Written on behalf of Feigenbaum Consulting
When someone is planning on how to distribute their estate in the event of their death, one thing they may consider is leaving their estate to beneficiaries, but also allowing for the care of a loved one through the establishment of a trust. To paint a picture more clearly, a parent may designate their children as beneficiaries of the estate in their will, but also direct that money be held in trust to care for their spouse until his or her death. This was the situation in a recent case brought before the Ontario Superior Court of Justice in which the testator left her estate to her three children, but also created a trust to provide for the care of her husband, who was still alive at the time of her death. The children were named as trustees, but due to a poor relationship with their father, the Ontario Court of Appeal was left to determine how absolute their “absolute discretion” as estate trustees was.
Testator creates trust to care for her husband; children are trustees
The testator in this case was a mother and wife. She died in 2016 and her will stated that her three children would be the beneficiaries of her estate. However, her husband (the father of the children) was still alive at the time of her death. The will stipulated that the three children would act as trustees over a trust established to provide funds for the husband to live off. The will instructed that the trustees would have “absolute discretion” to encroach on the capital left in the estate in order to ensure her husband’s “comfort and well-being” would be maintained.
This might sound all well and good, and in some cases it may have been. However, as we often see in matters leading to estate litigation, disagreements amongst family members led to an impasse. The husband, who did not have a good relationship with the children, asked the trustees to contribute to the expenses he planned to incur once he sold the matrimonial home and moved into an assisted living facility. He told the trustees that he would need about $4,000 per month to go towards the cost of his new living arrangement, claiming he only had enough savings to pay $1,800 towards the costs, which neared $6,000 per month.
The children, who, as previously mentioned did not have a good relationship with their father, thought he had more money than he was letting on and believed he was trying to deceive them. Because of this, they denied his request, stating that the absolute discretion in the will allowed them to do so. Instead, they offered to provide their father with $1,000 every four months until he provided them with financial documents that demonstrated to their satisfaction that more money was required.
Father asks court to force children’s hands
The father applied to ask the courts to enforce the terms of the will, which he believed required the children to encroach on the capital of the estate insofar as is required to maintain his comfort and well-being. The children responded by stating that their “absolute discretion” allowed them to deny their father’s request.
The application judge concluded that the children did not like or trust their father and that this contributed to their decision-making. The judge ordered the children to provide the father with $3,875 per month to go towards his assisted living expenses.
The trustees appealed the decision on the grounds that the application judge erred in what they understood as an overriding of the discretion provided to them in the will. The Court of Appeal stated that its analysis would have to begin with trying to understand the testator’s intentions.
Determining a testator’s intentions requires the court to look at the will and the circumstances surrounding the testator when it is made. The court stated it had to put itself in the testator’s shoes at the time the will was made, an approach known as the “armchair principle.”
In addition to the armchair principle, the court wrote that when it comes to issues involving discretionary trusts, it cannot substitute a decision made by the trustees simply because it would have come to a different decision. However, if the court finds that there has been a breach of fiduciary duty, the court can intervene to the extent that the duty is met.
The court agreed with the application judge’s finding that the trustee’s distrust of their father was influential in their decision to deny his request. The court also agreed that it was clear the father did not have the funds required to live in the facility and that the testator’s intention was likely to have aligned with the father’s request. Ultimately, the court found that a reasonable person who did not have a poor relationship with someone in the father’s position would have granted his request since it fell within the direction of the will.
Feigenbaum Law provides proactive advice for estate litigation
At Feigenbaum Law, we understand how difficult it can be for families who are involved in disputes around the estate of a loved one. Furthermore, the time and expense required to resolve estate disputes can keep beneficiaries from accessing what was left to them while also depleting funds from the estate, which may have to defend itself. That’s why our estate litigation team, led by Mark Feigenbaum, provides proactive estate planning to our clients.
We work with our clients to plan their estates in a way that helps ensure their beneficiaries are provided for according to our client’s wishes while also working to lower the tax burden on the estate. We know that even the most careful planning cannot guarantee an absence of litigation, and we are always prepared to represent our clients before the courts when needed. To see how we can help you put an estate plan together, or how we can help with an estate litigation matter, please don’t hesitate to contact us online or by phone at 1-877-275-4792