Working with a Will – The most common problems that arise

At LegalWills.ca, we help you to write your Will. We do not get involved in the probate process at all. After you have died, your Will is probated, and your Executor has the responsibility to carry out the instructions in your Will. Sometimes this is where the problems start and estate disputes arise.

This is separate from a challenge to a Will. Estate disputes are arguments arising while the estate is being managed by the Executor.

We recently spoke to Neil Milton of Ontario-Probate.ca. He specialized in probating of estates and has seen first hand the kinds of problems that can arise, and he also knows how to fix them.

He has kindly prepared this guest article, distilling his knowledge into the most common types of disputes that crop up while the Executor is trying to manage an estate.

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Common estate disputes

While there are many causes of estate disputes, formal ‘will challenges’ are actually quite rare.

There are a whole host of grievances that people have which usually fall in to one of the following categories:

• Debts incurred by the deceased before their death and not paid before death;
• Gifts made by the deceased before their death which reduce the size of their estate;
• Obligations created by statute which must be paid by the estate before any distribution is made to beneficiaries;
• Failure of the estate trustee to act at all;
• Improper actions by the estate trustee; and,
• Allegations that the will itself should be invalid (a ‘will challenge’).

Disputes in these difference categories are often handled by the Courts very differently – some are relatively quick and inexpensive to pursue, others are very complex and expensive.  It is very important to get the advice of experience legal counsel to determine whether there is a case and if so how to pursue it.

Debt and Quantum Meruit Claims

People die owing money.  Sometimes, these debts are ‘resolved’ by way of bequest in the will, but when they are not, the creditor (the person owed money) has other remedies. 

A claim for a fixed amount due from the deceased to the creditor (a loan for instance) is a “debt claim”.  Other claims are for ‘fair and reasonable compensation’ for services rendered by the claimant to the deceased but where the amount is not fixed.  These are also debt claims, but are frequently referred to as ‘quantum meruit’ claims which refers to the amount of ‘fair and reasonable compensation’ which needs to be determined.

If the deceased fails to pay money to a creditor, the creditor has a debt claim that they can make against the estate.  Debt claims rank above all inheritances and must be paid in full before anyone inherits from the estate assets. 

Estate trustees are not liable for the debts of the deceased if they act properly.  However, the estate trustee does become personally liable if they fail to pay any valid debt of the deceased before they distribute the estate to the beneficiaries.  Accordingly, the estate trustee is highly motivated to resolve debts of the deceased prior to distribution of the balance of the estate.

If the debts of the deceased exceed the assets of the deceased, then the estate is ‘insolvent’ or ‘bankrupt’.  The executor named in the will is not personally liable for these debts or to the creditors, but should renounce the role and consider having a licensed insolvency professional (a bankruptcy trustee) take over.

When the amount of a debt is disputed (for instance, the estate trustee disagrees with amounts claimed by the creditor), the Estates Act and the Rules of Civil Procedure provide a summary means for resolution of claims by creditors against the estate.  These proceedings can be tailored to the circumstances, and thus should be faster and less expensive than the usual ‘law suits to recover debts’.

Child and spousal support owed by the deceased

Child support is a type of debt

Child support and spousal support that was due before the death is clearly a debt due by the deceased on their death and must be paid by the estate trustee prior to any distribution of estate assets to beneficiaries. 

Child support that might be due for the period after death is a more complex issue.  It is important to determine whether the support obligation continues after death or ceases on death.  The precise wording of a separation agreement or court order may be extremely important to answering this question.

Sometimes, the obligation ceases on death but there is a life insurance policy that is intended to payout instead of future support. 

If the obligation to pay support continues after death, complex valuation issues can arise, as support is often contingent on a number of factors which are difficult to estimate in advance.  For instance, if the deceased dies when their child is 17, how is one to estimate the likelihood and cost of supporting that child through post-secondary education?

Gifts and dispositions before death

Sometimes the estate is much smaller than expected because the deceased has ‘given away’ assets before death.

Where a gift was clearly intended and made without any improper action (for instance, a gift to a charity) then the gift is very likely to stand.

However, some gifts can be challenged.  If the estate trustee has made gifts to persons in a ‘special relationship’ to the deceased shortly before their death (such as to a child or care giver), then the obligation to prove that a gift was intended falls on the recipient.  The recipient must establish that the deceased intended to make a gift, and not, for instance, ‘an early installment on an inheritance’ or as a result of ‘undue influence’ of the giver by the recipient.

Jointly owned houses and bank accounts

Sometimes the deceased has not completely gifted an asset but has made it ‘joint’ with someone such that on their death the third party will become the sole owner of the asset.  When this happens the issue is not ‘is the will valid’ but ‘were assets that should be in the estate transferred before death’ so that they no longer fall into the estate?  In particular, significant concerns can arise related to:

While the effect of the transfer often only becomes apparent on death, the ‘transfer’ or change in tile or designation actually took place before death.

Beneficiary designations for registered investment funds (RRSPs, RRIFs, TFSAs) are difficult to attack.  There are possible grounds of attack if the testator did not actually make the designation (ie. It was made by someone other than the testator, acting under Power of Attorney or otherwise), or the testator lacked capacity when the beneficiary designation was made, or the testator was coerced or unduly influenced into making the designation.  However, it is important to keep in mind that these are narrow grounds, difficult to prove, and rarely supported by the evidence.

Where assets such as real estate and bank accounts are transferred into joint ownership the law makes a crucial distinction based on who the joint owner is. 

Joint ownership between spouses is normal and expected (even if the spouse is recent and common law).  Joint ownership between spouses is extremely difficult to attack because the presumption is that spouses wish to support each other and share their assets. 

Joint ownership between a parent and their adult child is an entirely different matter.  Joint ownership of a bank account with an adult child is often established so that the child can assist the parent with their banking, in lieu of acting under a power of attorney.  This joint ownership for administrative convenience does not prove an intention by the parent to gift the balance of the joint account to the child on their death.  Similarly, many transfers of real estate by a parent to joint ownership with an adult child were intended to minimize estate administration tax and not as an outright gift to the adult child.

When a bank account or real property is placed into joint ownership by a parent with an adult child, the law presumes that the child will hold the asset in trust for the estate of the parent, and the asset will not pass automatically to sole ownership by the joint-owner child.  The is known as the rebuttable presumption of resulting trust.

For the child to take the asset outright, the onus lies on the child to prove that the parent intended to gift the asset to them, to the exclusion of the parent’s estate and other heirs.  This is how the presumption is rebutted.

This shifting of the onus of proof is very important.  Beneficiaries aggrieved by a joint ownership situation do not need to prove that the asset belongs to the estate – it is presumed to belong to the estate unless the joint owner child can rebut this presumption.

If a parent wants to gift an asset to one of their adult children and ensure that it is not impressed with a resulting trust and is pulled back into their estate to be shared with all heirs, the parent should document the intention to gift.  A written, signed document expressing the intention is preferred; a mere transfer of title of a property by a real estate lawyer is not sufficient and is almost an invitation for hard feelings and litigation.

Statutory claims

You are not free to do whatever you want in your Will. There are certain obligations, set by law, which vary from Province to Province. Generally speaking, you cannot completely disinherit your spouse, or anybody financially dependent on you.

In BC, it is also difficult to disinherit an adult child. Or at least, if you do, there may be a challenge to your Will.

In Ontario, there are two laws that protect inheritance rights:

• Family Law Act claims by married spouses, and

• Succession Law Reform Act claims by people financially dependent on the deceased (which include common law spouses, children, etc.)

In BC it is the Wills Variation Act. Other Provinces have their own statutes.

Across different Provinces, a married spouse is entitled to elect to take:

• If there is a will, then either
– what they will inherit under the will, or,
– what they will receive by way of equalization payment under the Family Law Act as if their relationship ended on the day before the spouse died, or

• if there is no will, then either
– In Ontario, what they are entitled to receive under the Succession Law Reform Act (there are roughly similar statutes in most common law Provinces) or,
– what they are entitled to receive by way of equalization payment under the Family Law Act as if their relationship ended on the day before the spouse died.

This means, in effect, that a married spouse cannot be completely disinherited under a will and can never be forced to receive less than what they would receive as an equalization payment ‘in a divorce’ (which, is approximately 50% of the gain in value of net family property by the parties during the marriage).

If the surviving married spouse elects to take their entitlement under the Family Law Act, then the remaining estate of the deceased is distributed under the will or Succession Law Reform Act as if the surviving spouse pre-deceased the deceased spouse.

These claims must be made within 6 months of the death.  If they are not made in this time frame, then the spouse will receive as provided in the will or under the Succession Law Reform Act.

These Family Law Act remedies are not available to common law spouses in most Provinces.

Dependent support claims

Where the deceased, whether testate (with a will) or intestate, has made inadequate provision for the support of a person who the deceased was either supporting financially or was legally obliged to support financially at the time of their death, the Court may make an Order to support the dependent person ‘from the assets of the deceased’.

Dependent support orders made under the Succession Law Reform Act are a very powerful tool to address unfairness to individuals who were financially dependent on the deceased.  Dependent support claims are particularly useful for financially dependent common law spouses (and ex-spouses) when the deceased failed to make a will (intestacy).

A wide range of assets can be considered by the judge for payment of dependent support. These include many assets that often fall outside the true estate of the deceased.  For instance, dependent support orders can consider and apply to the proceeds of life insurance on the life of the deceased, jointly owned assets (such as bank accounts and real estate), and assets that pass by beneficiary designation such as RRSPs, RRIFs, and TFSAs.

Interim orders for dependent support are possible.

A claim by a dependent for support must be filed within 6 months of the grant of probate for the estate of the deceased. 

This limitation period explains why is often unwise for an estate trustee to distribute the estate of the deceased sooner than 6 months after the grant of probate.

Objecting to a Will and Will challenges

Ontario is a ‘testamentary freedom’ jurisdiction.  A testator in Ontario has no obligation to gift anything to anyone who was not either a) their married spouse or b) financial dependent on them before their death (these claims are discussed below).  The law is very different in other places (most civil law jurisdictions like Quebec, and some common law provinces like British Columbia).

Adult children of the deceased who were not financially dependent on the deceased prior to their death have no enforceable claim against the estate just because they were a child of the deceased except in the Provinces of British Columbia and Quebec.  For every other Province deceased can unilaterally cut one or all of their adult non-dependent children ‘out of their will’.

Challenging a properly signed will to have it set aside is possible, but usually very difficult. 

The most common grounds of a direct will challenge are:

• Lack of capacity.  For a will to be valid, the testator must have the capacity to make a will at the time it is made.  A testator must have a reasonable understanding of their finances, their financial obligations, and the consequences of the choices in their will.  A precise or detailed understanding is not required, but a general comprehension is.  Thus, a testator who suffers from severe dementia and is unaware of their finances or family members may lack capacity.  Note, however, that the mere fact that someone has been diagnosed with dementia does not mean that they lack the capacity to make a will.  The capacity to make a will is a legal test, based on a number of factors, and the threshold is relatively low.

• the testator was ‘unduly influenced’ by a beneficiary; undue influence requires proof that the will of the testator was unduly swayed by pressure exerted on them by the beneficiary.  Note that ‘some influence’ among family members is to be expected, especially from spouses and children and is actually a regular and important part of loving relationships.  The mere fact that a spouse or one favoured child receives a disproportionate share of the estate does not prove that the individual exercised undue influence over the testator.  Undue influence is very hard to establish among spouses; it is more plausible if the allegation is that a child or third party caregiver threatened or coerced a vulnerable testator, especially if the caregiver controlled all aspects of the testator’s life and prevented others from visiting or speaking to the testator.  In order for a will to be set aside for undue influence it is outright and overpowering coercion of the testator, which must be considered. The party attacking the will bears the onus of proving undue influence on a balance of probabilities. 

In a will challenge, the onus is on the challenger to prove that the impugned will is invalid.  However, gathering evidence to meet this burden can be difficult and expensive.  Even gathering enough evidence to determine if there is a possible case can be difficult, time-consuming and expensive. 

Often the challenger has limited access to the medical records of the testator, and no knowledge about how the will was made.  The testator’s lawyer owes a duty of confidentiality to the testator and cannot readily disclose information received from the testator to anyone other than the estate trustee. Moreover, if the allegation is one of undue influence by a primary caregiver then the challengers may have very limited knowledge of the true relationship (especially if they allege that the caregiver controlled access to the testator).  Accordingly, a Court order is often required for the beneficiaries to access the lawyer’s file and medical records, which the beneficiaries need before they can determine whether the will challenge has any merit and any prospect of success.  This creates a significant hurdle for many beneficiaries.

Most will challenges involve issues of credibility and therefore require a trial.

There are a surprisingly large number of wills made late in life by individuals of diminished capacity that result in an abrupt change of their estate plans, and often to the complete detriment of all but the person serving as their caregiver.  These cases are very suspicious and troubling.  They also raise significant ethical and insurance issues for any lawyer involved in preparing this ‘late stage will’.  Because disputes about these wills are so painful and expensive, hopefully there will be a trend towards much better and clearer documentation of the testator’s capacity and wishes –a video of the testator giving will instructions and expressing their intentions would, for instance, be very helpful.

Objecting to an executor (Passing over and removal of an estate trustee)

“Passing over” occurs when the Courts choose not to appoint an executor named in the will as the estate trustee.

“Removal” of an estate trustee occurs when the Courts terminate the appointment of an estate trustee who has previously been granted a Certificate of Appointment.

A testator has the right to choose their own executor, and the Courts prefer to respect that choice.  The test that the Courts apply for passing over or removal is the same, and it is onerous.  Only in very clear cases will the Courts over-rule the wishes of the testator.  The evidence must show that the appointment of the named individual will imperil the proper administration of the estate.  Examples include where the individual has a clear conflict of interest, is disregarding the terms of the will, or the trustee is so hostile to certain beneficiaries that the trustee is disregarding their obligations.

Note that hostility of the beneficiaries to the trustee is not normally reason to remove a trustee.

Estate disputes arising from the behavior of the estate trustee

Rather than applying to have the estate trustee passed over or removed, it may be appropriate to focus on trying to remedy improper action or inaction.  This is especially true once the estate trustee has been appointed by the Court, because removal is so difficult.

The most common complaints are:

• the executor will not show the will to family members;
• the executor is very slow to probate;
• the estate trustee is very slow to administer the estate;
• the estate trustee is claiming excessive compensation.

The executor will not show the will to family

Generally, it is wise for executors to share information with family of the deceased, but they are often not obliged to do so.

Family members and beneficiaries do not have a blanket right to see or receive a copy the will. 

There is no right to a ‘reading of the will’ in most Canadian Provinces.

If the executor probates the will, the executor must provide notice (with a copy of the relevant portions of the will) to each beneficiary under the will.  If a ‘potential beneficiary’ has not received such a notice then either the executor has not filed for probate, or, the individual is not an actual beneficiary. 

If the executor has not applied for probate, then the solution is to commence proceedings to either a) have them passed over as the estate trustee, or b) compel them to ‘apply or renounce’ to force them to move forward. 

Delay probating the estate

An executor is permitted a ‘reasonable’ period of time to probate a will.  It is unreasonable to expect probate to have occurred within days or a few weeks of the death.

However, when an executor has failed to probate for a long period of time (especially if it is over a year) an Application can be brought to compel the named executor to ‘probate or renounce’ in a reasonable timeframe.

Alternatively, the executor’s delay probating can be evidence used to support an Application to pass over that executor and have someone else appointed the estate trustee. 

After probate, the estate trustee is not administering the estate properly

Beneficiaries are not entitled to micro-manage the estate trustee.  However, when the estate trustee is unreasonably slow, or is clearly failing to administer the estate properly (or at all) or is incurring unnecessary or excessive expenses, the beneficiaries are not without rights or remedies.  In all of these cases, beneficiaries must offer proof of misconduct, not mere speculation or personal grievances. 

Sometimes the estate trustee has a legitimate reason – especially if the estate is complex or imposes long term trusts.

However, sometimes there is no proper excuse for the delay.

One common cause of slowness is that the estate trustee has a built-in conflict of interest (for instance, the estate trustee may be living rent-free in the house of the deceased, with no desire to sell the house).  Another is that the estate trustee is unwilling or incapable of addressing contentious issues (for instance, that a sibling lives in the house of the deceased and refuses to leave) or the estate trustee may be overwhelmed by grief and the tasks required to administer the estate.  In these cases it is important to focus on the facts, and usually not very important to focus on ‘blaming the estate trustee’.

Generally, but not always, it is preferable to focus on compelling the estate trustee to complete the administration of the estate and a distribution to the beneficiaries, rather than focusing on having the estate trustee removed and replaced (assuming that the estate trustee has been appointed).

If the estate trustee has improperly managed the estate – for instance, given gifts to the wrong people, not collected income (such as rent from an occupant) or undervalued assets (especially if sold to a party not at arms-length to the estate trustee), or overpaid debts, the beneficiaries can and should demand a ‘passing of accounts’.  In a passing of accounts, the Court will determine whether the estate trustee’s conduct was proper and fix the trustee’s compensation.

Challenging estate trustee compensation

Executor compensation is a very common cause of disputes.   An estate trustee is entitled to reasonable compensation for performing the role. 

• It is not reasonable to expect the estate trustee to perform the role for free. 
• The estate trustee is not entitled to unreasonable or excessive compensation.  

Unreasonable and excessive interventions of beneficiaries can significantly increase the compensation due to the estate trustee as well as the fees of the estate trustee’s lawyer.

There is a very rough rule of thumb that the executor is entitled to compensation equal to 5% of the value of the estate.  This is a very rough guide, and is not the law.  It is not a justification for excessive compensation.

What is reasonable compensation depends on a wide range of factors, including in particular the complexity of the issues, the time, skill, and effort of the trustee, the amounts in issue, and the number of years the estate needed to be open.  Size is not determinative: some large estates can be much simpler to administer than much smaller estates, and the mere fact that an estate is large should not result in a windfall to the estate trustee (this is particularly true where large but simple investment portfolios or a single piece of residential real estate have resulted in the estate being large but simple).  The amount of effort expended by the trustee is a guide, but not determinative, of the actual complexity of the estate and thus the magnitude of reasonable compensation.  Compensation should not increase for trustees who are unreasonably slow to act or inefficient or perform tasks personally that could have been handled much more efficiently by third parties.

Sometimes estate trustees claim compensation on the incorrect value of the estate.  For instance, it is usually incorrect to claim compensation on the gross value of real estate and on the mortgage and real estate commissions, rather than on the net proceeds received from the real estate lawyer after sale of the property and payment of all related debts and expenses. 

Another frequent cause for complaint is double dipping – this occurs when the trustee claims compensation when they have a third party (especially a lawyer) perform estate trustee tasks.  The amount paid to the third party should be deducted from the trustee’s compensation.

Trustee compensation is best challenged in a passing of accounts.  If the estate trustee has not applied to pass their accounts, the beneficiaries can secure a Court order compelling the estate trustee to pass them.  Because it is an obligation of the estate trustee to provide accounts, no reason must be provided to compel an accounting.  The costs of commencing these applications (to pass accounts, and to compel a passing of accounts) are usually borne by the estate. 

A demand for a passing of accounts is not a challenge to the trustee’s integrity.  Trustees faced with a request for accounts should not be insulted – they should simply get on with the job of providing and passing their accounts.

It is an obligation of the estate trustee to prepare their accounts, and accordingly if a third party is hired to prepare the accounts in Court format these fees should usually be deducted from executor compensation. 

The legal fees incurred both making and responding to objections to the accounts (by both beneficiaries and the estate trustee) are open for consideration by the judge presiding over the passing of accounts.  Generally, the ‘loser pays’ approach of civil litigation should apply. Offers to settle objections should have an impact on both who owes whom and how much.

About Milton’s

Miltons Estates Law is a team of Ontario lawyers dedicated to providing excellent estates law services. They assist with probate, act for parties to estate disputes, advise executors with non-contentious estates, and act as estate trustees. They focus on providing advice that is practical, cost-effective, and results-oriented.

They do not draft wills.

[email protected]

www.ontario-probate.ca