Law Times

Law Times • OcTOber 22, 2018 Page 9 www.lawtimesnews.com Pressure to find missing beneficiaries BY MARG. BRUINEMAN For Law Times W hen a beneficiary of an estate is miss- ing, it puts pres- sure on the execu- tor to do what is reasonable to find them before seeking relief through the courts to ensure that the executor or estate trust- ee is not liable. The questions for the lawyers then are: What is reasonable and what options do executors have to protect themselves? The search for a missing beneficiary can begin by talk- ing with others named in the will, family members, friends, neighbours and any clues the testator might have left in their own contact information. Ad- vertisements could be posted in the area where the individual was last seen. Online searches and employment of other online tools might garner information. Other avenues include hiring a researcher, private investigator or genealogist for family mem- bers who may be overseas, say lawyers. "The searches that are going to be done by the executor are really important because, at the end of the day, the goal here is to find these people, and if you can't find them, to at least con- vince the court that you've done your very best to find them," says Suzana Popovic-Montag, man- aging partner of Hull & Hull LLP, where she practises in the areas of estates, trusts, capacity and fiduciary litigation. But Popovic-Montag says the extent of the search really needs to be in proportion to the size of the estate and the bequest left to the individual that is miss- ing. It's up to the executor to do a cost-benefit analysis because spending thousands of dollars on a search for a $3,000 bequest, for instance, doesn't make any sense. "The problem is a little bit exacerbated, too, for executors because we have an act that says you have to make reasonable enquiries to find beneficiaries through births outside of mar- riage," she adds. A will that directs that the estate — or part of the estate — should be left to the testa- tor's children could include those conceived out of wed- lock, heightening the executor's search responsibility, she says. If the beneficiary remains missing following what the ex- ecutor believes are reasonable searches, they can to turn to the courts for relief. That includes having them declared dead or seeking an absenteeism order to have someone else accept the bequest on behalf of the missing individual, she says. But there are other approaches. "Where the absentee has an interest in the estate, rather than declaring the absentee dead and, therefore, the absentee loses the interest in the estate, the court can appoint a committee to manage beneficiaries' interest. It can be an individual or trust corporation. And, basically, that committee would manage that estate," says Toronto-area estate lawyer Charles Ticker. That preserves the missing person's right to the estate, he adds. And if later that person remains missing, an order can be sought to have them declared dead, says Ticker. One order that can be useful but that Ticker believes isn't so frequently used despite its intro- duction more than a century ago is a Benjamin order, which came out of the old British case Nev- ille v. Benjamin, in which one of 13 children named in a will couldn't be found. The court declared the ben- eficiary predeceased the testator, meaning the missing person's share in the estate could be di- vided among the rest of the ben- eficiaries. "The purpose of the order is it protects the trustee because if the beneficiary does show up down the road and says, 'Hey, I'm back,' if the trustee has al- ready distributed the estate and has obtained this Benjamin order, the trustee is protected" from liability for the distributed estate, says Ticker. "The beneficiary, in some circumstances, can go after the other beneficiaries and try to get it out of them, but that would not be an easy task." Although Benjamin orders aren't frequently used in On- tario, it did come up in Steele v. Smith before the Superior Court of Justice. The case examined what the estate trustee has to go through to find the missing ben- eficiary and how much time has passed since the testator's death, concluding that the 18 months between the testator's January 2017 death and the July 2018 or- der was enough time. It's handy because it directly applies to the problem of a miss- ing beneficiary in an estate mat- ter, says Jacob Kaufman, who practises with de Vries Litigation LLP in Toronto, whereas a dec- laration of death can have other, sometimes unintentional, con- sequences. Additionally, On- tario's Declaration of Death Act considers two options for time of death: a circumstance of peril at which time the death was likely caused or the date the applica- tion was made. "It's a pragmatic, fair ap- proach where the court can balance everyone's interest," Kaufman says, of the Benjamin order. LT FOCUS A centuries' old practice gives the deceased's personal representative one year after the date of death to wind up the deceased's estate. Often referred to as the "executor's year", the personal representative is required to gather in the assets, pay liabilities, and distribute the estate according to the terms of the will or the laws of intes- tacy. Today, however, it often takes more than a year to administer an estate. Yet, as explained in the recent case of Rivard v Morris 1 , interest will accrue on specific legacies not paid at the end of the executor's year. In Rivard, the deceased died in October 2013. The deceased left his two daughters specific legacies of $530,000 each and the residue of his estate to his son. After their father's death, the daughters challenged his will. The litigation settled in August 2016 and the daughters received their legacies (two years after the first anniversary of the deceased's death). The sisters then claimed that they were owed interest at 5% per year on their respective legacies. The application judge recognized (but did not name) a common-law rule providing that interest was to be paid on specific legacies not paid at the end of the executor's year. However, the court exercised its discretion not to award any interest payment to the daughters on their specific legacies - one reason being that the daughters' will challenge delayed the estate's administration and distribution. The daughters appealed. The appeal was allowed. The Ontario Court of Appeal held that the daughters were entitled to an interest payment of 5% per year on their legacies after the first year. The ONCA noted that estates should be wrapped up within the executor's year. Moreover, it referenced the equitable "rule of convenience" to explain that interest will accrue on specific legacies not paid after the executor's year ends. Interest is payable even if it is not possible or practical to make a payment within the executor's year, and even if the legatees caused the delay. According to the ONCA, if a testator does not believe the rule of convenience is fair, she can postpone or specify a date for the payment of specific legacies in her will or set a different interest rate (will drafters take note!). In this case, no alternative date for payment or interest rate was indicated in the will. Therefore, it was presumed that the deceased wanted his daughters to be paid within a year of his passing. The ONCA concluded that the daughters were entitled to an interest payment of 5% 2 per year from the first anniversary of the deceased's death payable from the residue of the estate (i.e. two years of interest). With regard to the application judge's exercise of discretion to not order an interest payment, the ONCA noted that there was no relevant Canadian or English case law indicating that courts have such discretion. The ONCA considered arguments for and against the exercise of such discretion, but ultimately did not decide this issue. The deceased's son has filed for leave to appeal with the Supreme Court of Canada. 3 It seems self-evident that administering an estate can often take longer than anticipated and/ or be outside of the personal representative's control. Moreover, some estates can be difficult and complex to administer, particularly when assets are located outside of the jurisdiction or complex tax issues loom. Will challenges bog down estates in litigation for years. Therefore, it is not always reasonable to expect that an estate will be wound up in a year. Nevertheless, the rule of convenience provides certainty and avoids disputes as to whether interest is payable and when such interest should accrue; it may not be a perfect rule, but it is "convenient". However, some in the estate bar have argued that the executor's year should be extended to 18 or 24 months (a more realistic timeframe). Or, perhaps, courts should have unhampered discretion to order that no interest is payable. After all, they argue, the rule of convenience is an equitable principle and, as the ONCA stated, "discretion is a hallmark of equity" 1 . Estate litigation is never dull. 1 Rivard v Morris, 2018 ONCA 181 (CanLII). 2 Section 3 of the Federal Interest Act provides for a rate of interest of 5% whenever interest is payable by agreement of the parties or by law and no rate is fixed by the agreement of the parties or by law. 3 No word on whether leave has been granted. By Anna Alizadeh and Justin de Vries of de VRIES LITIGATION LLP A rule of inconvenience? LLP A d v i c e . A d v o c a c y . R e s o l u t i o n . Sponsored by Justin de Vries de VRIES LITIGATION LLP DeVries-Sponosored_LT_Oct22_18.indd 1 2018-10-16 1:13 PM Suzana Popovic-Montag says the extent of a search for the beneficiary of an estate really needs to be in proportion to the size of the estate and the bequest left to the person who is missing. The beneficiary, in some circumstances, can go after the other beneficiaries and try to get it out of them, but that would not be an easy task. Charles Ticker

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