Grandparent Rights in Custody Cases

When we talk about access, which includes the right to see a child, we tend to think only in terms of the rights of the child’s parents. However, as the number of families affected by divorce increases, extended family members, including grandparents, begin to worry about their relationship with their grandchildren and whether or not they will play a meaningful role in their grandchildren’s lives. This becomes a very real concern for grandparents if their own child is not the custodial parent.

In the Province of Ontario, there are two pieces of legislation that govern the issue of access – the Divorce Act (which applies only to children of a marriage) and the Children’s Law Reform Act. There is no language in either Act that specifically refers to grandparents. However, the Divorce Act states that a court may make an order for custody or access on the application of either of the spouses, or by any other person. A grandparent would fall into this category, but they must first seek the court’s permission to bring an application for custody of or access to their grandchild. The Children’s Law Reform Act allows a parent of a child or “any other person” to apply for an order respecting custody of or access to a child (permission from the court to bring an application is not a prerequisite under the Children’s Law Reform Act.)

In Ontario, there is no presumptive right to access for grandparents or other people outside of the children’s own parents. The courts have taken the position that a child’s relationship with their grandparents is expected to be fostered and maintained through the grandparent’s own child.

Since 2001, the Ontario Court of Appeal has stated it is up to the children’s parents to decide if and when certain people should have access to their children. So long as there is no evidence the parents are behaving in a manner which demonstrates an inability to act in accordance with the best interests of their children, their wishes will be respected.

While the Ontario Court of Appeal acknowledges their approach may seem insensitive to the needs of grandparents, it is not the grandparents’ needs (or even the grandparents’ wishes) that must be viewed and examined. These cases are about the needs and interests of the children and the merits of a grandparents’ application for access to their grandchildren will hinge on the children’s best interests. There are a number of factors to consider when determining what those best interests are, including:

• the wishes of the custodial parent, especially if there is no obvious benefit to the child from ongoing contact with the grandparent;

• whether or not there is an established, ongoing and positive relationship between the grandparent and grandchild;

• whether the grandparent has or will act in such a way as to undermine the child’s parent(s) or the child’s relationship with their parent(s);

• the severity of any conflict between a grandparent and the child’s parent;

• whether the grandparent has something special to offer the child, particularly from a family or cultural point of view; and

• whether the child will experience a sense of loss and/or abandonment if the grandparent is prevented from being part of the child’s life.

In 2012 the Ontario government introduced a new Bill that aims to promote the relationship between children and their grandparents, primarily in situations where the children’s parents are separated or divorced. Bill 67, titled “An Act to amend the Children’s Law Reform Act with respect to the relationship between a child and the child’s grandparents” received its first reading on April 17, 2012. If passed, the Bill will amend those provisions in the existing Children’s Law Reform Act which govern custody and access by prohibiting parents (or anyone else entitled to custody) from creating or maintaining unreasonable barriers to the formation and continuation of a personal relationship between the child and the child’s grandparents. In fact, Bill 67 would add the child-grandparent relationship to the list of considerations the court must consider when deciding what is in the child’s best interests. Further, in applications for custody, the court would be required to consider whether the parent applying for custody is willing to facilitate contact with the child’s grandparents. Bill 67, if passed, would not automatically give grandparents the right to access to their grandchildren. They would still have to apply to the courts.

Until we have change to Ontario legislation, grandparents are still considered legal strangers when it comes to access. To have their case for access heard in court, grandparents must file an Application and an Affidavit in support of their claim for access. In addition, they must provide a police clearance certificate and a Children’s Aid Society clearance. The outcome of these cases are very dependent on the specific facts of each case, however, any person applying for custody or access to a child can be certain that, in all cases, the children’s needs will be the paramount consideration.

- Amanda M. Hall for abblaw.ca 

[The above article is for general informational purposes only and is not legal advice. If you live in the Ottawa area and would like advice about a legal issue please email us or call 613-569-9500 to speak with one of our lawyers or a member of our staff.]

Construction Liens: The Basics for Homeowners

As a homeowner undertaking a renovation project on your property, you may or may not be aware that the title to your property could become encumbered by a construction lien. Construction liens can create serious problems when you want to sell or mortgage your property. They also can affect your credit rating. Construction liens are a very complex and technical area of law. These actions are governed by the Construction Lien Act and have many different requirements than any other court action. If you find yourself in a construction lien dispute, you should speak to a lawyer with experience in construction liens to help you deal with the situation and avoid any possible costs and delays.

What is a Construction Lien?

A lien is a security interest registered against the title to real property by a person who supplied labour or materials to your property. It can prevent you from selling or re-financing your property. It can also be a threat to your current mortgage, and your current mortgage may even have a provision requiring you to remove a lien from your title. In an extreme case, a lien claimant may be able to force a sale of your home.

Who Can Register a Construction Lien?

A construction lien can be registered by almost any person who supplied labour or materials related to construction, demolition or other improvements to your property. A lien can be registered by your contractor, a sub-contractor, or even the business from which your contractor bought your fixtures and materials.

To the surprise of many homeowners, there does not have to be a direct contractual relationship between the person who registers the lien and the homeowner.

There are two situations that commonly arise that homeowners should be aware of:

Scenario #1 – General Contractors and Sub-Trades

If you, as a homeowner, hire a general contractor to oversee the construction project and the general contractor hires a tradesperson to complete a specific aspect of the project, that tradesperson could register a construction lien against the title of the property even though there was no direct contract between the homeowner and the tradesperson.

Scenario #2 – The “Renovation-Happy” Tenant

Another example of where a construction lien might be registered against the title to a property is where the homeowner leases the property in question to a tenant. If the tenant contracts with someone to carry out work on the property and doesn’t pay that contractor, that contractor might register a lien against the home. However there are some important additional restrictions on the right of a supplier who works for a tenant to lien the owner’s title.

Timelines and Construction Liens

The right to lien a property arises when the person first supplies services or materials to the property. In order to keep a lien alive, the lien claimant must do a number of things within a number of deadlines. The lien claimant must preserve the lien, which usually means registering a claim for lien on title, usually within 45-days after the lien claimant’s last substantial supply or work. Then the lien must be perfected , which usually means starting a court action and registering proof of that on title, usually within 90 days after the last day of supply or work.

There are other deadlines and quite a few variations and exceptions to these rules. Complying with the all the requirements established by the Construction Lien Act can be complex but is essential to creating and keeping a valid lien. If the lien claimant has failed to follow the correct procedure, you may be able to get the lien taken off your title much more easily than would otherwise be the case. It is important therefore to consult a lawyer that specializes in this area as soon as possible.

How to Remove a Lien

There are two primary ways to remove a construction lien from the title to a property:

Consent and settlement

If the dispute can be settled and an agreed amount paid to the lien claimant the lien claimant can register a discharge of the lien from your title. Even if you cannot agree on how much the lien claimant should be paid, you might be able to agree to have someone else hold an agreed amount as security for the lien claim until the dispute is resolved, and have the lien clamant register a discharge of the lien.

Payment into Court

If it is not possible to reach an agreement, a property owner can pay the amount of the lien claim plus 25% as security for legal costs into court. The court will then issue an order discharging the lien against the title. An owner doesn’t even need to tell the lien claimant that he or she is going to do this.

If you have strong evidence that the lien is for an excessive amount, an owner can also ask the court to decide on a lesser amount to be paid into court. In this situation, however, you have to tell the lien claimant about your request and give the lien claimant a chance to tell the court his or her side of the story.

In both situations described above, the money paid into court, or held in trust by an agreed upon person, will be held until the lien claimant continues with the construction lien court action and the court decides how much, if any, the lien claimant should be paid.

Conclusion

Construction liens are complex, technical and time consuming. The information provided above has really only scratched the surface of the area of construction liens. There are many other aspects of construction liens that impact someone involved in a construction lien action. For this very reason, it is important to consult with a lawyer that has experience in this area as soon as possible. The team at Augustine Bater Binks LLP would be happy to consult with you on any issue with respect to construction liens.

  – Lauren M. Angle for abblaw.ca

[The above article is for general informational purposes only and is not legal advice. If you live in the Ottawa area and would like advice about a legal issue please email us or call 613-569-9500 to speak with one of our lawyers or a member of our staff.]  

Executor's Compensation

What is it?

Executor’s compensation is the money that is paid by an Estate to the trustee(s) or executor(s) who manage the Estate. A trustee or executor is the person appointed in a will to manage the affairs of the deceased's estate. Although those terms refer to different roles they are often used together because the same person(s) is often appointed to take on both roles. Normally, after a person dies, there are bills to pay, there are bank accounts to manage (i.e. close the existing account and open a new account in the name of the Estate), there are taxes to be paid, there may be real estate to manage or sell, there may be disputes to settle etc. When all is resolved, hopefully there will be a balance in the Estate to distribute to the beneficiaries under the will.

Some estates are large in value and some estates are small in value. Some estates are complex and require that the executors do a lot of work. Some estates are simple and don't require that the executors do much work at all. No one is expected to work for free. The question becomes, how much financial compensation should an executor receive for the work they do on behalf of a particular Estate? That is the issue known as "Executor's Compensation.”

How much should be paid to an executor?

       Should the Executor Waive Compensation?

The first point to recognize is that where the executor and the residual beneficiary are the same person there is no financial benefit (and a tax disincentive) for the estate to pay executor’s compensation. In those cases the executor would normally waive any compensation. For instance, a husband may appoint his wife as his primary executor and may also name her as the sole residual beneficiary of his will. In that case there would be no point in paying her compensation for her work as an executor. Effectively, she would be paying herself and she’d have to pay income tax on the money paid to her as executor’s compensation whereas the bequest under the will is not subject to income tax. (See Scenario #1 at the end of this article.)

      Where Executor’s Compensation is Claimed by an Executor

Where the executor claims executors compensation, how is that compensation quantified? It may be that the residual beneficiary and the executor come to an agreement as to a fair and reasonable allowance to be paid for executor’s compensation. If the parties are unable to agree upon an amount, then the executor is entitled to pass his/her accounts and in the process of passing accounts to claim executors compensation. It is then up to the beneficiaries (or some of them) to object to the passing of accounts. In Ontario a single judge of the Superior Court of Justice has jurisdiction to quantify executor’s compensation. Set out below is a summary of the legal guidelines and principles applied by the Court in fixing executors compensation.

Statutory Authority

In Ontario the statutory authority enabling the Court to permit a fair and reasonable allowance upon a passing of accounts for the effort expended in the administration of the estate is found in section 61 of the Trustee Act, which says that;

“A trustee, guardian or personal representative is entitled to such fair and reasonable allowance for the  care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice.”

The courts have developed guidelines for quantifying what is “fair and reasonable” compensation. The usual starting point is an amount equal to 5% of the estate or:

2.5% on capital receipts;

2.5% on capital disbursements;

2.5% on revenue receipts; and

2.5% on revenue disbursements.

In addition, the courts will often allow a management fee of 2/5 to 3/5 of 1% of the average annual value of the gross assets under administration.

It is also possible for the executor to request a special (i.e. additional) fee where additional compensation is required to fairly compensate the executor for the work and responsibility taken on by him/her.

The case law interpreting section 61 of the Trustee Act has developed 5 factors which are to be considered in reference to executor’s compensation on a passing of accounts:

a. The magnitude of the trust;

b. The care and responsibility involved;

c. The time occupied in performing the duties;

d. The skill and ability displayed; and

e. The success which has attended its administration.

Toronto General Trusts Corp. v. Central Ontario Railway Co. (1905), 6 O.W.R. 350;1905 CarswellOnt 449 (Ont. H.C.)

The law concerning executor's compensation is set out in Jeffery Estate (Re) (1990), 39 E.T.R. 173, 1990 CarswellOnt 503 (Ont. Surr. Ct.) at paras. 13 & 16 in the following terms:

  

“… In Ontario, at least, a practice has developed of awarding compensation on the basis of 2 ½ per cent against the four categories of capital receipts, capital disbursements, revenue receipts and revenue disbursements along with, in appropriate cases, a management fee of 2/5 of 1 per cent per annum on the gross value of the estate…. Beyond this, of course, the cautionary words of the Re Atkinson case, emphasize that the use of percentages must not become a ritual.

…

To me, the case law and common sense dictate that the audit judge should first test the compensation claims using the “percentages” approach and then, as it were, cross check or confirm the mathematical result against the five factors approach set out in Re Toronto General and Central Ontario Railway ….The process is not scientific but it is not intended to be: in the estate context, it is a search for an award which reflects fairness to the executor; in a real sense, the search is for an appropriate quantum meruit award in a unique setting.”

In the case of Laing Estate v. Hines (1998), 167 D.L.R. (4TH) 150 O.C.A; 1998 CarswellOnt 4037 (Ont. C.A.) the Ontario Court of Appeal confirmed the law as expressed in Jeffrey Estate. At ¶ 9 of the Laing case the court stated:

“A court on a passing of accounts is obliged to first test the compensation claimed by applying the percentages and then cross checking the result in reference to the five factors with a view to achieving a fair and reasonable result.”

Conclusion

The ultimate question that the court must answer is what amount is “fair and reasonable” for the work performed and the responsibilities undertaken by the executor. The answer to that question is arrived at by:

1. Applying the percentages (i.e. 5% of the value of the estate);

2. Cross checking the result of the percentage approach in reference to the five factors

3. Using a broad brush approach rather than a fine calculation approach in considering the result.

Note:

Executor compensation issues can be very complex. Should such issues arise it is recommended that a lawyer be consulted to deal with the factual and legal circumstances of a particular case.

 

Scenario #1

The testator dies leaving an estate with a value of $1.0M. The testator appoints his wife as executor and she is the sole residual beneficiary of the estate.

If the wife did not take any executor's compensation she would receive $1.0M as residuary beneficiary.

If the wife took the normal executor’s compensation of 5% of the value of the estate as executor's compensation she would receive $50K as executor’s compensation and the balance of the estate ($950K) as residuary beneficiary. Note however that executor's compensation is taxable income (as wages) and therefore the wife would have to pay income tax on the $50K of say $20,000.00. In this case, as a result of claiming executor’s compensation, the wife would receive $980K (after tax) rather than $1.0M.

Logically therefore, where the executor and the sole residual beneficary are the same person, the executor will waive their entitlement to compensation and none will be paid.

Scenario #2

The testator dies leaving an estate with a value of $1.0M. The testator appoints his brother as executor. The testator’s wife is the sole residual beneficiary of the estate.

If the brother did not take any executor's compensation the wife would receive $1.0M as the residuary beneficiary.

If the brother asked for and the wife agreed to executor’s compensation of 5% of the value of the estate as executor's compensation the brother would receive $50K as executor’s compensation and the balance of the estate ($950K) would be paid to the wife as residuary beneficiary. The brother would have to pay tax on the executor’s compensation he received.

Scenario #3

The testator dies leaving an estate with a value of $1.0M. The testator appoints his brother as executor. The testator’s wife is the sole residual beneficiary of the estate.

The testator’s brother seeks the normal executor’s compensation of 5% of the value of the estate as executor's compensation. The testator’s wife objects to the brother receiving $50,000.00. The brother passes his accounts and the court applies the percentages and then the 5 factors to determine if the compensation is fair and reasonable. The brother may receive $50,000.00 or he may receive less depending upon the view of the Court as to what is “a fair and reasonable allowance”.

Scenario #4

The testator dies leaving an estate with a value of $100K. The testator appoints his brother as executor. The testator’s wife is the sole residual beneficiary of the estate.

The testator’s brother seeks the normal executor’s compensation of 5% of the value of the estate as executor's compensation plus a special fee due to the large amount of work involved in this particular estate. In this case the amount payable by applying the percentage approach is only $5,000.00. The testator’s wife objects to the brother receiving more than $5,000.00. The brother passes his accounts and the court applies the percentages and then the 5 factors to determine if the compensation is fair and reasonable. In this case it may be that matrix of quantum of the estate and quantum of work required of the executor justifies an additional payment. Again, it depends upon the view of the Court as to what is “a fair and reasonable allowance”.

-- Philip W. Augustine for abblaw.ca

[The above article is for general informational purposes only and is not legal advice. If you live in the Ottawa area and would like advice about a legal issue please email us or call 613-569-9500 to speak with one of our lawyers or a member of our staff.]

Mediation and its Benefits

When a client thinks of hiring legal counsel to work on his or her behalf, thoughts of a lawyer in court objecting with conviction to everything said by the opposing party may come to mind. Hollywood movies such as The Rainmaker, A Few Good Men and many others would lead one to believe that this is “good advocacy.”

In reality, over 90% of cases in Ontario’s civil court system never make it to trial. This not only means that lawyers in Ontario have found ways to settle disputes outside of court, but it also means that lawyers across the province have suffered from a gradual decline in opportunities to be told by witnesses that they “can’t handle the truth.”

One of the tools often used to settle disputes out of court is mediation. Mediation is a consensual meeting between all of the interested parties in a dispute and a neutral third-party known as a “mediator.” The mediator is not a judge and has no power to ultimately decide or rule on the matter. Instead, the mediator’s role is to assist the parties in arriving at a fair and meaningful settlement. Mediation is but one of several commonly known processes under the umbrella of Alternative Dispute Resolution (ADR). Other well-known ADR processes include negotiation and arbitration.

Given that the mediator is more of a facilitator than a judge, one of the keys to a successful mediation is the impartiality of the mediator. In most cases, impartiality is built into the process from the beginning because the mediator will have been selected by the mutual agreement both parties. Since any sign of favoritism could undermine the legitimacy of the mediator and the effectiveness of the mediation itself, good mediators are careful to ensure there is no perception of bias both before and during the mediation.

Techniques used will vary depending on the mediator’s own past experiences and training, but generally mediators use communication strategies that are designed to elicit information from the parties, keep them focused on settlement and help each side understand the strengths and weaknesses of its own case.

The entire mediation is conducted on a without prejudice basis. This means that nothing a party says during the mediation can be used in proceedings outside the mediation. Everything anyone says is treated as strictly confidential. The without prejudice nature of the mediation helps to facilitate open dialogue between the parties and encourages creative settlement solutions.

In terms of the progression of the mediation itself, the mediator will generally open with a statement outlining the structure of the mediation and will provide a general summary of the dispute. If it has not already been done, the mediator will also ask the parties to sign a mediation agreement.

Next, the mediator will typically go around the table giving each party the opportunity to make a statement. During this time, the mediator will generally ask that no one interrupt the speaker. This ensures that each person has the chance to say what they want while everyone else is listening. Sometimes, just having the opportunity to openly state one’s position to the other side is enough to get parties moving towards settlement.

Once everyone has been heard, the mediator will often summarize the interests and positions of the parties. At this stage, the mediator may also provide the parties with some objective feedback regarding the strengths and weaknesses of the parties’ respective positions in hopes of moving them closer to settlement.

Often the mediator will then split the parties by asking them to go into separate rooms. This process is known as “caucusing.” At this stage the mediator takes on the role of messenger, shuttling information and settlement offers between the rooms. Some mediators will take an aggressive approach during caucusing, offering advice to each party about what they think it will take to settle the case. Others will take a more passive approach, acting merely as conveyors of information.

While mediation may not be as glamorous as court, it has its benefits. Legal fees are often substantially lower if a matter can be settled at an early stage. Much of the stress and anguish which often accompanies lengthy litigation can be avoided through a mediated settlement. In addition, since mediation allows the parties to arrive at a settlement collectively, these settlements are more likely than judge-made orders to be adhered to by the parties and ultimately stand the test of time.

While trials are certainly better fodder for Hollywood and primetime, mediation has become a critical tool for dispute resolution in Ontario.

- Michael D. Heikkinen for abblaw.ca

[The above article is for general informational purposes only and is not legal advice.  If you live in the Ottawa area and would like advice about a legal issue please email us or call 613-569-9500 to speak with one of our lawyers or a member of our staff.]

Wills and Estates 101 Mini-Series Part IV: Did He Die or Did He Separate?

In Ontario there is a family property regime set out in the Family Law Act (FLA) which provides for the equal sharing of property accumulated by married parties during their marriage. Note, this provision does not apply to common-law spouses. What happens if, after the death of one married spouse, it is discovered that the deceased spouse has given all of his or her wealth to someone other than his or her surviving spouse?

Suppose Harold was married to Wendy for 42 years. After his death his last will and testament left most of his estate to his “close friend” Susan. Harold left Wendy $50,000.00. Wendy feels betrayed (especially if her will left everything to Harold). What can Wendy do?

In Ontario the FLA permits the surviving married spouse of the deceased to elect to take either under the will or to make a claim against the estate for an equalization of net family property (NFP) pursuant to Part I of the FLA.

Assuming Harold had a NFP greater than Wendy, Wendy may wish to elect to make a claim for a monetary payment equal to one-half the difference her NFP and Harold’s NFP. For a more thorough discussion of NFP equalization, please click here to read a post by Philip W. Augustine.

When spouses separate, the valuation date is typically the date of separation. This means that the assets and liabilities of each spouse would be calculated based on their value at the date of separation. But, where one of the spouses has died, the FLA deems the valuation date to be the day before the date of death.

The surviving spouse has six months from the date of death to elect to take an equalization payment pursuant to the FLA rather than taking pursuant to the will of the deceased.

An example will illustrate how this election works.

At the date of his death Harold had Net Family Property of $600,000.00

At the date of Harold’s death Wendy had Net Family Property of $300,000.00.

Pursuant to the FLA Wendy is entitled to $150,000.00 calculated as follows: $600,000.00 - $300,000.00= $300,000.00

$300,000.00 /2 = $150,000.00

Pursuant to the will Wendy is entitled to $50,000.00 (see facts above)

Unless Jim’s will had expressly provided that Sally could both make the election under the FLA and take under the will, Sally would be forced to choose only one of the two options.

If forced to choose, it is obviously more beneficial for Wendy to take pursuant to the FLA ($150,000.00) than pursuant to the Will ($50,000.00). Wendy would be well advised to make an election to take pursuant to FLA. Wendy has 6 months to make that election, failing which she shall be deemed to take pursuant to the will.

Should a surviving married spouse feel that he or she has not received a proper division of property upon the death of their spouse they should promptly seek out legal advice so they are in a position to make the necessary election should it be in their interests to do so.

     – Michael D. Heikkinen and Philip W. Augustine for abblaw.ca

[The above article is for general informational purposes only and is not legal advice. If you live in the Ottawa area and would like advice about making an FLA election or would like Augustine Bater Binks to prepare your will, please email us at info@abblaw.ca or call 613-569-9500 to speak to one of our lawyers or a member of our staff.]

Matrimonial Home a Trap for the Unwary: Issue #1

The “matrimonial home” is given special treatment in the Family Law Act and that special treatment can involve huge unfairness to one of the parties to a marriage following marriage breakdown. One way in which this unfairness can arise involves a provision in the Family Law Act (paragraph 4(1)(b)) which defines “net family property” –a fundamental legal concept which is used to equalize property upon the breakdown of a marriage.

When equalizing property accumulated by the parties during the marriage, the parties are each allowed to deduct from the value of their property at date of separation the value of the property which each of them brought into the marriage. However, (and this is where the unfairness comes in) a party is not allowed to deduct the value of the “matrimonial home” if a party owned it at the time of the marriage.

The easiest way to illustrate this issue is by a series of examples.

Example Number 1

Harold has $400,000.00 in cash when he gets married. Wendy has $0.00 at the date of marriage. The parties are married for 10 years and then separate. At the end of the marriage Harold has a net worth of $1,100,000.00 and Wendy has a net worth of $600,000.00. In this case Harold would be entitled to deduct the $400,000.00 he had at the date of marriage. That would reduce his net family property to $700,000.00. Harold would then pay Wendy ($700,000.00 - $600,000.00 = $100,000.00 / 2 = $50,000.00. Harold would then have ($1,100,000.00 - $50,000.00 =) $1,050,000.00 and Wendy would have ($600,000.00 + $50,000.00 =) $650,000.00. In other words, Harold would end the marriage with $400,000.00 more than Wendy and Harold and Wendy would both have shared equally in the wealth accumulated during the marriage. The parties would be in exactly the same relative property position property at the end of the marriage as when they started the marriage (i.e. Harold would have $400,000.00 more than Wendy). That is considered fair by most people.

Example Number 2

Now consider the same facts as in Example number 1, except, the day before getting married Harold purchased 123 Elm Street so that the happy couple would have a nice home to which to return after their honeymoon. The parties live in the home for 10 years and Harold still owns the same home at the date of separation. In this case Harold is not entitled to deduct the value of the home from his Net Family Property. The math in this example would be as follows:

     Harold $1,100,000.00 - $0.00 = $1,100,000.00

     Wendy $600,000.00 - $0.00 = $ 600,000.00

     Harold pays Wendy ($1,100,000.00 - $600,000.00 =)

     $500,000.00 / 2 = $250,000.00

     Wendy and Harold both end up with $850,000.00.

In example number 2 Harold lost half of the $400,000.00 which he brought into the marriage because he purchased a home prior to the wedding day and owned that home at the date of separation. Had Harold waited until after the wedding to purchase the home and brought cash into the marriage he would have been entitled to keep all of the $400,000.00 following marriage breakdown. Most people consider this result to be unfair.

As couples marry later in life or marry for a second time it is increasingly likely that one party to the marriage will bring a home into the marriage in which the parties will reside until the breakdown of the marriage. The treatment of the matrimonial home on separation has many traps for the unwary. More to follow.

— Philip W. Augustine for abblaw.ca

Wills & Estates 101 Mini-Series: Part III: Attorney Compensation

In our last post we covered some of the primary responsibilities and basic legal requirements of powers of attorney for property and personal care. We now turn to some questions people often have about a person getting paid for being an attorney, questions such as:

     Will the person designated as attorney be paid for his or her work?

     How much and when would the attorney get paid?

In Ontario, the answers to those questions are very different for attorneys under a power of attorney for personal care and under a power of attorney for property.

Power of Attorney for Property: The starting point for compensation for this kind of power of attorney is the Substitute Decisions Act [SDA], which provides that a continuing power of attorney for property may take annual compensation from the property in accordance with the prescribed fee scale. Currently, the prescribed fee scale is:

     • 3% of capital and income receipts;

     • 3% on capital and income disbursements; and

     • 3/5’s of 1% on the annual average value of the assets as a care
     and management fee.

This is not a fixed entitlement applicable to all cases. The amount of compensation for acting under a power of attorney for property, and even the right to any compensation, is subject to challenge and to review by the courts. The prescribed fee can eventually be reduced or increased depending on the case and a number of factors such as the size of the estate, the complexity of the required work, and the skill and success of the attorney in the management of the estate.

Unlike executors under a will, attorneys for property have the right under the SDA to “pre-take” compensation, that is to get paid while the work is ongoing, before their accounts have been reviewed and approved by the court. The statute specifically refers to compensation being taken monthly, quarterly or annually. As we mentioned though, any amount taken improperly may be subject to a court challenge and adjustment.

The statute also makes compensation for attorneys for property subject to any provisions regarding compensation contained in the actual continuing power of attorney document. This flexibility allows the grantor to expressly set out the amount of compensation the attorney for property is to be paid.

If the grantor expressly provides that he or she does not want the attorney to take compensation, the attorney will not be entitled to compensation despite the entitlements contained in the SDA and its regulations. Anyone named under such a power of attorney such therefore review the document itself very carefully before deciding whether to accept this responsibility.

Power of Attorney for Personal Care: Curiously, the SDA does not say anything at all about compensation for attorneys for personal care. There is therefore some doubt about whether such attorneys are entitled to be paid for their services at all. There is some authority for such claims, but the amount, the timing and other rules about getting paid are unspecified and very uncertain.

Therefore if one wishes to provide for the compensation of their attorney for personal care, this should be discussed with the lawyer as early in the drafting process as possible and set out clearly in the power of attorney document, expressly stating this intention and a method for calculating the amount of the entitlement and when the attorney can pay himself or herself.

As discussed in our last post, attorneys for property and personal care take on an onerous responsibility and are generally held to high standards by the courts. Consequently, it is important when drafting a power of attorney to be mindful of the fact that if you only provide a nominal amount of compensation or deny any right to compensation entirely this could result in the attorney refusing his or her appointment.

Although this posting has summarized some of the fundamentals of attorney compensation, it is always best to discuss your power of attorney needs with a lawyer within the context of your overall estate plan and unique personal circumstances.

     — Craig M. Bater and Michael D. Heikkinen for abblaw.ca

[If you live in the Ottawa area and would like Augustine Bater Binks to prepare your will or power of attorney, please email us or call 613-569-9500 to speak to one of our lawyers or a member of our staff.]