Friday, January 20, 2017

Trustee Compensation: Small Numbers That Add Up

BY PAUL ADAM, ASSOCIATE LAWYER

Some might feel that being an Estate Trustee is an utterly thankless job. I'm here today to tell you that
isn't totally accurate.

Trustees are entitled to a small 'thank you' in the form of a tariff on the work they do. Unfortunately, calculating the size of the tariff and getting in paid out often means more work for the Trustee, and sometimes can lead to conflict between Trustees and beneficiaries.

Ontario law does not explicitly specify exactly how much compensation Estate Trustees are to be allowed for their work. Section 61 of the Trustee Act calls the amount "a fair and reasonable allowance", as determined by the Court.

A series of cases, however, have discussed what precisely the appropriate amount is for an estate trustee to be given for the work of managing the Estate. For some time, the accepted tariff has been:
2.5% on all property (of any kind) and income that is deposited into the estate 
2.5% on all property (of any kind) and income that is paid out of the estate, including payments to beneficiaries of their inheritances
During a year in which the estate is being managed by a trustee, 2/5 of 1% (0.4%) of what the value of the estate was, on average, over the whole year.
(See Denofrio Estate (Ont. Superior Court 2012) and Freeman Estate (Ont. Superior Court 2007) to cite just two recent rulings)

Those numbers might look miniscule, but they add up. Consider the following scenario:

1. An estate took in $1,000,000 in a year: it cashed in a RRIF worth $50,000, received the proceeds of a life insurance policy worth $250,000, and sold a house worth $700,000. 
2. The Estate paid $20,000 that year for professional fees, $20,000 for funeral expenses, $60,000 in various taxes that year. A total of $100,000 in expenses paid out. 
3. At the end of the year, the Estate was preparing to pay out legacies worth $900,000, minus whatever was to be paid in trustee compensation. 
4. The average value of the estate over the whole year was $850,000.
The trustee, for the trouble it went to, could feasibly present the following account to the Estate's beneficiaries:
Total receipts: $1,000,000 @ 2.5% : $25,000
Total distributions (including legacies to be paid): $1,000,000 @ 2.5%: $25,000
Average annual value: $850,000 @ 0.4%: $3,400
That's $53,400, to be paid to the trustee before the trustee pays out the balance of the money in the estate to the beneficiaries.


Bear in mind that a trustee might have brought in that $1,000,000 by signing all of three cheques, and delegated all its other work to white collar professionals, and may need to write all of two cheques to pay the beneficiaries. On the other hand, the Trustee might have spent 20-30 hours a week doing tax returns, renovating property, locating assets, selling investments and dealing with the family. (On top of his or her regular job.)

But, regardless how much effort that took on the trustee's part, if in the end an estate brought in $1,000,000 in a year, and disbursed out $1,000,000 that same year, the trustee compensation would, at least in theory, be level.

That means, relative to the actual effort put in to manage the Estate, that $53,400 or so might be absolute peanuts or an absolute mint.

If indeed someone thinks the number is "off", and the Trustee and beneficiaries can't come to a reasonable agreement about compensation, the Court may examine the Trustee's accounts, and revise that figure of trustee compensation as appropriate.

To come to its conclusion, the Court is certain to apply this formula: 


(a)               size of the Estate;
(b)               care, responsibility and risks assumed by the trustee;
(c)               time spent by the trustee in carrying out his/her responsibilities;
(d)               skill and ability required and displayed by the trustee;
(e)               results obtained and degree of success associated with the efforts of the trustee

This basic formula has been in existence since Toronto General Trusts and Central Ontario Railway (1905, Ontario High Court). Here is an excerpt from Pachaluk Estate (Ontario Superior Court, 2009) that gives a general idea of how the Court applies the formula in practice:

(63) In my view, a reduced percentage ought to be applied [...] insofar as the condominium transfer is concerned.  The administration of the Estate in respect of this primary asset was fairly straight forward.  I would reduce the applicable percentage  from 2.5percent to 1.5 percent regarding the capital receipt of the condominium unit valued at $184,500 by the Estate Trustee.  Regarding the balance of the capital receipts, [the Trustee] Mr. McManemy was involved in disposing of specific bequests to adult beneficiaries in specie [in the same form they were in when the deceased died].  This was straight forward.  More complex was the trust transactions involving the DiFebo children.  All of these transactions deserve compensation.  However, the rate applied should be two percent.  [...]  In respect of the compensation on final distribution, the applicable percentage should be 1.5 percent as two cheques need to be prepared on final distribution to Donna Roughley and Darlene DiFebo in equal amounts as residual beneficiaries.
The end result was the Court slashed the Trustee's account on an estate worth about $400,000 from $19,400 to $12,923.56. 

When the Courts apply this formula, the resulting figure for Trustee Compensation may well be a figure that will be "measly" in the eye of the Trustee, "exorbitant" in the eyes of the beneficiaries and, you guessed it: "fair and reasonable" in the eyes of the Court.

- Paul B. Adam, Toronto
Visit our Toronto Law Office website: www.wiselaw.net

Thursday, January 19, 2017

Using Social Media To Build Your Online Reputation

BY GARRY J. WISE, SENIOR COUNSEL 

I was recently interviewed by Law Times correspondent Jim Middlemas on the role of social media in Canadian law practices.

It was a good opportunity to briefly discuss the history of Canada's legal blogosphere and to recall the early years of Wise Law Blog.

See the resulting article, Using social media to build a reputation, via Law Times, which includes quotes from me, among others.
- Garry J. Wise, Toronto

Visit our Toronto Law Office website: www.wiselaw.net

Can Your Last Will and Testament Prevent Your Ex From Getting Child Custody After Your Death?

Paul B. AdamBY PAUL ADAM, ASSOCIATE LAWYER

After a marital separation, some parents will, for better or worse, go to unimaginable lengths to prevent their ex-partners from having
custody or access to the children of the marriage.

Can this fight continue after death?

Can a separated parent use a last will to prevent the child's other parent from obtaining custody after death of a custodial parent?

In Ontario, a sole custodial parent can name anyone as the temporary custodian of a child in a Last Will and Testament, under section 61 of the Children's Law Reform Act. The appointment is temporary for 90 days, after that, the parent with temporary custody must apply for court ordered permanent custody. The appointment is also only effective when the testator is the only person who had custody of the child at the time when he or she died, or if both people with custody died at the same time.

Of course, under Ontario law, any other person who wishes custody of the child, irrespective of the directions in a will, can make his or her own Application for custody of the child.

In my practice, I have been the asked at least twice "What should I do if I do not, in any circumstances, want my ex to get custody of our child?"

The Newfoundland and Labrador case of NW v KB (Unified Family Court, 1995) offers some interesting guidance.

MB was separated from KB. They had a daughter. MB was dying. An Ontario judge had granted her custody of the daughter and liberal access to KB. MB and daughter were permitted to move back to Labrador where their family lived, for the final stages of the cancer treatment. MB drew up plans for the care of her daughter in a Last Will.

MB wanted her daughter to live permanently with her sister NW in St. John's. Her Last Will aired out a litany of complaints about KB, and directed custody to the aunt, NW.:
"The most important things I want for (Sylvia) are caring, loving, affection, stability and strong family values. I know that her father K.B. cannot provide her with this. [...] Although K.B. is (Sylvia's) biological parent, he cannot provide her with the family values, stability, affection and loving that my sister N.W. and her family can. K.B. does not express feelings of love and affection. He has been married on three occasions and is only thirty-three years old. All marriages ended in divorce for no valid reasons. I do not believe that K.B. can provide (Sylvia) with a stable environment that I want for her. K.B. and his family have no sense of family values. His brothers and sisters have children from other marriages and/or relationships. Many do not pay child support and many have been divorced. [The laundry list of complaints goes on. You can read the entire provision here at paragraph 16.] These are not the family values that I wish for my daughter (Sylvia)"
NW brought an application to be given full custody of her niece, pursuant to the Last Will. Unlike in Ontario, under Newfoundland's Children's Law Act, a provision granting custody to a non-parent after death was null and void as long as there was a living parent with a right to custody or access (as was the case with KB).



It will come as no surprise that the Justice Halley determined that the paramount consideration in determining who would have custody of child was the child's best interests. The Court was not prepared to sever the Dad's relationship with his daughter, but it took the claim for custody in the Aunt's application seriously enough to investigate what was really in the best interests of the infant daughter of KB and the late MB.

The Court found KB and NW to be two equally devoted and capable parents, either of whom, could and would have been suitable to have full custody.

The Court granted custody to the father but in apparent recognition of the merit of the Application, gave the Aunt very generous access to be exercised for 60 days or more during the year at her own expense around holiday and vacation times.

NB v KW sets out a fairly common fact scenario, and illustrates a few important general principles to keep in mind when trying to make a testamentary appointment of a guardian for a child:
1. The Child's best interests are still the Court's primary concern
2. The Court will be very reluctant to strip custody from a parent or person, who otherwise be entitled, unless it's truly in the Child's best interests.
3. The person you name in your Will as guardian of your child may influence the Court's decision on who is granted custody or access, but it will not necessarily be followed or be binding on the court.
4. If you use your Last Will as a platform to attack a spouse or other family member's parenting ability, don't assume that the Court will accept your comments uncritically.
Most importantly, think about what you want to be remembered for.

Is it that you used your Last Will to sow conflict, rather than reconciliation, after you were gone?

- Paul B. Adam, Toronto

Visit our Toronto Law Office website: www.wiselaw.net

LawFact of the Day: Wills and Estates

Here is your daily LawFact from Wise Law for Thursday January 19, 2017. Today we are talking about Wills and Estates.

A video posted by Wise Law Office (@wiselaw) on

If a deceased person owed support to a spouse or child under the Family Law Act, they may also be entitled to dependant's relief from the deceased's estate under the Succession Law Reform Act.

If the deceased's will doesn't provide for these obligations, the dependant can apply in court to receive the support they are owed.

- Garry J. Wise, Toronto
Visit our Toronto Law Office website: www.wiselaw.net

Wednesday, January 18, 2017

LawFact of the Day: Family Law

Here is your daily LawFact from Wise Law for Wednesday January 18, 2017. Today we are talking about Family Law.

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Where all matrimonial issues have been resolved as at the one-year anniversary of a separation, an uncontested divorce can proceed by filing specified paperwork with the Court.

Where issues remain unresolved, a divorce judgement can still be issued, and remaining issues can then be continued in a “corollary relief proceeding.
- Garry J. Wise, Toronto
Visit our Toronto Law Office website: www.wiselaw.net

Tuesday, January 17, 2017

LawFact of the Day: Employment Law

Here is your daily LawFact from Wise Law for Tuesday January 17, 2017. Today we are talking about Employment Law.

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Ontario employees are prohibited from discrimination and harassment against any employee.

Employers may not discriminate on the basis of race, religion, colour, citizenship, creed, gender, disability, sexual orientation, gender identity or expression, age, record of offences, marital status or family status.
- Garry J. Wise, Toronto
Visit our Toronto Law Office website: www.wiselaw.net

Monday, January 16, 2017

Top 10 Legal Headlines

Here are your Top 10 legal headlines from Wise Law on Twitter last week.

A video posted by Wise Law Office (@wiselaw) on


- Garry J. Wise, Toronto
Visit our Toronto Law Office website: www.wiselaw.net

140Law: Legal Headlines for the week of January 16, 2017

Here are this week's leading legal news stories from Wise Law on Twitter


- Garry J. Wise, Toronto
Visit our Toronto Law Office website: www.wiselaw.net

Friday, January 13, 2017

3 Things I've Learned as a Law Clerk

BY RACHEL SPENCE, LAW CLERK

Upon entering the legal field I was excited and eager to see if I had what it took to keep up in the real world, outside of school. I had been warned by other graduates that there was always a learning curve when starting, which I didn’t fully grasp until I arrived.


Looking back, I remember attempting to seek out blogs or articles just like this one, to see if anyone out there had any tips. In 2008, there was little to nothing as very few lawyers had websites or email addresses, let alone assistants or clerks writing about their experiences.

Eight years later, I'm glad to share the top three things I learned after entering the legal field:

Effective Foresight:
  • Put the acronym “CYA” to use, despite its vulgarity, we need to work with it in mind to protect our lawyer(s) and clients. This means, double checking everything we draft, collate, scan, plan for and enter in to a calendar system more than once to ensure there are no errors and absolutely nothing is being overlooked or unplanned for.
  • Reminding the lawyers of deadlines or minor details may seem annoying at first, but it’s part of your role.
  • Ensure there are precedents and make it your business to know where all of them are. If there are none, begin creating them yourself. It is more work upfront, but less in the end.
  • Know the Rules regarding service and ensure that everything is pre-planned in accordance with that knowledge.
  • Make a “Follow Up” folder in your email to remind you of any follow ups you need to complete in the coming weeks.
Client Communications are an Art:
  • Every day you will be communicating with people during the most difficult times in their lives. In many cases, they are extremely upset and looking for a clear way to resolve their problems on an expedited basis. You may be their first point of interaction with the firm and you have to ensure that you productively listen to best assist them.
  • To obtain the information we need from clients, who may be fuming and deeply want to express their story and hardships – is not always easy to do. It is our job to guide them back to discussing the facts we require to assist them in getting results. Doing this while maintaining a sense of empathy is truly an art.
  • When it comes to communicating with clients, I have found that efficiency is golden. If a client emails or calls for an update, despite how busy you are, attempt to get back to them within twenty-four hours even if it is to provide an acknowledgement and quick update, it will mean the world to most people.

Work Smarter, Not Harder:
  • Sometimes all it takes is a 10 minute meeting with other staff members to discover issues that are very easy to resolve. Make a point to talk to other staff members about ideas they have or issues they are facing to see if you can work together to find a resolution.
  • Is your office paperless? Why not? Faxes can come in via email these days instead of print.
  • Utilize whatever technology you can to ensure that your firm is operating efficiently and thus, effectively using client retainer funds.
  • Do you have a knowledge management process? Make sure you do.
  • Do you have precedents for everything? Make sure you do.
  • Do you have any ideas for promoting the firm? Speak up.
  • Could you work remotely if required? Is this something that would increase productivity? If so, discuss it.
  • Keep up to date on legal news and changes in the field. It’s as easy as following legal bloggers, legal organisations and even news on social media. The more in the know you are about what changes are happening, the better position you will be in to assist.
-Rachel Spence, Law Clerk

Visit our Toronto Law Office website: www.wiselaw.net

Thursday, January 12, 2017

LawFact of the Day: Wills and Estates

Here is your daily LawFact from Wise Law for Thursday January 12, 2017. Today we are talking about Wills and Estates.

A video posted by Wise Law Office (@wiselaw) on

An estate trustee is entitled to be paid for the work they do on behalf of the estate.

The compensation is 2.5% of each transaction in and of of the estate, and 0.4% of the average value of the estate for each year they act as trustee.

- Garry J. Wise, Toronto
Visit our Toronto Law Office website: www.wiselaw.net