When Can a Trustee Be Excused for Causing a Loss?

On Wednesday I blogged about the decision of the Ontario Superior Court of Justice in the McDougall Estate.  The case involved a handwritten will and codicil made by the deceased that was difficult to decipher.  A dispute arose between the estate trustee and the residual beneficiary about whether the will authorized the estate trustee to make a charitable gift.   Ultimately, van Rensburg J. found that although the deceased had intended that a charitable gift be made, the gift failed because the deceased had failed to specify the amount. 

Given that the estate trustee had already made the $10,000 donation, an issue arose as to what recourse the residual beneficiary of the estate had.  The beneficiary argued that as the donation had been improper, the estate trustee ought to be required to repay it (as well as the travel expenses incurred delivering the funds to the charity).  The estate trustee took the position that notwithstanding that she had made the donation in error, she had acted reasonably and in good faith and ought not to be held personally liable. 

Section 35 of the Trustee Act provides the court with the authority to relieve a trustee from liability for an improper act if it is satisfied that the trustee acted reasonably and honestly.  Additionally, the common law also allows the court to excuse a trustee from liability for an innocent mistake made in good faith. 

Here, van Rensburg J. found that notwithstanding the court determined that the gift to charity was not valid, the estate trustee’s interpretation of the will had not been unreasonable.  Additionally, she pointed to the fact that although the estate trustee had erred, she had derived no personal benefit from the error.  Ultimately, van Rensburg J. found that the circumstances were such that the trustee ought to be excused from liability and not required to repay the estate for the donated funds.

Yet Another Reason to Leave the Will Drafting to a Lawyer

There are innumerable problems that can arise when people try to do their own wills.  The recent decision in the McDougall Estate discusses the difficulties that arose in trying to decipher an individual’s largely illegible will. 

The deceased left a will and a codicil that were both in his own handwriting.  The parties were all in agreement that, when taken together, the documents constituted a valid holograph will and codicil.  Unfortunately, there were large parts of both documents that were illegible – and insofar as the court was able to decipher the language of the documents, it was still difficult to make out exactly how the deceased was trying to distribute his estate. 

The parties agreed that the effect of the will was to leave the bulk of the deceased’s estate to his sister.  However, there was a dispute over whether the will authorized the estate trustee to make a donation to charity.

Although the wording of the will was ambiguous, the parties agreed that, read without the codicil, the will authorized the charitable donation only if the residual beneficiary died before the testator or renounced her share of the estate.  The parties disagreed as to the effect of the codicil.

The estate trustee argued that the codicil permitted her to make a bequest to charity prior to transferring the balance of the estate to the residual beneficiary.  The beneficiary argued that the relevant words of the codicil were illegible and should be given no meaning.  Moreover, she argued that the language of the codicil, as it could be deciphered, was not particular as to the dollar amount of any charitable donation and, accordingly, should fail.

Justice van Rensburg found that when reading the will and codicil together it appeared that the deceased intended that a bequest to charity be paid prior to the residue being distributed to the beneficiary.  However, van Rensburg J. went on to find that the fact the amount of the bequest was not specified was fatal and on this basis the gift failed.  Accordingly, she found the estate trustee had wrongfully made the payment to the charity.

Tune in on Friday to find out what the consequences to the estate trustee were.  

The World's Richest Canine Has Gone to Whiskerville

Last week brought us the sad news that Trouble, the millionaire Maltese, has taken her final journey to the dog show in the sky.  For the uninitiated, Trouble was the beloved dog of Leona Helmsley. 

Helmsley died in 2007 leaving a will with some news-making provisions.  She excluded her two grandsons but left her beloved Trouble a trust fund worth some $12 million.  Her grandsons later challenged the will and a sympathetic judge reduced Trouble’s trust to $2 million – still, not bad for, well, a dog!

Unfortunately, Trouble’s post-Helmsley life was not entirely happy.  Despite the fact that Trouble wasn’t involved in convincing Helmsley to leave the will she did (at least, one hopes), she nevertheless ended up being the object of much resentment.  After the terms of the will became public, the poor dog was subject to 20 - 30 death threats!

Helmsley’s brothers apparently refused to care for her so Trouble traveled by private jet to Florida (under the pseudonym “Bubbles”) and was cared for by Carl Lekic, the general manager of the Sarasota-based Helmsley Sandcastle Hotel. 

While residing in Florida, Trouble’s annual expenses were approximately $190,000.  This included $100,000 for security; $8,000 for grooming; $1,200 for food; and between $2,500 and $18,000 for health care – poor Trouble had kidney, er, troubles. 

Although Trouble’s death just came to light last week, apparently she died on December 13.  She was 12 at the time.  Her remains were cremated and are currently being “privately retained”. 

Helmsley’s will specified that Trouble’s remains be buried along with Helmsley, although it is not yet clear whether this will occur.  Pursuant to the terms of Helmsley’s will, the remaining capital of the trust is to be reverted to the Leona M. and Harry B. Helmsley Charitable Trust for charitable purposes.    

Sizeable Gift Enhances Museum's Plans and Programs

On Monday I blogged about trends in planned giving.  So it was à propos that on Wednesday night I found myself at the Chairs’ Reception and Exhibition Preview of the Bollywood Cinema Showcards exhibit at the Royal Ontario Museum

During dinner, the Donor of Merit Award was presented to the trustees of the Louise Hawley Stone Charitable Trust.  The award is presented annually to a donor whose gift of $1 million or more has significantly advanced the museum’s goals and programs. 

In 1998, the ROM became the recipient of the largest legacy gift it has ever received from the estate of Louise Hawley Stone.  Mrs. Stone had been a supporter of the museum for over fifty years. 

Mrs. Stone had been an avid collector of Asian art and had served on the ROM’s board of trustees for a number of years in the late 1960s and early 1970s.  She also helped to establish the museum’s textile committee in the mid 1970s.    

Over the years Mrs. Stone donated many of the ROM’s major pieces of Chinese and English Furniture.  Additionally, she donated more than 1000 artifacts to the museum’s textile collection.

Mrs. Stone died in 1997.  The terms of her last will and testament established a charitable trust of almost $50 million for the ROM’s benefit.  It is the largest cash gift the ROM has ever received.  The terms of the trust specified that the income shall be applied by the museum for its "own publications relating to its collections or any part of them and for purchases of artifacts."

The Louise Hawley Stone Charitable Trust currently generates more than $2 million annually for the ROM.  Since its inception, the trust has granted more than $25 million to the ROM in support of acquisitions and publications.

Tips and Traps for Successful Planned Giving Programs

It’s not uncommon for people to want to benefit charities in their wills.  While sometimes it can be as easy as simply leaving a bequest, many charities have formal planned giving programs designed to facilitate gifts to their organizations.  Given the unprecedented intergenerational transfer of wealth that is occurring and that is expected to continue occurring for several decades, many charities can be expected to reap the benefits.         

CharityVillage.com and Give Green Canada recently released the International Gift Planning Survey, which aimed to assess the readiness of charities and non-profit organizations to respond to increased opportunities for legacy fundraising.  The survey involved more than 900 gift planning professionals from 25 different countries (with most respondents coming from North America). 

The survey results indicated that 88% of respondents had budgetary resources in their organization allocated to bequest fundraising.  The age of the programs varied.  34% reported that their organization’s planned giving program was more than 15 years old while 31% reported that their organization’s program had existed for five years or less. 

The efforts of those with planned giving programs in place appear to be yielding positive results.  36% of respondents said their organizations had seen an increase in the number of bequests they received since 2005, with 77% of respondents indicating that their organization’s average bequest size was more than $25,000 and 36% indicating that it was more than $50,000. 

The most frequently listed secret to a successful planned giving program was saying “thank you” to donors.  Other frequently successful enabling conditions were devoting a dedicated staff and budgetary resources to the giving program, actively marketing the program, and creating and engaging with a “legacy circle” of donors. 

The most commonly named barrier to a successful program was a lack of human resources in the organization.  Another stumbling block that arose was competition from short-term revenue generation sources within the organization. 

$800 Million? Now That's A Legacy!

May is national Leave a Legacy month in Canada.  Leave a Legacy is a national public awareness organization aimed at encouraging people to leave gifts to charity or other non-profits in their will (or through some other gift planning mechanism). 

Throughout May, Leave a Legacy has a number of events scheduled across the country.  The list of events in Toronto can be found here

One family in the United States that is certainly committed to leaving a legacy is the Waltons (of Wal-Mart fame).  The Wall Street Journal reports that the Walton Family Foundation has pledged to donate $800 million to the Crystal Bridges Museum of American Art, a museum founded by Alice Walton (daughter of Wal-Mart founder Sam Walton). 

The 201,000 square foot museum is encyclopedic in nature and aims to chronicle the history of American art from the late 1600s to the present. The museum is located in Wal-Mart’s rural Arkansas hometown of Bentonville (population 35,301) and set to open on November 11, 2011. 

The gift by the Walton Family Foundation is being heralded as the largest cash donation ever made to an American museum – exceeding the $660 million in oil stocks donated to the Getty Museum in Los Angeles by Paul Getty in the late 1970s and the $500 million cash donation made by Caroline Weiss Law to the Museum of Fine Arts in Houston.

The Los Angeles Times has pointed out that while the Waltons’ donation might be the biggest cash gift ever, the actual value of Getty’s donation was larger – when adjusted for inflation, his donation in 1976 is worth almost $2.5 billion in today’s terms. 

Changing Lives, $5 at a Time

These days, it seems like billionaires everywhere are promising to give their wealth away.  However, it’s important to remember that life changing donations can come in any amount. 

In December 1933, an individual using the pseudonym “B. Virdot” placed an advertisement in The Repository, a newspaper in Canton, Ohio.  In it, he offered modest cash gifts to families in need.  He asked that those who were interested write describing their financial troubles and how they would spend the money and he promised to keep their identities secret. 

The offer came at a particularly opportune time for some – it was in the midst of the Great Depression and Canton, an industrial town which then had about 105,000 residents, was struggling.  Approximately 150 people received cheques, most for about $5. 

The donor’s identity remained secret past his death until 2008 when his grandson, Ted Gup, was sorting through his papers and came across one addressed to “B. Virdot”.  As it turned out, “B. Virdot” was actually Samuel J. Stone, who had escaped persecution as a Jew and an impoverished life in Romania, immigrating to the United States and eventually building a successful chain of clothing stores. 

Mr. Gup has since used the letters and interviews with the descendants of some of the letter writers as the basis for the recently published book, “A Secret Gift.”  The book is an account of Mr. Stone’s life as well as the letters that were sent to him and the backgrounds and outcomes of the senders. 

I hope everyone enjoyed a wonderful Christmas! 

Building a Legacy, One Terracotta Warrior at a Time

Over the weekend, I had the opportunity to see the “Warrior Emperor and China’s Terracotta Army” exhibition at the Royal Ontario Museum.  The exhibition showcases funerary art from the tomb of Warrior Emperor Yin Zheng, the first emperor of China – including some of the life sized terracotta warriors with which he was buried.   

Yin Zheng is a pivotal, but controversial, figure in China’s history.  He unified China and went on to become its first emperor in 221 BC, ruling until his death in 210 BC.  While he is credited with developing a strong centralized government and bringing about social and cultural reform, he was an autocratic leader and his rule was characterized by tyranny and bloodshed. 

Yin Zheng wanted to ensure his continued dominance, so he built a massive mausoleum – at over 2.18 million square meters, it’s the largest in history – and filled it with 8000 terracotta warriors to help him rebuild his empire in the afterlife.  The site was first discovered by farmers in 1974 and, to date, over 2000 terracotta warriors, horses, and chariots have been unearthed. 

It is believed that construction of the mausoleum started in 246 BC, when Ying Zheng was only 13, and involved more than 700,000 builders.  The project was so labour-intensive not just because of its sheer size, but because Ying Zheng had directed that no two warriors should look exactly alike, the result being that each is unique.  Also inside the complex are palaces, watchtowers, and various artifacts that he anticipated needing in his afterlife. 

For those who are interested in seeing the exhibition, it runs until January 2, 2011. 

Welcome to the Toronto Estates and Trusts Monitor

I am pleased to announce the launch of my new blog.  I hope to update it often, so make sure to come back frequently to see what’s new. 

If you feel like sharing the content, the share link will allow you to post the blog on various social media sites, such as LinkedIn, Facebook, and Twitter or email it to others. 

I’m always happy to hear from my readers, so if you have any questions, comments, or topics you would like me to blog about, please feel free to email me using the enquiry form on the contact page.  

Have a great day!

Megan F. Connolly