ESTATE DILEMMAS

Feud Disruptors

Estate planning strategies to manage family fights

Losing a loved one is never easy, and the added stresses of family conflict can make issues much more difficult. This is why getting all family members on the same page during the estate planning process is so important.

Advisors can provide value to their clients by encouraging them to have open conversations with family members about their estate planning desires and objectives, particularly if specific family members are to be involved in implementation of the estate plan.

A review of the Ontario Court of Appeal decision Walters v. Walters, 2022 ONCA 38 (CanLII) provides a reminder as to the importance of having these discussions before a loved one passes away.

Florence Olive Walters passed away in 2016. She named her three adult children as trustees of a trust created in her will for the comfort and welfare of her surviving spouse, Gerald Walters. Mr. Walters is also the father of the trustees. They were named as capital beneficiaries of the trust, which would entitle them to receive the unused portion of their mother ’ s estate upon the death of their father. The trustees were given absolute discretion to use the capital of the residue of Ms. Walters ’ s estate to care for their father.

Mr. Walters requested that the trustees encroach on the capital of the estate to pay for his living expenses. However, due to mistrust of their father, the two acting trustees (one was removed), would not pay what was requested. Mr. Walters applied to court for an order requiring the trustees to make the payments. The lower court found in favour of Mr.Walters, determining that the trustees were influenced by factors including their dislike and distrust of their father.

The trustees were ordered to pay their father arrears of almost $100,000 and $26,000 out of the estate for his legal fees. They appealed the decision. The Court of Appeal reduced the arrears by approximately 40%, but affirmed the lower court decision in finding that it was reasonable to conclude that the trustees ’ discretion was improperly influenced by their dislike of their father.

Let’ s look at suggestions for family members to consider when discussing estate planning.

FAMILY DYNAMICS

The Court of Appeal decision noted that it was not surprising that the trustees disliked their father, given the history of their relationship. One of the most important factors to consider with estate planning is family dynamics. Every family is different and an estate plan should account for a family ’ s particular issues including: long-standing conflict between parents and children, sibling rivalry and other conflict issues, communication style, expectations, and its decision-making process, to name a few.

It is not recommended to appoint family members who do not get along or work well together to act jointly under a power of attorney, or as co-executors or cotrustees. In this Walters case, one of the children who agreed with his father ’ s position was removed as a co-trustee.

Additionally, if the relationship between the appointed attorney, executor, or trustee and the beneficiary or incapable person is strained, this can lead to litigation, as occurred in this case. Even in family situations where everyone gets along, appointing adult children to make financial decisions for a capable parent could lead to conflict and legal disputes.

During the estate planning process, the will maker and everyone appointed to assist with the implementation of the estate plan should discuss each person ’ s role. This provides an opportunity for all those involved to commit to carrying out their duties in an amicable and productive manner. The estate plan could also include directions for how to handle potential disputes and conflicts, without resorting to the courts if possible.

CHOICE OF TRUSTEE

Naming the children as trustees and capital beneficiaries of the trust, placed them in a conflict of interest. The less that was distributed to their father, would mean more estate assets for the trustees at his death. Discussions about who is best suited to act as a trustee, taking into account family history and conflict, is essential. Furthermore, when creating a trust, consideration should be given to providing a capable surviving spouse with some decision-making authority. Naming them as a co-trustee with adult children, and also including a neutral third party as a co-trustee to assist with an impasse or conflict, could be a planning option.

COMMUNICATION OF INTENTIONS

Although the deceased’ s will indicated that her husband be cared for from her estate assets during his lifetime, the trustees were unwilling to pay his requested living expenses for a home he wanted to live in. To minimize potential conflict and litigation, intentions regarding amounts to be paid for living expenses, and different options for housing, vacations, personal needs, medical care, and other issues involving the beneficiary should be clearly communicated.

When a loved one dies and there is family conflict, estate assets can be lost to court and legal fees and relationships may be damaged. Planning to minimize the likelihood of family discord is well worth the effort. Paying attention to family dynamics, making wise choices regarding those who will help with the implementation of the estate plan, and clearly communicating intentions, is likely to go a long way in developing a solid estate plan and minimizing family conflicts.

AKUA CARMICHAEL, LLB, J.D., TEP, is director, tax & estate planning services at The Empire Life Insurance Company. The opinions expressed in this publication are those of the author.