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Arthur Fish IFB Toronto Fall Conference November 4, 2014 Other Peoples’ Fights: Attorneys for Property & Estates as Clients.

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Presentation on theme: "Arthur Fish IFB Toronto Fall Conference November 4, 2014 Other Peoples’ Fights: Attorneys for Property & Estates as Clients."— Presentation transcript:

1 Arthur Fish IFB Toronto Fall Conference November 4, 2014 Other Peoples’ Fights: Attorneys for Property & Estates as Clients

2 The Estate as a Client “Estate” includes Attorney for Property Client means your client or customer Legal and Ethical issues when someone other than the owner makes decisions and gives instructions A.Why this matters now? B.Basic Approaches C.Dealing with the Bad Files 2

3 A. WHY THIS MATTERS NOW? 3

4 I: Why Now: Generally? Demographics Aging population More Incapacity = More “substitute decision makers” – Guardian\Attorney for Property More deaths = more Executors + Executors and Trustees becoming incapable or dying in office Wealth (more to fight over = more fights) Divorce (yesterday’s divorce = today’s Power of Attorney dispute) 4

5 I(a): Why Now: Generally? Traditional Canadian restraint giving way to litigiousness Legal Generalists are retiring Accountancy and financial institutions filling the gap Monetization of assets as owners age Banks and Financial Services Industry focused on wealth management 5

6 II: Legal Developments Continuing Powers of Attorney Conflicts of Law Joint Ownership (S.C.C. decisions – Pecore & Madsen) More attractive: Way more complex High Probate Fees (“Estate Administration Tax”) Multiple Wills 6

7 III: How Will this Appear? Attorney for Property or Will presented Direct or indirect knowledge customer may lack capacity (e.g. instruction to reinvest dividend or purchase additional coverage, “Don’t tell my Dad I called, but…”) After the fact challenges to capacity (“Mom didn’t understand that…”) Stuck in the middle Your client’s family members Your own friends & relatives 7

8 IV: Factors in Financial Services “Know Your Client” versus “Keep Your Client” Privacy & Confidentiality Legislation Money Laundering - Insider Trading Provision of non-traditional services Adding value for high net worth clients In-house estate planning services 8

9 IV(a): Issues in Financial Services Bank Power of Attorney and joint ownership forms More litigation Vicarious knowledge Pressure the “deep pocket” – lawyers and courts 9

10 V: Commercial Banking, Too Monetization of private companies Family Fights in private corps with operating line Attorney for Property or Executors\Trustees providing security\guarantees 10

11 VI: Why this Session? Anecdotally: 50 – 75% of front line questions = Estates and Power of Attorney In my practice: issues 2x week More litigation Litigation is nastier Risks are different and higher 11

12 VII: What are the Risks? Pay to the wrong person = double liability Take instructions from the wrong person = breach of contract\tort\regulatory liability Internal Costs: dragged into other people’s fights External Costs: litigators seeking costs against the “deep pocket” in ordinary matters Genuine Risk of Liability: bad advice\dithering A favor for her, a favor for him… Beware trading losses Intentional Tort: trust – knowing receipt, knowing participation Breach of Confidentiality 12

13 VIII: What’s Right? Doing what’s right is good for business (meeting the needs of an aging population), e.g. include power of attorney review and consent to release info in annual review Regulators, including LSUC and OSC, under pressure to act Business approach goes wrong on fiduciary duty An opportunity to define standards, e.g. for accepting a power of attorney in the financial services sector Burden of protecting vulnerable older individuals is falling on us 13

14 B: BASIC APPROACHES 14

15 I. The Core Issues Give me the money\assets Give me information Let me open\operate an account Boil down to – How do I know that this person has the authority to act? 15

16 II. The Sources of Authority Power of Attorney Joint Ownership Beneficial Designation An Intestacy submitted for Probate Will 16

17 III. Powers of Attorney Die with the Customer CANNOT be used to appoint an executor SHOULD NOT typically be granted by an executor or trustee (What’s the difference between an executor & a trustee?) Careful when an attorney makes gifts No beneficial designations by an attorney Careful documentation on account opening ID, update “Know Your Client,” document EITHER incapacity OR customer’s instruction to deal solely with the attorney 17

18 IV. Joint Ownership: What It Is Must be “with right of survivorship” SCC has muddied the water: NO presumption of advancement Presumption of undue influence Three Possibilities Decisions Only Nothing ‘till I die It’s Yours Now Update the forms? 18

19 V: Joint Ownership: What to Do? Read the account documents Always require proof of death If signs of conflict, review the entire file Require identification & proof of authority before releasing information (BUT if genuine risk of liability, avoid fights over disclosure) Executor versus co-owner disputes: only they can resolve it 19

20 VI: Joint Ownership: Executor v. Co-owner The parties disagree (co-owner versus executor – can also arise with attorney for property) Good notes and records No favors Neutrality No dithering - Document requirements & deadline: Parties settle in writing, Parties take step to resolve (Judicial Directions), or, You pay the funds into court 20

21 VI(a): Joint Ownership Dispute: Bank Options Interpleader (Rule 43 – adverse claims to property) Trust Funds (Trustee Act, s.36(1) with leave) Trust Funds held for minor (Trustee Act, s.36(4) or (6) of right, with accompanying affidavit) 21

22 VII: Beneficial Designation (Registered Plans and Insurance Products) Similar approach to Joint Ownership BUT you have the benefit of statutory protection Succession Law Reform Act, Part III, s.53 Insurance Act, s.193(2) Adverse claims to insurance = pay into court, s.214. Issues arise…. Attorney for property changes designation Separation Agreements\Orders Conflict between Will and Power of Attorney – only the parties can settle 22

23 VIII: Beneficial Designation: What to Do? Fight over meaning (Will versus Designation) Put onus on the parties to resolve Pay into Court if they don’t Claim against Asset Judgment Call: Rely on statute versus pay into court? If former, document: “You go to court by our deadline, or we will pay pursuant to designation.” 23

24 IX: Wills Who controls assets on the owner’s death (if no designation or co-ownership): Executor appointed by Will Administrator of an Intestacy by court appointment Executor’s Authority comes from Will: “probate” establishes it beyond challenge On Intestacy, authority comes only from appointment 24

25 X: Intestacy An intestacy can be probated “Certificate of Appointment of Estate Trustee Without a Will” 50% of beneficiaries entitled to at least 50% of the assets ordinarily pick executor Always require an intestacy to be probated (What does probate do for you?) 25

26 XI: Intestacy: What to Do? Notarized copy of the order READ the order: does the person claiming authority really have it? The right person The right court (conflict of laws) ID and document instructions 26

27 XII: Wills Originate in Roman law: Adopted by the common law Time honored language and structure Appointment Bequests Clauses Delaying realization\Paying Debts Residue (what’s left after paying debts, taxes, expenses and bequests) Trusts of residue (spousal; protective for children; spendthrift; Henson) Powers and Discretions, including banking and investing Testimonium: In Ontario, 2 witnesses, present at same time with testator – Affidavit of Execution 27

28 XIII: Best to Worst Ontario Will with Certificate of Appointment of Estate Trustee Ontario Will without Certificate Your policy on waiving probate? Waiver of Probate Bond (50% rule) Indemnity? Leave assets on hand? (Monitor overall exposure?) Demand Probate Foreign Will Meaningless Withholding? There are easy options (reseal, ancillary grant, appointee of foreign executor) 28

29 XIV: Who’s the Executor? Named in the Will? Alternate named in the Will (“Certificate of Status” under the rules) “Personal Representative” of last living executor Document the chain of authority Trustee appointment under Trustee Act (supported by lawyer’s opinion) 29

30 XVI: Who’s Entitled to Information? The “Personal Representative” Compromise for purpose of obtaining probate Review service carefully: if applicant seeks costs, you must respond Review the file, assess exposure to liability 30

31 XVII: Opening\Operating an Account MUST have constating document – Notarial copy of Will with Certificate Executor is the customer for most legal purposes ID and update “Know Your Client” Risk - Knowing Receipt of Trust Funds; Knowing Participation in Breach of Trust READ the document: Is it the right person? Is it really an estate or trust account? 31

32 C: DEALING WITH THE BAD FILES 32

33 When the File Goes Bad Watch for signs of trouble (tell-tale complaints with no action, unexplained access to historical files, poorly drafted Will, history of complaints\litigation with you or within family) Fish’s 1 st Rule of Estates – If they’re fighting with one another, they’ll eventually fight with you Review the entire file and assess risk Read any documents served even if you’re not a party Make it the combatants’ problem Document your requirements, set a deadline, pay the assets into court if it’s not met 33


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