King Lear: Lessons in estate and succession planning, capacity and family dynamics


Written on August 29, 2014 – 6:00 am | by Ken Shulman

The Stratford Festival has included ‘King Lear’ among this year’s performances.  ‘Lear’, of course, is the poster boy for older adults who use poor judgment in determining how and when to distribute their assets to their children.  The opening of King Lear reveals the King’s intent to divest his kingdom to his three daughters. Similar to many older adults, he “wishes unburdened to crawl toward death”.  However, he adds a cruel twist.  His three daughters must publicly profess their love for him with “the largest bounty to whoever doth love him most”. This was a narcissistic and capricious act with tragic consequences for him and his one sincerely devoted daughter, Cordelia who refused to be hypocritical as were her two older sisters. Leaving himself no control of his assets and putting himself at the mercy of two greedy, ambitious and vindictive daughters, Shakespeare’s Lear provides us with a cautionary tale.

It is unclear in the opening scene of King Lear whether he has always been a narcissistic and controlling person (therefore probably considered capable) or whether he is mentally ill and in the early stages of dementia with impulsivity and poor judgment (therefore probably incapable). The ability to view the play to its conclusion should have the advantages of a retrospective capacity assessment in which earlier actions, behaviour and symptoms can be cast into sharper relief and be better understood in the context of the clinical course after the event in question.  However, Shakespeare presents Lear as an amalgam of personality disorder, delirium and dementia, thus leaving lots of opportunity for critical thinking but no clear conclusions.  Nonetheless, Shakespeare is remarkably relevant today as he highlights the vicissitudes of old age and its impact on families and on estate planning.   Shakespeare would have made for an excellent expert who could have informed and indeed entertained the modern day court. For those interested, the iconic ‘King Lear’ is well worth reading or seeing the play at Stratford starring Colm Feore. Performances have been extended until October 25.

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    PRICE ADJUSTMENT CLAUSES IN ESTATE PLAN AGREEMENTS


    Written on August 28, 2014 – 7:00 am | by Steven Frye

    Many estate plans include a transfer of property (e.g. shares of a privately held corporation) to a company and freeze the value (or price) of the transferred property to the current owners at the transfer date. To avoid some punitive provisions in the Income Tax Act associated with non-arm’s length transfers, transfer agreements often include a price adjustment clause (“PAC”) which provides for a retroactive adjustment to the transfer value or price in the event the Canada Revenue Agency (“CRA”) or a Court make a determination sometime after the transaction date that the fair market value of the transferred property was greater or less than the value ascribed at the time of transfer.

    What makes for a bona fide price adjustment clause? In a recent bulletin, CRA has updated its position on the conditions for the recognition of a PAC:

    • The Agreement reflects an intention of the parties to transact at fair market value. If a significant difference in valuations arises, that may place some doubt on the parties’ intentions.

    • The fair market value determination for the purposes of the PAC is based on fair and reasonable methods. More in this in my next blog.

    • The parties agreed at the outset that a subsequent determination of fair market value by the CRA or a Court will be the value used for the transferred property.

    • The excess or shortfall arising from the subsequent determination will give rise to a paid refund or legal liability as the case may be.

    Thanks for reading.

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      Should you wait to bring a will challenge?


      Written on August 27, 2014 – 9:56 am | by Katie Ionson

      The Ontario Superior Court recently addressed the question of the limitation period applicable to a will challenge.[1] The challenge in this case was brought by the testatrix’s son. The testatrix, Eleanor, died on June 4, 2011. She left Primary and Secondary Wills executed on April 9, 2011 that left specific assets to her son, Blake, and divided the residue of her estate equally between Blake and her other son, Cody. Blake argued that his mother’s intention was to leave him her entire estate and on September 5, 2013, he brought an application for a declaration that the 2011 Wills were invalid.

      The respondents argued that the general two-year limitation period set out in the Act applies to will challenges and that Blake’s application was therefore statute-barred under the Limitations Act, 2002 (the “Act”). They submitted that Blake had sufficient knowledge to commence the application prior to September 2011. Among other things, on June 28, 2011, Blake wrote Eleanor’s lawyer expressing concern with his mother’s choice of executors and requesting the names of reputable estate lawyers, which were subsequently provided to him. The court also found that Blake had received a copy of the Will by July 2011 and that he was familiar with Eleanor’s assets.

      Justice Greer agreed with the respondents in finding that the claim was statute-barred under the Act. She acknowledged that s. 16(1)(a) of the Act states that no limitation period applies in respect of an application for a declaration where no consequential relief is sought. However, she found that Blake’s will challenge sought consequential relief in that it asked, among other things, for an Order removing the executors and requiring them to pass accounts. In arriving at this conclusion, Justice Greer noted that:

      “To say that every next-of-kin has an innate right to bring on a will challenge at any time as long as there are assets still undistributed or those that can be traced, would be to put all [executors] in peril of being sued at any time…”

      In this case, Justice Greer found that Blake had sufficient knowledge to commence the application on the date of Eleanor’s death and the limitation period therefore began to run on that date. The decision suggests that the date of death is the date the act or omission giving rise to the challenge occurs, since a will becomes effective on death. This is significant as s. 5(2) of the Act deems the limitation period to begin on the date on which the act or omission giving rise to the proceedings occurs, absent evidence to the contrary.

      The decision of Leibel v. Leibel is a wake-up call to those contemplating a will challenge but tempted to hit the snooze button. With so much occurring in the executor’s year, a two-year limitation period in will challenges, potentially beginning on the testator’s death, is a short time in which to bring an application.

      Katie Ionson


      [1] Leibel v. Leibel, 2014 ONSC 4516. The court also considered the issue of whether Blake was estopped from challenging the Will based on equitable doctrines. This blog does not discuss those aspects of the decision.

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