Emotions Aside, Sometimes Estate Litigation is Wrong

On May 28, 2015, the Ontario Court of Appeal (ONCA) dismissed an appeal from the dismayed son of a deceased testator.

The son in Foley, 2015 ONCA 382, contended that his sister had unduly influenced their father when he made multiple transfers to her during his lifetime.

Not only did the appellant have to drag his sister through years of litigation, but, as the unsuccessful party, he will likely have to pay her legal costs in the actions as well. This kind of conflict, so emotionally and financially damaging to all concerned, is most unfortunate; not only is it a tragedy for these siblings and their families going forward, but it is almost certainly not the type of legacy the deceased wished to leave for his children.

Unfortunately, outcomes like this may multiply in the future, as a result of recent changes to testamentary trust legislation (December 2014). These important amendments will be the subject of discussion at the Distinguished Advisor Workshops to be held June 17 in Winnipeg, June 18 in Calgary, June 19 in Vancouver (where the author of this article, Greer Jacks, will be speaking), and June 22 in Toronto. Registrations for the DAW events are still being accepted.

The new changes to trusts should be of particular concern to advisors whose clients are in second marriages and wish to do the right thing for children of both prior marriages. The Foley case represents a good example of the difficulties that any appellant can face in estate litigation.

During the period from 1994-1997, the deceased Mr. Foley transferred over $300,000 to his daughter. When he passed away in 1998, his daughter received another $275,000 when his estate redeemed some bonds that were bequeathed to her. Mr. Foley’s son, Donald Foley, felt that his father lacked the capacity to give the gifts. But the capacity issue was not supported by any of the witnesses except for Donald’s wife.

The two central aspects of the legal analysis in Foley were (1) the presumption that gratuitous transfers from a parent are held in a resulting trust for that parent, and (2) the presumption that undue influence is present when the circumstances include the potential for domination in the relationship between the transferor and transferee.

Foley is an excellent example of the difficulties an appellant such as the brother in this case, faces when challenging the distribution of a Will and the legitimacy of inter vivos transfers, especially at the appeal level.  This is because the findings of fact of the trial judge are never easily set aside in the second judge’s opinion unless there is an error of law or principle, or unreasonableness.

In this case, the sister held a Power of Attorney over her father for certain periods, though not during the times that the bulk of the transfers were made.

The onus was also on the sister to rebut the presumption of resulting trust at the first trial, and she did so successfully. The ONCA was not convinced that the findings of fact of Justice Anne Mullins of the Superior Court of Justice were unreasonable. The gifts were well corroborated by intentions gleaned from the Will of the late Mr. Foley.

Strategically, all the facts and circumstances must be weighed and analyzed in a case like this before litigation is brought forward and Real Wealth Management Specialists can be of great help to their clients in preparing a cost-benefit analysis undertaken with legal counsel, to see whether it is advisable to pursue such action.

The objective of Real Wealth Management, after all is the sustainability of family wealth, after taxes, inflation and fees, including legal fees in cases like this.