether they contain the fixed and final

testamentary intention of a deceased, become our concerns as well.

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Ontario and SCC Cases Bennett et al. v. Gray / Bennett et al. v. Toronto General Trusts Corporation, [1958] SCR 392,

1958 CanLII 49 (SCC)

Canada Permanent Trust v. Bowman, [1962] SCR 711, 1962 CanLII 81 (SCC)

Re Laxer, 1963 CanLII 153 (ON CA)

Re Bishop, 1971 CanLII 545 (ON CA)

Re Davis, 1979 CanLII 1728 (ON SC)

Re Kinahan (1981), 9 E.T.R. 53 - 1981 CarswellOnt 498, [1981] O.J. No. 2450, 7 A.C.W.S. (2d)

469, 9 E.T.R. 53

Re Clarke, 1982 CanLII 2238 (ON SC)

Owers v. Hayes, 1983 CanLII 1721 (ON SC)

MacLennan Estate, Re, 1986 CarswellOnt 653, 22 E.T.R. 22, 35 A.C.W.S. (2d) 3261986

CarswellOnt 653, (Ont. Surr. Ct.)

Rudaczyk Estate v. Ukrainian Evangelical Baptist Assn. of Eastern Canada, 1989 CarswellOnt

534, [1989] O.J. No. 1368, 17 A.C.W.S. (3d) 138, 34 E.T.R. 231, 69 O.R. (2d) 613

Krushel Estate (Re) (Gen. Div.), 1990 CanLII 6633 (ON SC)

Facey v. Smith, 1997 CarswellOnt 1643, [1997] O.J. No. 1858, 17 E.T.R. (2d) 72, 35 O.T.C.

372, 70 A.C.W.S. (3d) 1130

Ladd v. Ladd, 2002 CanLII 22907 (ON SC)

Luty v. Magill, 2004 CanLII 48165 (ON SC)

Atherton Estate, Re, 2006 CanLII 30580 (ON SC)

Bertolo v. Nadalini, 2007 CanLII 1915 (ON SC)

Delongchamp v. Fex-Tinkis, 2007 CanLII 29961 (ON SC)

Papageorgiou v. Walstaff Estate, 2008 CanLII 32305 (ON SC)

CIBC Trust Corporation v. Horn, 2008 CanLII 39783 (ON SC)

Niziol v. Allen, 2011 ONSC 7457 (CanLII)

Laframboise v. Laframboise, 2011 ONSC 7673 (CanLII)

Christos Donis v. Dimitra Georgopoulous and Eleni Donis, 2014 ONSC 1427 (CanLII)

Reid et al. v Reid; Reid v Reid et al, 2016 ONSC 2098 (CanLII)

W.W. v Y.Y, 2016 ONSC 2387 (CanLII)

The Bank of Nova Scotia Trust Company v Ait-Said, 2016 ONSC 4051 (CanLII)

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Other Canadian Jurisdictions Eames Estate, Re, 1934 CarswellMan 77, [1934] 3 W.W.R. 364, 42 Man. R. 474

Toole, Re, 1952 CarswellAlta 19, 5 W.W.R. (N.S.) 416

Re Henderson (Seekey), [1982] 2 W.W.R. 262 (N.W.T.S.C.)

Wernicke, Re, 1983 CanLII 2083 (SK SU)

Holyk Estate, Re, 1992 CanLII 8232 (SK CA)

Kavanagh Estate v. Kavanagh (1992), 1992 CarswellNfld 207 (Nfld. T.D.); affirmed (1998),

1998 CarswellNfld 84 (Nfld. C.A.)

Caule v Brophy Estate, 1993 CanLII 3354 (NL SCTD)

Martineau v. Manitoba (Public Trustee) (1993), 1993 CarswellMan 76, 50 E.T.R. 87, 87 Man.

R. (2d) 200 (Man. Q.B.)

Oliver Estate v. Reid, 1994 CarswellNfld 44, [1994] N.J. No. 318, 124 Nfld. & P.E.I.R. 294, 384

A.P.R. 294, 4 E.T.R. (2d) 105, 50 A.C.W.S. (3d) 939

George v. Daily [1997] M. J. No. 51, 3 W.W.R. 379

Lindblom Estate v. Worthington, 1999 CarswellAlta 976, 1999 ABQB 796, [1999] A.J. No.

1214, [2000] 3 W.W.R. 85, 252 A.R. 17, 30 E.T.R. (2d) 106, 76 Alta. L.R. (3d) 135, 92

A.C.W.S. (3d) 364

Evelyn Elizabeth Sawatzky et al. v. The Estate of Harry Leonard Sawatzky, 2009 MBQB 222

(CanLII)

Bates v. Oryshchuk, 2009 CarswellAlta 1923, 2009 ABQB 688, [2010] A.W.L.D. 694, 183

A.C.W.S. (3d) 303, 18 Alta. L.R. (5th) 306, 485 A.R. 379, 54 E.T.R. (3d)

Laidlaw Estate, 2010 ABQB 132 (CanLII)

Komonen v. Fong, 2011 CarswellNS 550, 2011 NSSC 315, 205 A.C.W.S. (3d) 874, 306 N.S.R.

(2d) 370, 72 E.T.R. (3d) 153, 968 A.P.R. 370

Nerstine Estate (Re), 2012 SKQB 15 (CanLII)

Popowich Estate, 2012 ABQB 665 (CanLII)

Smith Estate, 2012 ABQB 677 (CanLII)

Yaremkewich Estate (Re), 2015 BCSC 1124 (CanLII)

Estate of Young, 2015 BCSC 182 (CanLII) Supreme Court of British Columbia

Bailey Estate (Re), 2016 BCSC 1226 (CanLII)

Lakeman v. Bayne, 2016 CarswellAlta 542, 2016 ABQB 180, [2016] A.W.L.D. 1693, [2016]

A.W.L.D. 1694, 16 E.T.R. (4th) 277, 265 A.C.W.S. (3d) 273, 31 Alta. L.R. (6th) 62

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TAB 2

Will Interpretation Issues that Arise

During the Probate Process

Andrea Hill Evans Sweeny Bordin LLP

September 20, 2016

Practice Gems:

PROBATE ESSENTIALS 2016

Will Interpretation Issues that arise during the Probate Process

Andrea M. Hill Evans Sweeny Bordin LLP

Before your client applies for a Certificate of Appointment of Estate Trustee with a

Will, you may need to resolve certain issues very early on in the process, such as who the

beneficiaries are and what constitutes the estate assets.

Depending on the words used to describe a class of beneficiaries or the testator’s

property, it may be difficult to determine who to serve with the application or how to calculate

the value of the estate assets.

Asking the court to assist by interpreting the Will is not necessarily an easy path either.

Concerned about perceived abuses by disappointed beneficiaries looking to vary the Will in

their favour, the court created a narrow test for the admission of evidence in a Will

interpretation application.

Process – Application for Directions

An application for the interpretation of a Will is a request for the court to give

directions. Rule 75.06(3) of the Rules of Civil Procedure governs motions and applications for

directions:

75.06 (1) Any person who appears to have a financial interest in an estate may apply for directions, or move for directions in another proceeding under this rule, as to the procedure for bringing any matter before the court.

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(2) An application for directions (Form 75.5) or motion for directions (Form 75.6) shall be served on all persons appearing to have a financial interest in the estate, or as the court directs, at least 10 days before the hearing of the application or motion.

(3) On an application or motion for directions, the court may direct,

(a) the issues to be decided;

(b) who are parties, who is plaintiff and defendant and who is submitting rights to the court;

(c) who shall be served with the order for directions, and the method and times of service;

(d) procedures for bringing the matter before the court in a summary fashion, where appropriate;

(e) that the plaintiff file and serve a statement of claim (Form 75.7);

(f) that an estate trustee be appointed during litigation, and file such security as the court directs;

(g) such other procedures as are just.

(3.1) On an application or motion for directions, the court may, in addition to giving any direction under subrule (3),

(a) give any direction that may be given under subrule 75.1.05 (4), in the case of a proceeding that is subject to Rule 75.1 (mandatory mediation); or

(b) in the case of a proceeding that is not subject to Rule 75.1, order that a mediation session be conducted in accordance with Rule 75.2, and, for the purpose, give any direction that may be given under subrule 75.1.05 (4).

(4) An order giving directions shall be in Form 75.8 or 75.9.

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Section 60 of the Trustee Act, R.S.O. 1990, c.T.23 allows the trustee to apply to the

Superior Court for its opinion, advice and direction:

60.(1) 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 the trust property or the assets of a ward or a testator or intestate.

Test for evidence in a Will interpretation application

The “golden rule” used in interpreting Wills is to “give effect to the testator’s intention

as ascertained from the language that was used.”1 What this means in practice is that the court

will only allow certain evidence to be admissible on the application.

The leading case on what constitutes admissible evidence in this circumstance is Rondel

v. Robinson Estate2. The Ontario Court of Appeal held that the court is to look to the words

used and the surrounding circumstances of the testator to determine intention, but not extrinsic

evidence (evidence derived from outside sources) of the testator’s intent.

The evidence submitted on the application is to allow the court to understand the facts

and circumstances surrounding the Will. Accordingly, admissible evidence will include the

character and occupation of the testator, the amount, extent and condition of his or her property,

and the testator’s family members and relationships.3

1 Dice v. Dice Estate, 2012 ONCA at para. 36 2 2011 ONCA 493 3 ibid. at para. 26

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Simply put, the court places itself in the position of the testator – applying the “armchair

rule” – and views the words used in the Will in that context.

However, there are circumstances in which the words used are unclear enough that the

testator could be referring to more than one person or class of persons, or more than one asset.

This is called an “equivocation”, and is more than a mere ambiguity in the Will.4 In such cases,

the court will allow direct extrinsic evidence of the testator’s intention to understand which of

the possible beneficiaries or objects is correct.

For example, the Will may say that the residue is to go to the testator’s grandchildren.

Typically, that word does not require interpretation. But, if the testator had no children of her

own and was married twice to men who had grandchildren from their first marriages, the

meaning of the word becomes less clear.

Does “grandchildren” mean step-grandchildren? What if the testator’s first marriage

ended in divorce? Does it mean all step-grandchildren? Or, only those step-grandchildren from

the testator’s most recent marriage, in which she was widowed?

In such a case, it is the testator’s circumstances (and, specifically, his or her family

relationships) that cause the question to arise, not that the word used in the Will is imprecise

or vague. Direct extrinsic evidence of the testator’s intention, perhaps from an earlier Will or

her discussions with her lawyer, can help resolve what the testator meant when she used the

word “grandchildren”.

4 ibid. at para. 29

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The danger of broadening those cases in which direct extrinsic evidence is admissible

is that disappointed beneficiaries could abuse the situation and file affidavits setting out what

they say the testator “truly meant” by the words used in the Will. This loosening of the legal

test could result in an increase in Will challenges brought under the guise of Will interpretation

applications.

Applications to determine beneficiaries

In some cases, the interpretation application is brought to determine who the

beneficiaries are.

In Royston et al. v. Alkerton et al.5, the residue was to be distributed to the testator’s

children “alive at [her] death” but, if any child were to predecease her, leaving issue alive at

the testator’s death, then the deceased child’s share is to be divided among that child’s issue in

equal shares per stirpes.

A dispute arose because one of the testator’s children died prior to the execution of the

Will. Another of the testator’s children took the position the testator was only referring to her

children alive at the time she made the Will, and not any children who had died before the Will

was made. Were this interpretation to be adopted, the remaining children’s shares would have

increased, and two grandchildren would inherit their father’s share.

An affidavit filed in the application described the two grandchildren as having been

raised in a “wealthy family situation” with a large home and a summer cottage. In contrast, the

5 2016 ONSC 2986

2 - 5

affiant detailed her emotional, intellectual and financial suffering at the hands of an alcoholic

father. She also alleged that the two grandchildren spent little time with the testator prior to

her death.

Citing the Rondel decision, the court held that the affidavit contained inadmissible

evidence of the affiant’s subjective belief of the testator’s intentions. The court examined the

testator’s family situation and the contents of an earlier Will to find that the word “children”

should be interpreted to mean all of the children of the testator. And, as the only restriction

was that her children be alive at her death, it should not be further restricted to mean only those

children alive when the Will was drawn.6 If the testator meant to refer only to children alive

when she made her Will, the court held that she could have used those words.

In Re Smirnw Estate7, the testator directed that the residue of his estate was to be placed

in trust for the six children of his two nieces until they reached the age of thirty. The residue

was to be divided into two shares (one for each niece’s family), and each share was to be

divided into equal parts, one for each child of each niece.

When each child turned thirty, she or he was to receive their share. If they were not

thirty at the testator’s death, then their share was to be invested until they attained the age of

thirty. While invested, the trustees were to pay the child so much of the income and capital as

in the trustees’ discretion was considered appropriate, with the balance of each share to be paid

to the child upon reaching the age of thirty.

6 ibid. at para. 20 7 Re Smirniw Estate, (21 April 2016), Hamilton 15/55730 (Ont. Sup. Ct.)

2 - 6

The dispute arose because the Will also contained a clause that was left incomplete:

Failure of Gifts - If as a result of the death of all of the children of my nieces Nadia and Oksana, some or all of the gifts provided in my Will have failed, I direct my Trustees to transfer any residue to ________________.

As a result of the incomplete clause, a question arose as to what was to happen if one

of the children were to die before reaching age thirty. Would his or her share be paid into his

or her respective estate? Or, would it be re-allocated among the surviving children?

The argument was made that the balance of the share would fall into each child’s estate

because each beneficiary had an absolute, vested, indefeasible interest in the deceased’s estate.

The relevant section of the Will contained no gift over in the event of the early death of the

beneficiary. Each beneficiary was entitled to the income and some or all of the capital of his

or her share while it was held in trust. When they reached the age entitling them to payment of

their share, they were to receive it absolutely. The Superior Court held that the share would be

paid into each child’s respective estate were he or she to die before receiving the balance of

the share.

In making this decision, the court found that there was another class of beneficiaries:

the beneficiaries of any of the nieces’ children who died before being paid their full share of

the estate.

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Applications to determine estate assets

There are circumstances in which it is not clear what assets are to be included in the

estate. This could arise where there are multiple Wills governing different assets or to applying

to assets in different jurisdictions.

In Rondel, the deceased had property in Spain, England and Canada. She also had two

bank accounts in Spain. In 2002, she made a Will in Spain that was intended to deal with her

European property. According to the court, the Spanish Will made it clear that the testator had

executed a Will in Canada to deal with the deceased’s property located outside of Europe.

A new Will was executed in Canada in 2005 that revoked all former Wills. The

testator’s Canadian lawyer did not ask about any prior Wills, where her property was located

or about her family situation. The new Will contained a standard clause that it was to apply to

all of the testator’s property “wheresoever situate”.

Following the testator’s death, an application was brought to interpret the Canadian

Will. The solicitor for the estate, who had drafted the Canadian Will, filed evidence that the

testator did not intend to revoke her Spanish Will. The application judge dismissed the

application and found that the evidence tendered by the solicitor was inadmissible.

The Court of Appeal upheld the lower court’s decision and held that there was no

equivocation in the Canadian Will; the words used were clear.8 The Canadian Will stated that

it dealt with the entire residue of the testator’s estate, and the testator read and approved the

8 Rondel, supra. at para. 31.

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Will. Therefore, the assets in the deceased’s estate included the European property in addition

to what the testator had in Canada.

In Kaptyn v. Kaptyn,9 the deceased made a primary Will, which dealt with all of his

assets, except his shares in privately-held corporations, and a secondary Will, which purported

to deal only with the corporate shares, although there were bequests in the secondary Will of

any interest he held in real property.

One of the many questions raised on the application involved the disposition of the

testator’s interest in the real property, as it was owned by the corporations and thereby owned

indirectly by the deceased.

The court accepted the following evidence of the circumstances surrounding the

making of the primary and secondary Wills: the testator was a knowledgeable and experienced

businessman; a large part of his holdings was in real property; he understood the structure of

his estate; and the Wills had gone through several drafts.

Justice D. M. Brown reviewed the evidence and then stated that the “big picture” of the

testator’s intention was clear from the language of the Wills, the admissible extrinsic evidence

and the findings of an earlier judge:

The character and occupation of the testator: he was successful, knowledgeable

and experienced in business;

9 2010 ONSC 4293

2 - 9

The testator’s property: he understood what he owned, how it was structured

and what he wanted to do;

The testator’s family relationships: he wanted his wife looked after and the rest

of his property distributed to the families of his two sons. His real estate holdings

were to be gifted to his grandchildren directly.

The court concluded that the testator’s intentions were clear: the real property was to

be gifted to the grandchildren despite the fact that testator owned it indirectly through

privately-held corporations.10

Summary

The procedure for interpreting a Will is an application brought under Rule 75.06(3) and

Section 60 of the Trustee Act.

The test for a Will interpretation application is that the court is to give effect to the

testator’s intention as ascertained from the language that was used and the surrounding

circumstances of the testator.

Admissible evidence includes character and occupation of the testator, the

amount, extent and condition of his or her property, and the testator’s family

members and relationships.

10 Ibid. at paras. 64-5.

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Direct extrinsic evidence of the testator’s intention is allowed to resolve issues

of “equivocation” – when the words used could refer to two or more persons or

objects.

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TAB 3

Locating Missing Beneficiaries

Ian Hull, C.S. Hull & Hull LLP

Laura Betts

Hull & Hull LLP

September 20, 2016

Practice Gems:

PROBATE ESSENTIALS 2016

LOCATING MISSING BENEFICIARIES

Ian M. Hull and Laura Betts

Ian M. Hull Tel: (416) 369-7826 Fax: (416) 369-1517

Email: ihull@hullandhull.com

Laura Betts Tel: (416) 640-3949 Fax: (416) 369-1517

Email: lbetts@hullandhull.com

Hull & Hull LLP

Barristers and Solicitors

TORONTO 141 Adelaide Street West, Suite 1700

Toronto, Ontario M5H 3L5 TEL: (416) 369-1140 FAX: (416) 369-1517

OAKVILLE 228 Lakeshore Road East Oakville, Ontario L6J 5A2

TEL: (905) 844-2383 FAX: (905) 844-3699

www.hullandhull.com www.hullestatemediation.com

Subscribe to Hull & Hull LLP blogs and podcasts at http://estatelaw.hullandhull.com

Locating Missing Beneficiaries Page - 2 - Ian M. Hull and Laura Betts ______________________________________________________________________

I N D E X

Introduction ................................................................................................................................ 3

Legal Obligation of Estate Trustee to Locate Missing Heirs ............................................ 4

The Source of the Beneficiary Identification Issue .......................................................... 5

Distribution to beneficiaries under terms of a Will ................................................. 5

Distribution to beneficiaries on intestacy .............................................................. 5

Surviving Spouse - No Issue ................................................................................ 6

Surviving Spouse – With Issue ............................................................................. 6

No Spouse - Surviving Issue ................................................................................ 7

Ascendants and Collaterals .................................................................................. 7

How to Identify a Missing Heir ........................................................................................ 8

Initial Searches .................................................................................................... 8

A Professional Researcher ................................................................................... 8

How to Locate and Notify a Missing Heir ........................................................................ 9

Missing persons and the Absentees Act, and the Declarations of Death Act, 2002........10

Declarations of Death Act, 2002 ..........................................................................10

Absentees Act .....................................................................................................11

Court Application to Ascertain Heirs ..............................................................................12

Liability ..........................................................................................................................12

Conclusion ................................................................................................................................13

LOCATING MISSING BENEFICIARIES

1. How to track down beneficiaries that cannot be readily located 2. Beneficiaries located overseas 3. Beneficiaries on intestacy 4. Missing persons and the Absentees Act, and the Declarations of Death Act, 2002

INTRODUCTION

An estate trustee’s duties in administering an estate include, among other things, the distribution

of all estate assets in accordance with the terms of the Will or the rules of intestacy. However, in

order to make such a distribution, the trustee will be required to identify any and all heirs that may be

rightfully entitled to a share of the estate.

In most cases this is often a simple and routine task, for example, where family members are

expressly named, or are well known and can be readily identified. However, where a testator has a

large extended family, complications may arise in both determining and locating beneficiaries,

particularly, the next of kin on intestacy, or the intended recipients of a class gift.

In any event, an estate trustee must make “reasonable inquiries” to identify any and all beneficiaries.

However, identification is only half the task, as once a missing beneficiary is identified he/she must

also be located and notified of his/her interest in the estate.

This paper focuses on the identification and location of missing heirs. First, it outlines the legal

obligations of an estate trustee to identify and locate heirs. It explains the source of issues faced by

trustees in identifying beneficiaries, both with a Will and upon intestacy. It then sets out the steps

that should be taken by a trustee to locate missing heirs, and identifies various issues encountered

by trustees, such as having to declare a missing beneficiary dead, or having to apply to the court for

a determination on the issue of missing beneficiaries. Finally, the paper considers the issue of

liability, not just for the estate trustee, but also for solicitors acting for or advising the estate trustee.

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Locating Missing Beneficiaries Page - 4 - Ian M. Hull and Laura Betts ______________________________________________________________________

Legal Obligation of Estate Trustee to Locate Missing Heirs

While not a statutory requirement, an estate trustee has a duty to ascertain all heirs who might be

rightfully entitled to a share in the estate.1 However, there is little available in either statutes or case

law to guide executors as to the precise extent or breadth they must go to ascertain next of kin or

missing heirs.

In Ontario, the only legislative guidance dealing with the extent of the search concerns children born

outside of marriage. Section 24(1) of the Estate Administration Act requires a trustee to make

“reasonable inquiries” to locate a beneficiary or someone who may be entitled “by virtue of a

relationship traced through a birth outside marriage.”2 “Reasonable inquiries” is not defined, however

a logical starting point for an estate trustees in this regard would be to specifically ask family and

friends of the deceased of the likelihood of a child being born outside of marriage. Section 24(2)

goes on to state that if the result of the trustee’s inquiries and a search of the Registry General

records suggests no child exists, the estate trustee will not be liable for failing to distribute property

to an existing child.3

While this provision speaks specifically to the duty of an executor to satisfy him or herself that there

are no beneficiaries who are children born outside marriage, the standard of “reasonable enquiries”

is applicable to the search for any beneficiary.

With respect to the extent of the search that must be undertaken, the Trustee Act4 provides some

guidance. Section 53 provides, that while placing a notice or advertisement may be sufficient for the

trustee in giving notice to creditors of the existence of the estate before final distribution, it is not

sufficient notice with respect to heirs.5 Therefore, it is clear that an executor has an obligation to do

more in alerting beneficiaries to the existence of an estate than simply placing a notice in a

newspaper.

Various judicial decisions indicate that the extent of the estate trustee’s duty may differ depending on

the particular circumstances. Factors such as the size of the estate6 or bequest7 may determine the

extent of the search for a missing beneficiary. A court will likely require more extensive enquiries be

1 Re Short Estate, (1941) 1 W.W.R. 593 (B.C.S.C.). 2 Estate Administration Act, R.S.O 1990, c. E22, s. 24. 3 Ibid, s. 24(2). 4 R.S.O. 1990, c. T.23. 5 Ibid, s. 53. 6 Re Ashman (1907), 15 O.L.R. 42, 10 O.W.R. 250; Jones v. British Columbia (Public Trustee), [1982] 5. W.W.R. 543

(B.C.S.C). 7 Re Ramsey, [1943] 2 D.L.R. 784 (Ont. H.C.); Kossak Estate v Kosak, (1990) 72 O.R. (2d) 313 (Ont. H.C.).

3 - 4

made when an estate is large.8 However, even when an estate is small, the court may determine that

further searches need to be conducted.9

The Source of the Beneficiary Identification Issue

Distribution to beneficiaries under terms of a Will

If the deceased made a Will, the persons named as beneficiaries in the Will are entitled to

inherit in accordance with the deceased’s instructions.

The terms of the Will may be quite clear, for example where family members are expressly

named, or are well known and can be readily identified. However, difficulties arise where the terms

of the Will are not clear, and where the deceased’s family is not close or well known. For example,

where rather than being identified by name, the Will identifies beneficiaries as a class such as, my

children, my first paternal cousins or my next of kin.

The issue arises when it comes time to identify each individuals within the class with a degree of

certainty.

Distribution to beneficiaries on intestacy

If the deceased dies without a Will, they die intestate. If a person leaves a valid Will, but it fails

to dispose of the entire estate, whether intentionally or through inadvertence, they are said to

die partially intestate. In both instances the Succession Law Reform Act10 will apply.11

Sections 44 and 47 sets out the priorities of the persons and classes of persons, who are

deemed to inherit pursuant to the statute. It is important to note that no distinction is made

between persons born within or outside marriage or between relatives of the half blood and

whole blood.12 In addition, descendants and relatives conceived before and born alive after the

death of the intestate are included in the scheme of distribution as if they were alive on the date

of death of the deceased.13

8 Parker (Re), (1982), 139 D.L.R. (3d) 292. 9 Re Davis, [1934] O.W.N. 62 (Ont. H.C). 10 R.S.O. 1990, c.26. 11 In the case of partial intestacy, the SLRA will only apply to the portion not covered by the will. 12 Anne E.P. Armstrong, Estate Administration: A Solicitor’s Reference Manual, (Thomson Carswell) at Special

Instruction 33 “Distribution on Intestacy” SI-39 at [3]. 13 Ibid, at [3].

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Locating Missing Beneficiaries Page - 6 - Ian M. Hull and Laura Betts ______________________________________________________________________

For the estate trustee, this means that all next of kin will need to be identified, including all

children born outside of marriage. In some instances even very distant relatives may be entitled

to inherit if there are no next-of-kin closer in relationship.

Surviving Spouse - No Issue

We should note that the surviving spouse of an intestate deceased is allowed to decide whether

to make an application for his/her entitlement under the Family Law Act for equalization

payment,14 or to take under Part II of the Succession Law Reform Act. However, in this paper,

we will only deal with a spouse’s entitlement under Part II of the Succession Law Reform Act.

Where the deceased is survived by a spouse and no issue, the spouse takes the entire estate of

the deceased.15 However, the Family Law Act16 defines “spouse” as “two persons who, (a) are

married…”. Therefore, in Ontario all individuals must be married, rather than common law, in

order to classify as a spouse.

Surviving Spouse – With Issue

If the deceased is survived by a spouse and issue of any degree, the spouse is entitled to a

preferential share of $200,000. However, if there is only a partial intestacy, the spouse’s

preferential share will amount to $200,000 less the net value of any property which the spouse

receives under the deceased’s Will.17 Therefore, if the amount received under the Will exceeds

$200,000, there can be no preferential share.18 Where the net value of the total intestate estate

does not exceed $200,000, the spouse is entitled to the entire estate notwithstanding there are

issue of the deceased alive at his death.19

Where the net value of the estate exceeds the preferential share, the residue is distributed

according to the number and degree of issue surviving.20

Where there is only one surviving child of the deceased or no surviving children but surviving

issue of only one child of the deceased, the spouse takes half of the residue to the estate and

the issue take the other half.21

14 Family Law Act, R.S.O. 1990, c F.3, s.5. 15 Succession Law Reform Act, R.S.O. 1990, c.26, s. 44. 16 R.S.O. 1990, c. F.3. 17 Ibid, s. 45(3)(a). 18 Ibid, s. 45(3)(b). 19 Ibid, s. 45(1). 20 Ibid, s. 47(1).

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Where more than one child or the issue of more than one deceased child, or one child of the

issue of one or more deceased children are alive at the intestate’s death, the spouse takes one

third of the residue to the intestate estate and issue take the remaining two thirds.22

No Spouse - Surviving Issue

Where the deceased dies leaving issue but no spouse, the issue are entitled to the entire

estate. As between themselves, the issue of the deceased take their share per stirpes.23

However, there is one exception. Where a deceased dies intestate leaving grandchildren, but no

children, the grandchildren take per capita. Had one child survived, the issue would take per

stirpes.

Ascendants and Collaterals

Where the deceased dies intestate leaving no surviving spouse or issue, the estate is

distributed to the surviving parent, or where both parents survive, to each parent in equal

shares.24 If no parents survive the deceased, the estate is share by any surviving brothers or

sisters with one qualification. If there are children of a deceased brother or sister alive at the

death of the intestate, the children take the share their parent would have received had he

survived the deceased.25 In order for the rule to apply, there must be at least one brother or

sister alive at the deceased death. The children of the deceased brother or sister divide their

parent’s share as if the parent had died intestate with respect to that particular property.

Where no spouse, issue, parents or brothers/sisters survive the deceased, the estate is divided

equally among any surviving nieces and nephews.26

If the deceased dies intestate without any surviving spouse, issue, parents, brothers/sisters,

nieces/nephews, the estate is distributed among the next of kin who are of the closest degree of

kindred to the deceased. The Succession Law Reform Act sets out the manner in which

degrees of kindred should be established, directing that “degrees of kindred shall be computed

by counting upward from the deceased to the nearest common ancestor and then downward to

the relative”.

21 Ibid, s. 46(1). 22 Ibid, s. 46(2). 23 Ibid, s. 47(1). 24 Ibid, s. 47(3). 25 Ibid, s. 47(4). 26 Ibid, s. 47(5).

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Locating Missing Beneficiaries Page - 8 - Ian M. Hull and Laura Betts ______________________________________________________________________

In some instances it may be very difficult to determine beneficiaries pursuant to these provisions

with precision. However, great care must be taken to ensure that some degree of certainty can

be achieved as to the identity of relatives, to prevent the correctness of the distribution from

being challenged.

How to Identify a Missing Heir

Initial Searches

A good starting point is to make contact with the family, friends and neighbours of the deceased.

These individuals may have important information, relevant to those who will need to be

contacted during the administration of the estate, and may offer assistance in creating a family

tree.

The estate trustee should also examine the personal effects of the deceased, including

correspondence, to determine both the existence and location of other family members.

Enquiries might also be made of the deceased’s employer, co-workers and other professionals,

such as the deceased lawyer, accountant or doctor, who may be able to offer information.

Some general searches of historical and current public records would also be good starting

point.27 Generally, the estate trustee has authority to request information with respect to death,

birth, and marriage records. Additionally, there are an abundance of genealogical websites and

search engines on the Internet that may assist the estate trustee in his or her preliminary

searches.28

However, after such self-help remedies have been exhausted, the estate trustee should

consider seeking the assistance of a professional.

A Professional Researcher

Often, estate trustees may consider hiring a professional researcher or a genealogist to assist

them in the location of missing heirs. The Archives of Ontario can provide a list of accredited

researchers both in Canada and internationally.29

27 For example, the Office of the Registrar General (Ontario), P.O. Box 4600, 3rd Floor, 189 Red River Road, Thunder Bay, Ontario P7B 6L8, t: 1-800-461-2156, e: cbsinfo@cbs.gov.on.ca, website: www.mgs.gov.on.ca.

28 For example, www.cyndislist.com; www.rootsweb.com; www.ancestry.com; or www.jewishgen.org. 29 See, http://www.archives.gov.on.ca/en/index.aspx.

3 - 8

A professional researcher will be able to access databases not available to the estate trustee

and will often be able to obtain information in a more precise way. They routinely consult

genealogical search engines and attend cemeteries to determine family relationships and the

status of beneficiaries. These researchers will generally charge for their service or, instead, in

exchange for a finder's fee, should they be successful in their search.

When looking to retain a professional researcher, the estate trustee should look for someone who

can provide the estate trustee with their methodology for locating a missing heir. The parameters of

the search should be clear and communicated in writing to prevent expenses associated with

unnecessary searches. It is also be especially useful to hire someone familiar with heirship searches

and already familiar with sections 44 and 47 of the Succession Law Reform Act and other relevant

statutes. An estate trustee may consider asking their solicitor to refer someone to prepare an

heirship report.

Ultimately, it is the responsibility of the estate trustee to search for heirs and he or she should

examine all materials provided by the professional researcher and authenticate documents attached

to their report. The estate trustee has to ascertain the links suggested by the researcher report.

Wherever possible, the trustee should verify the information provided in the report with other family

members.

How to Locate and Notify a Missing Heir

Once a missing beneficiary has been identified, the estate trustee must locate and notify that

beneficiary of his or her interest in the estate.30

Many estate trustees find success searching online, for example, using Google or Canada

41131, for contact or other information. However, if this is not successful, the estate trustee must

turn to another means.

The courts have consistently held that an estate trustee should advertise for a person entitled to

share in an estate in the locality where the claimant was known to reside or where he or she is

reasonably likely to reside.32 This notice should provide as much detail as possible about the

deceased’s life in order to assist in his or her identification and possible persons entitled.

However, while newspaper advertisements once served as sufficient notice in some cases, it is

30 McGrath v. Atlantic Trust Co. (1969), 8 D.L.R. (3d) 255 (N.S.C.A). 31 For example, http://findaperson.canada.411.ca. 32 Re Ashman (1907), 15 O.L.R. 42 (H.C.J); Stewart v Snyder (1898), 30 O.R. 110 (H.C.J.).

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Locating Missing Beneficiaries Page - 10 - Ian M. Hull and Laura Betts ______________________________________________________________________

foreseeable that rapid technological advances, such as the internet, may warrant more

extensive means of public notification.33

In some cases, these sorts of advertisements will tip off so-called heir hunters. Heir hunters are

professional genealogists who work the other side of the missing-beneficiary issue. They keep

an eye on probate cases, in which it seems likely that beneficiaries are unknown or cannot be

easily found. They then attempt to locate beneficiaries, and convince them to enter into

contracts that will provide a percentage of their inheritance to the heir hunter. Heir hunters often

refer beneficiaries to lawyers, to ensure that they will receive payment for their work.

If it is suspected that the beneficiary is located overseas, it is possible that some consulates or

embassies may also be helpful in assisting the estate trustee to search for heirs who live in their

respective countries, however they have no obligation to provide assistance.34

In every event the estate trustee should maintain records of the searches he/she has conducted

and should insist the same any individual hired to assist on their behalf.

Missing persons and the Absentees Act, and the Declarations of Death Act, 2002

Declarations of Death Act, 2002

Pursuant to the Declarations of Death Act,35 an ‘interested person’, being among others, an

estate trustee, may apply to the Superior Court of Justice for an order that a missing individual

be declared legally dead.

Under the Declarations of Death Act the court is authorized to determine whether a person is

dead (1) on the basis of circumstantial evidence (circumstances of peril), or (2) a common law

rule which presumes a person dead after an unexplained absence of seven years or more.36

In order to successfully obtain a declaration of death, the individual making the application must

be able to demonstrate that:

a. he/she has not heard of or from the person since their disappearance in circumstances of peril - or within the 7-year period;

33 Anne E.P. Armstrong, Estate Administration: A Solicitor’s Reference Manual, (Thomson Carswell) at Special Instruction 19 “Personal Representative’s Duties and Powers”, SI-20.4 at [3].

34 Monique Charlebois, “The Estate Trustee’s Duty to Search for Heirs,” 23 E.T.P.J. (2004) 209 at 221. 35 Declarations of Death Act, S.O. 2002, c. 14, s. 1-2. 36 Ibid, s 2(3)-2(6).

3 - 10

b. to his/her knowledge, after making reasonable inquiries, no other person has heard from the individual;

c. there is no reason to believe that the person is alive; and d. there is sufficient evidence to find that the person is dead.37

The courts have been hesitant to make declarations of death unless it is clear on the facts that

an individual is indeed dead. Therefore, even where a person has been missing for more than 7

years, the courts will expect any applicant to have taken reasonable steps to locate them.38

In the event the court is not satisfied that there is sufficient evidence to declare an individual

dead, section 3 of the Declarations of Death Act also permits the court to make an order under

the Absentees Act.

Absentees Act

Where a person is missing but there is insufficient evidence to determine whether or not he or

she is alive or dead, application may be made to court for an order under declaring the person

an "absentee” under the Absentees Act39.

An ‘absentee’ is defined as a person, who having his or her usual place of residence or domicile

in Ontario, has disappeared, whose whereabouts are unknown, and as to whom there is no

knowledge as to whether he or she is dead or alive.40

In such circumstances, the court may make an order for the custody, care and management of

the property of the absentee, and committee may be appointed for this purpose.41 The

committee is subject to the same powers and duties as a guardian of property under the

Substitute Decisions Act, 199242. In addition, the committee is specifically authorized to expend

monies for the purpose of locating the absentee and ascertaining whether he or she is alive or

dead.43

37Ibid, s 2(4) and 2(5). 38 See, Wasylyk v. Wasylyk, 2012 ONSC 7029. 39 R.S.O. 1990, c.A.3. 40 Absentees Act, R.S.O. 1990, c. A.3, s. 1. 41 Ibid, s. 4. 42 1992, c. 32, s. 1. 43 Absentees Act, R.S.O. 1990, c. A.3, s. 6-7.

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Locating Missing Beneficiaries Page - 12 - Ian M. Hull and Laura Betts ______________________________________________________________________

Court Application to Ascertain Heirs

If an estate trustee has remained unsuccessful in attempts to locate estate beneficiaries, or is

unsure whether all heirs have been ascertained, as a last resort, he or she may also go to court

for advice and direction. An application can be brought pursuant to Rule 14.05(3) of the Rules of

Civil Procedure for a determination on the issue. This will ensure that distribution is made to

proper beneficiaries, without further delay.

However, we again stress the importance of documenting all steps fully so that adequacy of

attempts can be considered, and proven, if necessary, before the court. If/when an application

for determination is brought the estate trustee will need to provide an affidavit detailing all efforts

made to locate the proper beneficiaries and serve anyone with an interest in the estate.

Documentation presented to the court typically includes search results from online databases

and a report prepared by the researcher.

Courts are hesitant to make an order that adequate attempts have been made to locate missing

beneficiaries due to the significant consequences if one cannot be found and later emerges. The

court may require that additional steps are taken or that a period of time passes to ensure that

the missing beneficiaries will not come forward at a later time.44

Liability

The importance of identifying and locating beneficiaries must not be overlooked, as an estate trustee

can be personally liable in negligence for not making sufficient inquiries to locate rightful heirs.

Consequently, a solicitor representing an estate trustee should also be sure to advise his or her

client to be diligent in locating heirs to relieve themselves from possible liability.

In most cases an estate trustee will rely on their solicitors to advise and guide them as to how to

ascertain the identity of heirs. Solicitors should ensure that advice given to the estate trustee

respecting the requisite efforts that should be made to ascertain heirs will give protection to that

solicitor from a claim to negligence at the suit of disappointed heirs who have not been located. It

cannot be emphasized too strongly that you should put in writing to your client that he/she is the

estate trustee and while you are prepared to assist them in their search for heirs, he or she must

bear the ultimate responsibility of determining the identity of those person who share in the estate.

44 See, Puffer v. The Public Guardian and Trustee, 2012 ONSC 3579.

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CONCLUSION

In locating beneficiaries, an estate trustee will be held to the standard of reasonable efforts. If

the trustee goes through the steps available to him or her independently, then consults a

researcher or private investigator, the expectation of reasonable efforts may be satisfied. If this

search indicates beneficiaries exist, an estate trustee has a duty to locate and notify those

beneficiaries of their entitlement under the estate. However, if diligent searches do not yield

beneficiaries, or certainty that no beneficiaries exist, then court action is available to finalize the

matter and permit distribution of the estate. It is important to document and provide evidence of all

searches and efforts in order to validate court action, but also to protect the estate trustee from

potential liability.

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TAB 4

Estate Administration in Ontario with

Foreign Testamentary Documents

Jenny Pho Dale & Lessmann LLP

September 20, 2016

Practice Gems:

PROBATE ESSENTIALS 2016

ESTATE ADMINISTRATION IN ONTARIO

WITH FOREIGN TESTAMENTARY DOCUMENTS

Jenny Pho

Telephone: (416) 369-7809

Fax: (416) 863-1009

Email: jpho@dalelessmann.com

DALE & LESSMANN LLP

Canadian Legal Counsel

Suite 2100, 181 University Avenue

Toronto, Ontario M5H 3M7

Tel: 416-863-1010 | Fax: 416-863-1009

ESTATE ADMINISTRATION IN ONTARIO

WITH FOREIGN TESTAMENTARY DOCUMENTS1

It is becoming increasingly common for residents of foreign jurisdictions to own assets in

Ontario. The implications of foreign ownership upon the death of the owner need to be

considered. If the deceased appointed an estate trustee in his or her jurisdiction of residence, the

estate trustee would be responsible for the administration of the deceased’s worldwide estate.

There are different requirements in each jurisdiction with respect to the recognition of foreign

testamentary documents. This paper addresses the process in Ontario for obtaining a certificate

of appointment by a foreign estate trustee, as well as some issues that may arise for a foreign

estate trustee.2

A grant of probate in a foreign jurisdiction does not automatically vest the estate trustee with the

authority to administer the deceased’s assets in Ontario.3 The estate trustee must seek separate

authorization from an Ontario court. The appropriate procedure for obtaining a certificate of

appointment are set out in the Rules of Civil Procedure4 and will depend on factors such as

whether the deceased resided in a Commonwealth jurisdiction, or if the foreign estate trustee was

appointed in the home jurisdiction with or without a will. Appointments granted by other

Canadian provinces or Commonwealth countries, regardless of whether or not the deceased had a

will, may be confirmed here by resealing.5 The effect of resealing a certificate of appointment is

to give the original foreign grant the same force and effect as if it were originally granted in

Ontario. Appointments granted by non-Commonwealth jurisdictions may be given effect by an

application for ancillary appointment of an estate trustee with a will.6 In the event the deceased

did not have a will and an appointment was granted in a non-Commonwealth jurisdiction, the

estate trustee will need a certificate of appointment of foreign estate trustee’s nominee as estate

1 The author acknowledges and thanks Nathan Ische for his assistance in the preparation of this paper. 2 For the purposes of this paper, any reference to an “estate trustee” shall include any personal representative of the

deceased. 3 Re Estate of Albert Applegath III, 2014 ONSC 2942, at para 7 [Applegath]. 4 R.R.O. 1990, Reg. 194 [the Rules]. 5 Ibid, Rule 74.08. 6 Ibid, Rule 74.09.

4 - 1

trustee without a will.7 All applications are to be made to the Superior Court of Justice and are to

be filed in the county or district where the assets of the deceased are located.8

Confirmation by Resealing of Appointment of Estate Trustee with or without a Will

If the foreign estate trustee has been granted a certificate of appointment, or the equivalent, in a

Commonwealth jurisdiction, the estate trustee may apply to the Ontario Superior Court of Justice

to have the grant resealed in accordance with Rule 74.08 of the Rules. To have the grant

resealed, the estate trustee must confirm that the foreign grant is still effective and provide

certified copies of the original grant with the application for confirmation. Rule 74.08 provides:

(1) An application for confirmation by resealing of the appointment of an

estate trustee with or without a will that was granted by a court of

competent jurisdiction in the United Kingdom, in a province or territory of

Canada or in any British possession (Form 74.27) shall be accompanied

by,

(a) two certified copies of the document under the seal of the court

that granted it, or the original document and one certified copy

under the seal of the court that granted it;

(b) the security required by the Estates Act; and

(c) such additional or other material as the court directs.

(2) A confirmation by resealing of the appointment of an estate trustee with or

without a will shall be in Form 74.28.9

The security to be provided with the application is discussed in further detail below. For an

application for resealing, a bond is not necessary if the estate trustee files a certificate in

accordance with s. 52(3) of the Estates Act. This certificate is issued by the registrar of the court

that issued the original grant and confirms that the security given to the foreign court covers the

value of the assets of the estate located in that jurisdiction as well as the assets located in

Ontario.10 If the estate trustee is unable to provide such a certificate, he or she will need to post a

bond in the normal course.

In addition, before the grant is resealed, the estate trustee will need to pay the estate

administration tax based on the value of the assets located in Ontario.

7 The Rules, supra, note 4, Rule 74.05.1. 8 Estates Act, R.S.O. 1990, c. E.21, s. 7(2). 9 The Rules, supra, note 4. 10 Estates Act, supra, note 8, s. 52(3).

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Where a certificate of appointment was obtained without a will in a Commonwealth jurisdiction,

the estate trustee can apply for resealing personally and need not appoint an Ontario resident. As

will be discussed later, this is not the case where the original grant was obtained without a will in

a non-Commonwealth jurisdiction.

Certificate of Ancillary Appointment of Estate Trustee with a Will

If the foreign estate trustee has been granted a certificate of appointment with a will, or the

equivalent, in a non-Commonwealth jurisdiction, the estate trustee will need to obtain a

certificate of ancillary appointment in accordance with Rule 74.09 of the Rules. Rule 74.09

provides:

(1) An application for a certificate of ancillary appointment of an estate

trustee with a will where the applicant has been appointed by a court

having jurisdiction outside Ontario, other than a jurisdiction referred to in

rule 74.08, (Form 74.27) shall be accompanied by,

(a) two certified copies of the document under the seal of the court

that granted it;

(b) the security required by the Estates Act; and

(c) such additional or other material as the court directs.

(2) A certificate of ancillary appointment of an estate trustee with a will shall

be in Form 74.29.11

The ancillary appointment, being secondary to the foreign certificate of appointment, is

recognition by the Ontario courts of the existence of the original grant. In determining whether

or not to grant the certificate of ancillary appointment, the Ontario court is not making any

determinations as to the validity of the foreign will or the original grant. The court, however,

does still have the power to determine whether or not they will grant the certificate of ancillary

appointment in Ontario. The court may refuse the application in circumstances where the estate

trustee under the foreign grant would for some reason be disqualified in Ontario. For example,

disqualification would occur if the applicant is a minor, mentally incompetent or an entity not

authorized to act in Ontario.

11 The Rules, supra, note 4.

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The estate trustee will be required to post security to cover the Ontario assets regardless of any

clause in the foreign will waiving the necessity of posting a bond.12 The estate trustee may make

an application for the court to dispense with the bond. The content of a proper application to

dispense with the administrative bond is discussed below.

In addition, before the certificate of ancillary appointment is granted, the estate trustee will need

to pay the estate administration tax based on the value of the assets located in Ontario.

Certificate of Appointment of Foreign Estate Trustee’s Nominee as Estate Trustee Without

a Will

If the foreign estate trustee has been granted a certificate of appointment without a will in a non-

Commonwealth jurisdiction, the foreign estate trustee may only administer assets in Ontario by

nominating an Ontario resident, a nominee, to act in their place as estate trustee in Ontario in

accordance with Rule 74.05.1 of the Rules. Rule 74.05.1 provides:

(1) An application for a certificate of appointment of a foreign estate trustee’s nominee as

estate trustee without a will (Form 74.20.1) shall be accompanied by,

(a) a nomination (Form 74.20.2) of the applicant by the estate trustee appointed in

the jurisdiction where the deceased was domiciled at the date of death;

(b) a copy of the document appointing the foreign estate trustee, certified under

the seal of the court that granted it;

(c) a certificate under the seal of the court that granted the foreign document,

issued within a reasonable amount of time before the date of the application

and stating that the foreign document remains effective as of the date of the

certificate;

(d) the security required by the Estates Act; and

(e) such additional or other material as the court directs.

(2) The certificate of appointment of a foreign estate trustee’s nominee as estate trustee

without a will shall be in Form 74.20.3.13

This application requires that the applicant must first be appointed as estate trustee in the

jurisdiction where the deceased was resident, which may be problematic if the foreign

12 Megan Connolly, “Grants from Outside Ontario” in Anne E.P. Armstrong, ed, Estate Administration: A Solicitor's

Reference Manual (Carswell, 1999) at Chapter 2.15.2 [Estate Administration] 13 The Rules, supra, note 4, Rule 74.05.1.

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jurisdiction does not require the appointment of an estate trustee. The Ontario nominee would

only be granted the power to act in Ontario.

Similarly to an estate trustee applying for a certificate of ancillary appointment, the nominee will

be required to post security to cover the Ontario assets and will be required to pay the estate

administration tax on the value of the assets located in Ontario.

Estate Information Return

In all of the above situations, the estate trustee will be required to file an Estate Information

Return (“EIR”) within ninety (90) days of the receipt of the certificate of appointment in Ontario.

The EIR must list the value of all of the assets in Ontario. The foreign estate trustee is otherwise

subject to the same requirements as any other Ontario estate, with the Ministry of Finance having

the power to audit the estate.

Administration Bonds

An administration bond is required when an estate trustee does not reside in Ontario or elsewhere

in the Commonwealth,14 or where an alternative estate trustee is applying to the court for

appointment as estate trustee, such as in an application for a certificate of appointment of a

foreign estate trustee’s nominee as estate trustee without a will.15

The amount of the bond is double the amount of the value of the assets.16 However, if the bond

is being provided by a licenced insurance company, the amount of the bond is reduced to the

amount of the value of the estate.17 A judge may, under special circumstances, further reduce the

amount of or dispense with the bond.18

The case of Re Estate of Robert James Henderson provides helpful guidance for estate trustees

wishing to dispense with the administration bond.19 In establishing what factors the courts should

consider, the court cited the obligations imposed upon estate trustees by Form 74.32 of the Rules

which provides:

14 Estates Act, supra, note 8, s. 6. 15 The Rules, supra, note 4, Rule 74.05.1(1)(d). 16 Estates Act, supra, note 8, s.37(1). 17 http://www.attorneygeneral.jus.gov.on.ca/english/estates/estates-FAQ.asp#s7 18 Estates Act, supra, note 8, s. 37. 19 Re Estate of Robert James Henderson, 2008 CanLII 69136 (ON SC) [Henderson]

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The principal as an estate trustee is required to prepare a complete and true

inventory of all the property of the deceased, collect the assets of the state, pay the

debts of the estate, distribute the property of the deceased according to law, and

render a complete and true accounting of these activities when lawfully

required.20

And Rule 74.11(2) which provides:

Any person, including a creditor, who has a contingent or vested interest in an

estate may at any time, on notice to the estate trustee or applicant for appointment,

move for an order to have a bond filed or the amount of an existing bond

increased or reduced.21

The court concluded that “the main purpose of an administration bond is to ensure that an estate

trustee pays the debts of the estate and distributes the property of the estate to those who are

entitled to it.”22 If the estate trustee can show that, “the protection afforded by a bond to

beneficiaries and creditors is not required or will be met in some other way”23, then the

application to dispense with the bond should be granted. The evidence to support the application

must include the identity of all of the beneficiaries, consents from all beneficiaries who are sui

juris, and the value of the interest of any minor or incapable beneficiary.24 To show that the

creditors are protected, the applicant will need to provide evidence that the debts of the deceased

have been paid, or, if they have not been paid, the details of each debt along with an explanation

of how such debt will be paid from the assets of the estate.25 It is not sufficient to make a general

statement that the debts will be paid from the assets of the estate.26

Unique Situations

There are situations that do not fit neatly within the parameters of our Rules. Examples include

instances where, the jurisdiction of the deceased did not require the appointment of an estate

trustee, or someone other than the foreign estate trustee is applying to administer the assets in

Ontario and there is a will. Another unusual situation that may arise is when a foreign trust

company is applying to be the estate trustee in Ontario.

20 Henderson,supra, note 19, citing R.R.O. 1990, Reg. 194, Form 74.32. 21 Ibid, citing R.R.O. 1990, Reg. 194 Rule 74.11(2). 22 Ibid, para 10. 23 Ibid. 24 Ibid, para 12. 25 Ibid. 26 Ibid, para 16.

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In such instances, the person applying to be the estate trustee in Ontario will need to seek a court

order to approve the form of application being submitted, which will depend on the particular

circumstances.

No Foreign Estate Trustee or Grant

In certain jurisdictions, it is not necessary to appoint an estate trustee under one’s will. For

example, under Austrian law, a person can simply name someone as his or her sole heir under a

will and the person so named becomes the owner of all assets of the estate by devolution order of

the court. Anyone who is statutorily entitled to any of the assets of the estate can then make a

claim against the sole heir. There is no requirement to name a separate estate trustee.

If no foreign estate trustee has been appointed by the will, the person wishing to administer the

assets in Ontario can still try to submit an application for a certificate of ancillary appointment of

estate trustee with a will. That application, however, should include an affidavit from a lawyer

from the foreign jurisdiction providing an explanation of the laws of the foreign jurisdiction,

including the reason why no foreign estate trustee was appointed.

In the case where the will does appoint an estate trustee, but the estate trustee is not required to

apply for probate in the foreign jurisdiction (for instance, if all the assets in the jurisdiction are

held in joint tenancy), it may be possible for the estate trustee to apply for a certificate of

appointment of estate trustee in Ontario. Depending on the situation, it may be appropriate to

limit the appointment to the assets in Ontario. The application should include an affidavit

explaining the circumstances.

Application by a Person Other than Foreign Estate Trustee

In Applegath, the court dealt with the issue of whether a person other than the foreign estate

trustee can apply to be the estate trustee in Ontario.27

Albert Applegath III, a resident of New Mexico at the time of his death, owned assets located in

Ontario. These assets included royalties in Wesdome Gold Mines Ltd. Before continuing royalty

27 Applegath, supra, note 3.

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payments to Albert’s estate, Wesdome required evidence of probate or of formal recognition of

Albert’s New Mexico will in Ontario.

Albert’s will appointed his wife, Clavis Applegath, as estate trustee of his estate and she was

subsequently granted probate by the District Court of the State of New Mexico. However, one of

the other beneficiaries, Carmen Consuelo Applegath, applied to the Ontario court for a certificate

of appointment of estate trustee with a will in order to deal with the royalty payments from

Wesdome. The court held that, “as a general rule, probate of a will is granted only once”28 and

accordingly, Carmen’s application was improper.

In denying the application, the court provided two possible options for Carmen to receive an

ancillary appointment in Ontario.

The first option would be for Carmen to apply to have Clavis replaced in New Mexico. Once

Carmen is appointed as the new estate trustee, then he would apply for ancillary appointment in

Ontario. The application for ancillary appointment can be processed by the Estates Office as a

routine application.

The second option would be for Clavis to apply for ancillary appointment in Ontario of a

nominee estate trustee for the sole purpose of dealing with the assets located in Ontario. This

option would require the original estate trustee to bring the application before a judge. The

application must include persuasive evidence as to why the original estate trustee could not

administer the estate assets in Ontario as an ancillary appointee, and why he or she requires a

nominee.

Recognition of a Foreign Trust Company as Estate trustee for an Ontario Estate

Another unique situation arises when the estate trustee appointed to administer the assets in

Ontario is a foreign trust company. This situation arose in the case of Re Herring Estate.29

In that case, the deceased was a US resident who created an inter vivos trust in North Carolina

naming a trust company licensed in North Carolina, Branch Banking and Trust Company

(“BB&T”), as the sole trustee. BB&T was also named estate trustee in the deceased’s will. The

28 Applegath, supra, note 3, para 10. 29 Re Herring Estate, 2009 CanLII 44707 (ONSC) [Herring Estate].

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deceased’s wife was the sole beneficiary of the trust and the trust was the sole beneficiary of the

estate’s residue. BB&T was granted probate in North Carolina.

BB&T sought to administer the assets located in Ontario and applied for a certificate of ancillary

appointment of estate trustee with a will. The Estates Registrar rejected BB&T’s application on

the basis that BB&T was not an approved and registered Ontario trust corporation under section

175(2) of the Loans and Trust Corporations Act 30 (“LTC Act”) and was in violation of Section

213 of that Act.

BB&T requested that the application be referred to a judge for reconsideration. BB&T argued

that while section 175(2) permits the court to grant probate to a trust company registered under

the LTC Act, it does not prohibit the appointment of a foreign trust company that is not

registered under the LTC Act. BB&T further argued that Section 213 of the LTC Act, which

limits the entities that may, “offer services to the public as estate trustee or administrator, or act

as a trustee in respect of any service it provides to the public”, did not function to prohibit a

foreign trust company from acting as ancillary estate trustee in respect of the deceased’s estate.31

The court agreed with BB&T’s arguments. Justice Brown held that since the North Carolina

court has given effect to BB&T’s appointment as estate trustee, BB&T was bound to discharge

all the duties imposed upon it, including the administration of assets in Ontario. The restriction in

section 213 did not apply since BB&T was not seeking to offer services to the Ontario public.

Its services would be limited to the estate.

Conclusion

Dealing with foreign testamentary documents and foreign grants adds a level of complexity to

the application process even if the situation falls within the scope of our Rules. Often the foreign

testamentary documents and foreign grants will not be in English and will need to be translated

before they are able to be submitted to the court. In certain cases, it may not be possible to

obtain a sealed copy of the foreign grant. Or there can be estate litigation or other uncertainties

in the foreign jurisdiction preventing or delaying the foreign grant. Accordingly, it is preferable

30 Loan and Trust Corporations Act, R.S.O. 1990, c. L.25. 31 Ibid, s. 213.

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that a person owning assets in Ontario have an Ontario will, appointing an Ontario estate trustee,

to deal with those assets.

If the deceased does not have an Ontario will and the situation does not fall within the scope of

our Rules, the person wishing to apply to become the estate trustee in Ontario will need make an

application before a judge with an affidavit setting out the unique circumstances. This process

will require additional time and expense, but, at the end of the day, the assets in Ontario will

need to be administered.

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TAB 5

The Rectification of Wills in Ontario

Craig Ross Pallett Valo LLP

Jaspal Sangha

Pallett Valo LLP

September 20, 2016

Practice Gems:

PROBATE ESSENTIALS 2016

PALLETT VALO LLP

The Rectification of Willsin Ontario

Craig Ross and Jaspal Sangha

7/8/2016

This paper analyzes the current state of common law in Ontario, with regards to the jurisdictionof the Court to rectify a will when there has been a mistake, such as a typo, during drafting.

The Rectification of Wills In Ontario

This paper analyzes the current state of common law in Ontario, with regards to the

jurisdiction of the court to rectify a will when there has been a mistake, such as a typo, during

drafting. Rectification is defined as the “judicial alteration of a written contract to make it

conform to the true intention of the parties when, in its original form, it did not reflect this

intention.”1 The common law surrounding the rectification of wills in Ontario has recently

started to change, as the courts cautiously expand their jurisdiction. Critical to this analysis is an

understanding of the fundamental purpose of the law of wills. Generally speaking, the primary

objective is “to give effect to the testamentary intentions of the testator for the distribution of her

estate.”2

Understanding this fundamental purpose provides insight into three important questions.

First, in what circumstances will the court allow for the rectification of a will? Second, what

must be established before a court can add or subtract words to a will? Third, when attempting to

establish the testator’s true intentions for the purpose of deciding if and how to rectify a will,

what types of evidence does a court deem admissible?

The following analysis breaks down each of these elements in an attempt to provide a holistic

understanding of the court’s discretion to exercise their power of rectification.

1. In what circumstances will the court rectify a will?

One of the most fundamental distinctions that must be drawn when deciding whether or not

to rectify a will is to determine from whom the mistake originated. The common law in Ontario

1 Black’s Law Dictionary, 9th ed, sub verbo “rectification”.2 Robinson Estate v Robinson, 2011 ONCA 493 at para 23.

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and across Canada regarding rectification of wills treat mistakes caused by the testator

differently from mistakes by the drafting solicitor.

Testator Mistakes

Across all Canadian common law jurisdictions, the courts will not exercise their power of

rectification in order to correct the testator’s “mistaken belief about the legal effect of the words

he reviewed and approved.”3 If the testator knew the contents of the paper that he executed, it is

irrelevant that the document will fail to accomplish the result intended.4

In the Ontario Superior Court of Justice case, Robinson Estate v Robinson, this principle

was applied once again through the Court’s decision not to rectify the will in question. In that

case, the application for rectification was dismissed because the will was drafted in accordance

with the instructions of the testator. The testator was misinformed about the application of a

revocation clause inserted in her will, and as a result, in absence of a mistake by the solicitor,

rectification could not take place. The court was simply not ready to “reverse a century of case

law” on this issue.5

Solicitor Mistakes

Although the court will not rectify a will in circumstances where the testator simply

misapprehended the meaning of the words within the will, the court will use its powers to rectify

unintended solicitor mistakes.

The courts will rectify a will and correct unintended solicitor mistakes in three

circumstances. In Robinson Estate the Court describes these three scenarios as the following:

3 Robinson Estate v Robinson, 2010 ONSC 3484 at para 30.4 Ibid.5 Ibid at para 47.

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1. Where there is an accidental slip or omission because of a typographical or clerical error;

2. Where the testator’s instructions have been misunderstood; or

3. Where the testator’s instructions have not been carried out.

These three mistakes originate from the solicitor and thus are mistakes that result in a will

that does not conform to the testator’s intention. The rectification of a will based on a solicitor

mistake is described in Feeney’s.

[The] application for rectification is usually based on the ground that, by some

slip of the draftman’s pen or by clerical error, the wrong words were inserted in

the will; the mistake may be latent in the letters of instruction or other documents.

Yet, when the mistake is that of the draftsperson who inserts words that do not

conform with the instructions he or she received, then, provided it can be

demonstrated that the testator did not approve those words, the court will receive

evidence of the instructions (and the mistake) and the offending words may be

struck out.6

The Court in Robinson Estate, which was later affirmed by the Court of Appeal, stresses

a key point; the objective of rectifying wills in these circumstances prevents “the defeat of the

testamentary intentions due to errors or omissions by the drafter of the will.”7

Nonetheless, while the court has the authority to rectify a will, it must be done with a high level

of vigilance when accepting evidence since the testator is dead.8 Therefore the power to rectify a

will is not to be used except “in the most exceptional circumstances.”9

2. What must be established before a court can add or subtract words to a will?

The Ontario Superior Court of Justice has made it clear that the “court has the power to

delete or add words to a will by necessary implication.”10 Although rectification of wills is

6 Feeney’s Canadian Law of Wills (Looseleaf, 4th ed.) at para. 3.28.7 Supra note 3 at para 25.8 Daradick v McKeand Estate, 2012 ONSC 5622 at para 32.9 Ibid at para 44.

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permitted in Ontario, there are clear guidelines for when this power shall be exercised by the

courts. In McKeand Estates, the Court laid out four criteria that must be established prior to

rectifying a will by adding or subtracting words.11

1. Upon reading of the will as a whole, it is clear on its face that a mistake has occurred in

the drafting of the will;

2. The mistake does not accurately or completely express the testator’s intentions as

determined from the will as a whole;

3. The testator’s intention must be revealed so strongly from the words of the will that no

other contrary intention can be supposed; and

4. The proposed correction of the mistake, by the deletion of words, the addition of words

or both must give effect to the testator’s intention, as determined from a reading of the

will as a whole and in light of the surrounding circumstances.

Surrounding circumstances, as enunciated by the Court, include “circumstances surrounding

the making of the will; the testator’s property at the time of the will; the testator’s use of

property; the testator’s relationship to named and potential beneficiaries; and prior wills.”12 This

is by no means exhaustive but sheds light on how the intention of the testator is determined.

3. What types of evidence, with regards to the testator’s intention, are deemed

admissible?

Court of Probate versus the Court of Construction

The rules surrounding the admissibility of evidence used to ascertain the testator’s

intentions differ depending on if the court is exercising their jurisdiction as a Court of Probate or

10 Lipson (Re), ETR (3d) 44, [2009] OJ no 5124.11 Supra note 8 at para 42.12 Ibid at para 41.

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a Court of Construction. As a result of the abolition of the Surrogate Court in 1989, the

importance of understanding the difference between each court was called into question in Balaz

Estate v Balaz;13

In any event, any such distinction now stands only as a matter of historical

interest. The Surrogate Court was abolished in 1989: S.O. 1989, c. 56, s. 48. Its

abolition wrought no change in the expressed jurisdiction of the Supreme Court of

Ontario - compare the Courts of Justice Act, 1984, s. 2(1), with the Courts ofJustice Act, S.O. 1989, c. 55, s. 10(2). The Superior Court of Justice exercises

exclusive jurisdiction in testamentary matters - it grants probate and it interprets

wills. It does not change hats when it moves from the first task to the second. Both

tasks form part of its broad civil jurisdiction. Consequently, distinguishing

between "courts of probate" and "courts of interpretation" does not aid the

inquiry about how this court should approach a request to rectify a will because

of a mistake.

However, the reasoning from Balaz was distinguished by the Court of Appeal in

Robinson Estate v Robinson, where the Court implicitly acknowledged a difference between the

“Court of Probate” and the “Court of Construction” by addressing what evidence a Court of

Construction was allowed to consider. As a result, although the Superior Court grants probate

and conducts contractual interpretation, “a distinction must be made insofar as the court's

approach to the evidence of the validity of a Will, as distinct from the interpretation of the

Will.”14 An understanding of each court’s role is therefore imperative.

When the court is exercising their jurisdiction as a Court of Probate, they determine the

“document that comprises the will and whether it is testamentary in nature and valid.”15 In the

case of probate, the court must decide if the document and its words are the will of the deceased.

Nevertheless, if it can be shown that the testator did not approve of the words (by mistake) then

13 2009 CarswellOnt 2007.14 McLaughlin v McLaughlin, 2015 ONSC 3491.15 MacIvor, Case Comment: Admission of Extrinsic Evidence in Aid of the Interpretation of Wills Re Kernahan(1990), 39 E.T.R. 243 (Sask. Surr. Ct.); rev'd, (1990), 39 E.T.R. 249 (Sask. C.A.).

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probate may be refused in part or in whole.16 After receiving a Grant of Probate and

subsequently being interpreted through the Court of Construction, the court is determining the

“meaning of the document admitted to probate.”17 These differing roles played by each court are

accompanied by different rules regarding the admissibility of evidence.

Evidence at the Court of Probate

In determining whether or not to make a Grant of Probate, the court may be able to

inquire into all of the surrounding circumstances to investigate the meaning of words for the

purpose of determining whether they constitute the will of the testator.18 At this stage, the rules

surrounding the admissibility of evidence to determine the intention of the testator is far more

liberal than in the Court of Construction. All evidence including evidence of the testator’s actual

intention is admissible in a Court of Probate.

This includes direct evidence such as “declarations by the testator about the persons or

property that he meant to include under a particular description, expressions of testamentary

intent in favour of particular persons who might be so described, and instructions given by the

testator to his lawyer or draftsman for the preparation of the will.”19

Evidence at the Court of Construction

Unlike the Court of Probate, the Court of Construction is considerably restricted in the

evidence that may be examined to determine the meaning of words within a will. In general,

when construing a will at common law, the court must determine what the intention of the

16 3.21 – Feeney’s Canadian law of Wills (Fourth Edition)17 Supra note 15.18 Supra note 16.19 Supra note 15.

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testator was through the “words used in the will.”20 However, there may be circumstances where

the testamentary intentions within a will are not clear even if the language of a will is clear and

unambiguous in its first reading. In these circumstances, “extrinsic evidence is admissible to aid

the construction of the will.”21 Although the court does allow extrinsic evidence when sitting as a

Court of Construction, it is important to note the court also draws a clear distinction between

direct and indirect extrinsic evidence. The latter, includes evidence from the surrounding

circumstances and is admissible unlike the former.

An example of direct extrinsic evidence includes a statement from a family member

speaking directly about the testators intentions. A family member may be self-motivated with his

or her statement and thus the courts are reluctant to admit it for the purposes of delineating the

testator’s intention. Conversely, an example of indirect extrinsic evidence, which is admissible,

includes evidence of the circumstances surrounding the testator during the drafting of the will.

This could include knowledge the testator had as to the extent of his or her assets and their

relationship to family members. Unlike a statement from a family member, indirect extrinsic

evidence from the surrounding circumstances cannot be said to possess the same bias as a direct

statement from a family member and is thus admissible.

Direct Extrinsic Evidence in the Court of Construction

The Ontario Court of Appeal22 has made it clear that, as a general rule, direct extrinsic

evidence is inadmissible in will interpretation cases. In the context of will interpretation, direct

extrinsic evidence refers to evidence, such as a statement from a third party purportedly claiming

to have direct knowledge of the testator’s intentions during the drafting of the will. Reservations

20 Supra note 2.21 Ibid at para 24.22 Ibid at para 29.

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about using this type of evidence go down to both reliability and credibility issues. These

concerns were discussed by the Court of Appeal in Robinson Estate.23 Credibility is a concern

with direct extrinsic evidence because third parties could “exaggerate their relationship and

fabricate the promises of bequest”24 seeing as the testator is deceased and unable to contradict

the evidence. Reliability is also an issue as third parties are “logically incapable of directly

proving the testator’s intent.”25 Direct extrinsic evidence of the testator making a statement to a

third party about their intentions for their bequests could very well be different from the

intentions of the testator at the time of will drafting.

Indirect Extrinsic Evidence in the Court of Construction

When admitting indirect extrinsic evidence, the court must not confuse the testator’s

intended dispositions with their own belief, or interpretation of what it thinks the testator actually

intended to write.26 In determining what the testator’s actual intent was at the time of the drafting

of the will, a court should “attempt to ascertain, if possible, the testator’s actual or subjective

intent.”27 The determination of the testator’s subjective intent is eloquently described by the

Court of Appeal in Burke, Re;28

Each Judge must endeavour to place himself in the position of the testator at the time

when the will was made. He should concentrate his thoughts on the circumstances which

then existed and which might reasonably be expected to influence the testator in the

disposition of his property. He must give due weight to those circumstances in so far as

they bear on the intention of the testator. He should then study the whole contents of the

will and, after full consideration of all the provisions and language used therein, try to

find what intention was in the mind of the testator. When an opinion has been formed as

23 Ibid at para 37.24 Ibid.25 Ibid.26 (CARS1MEMO-ONM 10212)27 Feeney, The Canadian Law of Wills; Construction (1978), at p. 1.28 Re Burke, 1959 CanLII 113 (ON CA).

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to that intention, the Court should strive to give effect to it and should do so unless there

is some rule or principle of law that prohibits it from doing so.

As a result of this admission of indirect extrinsic evidence, the Courts exercise “the

ordinary meaning” rule of construction in light of the surrounding circumstances.29

Exception to the Inadmissibility of Direct Evidence in the Court of Construction

The general rule to excluding direct extrinsic evidence of the testator’s intent is subject to

an exception. In circumstances where there is an “equivocation” in the will, direct extrinsic

evidence is admissible. The principle is described in Feeney, The Canadian Law of Wills30, as a

situation where “the words of the will apply equally well to two or more persons or things.” This

exception may be the only instance where direct extrinsic evidence is admissible to determine the

intention of the deceased testator.

Conclusion

This paper analyzed the state of common law in Ontario with regards to the jurisdiction

of the courts to rectify a will in the case of a mistake, such as a typo. Through an analysis of

three fundamental questions, clarity was provided with regards to issues such as when

rectification is available and the evidence admissible for determining in what manner

rectification was appropriate.

Although the Surrogate Court was abolished in 1989, it is clear, as a result of Robinson

Estate v Robinson, that there still exists a difference between the Court exercising its probate

jurisdiction versus its contract interpretation jurisdiction. Like discussed in this paper, these

29 Supra note 2 at para 24.30 (4th edition), Toronto; Butterworths 2011.

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differences arise from the analysis of two fundamentally different questions and differences with

regards to evidentiary requirements.

Although the determination of whether or not rectification is appropriate will rest on the

facts of each case, testator’s can be rest assured that the Courts will seek to ascertain each

individual testator’s true intentions.

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TAB 6

Joint Tenancy and Estate Administration

Tax

John Clark Clarks LLP

September 20, 2016

Practice Gems:

PROBATE ESSENTIALS 2016

JOINT TENANCY AND ESTATE ADMINISTRATION TAX

JOHN T. CLARK

CLARKS LLP

Most lawyers have experienced clients who wish to transfer assets into joint tenancy with their

children – or, perhaps a new loved one - in hopes of reducing estate administration tax (“EAT”).

Much has been written. The profession has been dealing with the fall-out of Pecore v. Pecore1

since the Supreme Court of Canada’s decision in 2007. Lawyers’ and recent court cases2 have

been more concerned with the larger issue of the intended devolution of jointly held property,

rather than its taxation.

My suspicion is that, since EAT is a tax, it commands more of clients’ attention than it should.

Clients in my experience consider the actual transfer of the relevant property as no more than a

relatively simple administrative task, but liability for taxes is a different story. Having taken

counsel from lay advisors, clients transfer properties into joint names with their children as

purportedly easy EAT-savings devices, often blind to the possibility that the simple

administrative transfer of the property that they intended has been compromised, and the risks to

their property interest prior to their death.

Lawyers must manage expectations while advising their clients’ that their efforts may not

achieve the intended objective without fact-specific attention to detail that will keep the property

1 2007 SCC 17, [2007] 1 S.C.R. 795 2 Among them: Sawdon Estate v. Watch Tower Bible and Tract Society of Canada, 2014 ONCA 101; Mroz v. Mroz, 2015 ONCA 171; Foley v. McIntyre, 2015 ONCA 382; Swiderski v. Walsh, 2015 ONSC 3443; Zeligs Estate v. Janes, 2016 BCCA 280

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out of harm’s way while the clients are alive, and delivering it to the intended destination after

the clients die.

From a practice risk perspective, in view of these client expectations, possible errors and

omissions liability should not be ignored. I am recently informed of a claim of solicitors’

negligence founded on the alleged failure to properly advise a client on the “first dealings”

probate exemption for real estate transfers occurring after the death of a property owner. Yes, the

damages in such a claim are a pittance compared to the value of the property concerned

(acknowledging that, for example, that the damages would be $14,500 on real estate valued at $1

million) and much less than damages arising out of an ill-planned disposition of the same

property from an Income Tax Act perspective, yet, claims there will be.

Can claims against lawyers who miss EAT savings be far behind, or, from the other perspective,

the inevitably expanding reach of the Ontario Minister of Finance?

What makes matters worse is the absence, in my respectful opinion, of clarity in terms of

circumstances in which when EAT is payable, or not, in connection with jointly held property

that “belonged to” a “deceased person at the time of his or her death”. Indeed, Justice Rothstein,

in Pecore, expressly stayed away from comment on the impact that his Judgment might have on

probate taxation regimes, such as EAT, other than to say: “Should the avoidance of probate fees

be of concern to the legislature, it is open to it to enact legislation to deal with the matter.”3

3 2007 SCC 17, [2007] 1 S.C.R. 795, at paragraph 54.

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Estate Administration Tax Act, 1998

“value of the estate” means the value which is required to be disclosed under section 32 of the

Estates Act (or a predecessor thereof) of all the property that belonged to the deceased person at

the time of his or her death less the actual value of any encumbrance on real property that is

included in the property of the deceased person. [Emphasis mine]

Estates Act

32(1) The person applying for a grant of probate or administration shall before it is granted make

or cause to be made and delivered to the registrar a true statement of the total value, verified by

the oath or affirmation of the applicant, of all the property that belonged to the deceased at the

time of his or her death [Emphasis mine]

I do not recall any discussion of the words, “belonged to” in first year Property Law. And I

confess that I am still not clear what it means in the context of this legislation.

For the purposes of EAT, under the pre-Pecore real property conception of joint tenancy, the

survivorship interest in the property was transferred by the deceased when the account was set

up, or when the property was transferred into joint names. There was no need to distinguish legal

and beneficial interests in the property.

Pecore changed that, introducing trust principles by presumptively deeming adult joint tenants to

hold their survivorship interests in property in trust for their co-tenant parents (and their estates).

Pecore also appears to have presumptively denied the existence of a joint tenant unity of interest

between parents and their children. Adult children are presumed to hold a legal, but not any

beneficial, interest, in the property; the beneficial interest rests with the parent co-tenants (and

through them, the residuary beneficiaries of their estates). On the other hand, the parent co-tenant

holds both a legal and beneficial interest. The adult child must discharge the onus of proving on a

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balance of probabilities that the intent of the co-tenant parent was to create a conventional joint

tenancy – with unity of interest – including the survivorship interest in one or the other,

conditional only upon which one of the joint tenants died last.

If joint tenancies are deemed to be severed (in the absence of evidence rebutting the presumption

of resulting trust) and trust principles govern, is EAT payable? If the joint tenancy is severed, the

adult children and the parents each have a tenant in common interest. The part held by the

parents would form part of their probatable estate, but is the same true with respect to the part

held in trust by the adult children?

In terms of EAT, one could argue that the tenant in common interest held in trust by the adult

children should be treated no differently than other property held in trust (other than, perhaps, if

the property is deemed to be held in a bare trust, should that make a difference). If this is the

case, severed joint property held on presumptive resulting trust would be free of EAT liability.

I would like to say that the safe approach to take is to interpret “all the property that belonged to

the deceased” as that property in respect of which the deceased had reserved unto himself or

herself the right to transfer under his or her Will. Stated another way, the relevant property would

be all the property the deceased had not transferred by any instrument (e.g. an express inter vivos

trust, a beneficiary designation, a transfer of property into joint tenancy with an express

[presumption rebutting] declaration of gift, or otherwise), other than by a validly executed Will.

But, I can’t…for two contrary reasons:

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1. It is conceivable that Ministry of Finance auditors could take the position that deceased

parents, in a Pecore situation, should also be presumptively deemed to have reserved unto

themselves the right to transfer by Will any joint property that is presumptively held by their

adult child in trust for them (and through them to their estates). In that case, all of the property

would be probatable, opening up liability for clients and lawyers for non-disclosure of assets and

EAT not paid.

2. On the other hand, in light of claims for failure to the properly access the “first dealings”

exemption, is any lawyer free from client allegations of negligence if EAT is remitted in error?

That said, a carefully crafted letter to clients explaining that liability for EAT is not settled at this

point, and outlining the attendant risks of non-disclosure and non-payment should be a suitable,

non-negligent approach to the matter.

Sawdon Estate v. Sawdon4.

In Sawdon, The Ontario Court of Appeal followed Pecore: a presumption of resulting trust,

rebuttable on a balance of probabilities with evidence of a parent’s contrary intention, arises

upon the gratuitous transfer of assets by the parent into the names of the parent and his or her

adult child as joint tenants. And, a presumption of advancement, rebuttable on a balance of

probabilities with evidence of a parent’s contrary intention, arises upon the gratuitous transfer of

assets by the parent into the names of the parent and his or her minor child as joint tenants.

4 2014 ONCA 101

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When Arthur Sawdon opened bank accounts in joint names with two of his five adult children,

for no consideration, a rebuttable presumption of resulting trust arose. Unlike Pecore, the Court

of Appeal found sufficient evidence on a balance of probabilities that Mr. Sawdon did not intend

to create a trust for the ultimate benefit (upon his death) of his estate and its residuary

beneficiary; rather it found that Mr. Sawdon had created an express trust. Mr. Sawdon and his

two sons held the survivorship joint tenant interest in trust for the benefit of all five of Mr.

Sawdon’s children.

The Court of Appeal confirmed that Pecore did not take away the right of a parent to make a gift

of assets through a trust: “the power of an owner to dispose of his or her ownership rights by

means of a trust is fundamental”5; andt also confirmed that the particular facts of Pecore did not

require a finding on that issue one way or the other, as the contest was between a joint tenant

adult child and the child’s estranged spouse, “where the ownership choices were the [Mr.

Pecore’s] estate or Paula [Mr. Pecore’s daughter], the former on the basis of a resulting trust and

the latter based on a gift”.

We can take the following from Sawdon:

Where a presumption of resulting trust is rebutted by evidence of a parent’s contrary

intention, there is a second question to be answered. Did the parent intend a gift to the

parent’s adult child (or children), or did the parent intend that the adult child (or children)

would hold their interest with the parent in trust for the benefit of certain individuals on

the death of the parent;

5 Ibid., p. 19.

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Remember the four unities of joint tenant title. Sawdon requires an inference from the

same evidence that was sufficient to rebut the presumption of resulting trust, or from

other evidence, that the parent was to be one of the trustees. There should be no

suggestion in the evidence that the survivorship interest is held in trust by the adult

children alone. Rather, the inference should be that the parent intended to restrict all of

his or her own absolute rights in connection with title. The parent cannot hold his or her

joint tenant interest on any different basis than the adult children hold their joint tenant

interests. The inference must be that all of the joint tenant owners hold legal title in trust

for the benefit of the parent for his or her lifetime, and for the benefit of the class of

individuals named by the parent upon his or her death;

Also in connection with the need to maintain the four unities of joint tenant ownership, if

both parents are joint tenant owners of property, one cannot deal with his or her one-half

interest in the property on any different basis than the other. For example, one parent

cannot purport to settle only his or her one-half interest in a trust for the benefit of the

children, independently of the other. Doing so would sever the joint tenancy, with the

consequence that both parents’ interests, now as tenants in common, would have to be

included in probate, and subjected to EAT; 6

In terms of EAT, as expressed above, I would like to say that since the joint tenant

interest is transferred through an inter vivos trust, the property in question would not

belong to the parent at his or her death;

6 Re Mee, [1971] B.C.J. No. 694; 23 (3d) D.L.R. 491 (C.A.), and cases cited therein.

6 - 7

Don’t forget the Income Tax Act. Depending on the nature of the property in question,

there may be capital gains to consider. How old are the parents? Section 73 of the Income

Tax Act is important – but beyond my limited scope here.

The Evidence: I have appended a form of Declaration. In order to rebut the presumption,

where a trust of the property held in joint tenancy is intended, a form of trust declaration

should be used. The document should be signed by the parent and the joint tenant

trustee(s) of the survivorship interest, expressly declaring that the relevant properties are

held in trust, under which the beneficial interest in the property while the parent is alive is

held for the parent, and the beneficial survivorship interest in the property upon death of

the parent is held for the parties described as beneficiaries in the document. Both the

parent and the adult child(ren) are trustees, declaring an interest on the same basis.

Finally, the trust is revocable.

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DECLARATION AND ACKNOWLEDGMENT OF REVOCABLE TRUST

To: _________________ and _______________ (the "Trustees")

1. This is a declaration of revocable trust in connection with transfers of real and, or personal property that I, (as “Settlor”), have made or intend make, under which I transferred or intend to transfer to the Trustees:

a. A joint tenant legal interest with me, and a legal (postponed until the date of my death) survivorship interest in and to the real property municipally known as __________________, ______________, Ontario, and legally described as ____________________________________,to the Trustees;

b. A joint tenant interest with me, and a legal (postponed until the date of my death) survivorship interest in and to:

i. ______________________________account no. _____________________;

ii. __________________ Checking/Savings account: No. _____________, USD account and _________________; and,

c. A joint tenant interest with me, and a legal (postponed until the date of my death) survivorship interest in and to such other property as I may hereafter transfer to you, as Trustees.

2. We will hold the property in a revocable trust, and, for as long as I live, full beneficial interest in the said property will be held for my own benefit, or as I may direct.

3. After my death, you, as Trustees, shall hold the property for the benefit of the residuary beneficiaries of my last Will and testament dated ___________, and any codicils thereto, and you shall administer the property upon the terms and trusts set forth in my said last will and testament, or any codicil thereto, or, in the absence of a valid will, in accordance with the laws of Ontario governing intestate succession. [alternative: - upon the terms and trusts set forth in Schedule A appended hereto. NOTE: Section 73 ITA may trigger a capaital gain depending on nature of property and identity of Settlor/s]

4. After my death, but prior to such disposition of the assets, all income from the assets shall be held in trust for the residuary beneficiaries of my said last will and testament, or any codicil thereto, in the same manner and proportions as their respective interests in

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the residue of my estate.

5. Each of us hereby covenants and agrees with each of the others that we will execute and deliver all further documentation required to give full effect to this instrument.

6. Any benefit, whether as to income or capital or both, or income from capital to which any person shall become entitled in accordance with the provisions of these transfers, shall not fall into any community of property which may exist between any such person and his or her spouse and shall not form part of his or her net family property for any purpose or purposes of the Family Law Act, R.S.O. 1990, c. F.3 , and any amendments thereto or any successor legislation thereto, but shall only be paid to such person on the condition that the same shall remain the separate property of such person, free from the control of his or her spouse.

7. This instrument may be executed in counterparts and delivered by facsimile or email, each of which counterparts when so executed and delivered shall be deemed an original, and all such counterparts shall together constitute one and the same instrument.

DATED this ____ day of ____________, 201__

___________________________________ Name:

as Settlor and Trustee

Acknowledgment

We hereby acknowledge and agree to administer the property in accordance with the terms and trusts expressed above.

DATED this ____ day of _____________, 201__

___________________________________ Name:

as Trustee

___________________________________ Name:

as Trustee

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TAB 7

LSUC The Contingency Planning Guide

For Lawyers

Alexandra Mayeski Mayeski Mathers LLP

Kathleen McDormand

Borden Ladner Gervais LLP

September 20, 2016

Practice Gems:

PROBATE ESSENTIALS 2016

The Contingency Planning Guide

October 2014

Visit For Lawyers at www.lsuc.on.ca or phone 416-947-3315 or 1-800-668-7380 ext 3315

For Lawyers

THE CONTINGENCY PLANNING GUIDE

Contingency planning for the operation of the law practice in the event of death, disability or other unexpected periods of absence from practice should be considered by the lawyer as a means of providing peace of mind for loved ones, clients and employees. This Guide has been prepared to encourage and assist lawyers who are in private practice to make such plans.

How to Use This Guide

The sample documents and other resources contained in this Guide are not intended to provide legal advice. They should be used thoughtfully and adapted by lawyers to suit their own individual circumstances. 1

This Guide contains the following sample documents and resources.

Sample Documents

Sample Continuing Power of Attorney for Property Excluding Law Practice

Sample Continuing Power of Attorney for Property for Law Practice

Sample Direction for the Release of the Power of Attorney for Property for Law Practice Document

Sample Last Will and Testament Clauses

Sample Law Practice Coverage Agreement Between the Planning Lawyer and the Replacement Lawyer

Other Resources

Planning Lawyer: Steps For Managing Your Law Practice to Facilitate the Task of the Replacement Lawyer

Checklist for the Replacement Lawyer Who Takes Over the Law Practice of another Lawyer

Practice Tips – Preparation of a Law Office Procedural Manual

Checklist of Issues to Consider when Preparing Continuing Power of Attorney for Property Documents

1 This Guide is not intended to replace a lawyer’s professional judgment or to establish a one-size-fits-all approach to planning for such contingencies. Lawyers should make plans that take into consideration the particular circumstances of their practice including the nature and the locality of the law practice. Subject to the Guide provisions that incorporate legal, by-law or Rules of Professional Conduct requirements, a decision not to follow the provisions in the Guide will not, in and of itself indicate that a lawyer has failed to provide quality service. Whether a lawyer has provided quality service will depend upon the circumstances of each case.

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Checklist of Issues to Consider when Preparing Wills

Article entitled “Preparing for the Death and Disability of a Law Partner or Shareholder”

This Guide outlines a number of key steps for lawyers making such plans. The recommended steps differ depending on whether the lawyer is a sole proprietor or is practising in partnership or in a professional corporation with more than one lawyer.

Terminology

The term “sole proprietor” for the purposes of this Guide means a sole practitioner, a lawyer practising as a sole proprietor in association with another lawyer(s) or a lawyer practising through a professional corporation of which the lawyer is the sole shareholder.

The term “Planning Lawyer” for the purposes of this Guide means the lawyer who makes arrangements for a Replacement Lawyer to take over the lawyer’s law practice and protect the interests of the lawyer’s clients in the event of the lawyer’s death, disability or unexpected absence from practice. The term “Replacement Lawyer” means a lawyer entitled to practise law in Ontario who takes over the Planning Lawyer’s law practice in the event that the Planning Lawyer dies, becomes disabled or is unexpectedly absent from practice.

Lawyers who lack the requisite knowledge and skill to develop their own contingency plan and prepare the required documentation should seek the advice of a lawyer with expertise in the area. In addition, depending on the lawyer’s circumstances, the lawyer may also wish to consult with a financial adviser.

Successful planning for death, disability or other unexpected absences from practice depends upon the existence of a Replacement Lawyer who is willing and able to take over the Planning Lawyer’s practice. Lawyers are encouraged to assist their colleagues and protect the interests of their colleagues’ clients by agreeing to act as Replacement Lawyers if their circumstances permit.

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KEY STEPS FOR A LAWYER PRACTISING AS A SOLE PROPRIETOR

If you are a Sole Proprietor consider taking the following key steps when planning for death, disability and other extended absences from practice.

STEP ONE

Choose a Replacement Lawyer and an alternate Replacement Lawyer entitled to practise law in Ontario to take control of your practice and protect the interests of your clients in the event of your death, disability or other unexpected absences from practice.

STEP TWO

Discuss with your Replacement Lawyers, the plans that you intend to make and ensure that they are agreeable to assuming the role.

STEP THREE

Discuss with your bank(s), the bank’s requirements to ensure that the Replacement Lawyer can access your trust/general accounts in the event of your death, disability, or unexpected absence from your practice.

STEP FOUR

Grant a power of attorney for property to the Replacement Lawyer and to an alternate Replacement Lawyer to take control of your law practice and protect the interests of your clients in the event of your disability or unexpected absence from practice.

The following are some issues that you may wish to discuss at this time with your Replacement Lawyer:

●●●●

●

●

The role of the Replacement Lawyer (e.g. wind up the practice or preserve and sell it)When will the Replacement Lawyer step into your practiceCompensation for the Replacement LawyerThe location of your Power of Attorney document, Last Will and Testament and how theReplacement Lawyer will obtain the document when requiredThe steps that you have taken or will take to facilitate the work of the Replacement Lawyerif the Replacement Lawyer should need to step into your practiceWhere the Replacement Lawyer will find information about your practice if theReplacement Lawyer is required to step into your practice (e.g. the location of an officemanual containing information about your practice and key contacts)

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Resources

Sample Continuing Power of Attorney for Property Excluding Law Practice ..................page 8 Sample Continuing Power of Attorney for Property for Law Practice .............................page 11 Sample Direction for the Release of the Power of Attorney for Property for Law Practice Document..........................................................................................................page 14 Checklist of Issues to Consider when Preparing Continuing Power of Attorney for Property Documents ..................................................................................................page 37

STEP FIVE

Appoint a Replacement Lawyer and a successor Replacement Lawyer as estate trustee for your law practice in your last will and testament.

Resources

Sample Last Will and Testament Clauses ......................................................................page 15 Checklist of Issues to Consider When Preparing Wills ...................................................page 40

STEP SIX

Consider entering into a written agreement with your Replacement Lawyer outlining both your responsibilities and the responsibilities of the Replacement Lawyer.

Resources

Sample Law Practice Coverage Agreement between the Planning Lawyer and the Replacement Lawyer ......................................................................................................page 19

We recommend that you consider preparing two Wills, one dealing with assets related to your law practice and the other dealing with all other assets. The purpose of having two Wills is to provide the Replacement Lawyer with full power and authority to operate, sell or wind down the law practice, while simultaneously ensuring that control over personal assets such as a family home and bank and investment accounts remains with the Planning Lawyer’s spouse, family member or whomever else the Planning Lawyer has currently named as his or her executor.

We recommend that you consider having separate Continuing Power of Attorney Documents for your personal assets and for your law practice. In this way your Replacement Lawyer will have full power and authority to operate, sell or wind down your law practice, while simultaneously ensuring that control over your personal assets such as your family home and bank and investment accounts remain with your spouse, family member or whomever else you have named as attorney for property with respect to your personal assets. Naming a different person to act as attorney for the Personal Assets also gives someone other than the Replacement Lawyer (most often a family member or trusted friend) the ability to review the transactions undertaken by the Replacement Lawyer in respect of the Law Practice, and to negotiate and approve the price and terms of a possible sale of the Law Practice to the Replacement Lawyer.

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STEP SEVEN

Prepare your practice so as to make the task of your Replacement Lawyer easier.

Resources

Planning Lawyer: Steps for Managing Your Law Practice to Facilitate the Task of the Replacement Lawyer ................................................................................................page 25 Practice Tips - Preparation of a Law Office Procedural Manual .....................................page 33 Checklist for the Replacement Lawyer Who Takes Over the Law Practice of Another Lawyer ...............................................................................................................page 27

STEP EIGHT

Ensure that there are sufficient funds available to the Replacement Lawyer to cover for a period of time office overhead and expenses and if appropriate any arrangements for compensation to the Replacement Lawyer (e.g. unused line of credit if available, life or disability insurance or other arrangements).

You should ensure that your practice is managed in a way that facilitates the task of your Replacement lawyer when he or she is required to step into your practice. In this regard in addition to ensuring that your practice is managed effectively, you should consider preparing an office manual outlining the procedures and other important information about your firm.

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KEY STEP FOR A LAWYER PRACTISING IN A PARTNERSHIP OR A PROFESSIONAL CORPORATION WITH MORE THAN ONE LAWYER

A lawyer operating as a partnership of lawyers or a professional corporation with more than one lawyer shareholder should deal with the death, disability or other prolonged unexpected absence of a partner or shareholder of the firm by way of agreement among the partners or shareholders of the firm.

Resource

Article entitled “Preparing for Death and Disability of a Law Partner or Shareholder” by Rachel Blumenfeld .....................................................................................................page 43

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SAMPLE CONTINUING POWER OF ATTORNEY FOR PROPERTY EXCLUDING LAW PRACTICE

The following sample form continuing power of attorney for property excluding law practice may be used by lawyers when developing a contingency plan for their personal assets excluding their law practice in the event of their own incapacity or other disability preventing a return, whether temporary or otherwise, to their law practice. This sample form should be modified to suit the personal circumstances of the lawyer.

Continuing Power of Attorney for Property made in accordance with the Powers of Attorney Act and the Substitute Decisions Act, 1992, as amended.

This Continuing Power of Attorney for property is given by (NAME OF DONOR), of the (insert “City” or ‘Town”) of , in the Province of Ontario.

1. I revoke any continuing power of attorney for property previously given by me, save and

except for any continuing power of attorney for property which I have executed in connection with the management and disposition of my Law Practice as defined in paragraph 2 below. I declare that this continuing power of attorney for property applies only to my Personal Assets, as defined in paragraph 2 below.

2. For purposes of this continuing power of attorney for property:

(a) “Law Practice” means all property, both real and personal, of every nature and kind

whatsoever, used in connection with my law practice including without limiting the generality thereof all bank accounts, investments, trust funds, client lists, client property, leasehold interests in any business premises, accounts receivable, goodwill, equipment, software and software licences, intellectual property and passwords and includes my Law Practice Corporate Properties.

(b) “Law Practice Corporate Properties” means all shares, debt and other interests which I may own in [name of law professional corporation], any successor corporation, and any other corporation that owns assets used in the carrying on of my Law Practice or that has employees who are involved in the carrying on of my Law Practice; and

(c) “Personal Assets’ means all my assets personally owned by me both real and personal

of every nature and kind whatsoever save and except for my Law Practice.

3. I appoint (NAME OF PERSON BEING APPOINTED) to be my attorney for property in respect of my Personal Assets, and I authorize my attorney to do on my behalf anything in respect of my Personal Assets that I could do if capable of managing property, except make a Will, subject to the law and any conditions or restrictions contained in this document.

Delete reference to Law Practice Corporate Properties if no corporations form part of the Law Practice.

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If (FIRST PERSON) cannot or will not be my attorney because of refusal, resignation, death, mental incapacity, removal by the court or any other reason, I substitute (NAME OF ALTERNATE PERSON) to act as my attorney for property in respect of my Personal Assets in place of (FIRST PERSON) in the same manner and subject to the same authority as (FIRST PERSON).

4. It is my intention that this document is a continuing power of attorney for property pursuant to the Substitute Decisions Act, 1992 and may be used during my incapacity to manage property.

5. This power of attorney includes the following powers:

(a) I authorize my attorney to exercise all powers in connection with my Personal Assets as

I would be able to exercise had I chosen to exercise such powers myself, or had I legal capacity to exercise such powers. This therefore authorizes my attorney to bind, secure information, and execute documents in connection with any Personal Assets in respect of my attorney’s dealings with any person. Without restricting the generality of the foregoing, I expressly constitute my attorney as my "legal representative" for the purposes of s.150 (1) (d) and all other purposes of the Income Tax Act (Canada), and authorize my attorney to bind, secure information and execute documents on behalf of my Personal Assets in respect of any matter involving the government of Canada or any institution, such as a bank or trust company, regulated by the government of Canada.

(b) I authorize my attorney to delegate any act my attorney may exercise to some other

person, and to revoke or suspend such delegation.

(c) I authorize my attorney to take physical possession of all of my Personal Assets, including property held in a safety deposit box, property held in safekeeping by others on my behalf, and property held by others subject to some professional privilege, which privilege I waive for this purpose. For greater certainty, my attorney shall be entitled to review my Will, in order to be able to manage my Personal Assets in a manner that is sensitive thereto.

(d) My attorney may take compensation out of my Personal Assets for any work done in

connection with this continuing power of attorney for property by him, her, or them, in accordance with the prescribed fee scale established pursuant to the provisions of the Substitute Decisions Act, 1992, as amended, for the compensation of attorneys under a continuing power of attorney.

(e) I authorize my attorney to provide any consent on my behalf with respect to any right of

possession or other interest I may have in a matrimonial home under the Family Law Act.

6. Any other general or limited power of attorney, whether continuing or not, granted by me

with respect to my Law Practice is not revoked and all such powers of attorney shall co-exist with this continuing power of attorney for my Personal Assets as multiple powers of attorney.

The parties being named in this continuing power of attorney do not have to be the same as the parties named in the continuing power of attorney prepared for the lawyer’s law practice.

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7. This continuing power of attorney will come into effect on the date it is signed andwitnessed.

I have signed this power of attorney in the presence of both of the witnesses who names appear below.

I have signed this power of attorney on , 20** (insert date)

[Signature of the Donor]

NAME OF DONOR

We are the witnesses to this power of attorney. We have signed this power of attorney in the presence of the person whose name appears above, and in the presence of each other, on the date shown above. Neither one of us is the attorney, a spouse or partner of the attorney, a spouse or child of the grantor or person whom the grantor has demonstrated a settled intention to treat as a child of the grantor, a person whose property is under guardianship or who has a guardian of the person, or less than eighteen years old. Neither one of us has any reason to believe that the grantor is incapable of giving a continuing power of attorney.

[Signature of Witness]

Insert name and address of witness

[Signature of Witness]

___________________________Insert name and address of witness

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SAMPLE CONTINUING POWER OF ATTORNEY FOR PROPERTY FOR LAW PRACTICE

The following sample form continuing power of attorney for property for law practice may be used by lawyers when developing a contingency plan for their law practice in the event of their own incapacity or other disability preventing a return, whether temporary or otherwise, to their law practice. This sample form should be modified to suit the personal circumstances of the lawyer.

Continuing Power of Attorney for Property made in accordance with the Powers of Attorney Act and the Substitute Decisions Act, 1992, as amended.

This Continuing Power of Attorney for property is given by (NAME OF DONOR), of the (insert “City” or ‘Town”) of , in the Province of Ontario.

1. I revoke any continuing power of attorney for property previously given by me in connection

with the management and disposition of my Law Practice as defined in paragraph 2 below.

2. For purposes of this continuing power of attorney for property:

(a) “Law Practice” means all property, both real and personal, of every nature and kind whatsoever, used in connection with my law practice including without limiting the generality thereof all bank accounts, investments, trust funds, client lists, client property, leasehold interests in any business premises, accounts receivable, goodwill, equipment, software and software licences, intellectual property and passwords, and includes my Law Practice Corporate Properties.

(b) “Law Practice Corporate Properties” means all shares, debt and other interests which I may own in [name of law professional corporation], any successor corporation, and any other corporation that owns assets used in the carrying on of my Law Practice or that has employees who are involved in the carrying on of my Law Practice; and

(c) “Personal Assets’ means all my assets personally owned by me both real and personal

of every nature and kind whatsoever save and except for my Law Practice.

3. I appoint (NAME OF FIRST REPLACEMENT LAWYER) to be my attorney for property in respect of my Law Practice and I authorize my attorney to do on my behalf anything in respect of my Law Practice that I could do if capable, except make a Will, subject to the law and any conditions or restrictions contained in this document.

Delete reference to Law Practice Corporate Properties if no corporations form part of the Law Practice.

Include this clause if there is an existing continuing power of attorney for the law practice that the lawyer wants revoked.

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If (FIRST REPLACEMENT LAWYER) cannot or will not be my attorney for property in respect of my law practice because of refusal, resignation, death, mental incapacity, removal by the court, or any other reason, I substitute (NAME OF ALTERNATE REPLACEMENT LAWYER) to act as my attorney for property in respect to my Law Practice in place of (FIRST REPLACEMENT LAWYER) in the same manner and subject to the same authority as (FIRST REPLACEMENT LAWYER).

4. It is my intention that this document is a continuing power of attorney for property pursuant to the Substitute Decisions Act, 1992 and may be used during my incapacity to manage property.

5. This power of attorney includes the following powers:

(a) I authorize my attorney to exercise all such powers in connection with my Law Practice

as I would be able to exercise had I chosen to exercise such powers myself, or had I legal capacity to exercise such powers. This therefore authorizes my attorney to bind, secure information, and execute documents on behalf of my Law Practice in respect of my attorney’s dealings with any person. Without restricting the generality of the foregoing, I expressly authorize my attorney to bind, secure information, and execute documents on behalf of my Law Practice in respect of any matter involving my clients, the Law Society of Upper Canada, the Lawyers’ Professional Indemnity Company LAWPRO, any institution in which I maintain a professional membership for my Law Practice, the government of Canada or any institution, such as a bank or trust company, regulated by the government of Canada.

(b) I authorize my attorney to delegate any act my attorney may exercise to some other

person, and to revoke or suspend such delegation.

(c) I authorize my attorney to take physical possession of my Law Practice, including property held in a safety deposit box, property held in safekeeping by others on my behalf, and property held by others subject to some professional privilege, which privilege I waive for this purpose. For greater certainty, my attorneys shall be entitled to review my Will, in order to be able to manage my Law Practice in a manner that is sensitive thereto.

(d) My attorney shall be entitled to be compensated at the rate of $ per hour for

all reasonable time spent administering my Law Practice under this continuing power of attorney.

(e) My attorney shall be permitted to purchase any of my assets governed by this continuing

power of attorney at fair market value with the consent of my attorney appointed in my continuing power of attorney dated , 20** in respect of my Personal Assets.

6. Any other general or limited power of attorney, whether continuing or not, granted by me

with respect to my Personal Assets is not revoked and all such powers of attorney shall co-

The parties being named in this continuing power of attorney do not have to be the same as the parties named in the continuing power of attorney prepared for the lawyer’s personal property.

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exist with this continuing power of attorney for my Law Practice as multiple powers of attorney.

7. This continuing power of attorney will come into effect on the date it is signed and

witnessed. I have signed this power of attorney in the presence of both of the witnesses who names appear below.

I have signed this power of attorney on , 20** (insert date)

[Signature of the Donor]

NAME OF DONOR

We are the witnesses to this power of attorney. We have signed this power of attorney in the presence of the person whose name appears above, and in the presence of each other, on the date shown above. Neither one of us is the attorney, a spouse or partner of the attorney, a spouse or child of the grantor or person whom the grantor has demonstrated a settled intention to treat as a child of the grantor, a person whose property is under guardianship or who has a guardian of the person, or less than eighteen years old. Neither one of us has any reason to believe that the grantor is incapable of giving a continuing power of attorney.

[Signature of the Witness]

Insert name and address of witness

[Signature of the Witness]

Insert name and address of witness

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SAMPLE DIRECTION FOR THE RELEASE OF THE POWER OF ATTORNEY FORPROPERTY FOR LAW PRACTICE DOCUMENT

To: (insert name of person or law firm holding the document in safekeeping) Barristers and Solicitors

From: (insert name of lawyer granting the power of attorney)

RE: Continuing Power of Attorney for Property for Law Practice made by me in favour of: (insert name of Replacement Lawyer)

Replacement Lawyer: (insert name of Replacement Lawyer) Alternate: (insert name of alternate Replacement Lawyer)

You have agreed to hold the above document in safekeeping for me. In view of the fact that a need for the use of the document may arise in circumstances where I might lack the capacity to direct you or may otherwise be unavailable, you may rely upon this direction at that time. I agree that in consideration for your undertaking to hold the document for me, you shall be indemnified from any liability to my estate or to any third party as a consequence of relying on this Direction, or exercising any judgement this Direction requires you to exercise. You may also, where necessary, provide this Direction to any physician for the purpose of exercising such judgement, and such physician shall be similarly indemnified in relying on this document or exercising any judgement the circumstances require him or her to exercise.

You may release my Continuing Power of Attorney for Law Practice to the Replacement Lawyer or the Alternate Replacement Lawyer at the request of said person upon the receipt of one (1) or more of the following documents:

1. A written direction from the undersigned to the Replacement Lawyer or the AlternateReplacement Lawyer to commence to act under this Power of Attorney for Property for LawPractice; or

2. A written confirmation from a qualified medical doctor advising that the doctor has examinedthe undersigned and, in the opinion of the doctor, it would be unwise for the undersigned tocontinue to independently handle his (or her) own financial affairs, or words to that effect; or

3. A sworn statement by the Replacement Lawyer, or the Alternate Replacement Lawyer that,based on the information available to him (or her), it would be in the undersigned’s bestfinancial interests for the Replacement Lawyer, or the Alternate Replacement Lawyer, tobegin to act under the Continuing Power of Attorney for Law Practice, and the undersignedis unable to give instructions under paragraph 1 above and the Replacement Lawyer orAlternate Replacement Lawyer is unable to obtain an opinion from a medical doctor as inparagraph 2 above.

___________ , 20** ___________________ (insert date) (insert name of Donor)

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SAMPLE LAST WILL AND TESTAMENT CLAUSES

The following sample clauses may be used by lawyers when developing last will and testaments for their law practice and other assets in the event of their own death. These sample form clauses should be modified to suit the personal circumstances of the lawyer.

The cross references in square brackets after each heading correspond to the paragraphs in the Checklist of Issues to Consider When Preparing Wills on page 40.

1. Introduction [1]

General Will

I, [name of Planning Lawyer], of [City], Ontario, hereby declare that this is my Last Will and Testament with respect to my General Estate (as hereinafter defined) and shall be referred to as “my General Will”.

Law Practice Will

I, [name of Planning Lawyer], of [City], Ontario, hereby declare that this is my Last Will and Testament with respect to my Law Practice Estate (as hereinafter defined) and shall be referred to as “my Law Practice Will”.

2. Revocation [2]

General Will

I hereby revoke all Wills and Codicils made by me prior to [date] regarding those of my assets that form part of my General Estate. For greater certainty, nothing in this my General Will shall revoke, or override, any Will made by me that purports to dispose of my Law Practice Estate (as hereinafter defined), which other Will shall be referred to as “my Law Practice Will”.

Law Practice Will

I hereby revoke all Wills and Codicils made by me prior to [date] regarding those of my assets that form part of my Law Practice Estate. For greater certainty, nothing in this my Law Practice Will shall revoke, or override, any Will made by me that purports to dispose of my General Estate (as hereinafter defined), which other Will shall be referred to as “my General Will”.

3. Life Insurance [3]

Law Practice Will

I hereby revoke all previous bequests, declarations or agreements made by me in connection with the payment of the insurance policy on my life with [name of insurance company], policy number [number], and I declare that the proceeds of the said policy shall be payable to [Name of Replacement Lawyer] as Special Trustee as a separate

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trust upon the same terms and conditions contained in paragraph [ insert the paragraph number of the dispositive provisions of the Law Practice Will] of my Law Practice Will. This declaration shall be a declaration within the meaning of the Insurance Act (Ontario).

4. Executors of Lawyer’s Estate [4 and 5]

General Will

I appoint [name] to be the sole Estate Trustee, Executor and Trustee of this my General Will. In the event that [name] predeceases me, or is or becomes at any time unable or unwilling to act or to continue to act as the Estate Trustee, Executor and Trustee of this my General Will, then I appoint [name] to be the sole Estate Trustee, Executor and Trustee of this my General Will in the place and stead of [name]. The person or persons from time to time acting as the Estate Trustee, Executor and Trustee of this my General Will is or are referred to herein as “my Trustee”.

Law Practice Will

I appoint [name of first Replacement Lawyer] to be the sole Estate Trustee, Executor and Trustee of this my Law Practice Will. In the event that [name of first Replacement Lawyer] predeceases me, or is or becomes at any time unable or unwilling to act or to continue to act as the Estate Trustee, Executor and Trustee of this my Law Practice Will, then I appoint [name of alternate Replacement Lawyer] to be the sole Estate Trustee, Executor and Trustee of this my Law Practice Will in the place and stead of [first Replacement Lawyer]. The person or persons from time to time acting as the Estate Trustee, Executor and Trustee of this my Law Practice Will is or are referred to herein as “my Trustee”.

5. Executors of Clients’ and Other Estates [6]

General Will

If at my death I am the sole executor of the estate of my spouse or of any parent, child or sibling of mine or my spouse, and where by reason of devolution of appointment, my executor would otherwise become successor executor or trustee of such estate or trust, then I appoint my Trustee to be the successor executor or the successor trustee of such estate or trust.

Law Practice Will

If at my death I am the sole executor or trustee of any estate or trust, other than the estate of my spouse or any parent, child or sibling of mine or my spouse, and where by reason of devolution of appointment, my executor would otherwise become successor executor or trustee of such estate or trust, then I appoint my Trustee to be the successor executor or the successor trustee of such estate or trust.

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6. Compensation [7]

Law Practice Will

I authorize my Trustee to claim and receive from my Law Practice Estate, as compensation for his/her time, trouble, care and skill in administering my Law Practice Estate, compensation calculated at the rate of [select one alternative]

% of [net monthly billings / gross monthly billings / monthly accounts collected] from my law practice

$ per hour/day/month

his/her hourly rate

Such compensation may be taken at intervals with the prior written approval of the person or persons from time to time acting as the estate trustee, executor and trustee of my General Will, or with the approval of the Superior Court of Justice upon application by my Trustee to pass his or her accounts.

7. Definitions [1 and 8]

Both Wills

In this Will,

(a) “My Law Practice Estate” means all property, both real and personal, of every nature

and kind whatsoever, used in connection with my law practice including, without limiting the generality of the foregoing, [my Law Practice Corporate Properties and] all bank accounts, investments, trust funds, client lists, client property, leasehold interests in any business premises, accounts receivable, goodwill, equipment, software and software licences, intellectual property and passwords.

(b) “My Law Practice Corporate Properties” means all shares, debt and other interests

which I may own at my death in [name of law professional corporation], any successor corporation, and any other corporation that owns assets used in the carrying on of my law practice or that has employees who are involved in the carrying on of my law practice.

(c) “My General Estate” means all of my property of every nature and kind whatsoever

and wheresoever situate, but excluding my Law Practice Estate;

General Will

(d) “My property” and “my estate” shall, unless the context otherwise requires, mean only my General Estate and shall not include my Law Practice Estate.

Law Practice Will

(e) “My property” and “my estate” shall, unless the context otherwise requires, mean

only my Law Practice Estate and shall not include my General Estate.

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8. Vesting Clause

General Will

I give, devise and bequeath my General Estate to my Trustee upon the following trusts, namely:

Law Practice Will

I give, devise and bequeath my Law Practice Estate to my Trustee upon the following trusts, namely:

9. Debts Clause [9]

General Will

My Trustees shall pay out of and charge to the capital of my General Estate my debts (including any income or profits tax payable by me or by my primary estate in respect of myself or my General Estate for the year of my death or any previous or succeeding year), funeral and testamentary expenses, and all estate, legacy, succession and inheritance taxes or duties, whether imposed by or pursuant to the law of this or any other jurisdiction whatsoever, that may be payable as a consequence of my death and that have not been paid by the executors and trustees of my Law Practice Estate out of my Law Practice Estate. In addition, if my Trustees deem it to be necessary or advisable, my Trustees may pay out of my General Estate all or any portion of my debts specifically related to my Law Practice Estate.

Law Practice Will

My Trustees shall pay out of and charge to the capital of my Law Practice Estate my debts (including any income or profits tax payable by me or by my Law Practice Estate in respect of myself or my Law Practice Estate for the year of my death or any previous or succeeding year) specifically related to my Law Practice Estate and if my Trustees deem it to be necessary or advisable, my Trustees may also pay out of my Law Practice Estate all or any portion of my other debts, funeral and testamentary expenses, and all estate, legacy, succession and inheritance taxes or duties, whether imposed by or pursuant to the law of this or any other jurisdiction whatsoever, that may be payable as a consequence of my death and that are not specifically related to my Law Practice Estate.

10. Purchase by Trustee [14]

Law Practice Will

Notwithstanding trusteeship, my Trustee may purchase any asset from my Law Practice Estate either at public auction or by private contract, provided that in the latter case the sale shall be at a price and on terms and conditions approved in writing by the person or persons from time to time acting as the estate trustee, executor and trustee of my General Estate.

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SAMPLE LAW PRACTICE COVERAGE AGREEMENT2 BETWEEN THE PLANNING LAWYER AND THE REPLACEMENT LAWYER

This Agreement is made the [insert the date]. Between:

X [insert the Planning Lawyer’s name]

(the “Planning Lawyer”)

and

Y [insert the Replacement Lawyer’s name]

(the “Replacement Lawyer”) WHEREAS the Planning Lawyer is a sole proprietor practising law in Ontario.

AND WHEREAS the Replacement Lawyer is a lawyer practising law in Ontario.

AND WHEREAS the Planning Lawyer wishes to put a plan in place for the management, sale or winding up of his/her Law Practice (as defined in section 1), in the event that the Planning Lawyer becomes incapacitated or unable to manage the affairs of the Law Practice for any reason or if he/she dies while still in practice.

AND WHEREAS the Planning Lawyer has appointed the Replacement Lawyer as his/her Law Practice Attorney and Law Practice Estate Trustee (as defined in section 1 ).

AND WHEREAS the parties wish by this Agreement to clarify when and on what terms the Replacement Lawyer shall act as Law Practice Attorney or Law Practice Estate Trustee.

NOW THEREFORE in consideration of the mutual covenants herein contained and for other good and valuable consideration, the parties agree as follows:

Definitions

1. Wherever used in this Agreement, the following terms shall have the meanings set out

below:

2 This sample form agreement may be used by sole proprietors or lawyers who are the sole shareholders of a professional corporation when developing a contingency plan for their law practice in the event of their death, own incapacity or other disability preventing a return, whether temporary or otherwise, to their law practice. This sample form should be modified to suit the personal circumstances of the lawyer.

This sample form agreement has been adapted from a sample form agreement prepared by the Law Society of British Columbia. We wish to thank the Law Society of British Columbia for its assistance.

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(a) “Authorized Person” means the following:

i. the Planning Lawyer, if alive and capable of managing his/her affairs;

ii. if the Planning Lawyer is alive but incapable of managing his/her affairs, the person(s) from time to time acting as the attorney(s) for property or guardian(s) of property of the Planning Lawyer with respect to the Planning Lawyer’s assets other than the Law Practice; or

iii. if the Planning Lawyer has died, the person(s) from time to time acting as the

executor(s) or estate trustee(s) of a Will governing the Planning Lawyer’s assets other than the Law Practice.

Each person whom the Planning Lawyer has appointed as an Authorized Person at the date hereof is listed in Schedule “A” to this Agreement. The Planning Lawyer agrees to notify the Replacement Lawyer promptly in writing of any change to the Authorized Persons.

(b) “Law Practice” means all property, both real and personal, of every nature and kind

whatsoever, used in connection with the Planning Lawyer’s law practice including without limiting the generality thereof all bank accounts, investments, trust funds, client lists, client property, leasehold interests in any business premises, accounts receivable, goodwill, equipment, software and software licences, intellectual property and passwords and includes the Planning Lawyer’s Law Practice Corporate Properties.

(c) “Law Practice Attorney” means the attorney appointed by the Planning Lawyer under The

Law Practice Power of Attorney. (d) “Law Practice Corporate Properties” means all shares, debt, and other interests that the

Planning Lawyer may own in [insert the name of the law professional corporation if applicable], any successor corporation, and any other corporation that owns assets used in carrying on the Law Practice or that has employees who are involved in the carrying on of the Law Practice.

(e) “Law Practice Estate Trustee” means the estate trustee appointed under the last will and

testament of the Planning Lawyer with respect to the Law Practice executed on [insert the date of signing], a copy of which is attached to this Agreement as Schedule “B”.

(f) “Law Practice Power of Attorney” means the continuing power of attorney for property of

the Planning Lawyer with respect to the Law Practice executed on (insert the date of signature), a copy of which is attached to this Agreement as Schedule “C”.

Assumption of Duties

2. The Replacement Lawyer accepts his/her appointments as, and subject to sections 3 and 4,

agrees to act as, Law Practice Attorney and/or as Law Practice Estate Trustee. 3. The Replacement Lawyer’s duties as Law Practice Attorney or as Law Practice Estate

Trustee shall commence only on the date the Replacement Lawyer receives actual notice of (the “Commencement Date”):

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(a) grounds to request the release of the Law Practice Power of Attorney, in accordance with the Direction Regarding the Release of the Document attached to this Agreement as Schedule “D”; or

(b) the death of the Planning Lawyer.

Until the Commencement Date, the Replacement Lawyer shall be under no obligation to monitor the Law Practice or the circumstances of the Planning Lawyer.

4. The Replacement Lawyer shall have two weeks from the Commencement Date to review

the books, records and files of the Law Practice and notify the Authorized Person whether or not the Replacement Lawyer is able and willing to accept at that time the duties under this Agreement and the attached Schedules. While conducting the review of the Law Practice, the Replacement Lawyer will take reasonable steps to deal with urgent matters to protect the interests of the Planning Lawyer and his or her clients.

Practice Management

5. If the Replacement Lawyer accepts the duties under this Agreement, the Replacement

Lawyer will take possession and control of the Law Practice, and will manage the Law Practice on behalf of the Planning Lawyer in the same manner that a prudent and competent lawyer would manage his or her own legal practice. Without limiting the generality of the foregoing, the Replacement Lawyer will, if and to the extent appropriate in the circumstances, follow the guidance set out in the Law Society of Upper Canada’s Checklist for the Replacement Lawyer who takes over the Law Practice of Another Lawyer, which is attached to this Agreement as Schedule “E”.

6. If the Planning Lawyer has died or if there is no reasonable expectation, after consultation

with the Planning Lawyer, the Planning Lawyer’s immediate family or the Planning Lawyer’s doctor, that the Planning Lawyer will be able to resume the practice of law in a timely manner to retain the clients and preserve the good will of the Law Practice, the Replacement Lawyer will sell or wind down and dispose of the Law Practice.

Financial Management

7. The Planning Lawyer will purchase disability and life insurance for the purpose of paying the Replacement Lawyer and funding the expenses of the Law Practice. The Planning Lawyer will name the Replacement Lawyer as the beneficiary of such policies.

8. The Replacement Lawyer shall:

(a) hold the proceeds received from the disability and life insurance policies referred to in

section 7 in trust and use those proceeds for paying the expenses of the Law Practice, which includes the Replacement Lawyer’s fees;

Lawyers should consider how the Replacement Lawyer will cover the office overhead and expenses for a period of time. Sections 7 and 8 are only relevant if the funding mechanism is insurance purchased for this purpose. Insurance, however, is not the only option. Other funding methods might include payment of expenses from the general account, personal bank account or, by the estate as provided for in the will. Sections 7 and 8 should be modified to reflect the funding mechanism chosen.

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(b) account for the proceeds of the disability and life insurance policies and their use as part of the reporting requirements under this Agreement; and

(c) give to the Authorized Person, any proceeds remaining after the Planning Lawyer

returns to practice or the practice is sold or wound up.

9. Without limiting the generality of section 5 and the powers and duties under this Agreement and the attached Schedules, the Replacement Lawyer will:

[List duties]

10. If the Replacement Lawyer wishes to buy some part or all of the Law Practice, he/she may

do so, if acceptable terms can be reached with the Authorized Person.

Indemnity

11. Each party (the “Responsible Party”) agrees to indemnify and save harmless the other party (the “Innocent Party”) from all loss or damage that the Innocent Party may sustain in any manner as a result of an error or omission made by the Responsible Party, so long as the Innocent Party did not have actual knowledge of the error or omission or, having actual knowledge, so long as the Innocent Party acted honestly and reasonably in attempting to correct the error or omission.

Reporting

12. The Replacement Lawyer will provide to the Authorized Person, on a quarterly or other

reasonable periodic basis, or on request by the Authorized Person, a written report(s) to include, but not limited to, an accounting for accounts billed, accounts collected and expenses paid, and any efforts to sell or otherwise dispose of the Law Practice.

13. If the Replacement Lawyer decides to sell or wind down the Law Practice, the Replacement

Lawyer will provide a written explanation to the Authorized Person.

Compensation

14. In consideration of carrying out the duties of Law Practice Attorney and Law Practice Estate Trustee, the Planning Lawyer agrees to pay to the Replacement Lawyer, and the Replacement Lawyer agrees to accept as sufficient, the compensation set out in the Last Will and Testament and/or Law Practice Power of Attorney of the Planning Lawyer attached as Schedules B and C.

Include section 9 below only if the Lawyer would like to specify tasks that are mandatory for the Replacement Lawyer to perform. If section 9 is not included in the Agreement, then section 5 of the Agreement would apply and the Replacement Lawyer would be required to consider all the matters referred to in Schedule “E” but could exercise his or her own judgment as to whether any particular action was required. Examples of items that the Planning Lawyer might wish to make mandatory, by listing them in section 9, are the payment of law office expenses for a period of time, the collection of accounts receivable, dealing with the lawyer’s bank accounts including trust accounts.

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Termination 15. If the Replacement Lawyer has not assumed any duties under this Agreement, this

Agreement may be terminated:

(a) by the Replacement Lawyer on two weeks’ written notice to the Planning Lawyer, or

(b) by the Planning Lawyer, if alive and capable of managing his/her affairs, immediately on providing written notice to the Replacement Lawyer.

16. Subject to the Replacement Lawyer’s duties pursuant to the Law Society of Upper Canada

Rules of Professional Conduct and in particular Section 3.7 on Withdrawal from Representation, if, after assuming any duties under this Agreement, the Replacement Lawyer decides that he/she can no longer act, he/she will:

(a) give the Authorized Person two weeks’ written notice of this decision;

(b) prepare to hand over the Law Practice or what remains of it and any funds the Planning

Lawyer holds in trust from disability and life insurance proceeds;

(c) provide a written report to the Authorized Person as described in section 12;

(d) take any steps necessary in this two week period to deal with urgent matters to protect the interests of the Planning Lawyer and the clients;

(e) advise Trustee Services of the Law Society of Upper Canada of the decision to

withdraw; and

(f) provide any additional information requested by the lawyer taking over the duties outlined in this Agreement.

17. If the Replacement Lawyer has assumed any duties under this Agreement, this Agreement

may be terminated:

(a) by the Planning Lawyer, if alive and capable of managing his/her affairs, on two weeks’ written notice to the Replacement Lawyer;

(b) by any Authorized Person, immediately upon providing written notice to the

Replacement Lawyer in which the Authorized Person shows good cause for such termination.

Subject to the duties of the Replacement Lawyer pursuant to the Law Society of Upper Canada Rules of Professional Conduct and in particular Section 3.7 on Withdrawal from Representation, the Replacement Lawyer will cooperate with the Planning Lawyer or other Authorized Person in returning the Law Practice to the Planning Lawyer and follow the steps set out in paragraph 16 (b), (c), and (d).

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Miscellaneous

18. In carrying out his/her duties under this Agreement and the attached Schedules, theReplacement Lawyer shall not be liable to the Planning Lawyer or his/her estate fordecisions made by the Replacement Lawyer in good faith which may result in a loss to thePlanning Lawyer or to his/her estate.

19. If the Replacement Lawyer has any problems or concerns in carrying out the duties underthis Agreement and the attached Schedules, and, in particular, in accessing the LawPractice bank accounts, he/she is urged to contact Trustee Services of the Law Society ofUpper Canada for help and support.

20. If a disagreement arises between the Replacement Lawyer and the Authorized Person as tothe handling by the Replacement Lawyer of the Law Practice and such disagreement cannotbe resolved in a timely way, the parties are urged to seek help to resolve the matter bymediation or binding arbitration.

21. For greater clarity, save and except for restrictions contained in the Law Practice Power ofAttorney, a copy of which is attached as Schedule C in the event of any inconsistencybetween this Agreement and the Law Practice Power of Attorney, the provisions of thisAgreement shall prevail.

The parties have agreed to its terms and signed this Agreement as of the date written above.

SIGNED BEFORE ME )

at ))))

on )))) )

Witness

SIGNED BEFORE ME

at

on

Witness

) Planning Lawyer )))))

)

)

) Replacement Lawyer

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. PLANNING LAWYER: STEPS FOR MANAGING YOUR LAW PRACTICE TO FACILITATE

THE TASK OF THE REPLACEMENT LAWYER

Consider taking the following steps to prepare your law practice for the entry of a Replacement Lawyer.

Have a system in place for the opening, closing and destruction of client files and ensure that this system is followed.

Resources

Law Society File Management Guideline http://www.lsuc.on.ca/with.aspx?id=2147491190

Guide to Retention and Destruction of Closed Client Files http://www.lsuc.on.ca/with.aspx?id=2147499150

Have a complete client list with contact information that can be produced at any time.

Document your files well so that the Replacement Lawyer reviewing the file will know what has transpired in the file.

Confirm your retainer in writing with the client and have a copy of the retainer agreement or correspondence in the file. Also consider inserting a provision into your retainer agreement with the client indicating your arrangement with the Replacement Attorney to manage or dispose of your law practice in the event of your death, disability or unexpected absence from your practice.

Resources

Retainer Agreements or Engagement Letters http://www.lsuc.on.ca/with.aspx?id=2147494248

Sample Retainer Agreements http://www.practicepro.ca/practice/financesbookletprecedents.asp

Have a conflict checking system in place and keep it up to date.

Resources

Selecting a Conflict Checking System http://www.lsuc.on.ca/WorkArea/DownloadAsset.aspx?id=2147491184

Checklist of Essentials of a Conflict Checking Systems http://www.practicepro.ca/practice/conflict/appendix5.asp

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The Bookkeeping Guidehttp://www.lsuc.on.ca/with.aspx?id=2147499736

Have a tickler or reminder system in place and keep it up to date.

Resources

Time Management Practice Management Guideline http://www.lsuc.on.ca/For-Lawyers/Manage-Your-Practice/Time-Management/Time-Management-Practice-Management-Guideline/

Keep your bookkeeping and accounting records up to date.

Keep your time and billing records up to date.

Resources

Prepare a law office procedural manual outlining the key processes in your law firm and important information about your firm and keep it up to date.

Resources

Practice Tips – Preparation of a Law Office Procedural Manual at page 33.

Have a contingency plan in place and periodically review and update the plan.

Ensure that you have sufficient funds available to the Replacement Lawyer to cover office overhead and expenses for a period of time.3

Discuss with your bank or determine what happens to your bank accounts, line of credit and other loans if you die or become disabled.

Consider all types of insurance, including: professional liability insurance coverage, property insurance (if you own your building); contents insurance, including extra riders for computers or other equipment of significant value; commercial general liability for third-party bodily injury or property damage; business interruption insurance; crimes coverage; and disability, life, or other appropriate personal coverage. With respect to professional liability insurance, consider whether the standard $250,000.00 LAWPRO run-off coverage is sufficient or whether it should be increased with Optional Run-off Buy-up coverage in the event that you pass away and discuss this with your Estate Trustee for the Law Practice.

3 A line of credit issued to a lawyer may not advance funds after the lawyer’s death or disability.

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CHECKLIST FOR THE REPLACEMENT LAWYER WHO TAKES OVER THE LAW PRACTICE OF ANOTHER LAWYER

Steps Before and Shortly After Entering the Law Practice

Determine whether you have the authority to take over the law practice and if so, the scope of your authority

Ensure that you have appropriate professional liability insurance in place

Secure the office, client property, client files and all law firm bank accounts (trust and general)

Meet with the law firm staff to address employment and related issues

If the lawyer has a Teraview Account advise Teranet of the lawyer’s death or disability and determine how you will deal with documents that require electronic registration.

Determine whether there are any matters that require your immediate attention

If there are matters that require your immediate attention, consider whether you have any conflicts of interest and how you will deal with these

Contact clients for matters that are urgent and obtain instructions to act on their behalf

Advise the court and opposing counsel that the Planning Lawyer has died or is incapacitated

Depending on the nature of the matter, you may need to obtain adjournments or extensions of closing dates or other deadlines.

If you have a conflict of interest and cannot act, you may need to make arrangements for another lawyer to deal with the matter.

This might involve: reviewing the firm’s law office procedural manual, if any, the firm’s calendaring or tickler system, books and records and accounts payable, the lawyer’s desk diary or calendar, any unopened mail, email and facsimiles; retrieving voice mail messages and speaking to staff and others.

If you do not have the authority, determine what steps you will need to take in order to obtain the authority. If you have the authority, determine whether your role is to wind down the law practice or preserve it.

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Determine whether you have access to the law firm bank accounts (trust and general) and lines of credit or what steps you will need to take to gain access

Establish how you will be compensated.

Additional Steps Once You Have Entered the Law Practice

Office Procedures

Familiarize yourself with the firm’s office procedures

Conflict Checking System

Determine the law firm procedure for checking for conflicts of interest

Do a conflicts check before you start working on files

If there is a conflict of interest, determine how you will deal with it

Calendar/Tickler System

Determine the law firm procedure(s) used to record deadlines and significant dates

Ensure the calendar or tickler system is up to date

Identify any matters that need immediate or early attention and determine how you will deal with these

Files

Locate the list of active files including names and addresses of clients

Locate the list of closed files

Determine where active/closed files are stored

Determine how files are organized

Determine how the filing system works – opening, closing, filing, organization of the information in the file, destroying the file

Review the status of active files and determine how you will deal with each file

Determine how you will deal with closed files

This might involve reviewing the firm’s office procedure manual and/or interviewing staff to obtain an understanding of the law firm procedures.

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Notification of Clients

Notify clients of the death or disability of the Planning Lawyer

Law Firm Bank Accounts/ Financial Records

Identify the bank accounts related to the law practice (trust, general, electronic registration bank account, special trust accounts)

Notify the bank(s) of the death or disability of the lawyer

Determine who has signing authority on the account(s) and make changes if required

Deposit any funds that require depositing

Notify the law firm’s accountant/bookkeeper of the death or disability of the Planning Lawyer

Determine the type of bookkeeping system in place

Locate and review accounting records, cheque books and most recent bank statements

Determine the procedure used for recordkeeping and the individuals involved

Ensure that the books and records are up to date

Determine how the books and records will be kept up to date

Determine whether you need to establish any internal controls regarding the firm’s books and records

Client Property

Determine the firm’s policy and procedure with regards to client property

Locate safety deposit box, key and inventory of contents

Examine contents and make inventory of contents

Secure all client property in the Planning Lawyer’s possession

If the client wishes to retain you to act in the matter, you should consider confirming in writing the terms of the retainer with the client. If the client wishes to retain another lawyer, prepare the file for transfer and consider having the client execute either a direction authorizing you to release the file to another lawyer or a receipt confirming the delivery of the file to the client and the termination of the retainer with the Planning Lawyer. In addition if applicable notify the court or tribunal that the Planning Lawyer is no longer acting and take steps to ensure that the Planning Lawyer has been removed as the lawyer of record and notify the opposing lawyer that the Planning Lawyer is no longer acting with regards to the matter.

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Notify clients of the death or disability of the Planning Lawyer and how they may retrieve their property

Original Documents

Determine the firm policy regarding original documents including last will and testaments and powers of attorney

Locate any original documents being stored and determine how you will deal with these (return to owner or continue storing)

Notify clients of the death or disability of the Planning Lawyer and how they may retrieve their original documents

If a client cannot be reached determine how you will deal with that client’s original documents

Mail, Email and Facsimiles

Review unanswered mail, email and facsimiles and determine whether responses are required and if so, when and how responses will be prepared

Determine the office procedure for filing mail, email and facsimiles

Determine how you will handle mail, email and facsimiles going forward

Client Billing

Determine the type of billing system

Determine how and when bills are prepared

Determine how and who will prepare bills going forward

Identify accounts receivable and procedures used for collection

Determine what steps if any should be taken to collect account receivables

Docketing System

Determine the type of timekeeping system used

Locate time records

Determine if and how time records will be kept going forward

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Accounts Payable

Determine whether there are any lines of credit or loans and how you will deal with these

Determine the status of accounts payable (operating costs, taxes, insurance, rent, utilities, supplies, services, benefits, employee expenses, withholding taxes, levies, insurance premiums, membership fees etc.)

Determine how you will deal with the accounts payable

Determine how you will deal with payroll and remittances

Computer System

Determine the type of computer system and software applications in place

Determine computer passwords

Determine back-up procedures and locate and secure back-up disks or records

Determine how back-up will occur going forward

Other Office Equipment (telephones, photocopier, fax machine etc)

Determine if equipment is owned or leased

Determine how you will deal with equipment

Determine how the equipment works

Determine how voice mail system works

Determine how phone calls, voice mail messages and emails and facsimiles will be dealt with going forward

Office Lease/Ownership

If the premises are leased, obtain a copy of the lease and review it, determine what payments if any need to be made, any notices to be given and whether the lease will continue

If required, notify the Landlord of the Planning Lawyer’s death or incapacity if required

If the premises are owned, determine if there are any outstanding payments relating to the premises, how they will be paid and how you will deal with the premises going forward.

Employees

Identify the employees of the Planning Lawyer and the terms of their employment

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Obtain advice if required regarding employer obligations and determine how the Planning Lawyer’s employer obligations will be met

Determine whether the employees will remain or be terminated

Teraview Account

Notify Teranet of the death or disability of the Planning Lawyer

Determine how electronic registration of documents relating to the Planning Lawyer’s Practice will be effected going forward

Law Society and LAWPRO

Notify the Law Society of the change in status of the Planning Lawyer

Notify LAWPRO of the change in status of the Planning Lawyer

Additional Resources

Law Society Guide to Closing Your Practice http://www.lsuc.on.ca/with.aspx?id=2147499389&langtype=1033

Law Society Guide for Retention and Destruction of Closed Client Files http://www.lsuc.on.ca/with.aspx?id=2147499150

Law Society Practice Management Guidelines http://www.lsuc.on.ca/with.aspx?id=2147490535&langtype=1033

LAWPRO Managing Practice Interruptions booklet www.practicepro.ca/disasterbooklet or http://www.practicepro.ca/practice/pdf/Practice_Interruptions_booklet.pdf

Law Society Bookkeeping Guide http://www.lsuc.on.ca/with.aspx?id=2147499736&langtype=1033

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PRACTICE TIPS – PREPARATION OF A LAW OFFICE PROCEDURAL MANUAL

In order to facilitate the task of the Replacement Lawyer, you should consider preparing an office procedural manual outlining your firm’s office procedures and other important information about your law practice. The manual should be reviewed periodically and kept up to date.

A law office procedural manual may include the following information.

Information about your filing system and procedures

How to generate a client list including client names, addresses and phone numbers How to generate a file list How active files are opened and assigned numbers Where and how active files are stored Whether closed files are assigned numbers How can closed files be accessed How files are closed, retained and destroyed

Client Property

Whether your firm retains original client documents and where these may be found What is your firm’s policy and procedure regarding the receipt and return of client documents/property Does your firm have a safety deposit box and if so how do you obtain access to it What is your firm’s procedure for dealing with original client wills If you store original wills, where are these kept

Office Administration

What are your office hours How do you access the office Where can you obtain information about the security of the office (e.g. alarm system) How do you deal with mail (incoming and outgoing) How do you deal with deliveries (incoming and outgoing) How do you deal with facsimiles How do you organize/file your email Who are your service providers and contractors and where can information about the arrangements with them be obtained How do you accept or admit service Who is responsible for the firm website What are the rules regarding the use of technology in your firm

Information about your tickler or reminder system

What type of tickler or reminder system does your firm use How does it work Who is responsible for inputting dates, retrieving dates, reminders and ensuring that the deadline is met

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How do you ensure that undertakings given and received are fulfilled

Information about your conflicts checking system

What type of conflicts checking system does your firm have How does it work What information is inputted into the system and when Who is responsible for inputting the information Who is responsible for doing the conflicts check and identifying potential conflicts

Information about your bookkeeping system and financial records

What type of bookkeeping system do you have Where are your financial records kept Who is responsible for keeping them up to date Who is responsible for doing the monthly reconciliations Where do you bank (name, address and phone number) and name and contact information of account manager

Information on all of your law office bank accounts (trust, general, special trust accounts, account numbers and bank)

What is the procedure for transferring trust monies (e.g. cheque , electronic, cheque requisitions, who is responsible for this) Outline internal controls in place Contact information for your bookkeeper, if applicable Contact information for your accountant How do you deal with petty cash Where do you keep your general and trust account cheques

Accounts Payable/Filings

Where do you keep accounts payable information How do you deal with the payment of accounts Where do you keep information regarding outstanding loans (eg. line of credit) Do you have business credit cards and if so particulars How do you handle payroll and remittances How do you handle Law Society and LAWPRO filings including payment of transaction levies Where do you keep records of filings How do you deal with tax filings (income tax, HST ) and where do you keep records of filings

What is your record retention and destruction policy Docketing System

Describe your timekeeping/docket system Where do you keep time records Who is responsible for keeping time records

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Billings

When and how do you bill clients Who is responsible for billing Where do you keep information regarding billings How do you handle collections of outstanding accounts

Office Equipment

Photocopier

Where can information about your photocopier and codes required to access it, if any, be found Who services your photocopier (contact information) Is it owned or leased and if leased where is the copy of the lease stored Where is the warranty kept

Computers/Printers

Where can information about your computers be found Where can information about your computer systems and software applications be found Where can information about your passwords be found Where can information about your printers be found Who services your computers (contact information) Who services your printers Are the computers/printers owned or leased and if leased where is the copy of the lease stored What is the system for backing up data on your computer and who is responsible for this Where are the software disks and information about the software kept Where are the warranties for the computers and printers kept

Facsimile

Where can information about your fax machine be found Who services your fax machine (contact information) Is it owned or leased and if leased where is the copy of the lease stored Where is the warranty is kept

Telephone

Where can information about your telephone system and passwords required to access voice mail be found Who services your telephone system (contact information) Is it owned or leased and if leased where is the copy of the lease stored How do you retrieve voice mail Do you keep a record of your voice mail and what is the procedure for this Where is the warranty is kept

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Client Identification and Verification

What are your law firm procedures for identifying and verifying the identity of a client Where are client identification and verification records stored (in file, centralized system)

Employees

Names and addresses of your employees and description of their jobs Where can terms of employment of each employee be found (e.g. copy of contract) Where are records relating to employees kept Where can information about employee pensions and other benefits be obtained

Contact Information (Name, Address and Phone Number)

Attorney for Property Executor (s) Bank Manager Landlord Accountant Excess Insurer Disability Insurer Property Insurer Business Credit Card Company Bookkeeper Staff Contractors (conveyancer, process server, law clerk) Technology Service Provider Service providers

Office Premises

Where may information regarding your lease or ownership of the office premises be obtained

Power of Attorney/Will

Where is your will and continuing power of attorney for property

PSP to Access Teraview

Where can information about your Teraview Account be obtained Who has PSPs under your account Who has access authority to documents under your account

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CHECKLIST OF ISSUES TO CONSIDER WHEN PREPARING POWER OF ATTORNEY FOR PROPERTY DOCUMENTS

Contingency planning for the operation of a law practice in the event of a lawyer’s incapacity or other extended periods of absence from the practice should be considered by the Planning Lawyer as a means of providing peace of mind for loved ones, clients and employees. A Planning Lawyer should consider how the law practice will be dealt with on his or her incapacity or for other extended periods of absence and address these considerations by establishing the appropriate documentation to facilitate either maintenance of the law practice or a sale or winding up of the law practice to another lawyer.

The use of separate Continuing Power of Attorney documents for Personal Assets and a Law Practice may assist a sole proprietorship or a professional corporation of which the Planning Lawyer is the sole shareholder to maintain financial stability both personally and professionally and to facilitate a smooth transition for clients of the Law Practice. The purpose of having two Continuing Power of Attorney documents is to provide the Replacement Lawyer with full power and authority to operate, sell or wind down the law practice, while simultaneously ensuring that control over Personal Assets such as a family home and bank and investment accounts remains with the Planning Lawyer’s spouse, family member or whomever else the Planning Lawyer has currently named as his or her attorney for property with respect to Personal Assets. Naming a different person to act as attorney for the Personal Assets also gives someone other than the Replacement Lawyer (most often a family member or trusted friend) the ability to review the transactions undertaken by the Replacement Lawyer in respect of the Law Practice, and to negotiate and approve the price and terms of a possible sale of the Law Practice to the Replacement Lawyer. The use of such documents should be considered a preferable means of addressing contingency planning, as opposed to not having such documentation in place and running the risk of an appointment of a guardian of property pursuant to the Substitute Decisions Act or of having Trustee Services of the Law Society of Upper Canada take over the law practice.

When preparing such Continuing Power of Attorney documents, the Planning Lawyer should consider the following issues:

1. Ensure that all assets are dealt with, either under the Continuing Power of Attorney for

Property for Law Practice [Page 11] or under the Continuing Power of Attorney for Property Excluding Law Practice [Page 8], and that there is no overlap that might cause confusion. The precedent documents accomplish this by defining what assets are to form part of the Law Practice, and providing that the Continuing Power of Attorney for Property Excluding the Law Practice covers all Personal Assets as defined in both types of documents. The precedent documents also make it clear from the very beginning of each document the nature of the assets for which authority is granted to the attorney for property to manage.

2. Ensure that neither Continuing Power of Attorney revokes the other. Each of the precedent

documents stipulates that it only revokes prior Continuing Power of Attorney documents dealing with one particular group of assets (Law Practice or Personal Assets). This means that the subsequent preparation of a new Continuing Power of Attorney for only one set of assets will not affect the other Continuing Power of Attorney that is in existence for the other

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set of assets. Consequently, changes can be made with respect to naming a new attorney for property or changing other terms independently for each type of document.

3. When selecting a Replacement Lawyer to act as attorney for property for the Law Practice,

consider:

The proposed Replacement Lawyer’s age, health, financial circumstances and family and business relationships and experience. It is advisable to name someone who is likely to be available not only if the Planning Lawyer becomes incapacitated or requires an extended period of absence from the law practice but also for as long as it takes to sell or wind up the law practice, if necessary. In essence, a Replacement Lawyer has full and absolute discretion to make decisions regarding the law practice, subject to any restrictions contained in the Continuing Power of Attorney for Law Practice so it is important to choose wisely and have regard to the fiduciary responsibilities being assumed by the Replacement Lawyer.

The ability of the Replacement Lawyer to communicate effectively with the attorney for

property for Personal Assets as there will be a need to discuss management of the Law Practice assets, allocation of payment of Law Practice debts, taxes and other expenses and allocation of debts, taxes and other expenses to be paid from Personal Assets.

The nature and location of the proposed Replacement Lawyer’s own law practice. A Replacement Lawyer with a well-established, well-run practice and reliable staff may be better able to take the time necessary to manage the Planning Lawyer’s law practice. A Replacement Lawyer whose office is in the same town or the same part of the city as that of the Planning Lawyer may find it easier to go back and forth as required to attend to matters in both offices.

The impartiality of the proposed Replacement Lawyer. If the proposed Replacement Lawyer has a conflict of interest with another role (e.g. a landlord, tenant or creditor of the Planning Lawyer, a client of the Planning Lawyer or a potential purchaser of the Planning Lawyer’s law practice), consider whether the conflict can be adequately addressed by requiring that certain decisions (such as the sale price and terms of the Planning Lawyer’s law practice) be determined by agreement between the Replacement Lawyer and the attorney for property of the Planning Lawyer’s Continuing Power of Attorney for Personal Assets or by some other reasonable decision-making process.

4. Approach the people selected to be the primary and alternate attorneys for property for each

document to confirm that they are willing to act in these roles. In the case of the Continuing Power of Attorney for Law Practice, the consent of the Replacement Lawyer(s) to act may be contained in an agreement of the type included in this Contingency Planning Guide on page 19. Consider appointing more than one Replacement Lawyer to act as attorney for property for the Law Practice with joint or joint and several responsibilities. In certain circumstances this may be a good and practical option for the Planning Lawyer. In selecting such Replacement Lawyers, the Planning Lawyer may wish to consider the ability of the Replacement Lawyers to work together with each other so as to minimize conflicts. Additionally consideration should also be given to any changes required to the Replacement Lawyers’ Professional Liability Insurance coverage as a result of the assumption of joint responsibilities.

5. If appropriate, negotiate ahead of time the rate of compensation to be paid to the

Replacement Lawyer and, if desired, set it out in an agreement between the Planning

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Lawyer and the Replacement Lawyer. Due to the nature of the work and the assets, it may not be appropriate to allow compensation to be claimed by a Replacement Lawyer in accordance with the regulations to the Substitute Decisions Act.

6. If the Planning Lawyer runs his or her law practice through a professional corporation, or

owns shares or debt in a management company that runs the practice, or in a corporation that owns real property leased by the law practice, the shares and debt in the corporation would normally be included in and administered as part of the Law Practice. Additional consideration should be given by the Planning Lawyer to addressing matters unique to these types of structures.

7. Any restrictions on the authority of the attorney for property, whether for the Law Practice or

Personal Assets should be clearly set out in the respective Continuing Power of Attorney. 8. The terms governing the payment of any gifts or making of loans to family members or other

parties should be clearly set out in the respective Continuing Power of Attorney. 9. If there is the possibility that the Replacement Lawyer may wish to purchase the Planning

Lawyer’s law practice, consider making provision for an option to purchase and address the terms of such a transaction in an agreement of the type included in this Contingency Planning Guide.

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CHECKLIST OF ISSUES TO CONSIDER WHEN PREPARING WILLS

A Planning Lawyer who runs his or her practice of law as a sole proprietorship, or as a professional corporation of which the Planning Lawyer is the sole shareholder, should consider preparing two Wills, one dealing with assets related to his or her law practice (the “Law Practice Estate”) and the other dealing with all other assets (the “General Estate”). The purpose of having two Wills is to provide the Replacement Lawyer with full power and authority to operate, sell or wind down the law practice, while simultaneously ensuring that control over personal assets such as a family home and bank and investment accounts remains with the Planning Lawyer’s spouse, family member or whomever else the Planning Lawyer has currently named as his or her executor.

When preparing two Wills, the Planning Lawyer should consider the following issues:

1. Ensure that all assets are dealt with, either under the Law Practice Will or under the General

Will, and that there is no overlap that might cause confusion. The precedent clauses accomplish this by defining what assets are to form part of the Law Practice Estate, and providing that the General Will covers all assets other than the Law Practice Estate. The precedent clauses also make it clear from the very beginning of each Will which set of assets is being dealt with.

2. Ensure that neither Will revokes the other. Each of the precedent documents stipulates that it

only revokes prior Wills dealing with one particular group of assets (Law Practice Estate or General Estate). This means that even if a Codicil is later prepared to one of the Wills, thus republishing the revocation clause, it will not affect the other Will.

3. If the Planning Lawyer has secured a separate life insurance policy to fund the ongoing

expenses of the Law Practice (including compensation due to the Replacement Lawyer), consider designating the Replacement Lawyer as the beneficiary, in trust to use the proceeds as part of the Law Practice Estate. If the Planning Lawyer also has other life insurance, take care that any life insurance beneficiary declaration in the General Will excludes the policy that is being dealt with under the Law Practice Will. If the Planning Lawyer only has one policy to cover both professional and personal obligations, consider dealing with it in the Law Practice Will with possibly a direction to pay a portion of the proceeds immediately to the Trustee of the General Will.

4. When selecting a Replacement Lawyer to act as executor for the Law Practice Will, take into

account:

The proposed Replacement Lawyer’s age and health. It is advisable to name someone who is likely to be available not only when the Planning Lawyer dies but also for as long as it takes to sell or wind up the law practice.

The nature and location of the proposed Replacement Lawyer’s own law practice. A Replacement Lawyer with a well-established, well-run practice and reliable staff may be better able to take the time necessary to manage the Planning Lawyer’s law practice. A Replacement Lawyer whose office is in the same town or the same part of the city as that of the Planning Lawyer may find it easier to go back and forth as required to attend to matters in both offices.

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The impartiality of the proposed Replacement Lawyer. If the proposed Replacement Lawyer has a conflict of interest with another role (e.g. a landlord, tenant or creditor of the Planning Lawyer, or a potential purchaser of the Planning Lawyer’s law practice), consider whether the conflict can be adequately dealt with by requiring that certain decisions (such as the sale price and terms of the Planning Lawyer’s law practice) be determined by agreement between the Replacement Lawyer and the executor of the Planning Lawyer’s General Will.

5. Consider approaching the people selected to be the primary and alternate executors of each Will to confirm that they are willing to act in this role. In the case of the Law Practice Will, the consent of the Replacement Lawyer(s) to act may be contained in an agreement of the type included in this Contingency Planning Guide.

6. Satisfy yourself that the executorship or trusteeship of any estate or trust of which the

Planning Lawyer is the last surviving executor or trustee (with no alternate executorship or trusteeship appointment in the governing Will or trust document) will devolve appropriately. Under the Trustee Act, unless a Will or trust document provides otherwise, the last surviving executor or trustee of an estate or trust is entitled to appoint a successor by Will. If there is no such appointment, then it is the personal representatives of the last surviving executor or trustee who can act as successor executor or trustee or appoint another person or other persons to fill this role. Even if it is not part of the Planning Lawyer’s practice to take on executorships or trusteeships for clients, it is possible that the Planning Lawyer may be acting as executor and trustee for the estate of his or her own spouse or parent at the time of the Planning Lawyer’s death. The precedent clauses emphasize the distinction between personal matters and professional matters by naming the Replacement Lawyer to administer estates and trusts of which the Planning Lawyer is named executor or trustee by virtue of his or her office, and the Planning Lawyer’s personal Trustee (who may be a family member or other person with knowledge of or an interest in the family) to administer estates and trusts of which the Planning Lawyer is named executor or trustee by virtue of his or her personal relationship to the deceased, settlor or beneficiary.

7. If appropriate, negotiate ahead of time the rate of compensation to be paid to the

Replacement Lawyer and, if desired, set it out in an agreement between the Planning Lawyer and the Replacement Lawyer. Due to the nature of the work and the assets, it would not normally be appropriate to allow compensation to be claimed as a percentage of receipts and disbursements, as in a personal situation.

8. If the Planning Lawyer runs his or her law practice through a professional corporation, or

owns shares or debt in a management company that runs the practice, or in a corporation that owns real property leased by the law practice, the shares and debt in the corporation would normally be included in and administered as part of the Law Practice Estate. The precedent clauses contain extra provisions to deal with interests in corporations, specifically the wording in square brackets in paragraph (a) and the whole of paragraph (b) in Section 7, the Definition Section of the Last Will and Testament Sample Clauses.

9. Allocate debts, taxes and other expenses appropriately between the Law Practice Estate

and the General Estate. The precedent debts clauses require the Trustees of the Law Practice Will to pay all debts and taxes related to the Law Practice out of the Law Practice Estate, and the Trustees of the General Estate to pay all other debts, taxes, funeral and testamentary expenses. There is also discretion to pay debts and taxes related to one set

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of assets out of the other. More care may need to be taken in allocating debts and taxes to the correct pool of assets if the beneficiaries of the two Wills are different.

10. If there are to be any specific bequests, take care that they appear in whichever Will

governs the particular asset which is the subject of the bequest. 11. Where a legacy is to be paid, satisfy yourself that there will be sufficient funds in the Will that

contains the legacy to pay it in full. Alternatively, the Planning Lawyer may wish to include the legacy in both Wills but, to avoid doubling up, may stipulate that the sum payable under the Law Practice Will is to be reduced by the sum, if any, paid under the General Will (or vice versa).

12. Include a residue clause in each Will to avoid any intestacy. In most cases (although this is

not necessary), the residue clauses in the two Wills will be identical, so that income from and proceeds of sale of the Law Practice Estate can be distributed to the same beneficiaries of the Planning Lawyer, in the same proportions, and on the same terms and conditions as the Planning Lawyer’s other assets.

13. The Replacement Lawyer may not want to be involved in the long term administration of a

trust for a spouse, minor child, or other beneficiary of the Planning Lawyer. Therefore, if there are to be ongoing trusts, consider authorizing or directing the Replacement Lawyer to pay or transfer the funds to the executors and trustees of the General Will, or to another trustee, as and when they become available (generally upon the sale or winding up of the law practice).

14. If there is any chance of the Replacement Lawyer wanting to buy the Planning Lawyer’s law

practice, consider authorizing such a purchase in the Will. Without a power to purchase assets from the estate, the purchase would require the approval of either the court or of all the beneficiaries (if there are no minor, unborn, unascertained or mentally incapable beneficiaries). Instead, the sample clause allows the estate trustee of the Planning Lawyer's General Estate (most often a family member or trusted friend) to negotiate and approve the price and terms of a possible sale of the Law Practice to the Replacement Lawyer. The easy availability of such an independent review is a strong argument for having two separate Wills and for naming a different person from the Replacement Lawyer to act as estate trustee for the General Estate. Note that the precedent clause is an administrative power only. If the Planning Lawyer wishes to give a first option to the Replacement Lawyer to purchase the practice, or set out a formula for determining price or other terms and conditions of sale, this should be done in the main body of the Law Practice Will or in a separate agreement.

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PREPARING FOR DEATH AND DISABILITY OF A LAW PARTNER OR SHAREHOLDER

By Rachel Blumenfeld

Historically, lawyers carrying on business together have done so through a partnership, often through a limited liability partnership (LLP). Increasingly, due to legislative changes,4 lawyers may now hold their partnership interests through professional corporations. In addition, smaller firms may be structured as professional corporations.

Where lawyers practise law together, either in a partnership or through a corporation, consideration should be given as to what will happen in the event that a lawyer retires, becomes disabled or dies. Both the law firm and each legal practitioner practising in the law firm should prepare for such events.

As in any business with multiple owners, problems can arise where a lawyer who is a partner or shareholder in a law firm retires, becomes disabled or dies. In order to minimize the disruption that such events may cause to the business, the partnership or shareholders agreement governing a law firm should specifically contemplate what would happen upon the occurrence of such events.

(i) Considerations for Partnerships and Partnership Agreements

An established law firm will typically have a comprehensive agreement that contemplates the retirement, disability or death of a partner. However, smaller or newly formed firms may not have an agreement in place.

A partnership agreement should contain specific provisions to address what happens when a partner becomes disabled or dies. First, a partnership agreement will typically provide that a partner will cease to be a partner upon disability or death, and that the personal representative of the partner be treated as a retired partner for certain purposes. For example, the agreement may include the following:

Upon the disability or death of a partner, that partner shall cease to be a partner and the provisions in this Agreement that apply to retired partners shall apply, mutatis mutandis, to the legal personal representative of the deceased partner.

Further, upon the death or disability of a partner, a partnership agreement will typically provide that the units held by the partner will be cancelled and the legal representative has no say in the conduct of the affairs of the partnership. A partnership agreement that governs partners that are professional corporations should contain a provision that deems references to the death or disability of a partner to be references to an approved shareholder where the partner is a professional corporation. For example, the agreement may include the following:

4 Lawyers in Ontario have been permitted to practise through professional corporations since 2006. (See sections 3.1 and 3.2 of the Business Corporations Act (Ontario), R.S.O. 1990, ch. B.16, as amended (“OBCA”), and ss. 61.0.1.- 61.0.9 of the Law Society Act (Ontario), R.S.O. 1990, ch. L.8, as amended (“Law Society Act”).

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The references to retirement, death or disability of a partner in this Agreement shall be deemed to be references to the shareholder where the partner is a professional corporation and, for greater certainty, upon the death of a shareholder, the professional corporation of which he or she is a shareholder shall cease to be a partner.

The partnership agreement should define what the term “disability” encompasses; for example, a partner might be considered “disabled” if the partner is unable to engage, in any material respect, in the full-time practice of law. Further, the agreement could grant a particular partner or committee of partners (the firm’s executive committee) the power, authority and discretion to determine whether a particular partner is disabled for purposes of the agreement. The agreement could also provide for a particular period of time during which a partner can be away from work because of a disability without being forced to withdraw from the partnership.

The partnership agreement should set out the timing of the repayment of the partner’s capital account, as well as any other accounts (e.g., the partner’s interest in unbilled disbursements and WIP), and the partner’s pro rata interest on his or her capital account. Where life insurance proceeds are available to the partnership, the agreement may stipulate that such payments are accelerated (compared to the schedule of payments on the retirement or expulsion of a partner). The agreement could provide that the firm pay such partner, or his or her estate, in a lump sum or in annual or more frequent instalments, over a specified period of time, the partner’s partnership interest multiplied by the value of the firm’s work-in-progress at the end of the month preceding the death of the partner.5

In addition, the agreement could include a clause that either requires each partner to obtain and maintain disability insurance and/or life insurance, or expressly states that obtaining and maintaining such insurance is the sole responsibility of each individual partner. In smaller partnerships, it may be prudent for the partners to hold term life (and/or disability) insurance policies on each other in order to have a source of funds to pay out the capital account of a deceased (or disabled) partner.

If life insurance proceeds are available to the partners or the partnership, the agreement may provide that a payment to a partner’s estate as a result of the partner’s death may be made as, when, and to the extent of the amount of, life insurance proceeds received by the partnership as a result of the death of a partner.

It would be prudent for the agreement to contain a general limitation on payments that would prevent the partnership from being required to pay an amount that exceeds a certain percentage of the net profit of the partnership for the year, notwithstanding the other provisions of the agreement. This would ensure the continued viability of the firm despite the disability or death of one of its partners.

The partnership agreement would also typically deal with the continued use of the name of a deceased partner and may include an indemnity for the estate of the deceased partner for liability resulting from the continued use of the partner’s name.

(ii) Considerations for Professional Corporations

As noted above, lawyers in Ontario are now permitted to practice law through a professional corporation. Where a law firm is organized as a professional corporation under the OBCA and

5 The partners should obtain advice from an accountant or valuator.

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Law Society Act, the shareholders should enter into a shareholders agreement to govern their relationship. The shareholders agreement should contain provisions that are substantially similar to those described above, adjusting for the inherent differences between a partnership and a corporation.

If the deceased or disabled lawyer had a shareholder loan account, the agreement should set out the terms of payment of the loan; as with a partnership, for a smaller corporation, life insurance policies held by the corporation may be a practical solution to ensuring funds are available to pay out the loan.

Where a law firm carries on business as a professional corporation with more than one shareholder, the shareholders agreement should also address what should happen to the shares of an individual who retires, becomes disabled or dies. In particular, the agreement should address whether the individual’s shares should be redeemed or purchased for cancellation and, if so, how those shares should be valued.

If the shares were acquired by the individual for nominal consideration, a redemption of the individual’s shares may occur for nominal consideration, whereas if the shares were acquired by the individual for value, the agreement may provide that the individual’s shares be redeemed for value.

In addition, a professional corporation must comply with the provisions of applicable legislation i.e., the Law Society Act, and applicable Bylaws,6 and the OBCA. The OBCA provides that a corporation does not cease to be a professional corporation despite the death of a shareholder.7

(iii) Considerations for the Practitioner Practising through a Professional Corporation

It is becoming more common for lawyers to incorporate a professional corporation that becomes the partner in the law firm. The individual lawyer practising through a professional corporation or as a shareholder in a firm (i.e., not as an employee) must also prepare for death and disability.

The OBCA requires that all of the issued and outstanding shares of a professional corporation formed under the Law Society Act be legally and beneficially held, directly or indirectly, by one or more members of the same profession, and that all of the officers and directors of the corporation be shareholders of the corporation.8 The OBCA further provides that the name of a professional corporation must include the words “Professional Corporation” or the French equivalent, and must carry on a business related to the particular profession (in the case of a lawyer, the practice of law).

Bylaw 7 of the Law Society of Upper Canada provides that a professional corporation must apply for permission to surrender its certificate of authorization when, inter alia, the corporation does not wish to renew the certificate or will no longer practice law in Ontario.9 The corporation is also generally required to publish a notice of its intention to surrender its certificate of authorization and to retain proof of such publication.

6 See Part II of Bylaw 7 at http://www.lsuc.on.ca/For-Lawyers/Manage-Your-Practice/Practice- Arrangements/Professional-Corporations/ 7 Subsection 3.3(1). 8 Subsection 3.2(2). 9 Section 10.

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Accordingly, an individual who practises law through a professional corporation should include a provision in his or her Will that provides that the shares of his or her professional corporation will be held and dealt with by a special trustee who is a lawyer in Ontario. This can be accomplished by having a separate Will that deals only with the shares of the testator’s law corporation (and any debt owing to him or her by the corporation).

Further, provisions of the practitioner’s Will with respect to the law practice should expressly direct the estate trustees to abide by any laws, rules, regulations and restrictions imposed by the Law Society of Upper Canada. For example, the Will may include the following:

In the event that my Trustees are dealing with my law practice and my shares of ABC LAW PROFESSIONAL CORPORATION, I direct my Trustees to abide by any laws, rules, regulations and restrictions imposed by the Business Corporations Act (Ontario), the Law Society Act (Ontario) and the Bylaws of the Law Society of Upper Canada.

Where the deceased practitioner is not the sole shareholder of the corporation, a shareholders agreement should be in place that dictates the manner in which the deceased shareholder’s interest in the firm can be extracted, as described above with respect to a partnership interest.

Where the deceased practitioner is the sole shareholder of the corporation and he or she has a separate Will dealing with the law practice and naming another lawyer as estate trustee, or the Will of the deceased practitioner provides that the shares of his or her corporation be held and dealt with by a special trustee, the estate trustee or special trustee can appoint himself or herself as the director of the corporation. Depending on the circumstances and any specific direction in the deceased practitioner's Will, the estate trustee or special trustee will then have two choices:

1. The estate trustee or special trustee of the deceased practitioner may have the shares of

the professional corporation valued and may arrange for the sale of the shares to a lawyer licensed to practise law in Ontario. The purchasing lawyer would then appoint himself or herself as the director of the corporation, change the corporate name to reflect the purchasing lawyer's name, notify the Law Society of the sale as required by section 11 of By-Law 7, and continue the law practice. The proceeds of sale of the shares would be distributed in accordance with the deceased practitioner's Will.

2. Alternatively, the estate trustee or special trustee of the deceased practitioner could

cause the professional corporation to surrender its certificate of authorization. Pursuant to section 10 of By-Law 7, a professional corporation must apply for permission to surrender its certificate of authorization when, inter alia, the corporation does not wish to renew the certificate or will no longer practise law in Ontario. The corporation is also generally required to publish a notice of its intention to surrender its certificate of authorization and to retain proof of such publication. The Law Society will grant the application if it is satisfied that certain matters related to the protection of clients' interests have been dealt with. Once the certificate of authorization has been surrendered, the estate trustee or special trustee, as director, can file for a change of the corporation’s name to delete references to legal practice and enable the corporation to continue as a holding corporation. Once the corporation ceases to be a professional corporation and, if necessary, its name has been changed, the shares of the corporation can either remain with the special trustee or be transferred to the general trustee(s) of the estate to be dealt with as ordinary shares of a private holding corporation.

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SUMMARY A partnership agreement should contain specific provisions to address what happens when a partner becomes disabled or dies. For example, the agreement may provide that:

A partner will cease to be a partner upon disability or death, and the legal representative

of the partner will be treated as a retired partner for certain purposes;

The units held by a disabled or deceased partner will be cancelled;

References to the death or disability of a partner are be deemed to be references to an approved shareholder where the partner is a professional corporation;

A partner will be deemed to be disabled in certain circumstances;

The partner’s capital account and other accounts will be paid to the personal

representative of the partner in a certain manner;

The repayment of a partner’s accounts and interest will be accelerated;

Each partner will be required to maintain disability insurance and/or life insurance;

In smaller partnerships, partners may hold life/disability insurance policies on each other;

Payments of amounts exceeding a certain percentage of the net profit of the partnership for the year are prohibited; and

The use of the name of a deceased partner is permitted.

Where a firm operates as a professional corporation, a shareholders agreement should contain substantially similar provisions to the ones described above.

An individual lawyer practising as a professional corporation or as a shareholder in a firm must also prepare for death and disability. In particular:

The practitioner should consider having a separate Will prepared that deals with his or

her shares of the law corporation, appointing a lawyer in Ontario as the estate trustee. At the very least, the practitioner’s Will should provide that the shares of the corporation will be held and dealt with by a special trustee who is a lawyer in Ontario; and

The estate trustee or special trustee can appoint himself or herself as the director of the

corporation in order to either sell the law practice to a lawyer practising in Ontario who could apply for a certificate authorizing the corporation as a Professional Corporation, or apply to surrender the certificate of authorization of the corporation and, if necessary, file for a change of the corporation’s name to exclude references to legal practice and enable the corporation to continue as a holding corporation. The corporation could then continue as a holding company.

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Further Resource Material can be found by clicking on the link below

LSUC Guide to Closing Your Practice for Lawyers

(http://lsuc.on.ca/with.aspx?id=2147499389).

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