When an individual passes away, the family or friends left behind will often have to figure how to manage the estate of the deceased.
When we meet with a deceased person’s family or friends for the first time following death, or sometimes in anticipation of an imminent death, our first determination is whether or not a formal probate or administration will be required. Answering this question involves a determination of what assets the deceased has and how title to them are held. If an individual has few assets of nominal value of less than $5000, then it is likely that the assets can be dealt with without a formal process. If an individual held all their assets in joint tenancy with others, and the deceased’s assets such as RRSPs and Tax Free Savings Accounts were left to beneficiaries other than the deceased, then the assets will also pass without a formal process.
If a deceased does hold assets in their name alone that have more than a nominal value, this triggers the need for probate (where there is a Will) or an administration (where there is no Will) of the estate. Each process requires an application to the court for a formal document that recognizes the executor or appoints an administrator. Until receiving this document, a deceased’s estate may not be legally distributed to beneficiaries.
The probate process is fairly formal, and usually all but the very simplest of estates are processed with the assistance of a law firm or trust company. Trust companies usually charge a percentage of the value of the estate, whereas law firms charge the value of time. Most work will be done by a paralegal under a lawyer’s supervision, so that the bulk of time charged to a file is at the paralegal billing rate.
The process, once the initial grant or order is received, consists of liquidating assets that are not to be distributed in kind, dealing with tax accounting, paying liabilities, and making interim and final distributions to beneficiaries. The process can easily take in excess of a year, especially where real estate needs to be sold or where there are trusts for minors to administer.
The process may be challenged in a number of ways, leading to litigation. The most common trigger for a dispute is when a natural or adopted child is disinherited, or is left a disproportionately small share of the estate. Under the Wills, Estates, and Succession Act, the child has the right, for a period of time following the initial grant of probate, to apply to court to vary the Will. The legislation makes it a moral obligation to adequately provide for spouses and children. There have to be very compelling reasons for someone to disinherit a child. Mere estrangement is not usually sufficient, especially if the deceased was in any way responsible for the fact that the relationship is less than ideal. On the other hand, where a disinherited spouse has entered into a prenuptial agreement that waived their right to inherit from the deceased, there will be a good chance of upholding the Will, unless the prenuptial agreement itself was flawed to the point where a court will set it aside. Where a disinherited child has been left out because they received significant financial help during the lifetime of the deceased, and the Will confirms this reason, then there is a good chance of upholding the Will. Each situation will turn on its own facts and seeking legal advice to fully evaluate a claim is prudent for both the executor defending a claim and a claimant thinking about making a claim.
Another common way of challenging a will involves disputing the mental competence of a deceased as at the time they made their Will. Competence can be affected by both actual impairment of mental faculties due to illness or medication, and/or the undue influence imposed by a family member or other person. Often these claims come about because an elderly person changes his or her will to leave everything to a caregiver or nurse, and the immediate family of the deceased believes that the caregiver improperly convinced the deceased to leave their estate to that caregiver.
An estate may also be sued based on a right under contract, equity or tort (usually negligence). If a deceased person owed an obligation, then their estate will generally have to honour the obligation. The potential for litigation lies where the obligation is not clear or widely known, such as a family loan, loan to or from a close friend, or an unregistered interest in a property held in a friend’s or family member’s name. When death is imminent, any transaction which moves assets into joint tenancy, or outright to others, can be suspect if done when the deceased may not have had full competence to understand the transaction.
There do exist planning measures that can insulate estates from claims and/or alleviate the need for, and costs of, a formal probate or administration. They are not universally suitable, but having an estate planning meeting with a lawyer well versed in the available estate plans can identify the appropriate plan and when it will be suitable to implement it.