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WELCOME
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Effective Estate and Tax Planning Strategies ndash Navigating the Next Normal
Recordinghttpsmillerthomsonwebexcommillerthomsonldrphp RCID=78368d68bd494f17b820ffcb51222191
Thursday July 9 2020 VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R-WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Wendi Crowe Host Edmonton Office
780429 9764
Bio
wcrowemillerthomsoncom
3
Please note all information provided during this session is not intended to constitute legal advice instead all information content and materials available are for general informational purposes only
4
Todayrsquos Panelists Have You Heard What The Judges Did Now to Alter Testator Intent
bull Jacklynn Pivovar ndash jpivovarmillerthomsoncom
bull Pia Hundal ndash phundalmillerthomsoncom (case examples)
Trustees Know Your Responsibilities During Volatile Market Conditions
bull Dwight Dee ndash ddeemillerthomsoncom
bull Darren Lund - dlundmillerthomsoncom
5
-
Have You Heard What The Judges Did Now to Alter
Testator Intent
Jacklynn Pivovar and Pia Hundal
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Ways to Alter Testator Intent bull Family maintenance and support claims
bull Challenges of will formality requirements
bull Challenges of capacity and undue influence
bull Joint property
bull Financial abuse
7
Family Maintenance and Support bull Who can make a claim varies between provinces
bull Responsibilities that flow from relationships and individuals borne from them
bull Applicants are entitled to apply for dependents support from the an estate if
the deceased does not make ldquoadequate provisionrdquo for their proper
maintenance or support
bull Claims of a ldquodependentrdquo or ldquofamily memberrdquo may override testamentary
freedom
8
Wills Formality Requirements bull Due execution
bull Knowledge and acceptance
bull Capacity
bull No undue influence or fraud
9
Capacity and Undue Influence Capacity
bull If the will-maker is found to not have capacity the Will is invalid and the estate
passes on intestacy
bull Varying degrees of capacity
Undue Influence
bull Requires the actual exercise of coercion such that the free will of the will-
maker is overborne and the will-maker creates a Will or gift that they did not
intend
10
Joint Property bull Significant cause of estate litigation
bull Can apply to wealth transfers such as bank accounts or real property
bull Joint Tenancy with adult children or any other person other than the
spouseadult interdependent partner gives rise to a presumption of a resulting
trust
11
Factors to Consider for Joint Tenancy bull Consider tax consequences usually treated as a disposition of one-half of
property for income tax purposes
bull Exposure to creditors of the joint tenant including family law claims
bull Loss of unilateral control of property
12
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Effective Estate and Tax Planning Strategies ndash Navigating the Next Normal
Recordinghttpsmillerthomsonwebexcommillerthomsonldrphp RCID=78368d68bd494f17b820ffcb51222191
Thursday July 9 2020 VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R-WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Wendi Crowe Host Edmonton Office
780429 9764
Bio
wcrowemillerthomsoncom
3
Please note all information provided during this session is not intended to constitute legal advice instead all information content and materials available are for general informational purposes only
4
Todayrsquos Panelists Have You Heard What The Judges Did Now to Alter Testator Intent
bull Jacklynn Pivovar ndash jpivovarmillerthomsoncom
bull Pia Hundal ndash phundalmillerthomsoncom (case examples)
Trustees Know Your Responsibilities During Volatile Market Conditions
bull Dwight Dee ndash ddeemillerthomsoncom
bull Darren Lund - dlundmillerthomsoncom
5
-
Have You Heard What The Judges Did Now to Alter
Testator Intent
Jacklynn Pivovar and Pia Hundal
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Ways to Alter Testator Intent bull Family maintenance and support claims
bull Challenges of will formality requirements
bull Challenges of capacity and undue influence
bull Joint property
bull Financial abuse
7
Family Maintenance and Support bull Who can make a claim varies between provinces
bull Responsibilities that flow from relationships and individuals borne from them
bull Applicants are entitled to apply for dependents support from the an estate if
the deceased does not make ldquoadequate provisionrdquo for their proper
maintenance or support
bull Claims of a ldquodependentrdquo or ldquofamily memberrdquo may override testamentary
freedom
8
Wills Formality Requirements bull Due execution
bull Knowledge and acceptance
bull Capacity
bull No undue influence or fraud
9
Capacity and Undue Influence Capacity
bull If the will-maker is found to not have capacity the Will is invalid and the estate
passes on intestacy
bull Varying degrees of capacity
Undue Influence
bull Requires the actual exercise of coercion such that the free will of the will-
maker is overborne and the will-maker creates a Will or gift that they did not
intend
10
Joint Property bull Significant cause of estate litigation
bull Can apply to wealth transfers such as bank accounts or real property
bull Joint Tenancy with adult children or any other person other than the
spouseadult interdependent partner gives rise to a presumption of a resulting
trust
11
Factors to Consider for Joint Tenancy bull Consider tax consequences usually treated as a disposition of one-half of
property for income tax purposes
bull Exposure to creditors of the joint tenant including family law claims
bull Loss of unilateral control of property
12
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Wendi Crowe Host Edmonton Office
780429 9764
Bio
wcrowemillerthomsoncom
3
Please note all information provided during this session is not intended to constitute legal advice instead all information content and materials available are for general informational purposes only
4
Todayrsquos Panelists Have You Heard What The Judges Did Now to Alter Testator Intent
bull Jacklynn Pivovar ndash jpivovarmillerthomsoncom
bull Pia Hundal ndash phundalmillerthomsoncom (case examples)
Trustees Know Your Responsibilities During Volatile Market Conditions
bull Dwight Dee ndash ddeemillerthomsoncom
bull Darren Lund - dlundmillerthomsoncom
5
-
Have You Heard What The Judges Did Now to Alter
Testator Intent
Jacklynn Pivovar and Pia Hundal
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Ways to Alter Testator Intent bull Family maintenance and support claims
bull Challenges of will formality requirements
bull Challenges of capacity and undue influence
bull Joint property
bull Financial abuse
7
Family Maintenance and Support bull Who can make a claim varies between provinces
bull Responsibilities that flow from relationships and individuals borne from them
bull Applicants are entitled to apply for dependents support from the an estate if
the deceased does not make ldquoadequate provisionrdquo for their proper
maintenance or support
bull Claims of a ldquodependentrdquo or ldquofamily memberrdquo may override testamentary
freedom
8
Wills Formality Requirements bull Due execution
bull Knowledge and acceptance
bull Capacity
bull No undue influence or fraud
9
Capacity and Undue Influence Capacity
bull If the will-maker is found to not have capacity the Will is invalid and the estate
passes on intestacy
bull Varying degrees of capacity
Undue Influence
bull Requires the actual exercise of coercion such that the free will of the will-
maker is overborne and the will-maker creates a Will or gift that they did not
intend
10
Joint Property bull Significant cause of estate litigation
bull Can apply to wealth transfers such as bank accounts or real property
bull Joint Tenancy with adult children or any other person other than the
spouseadult interdependent partner gives rise to a presumption of a resulting
trust
11
Factors to Consider for Joint Tenancy bull Consider tax consequences usually treated as a disposition of one-half of
property for income tax purposes
bull Exposure to creditors of the joint tenant including family law claims
bull Loss of unilateral control of property
12
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Please note all information provided during this session is not intended to constitute legal advice instead all information content and materials available are for general informational purposes only
4
Todayrsquos Panelists Have You Heard What The Judges Did Now to Alter Testator Intent
bull Jacklynn Pivovar ndash jpivovarmillerthomsoncom
bull Pia Hundal ndash phundalmillerthomsoncom (case examples)
Trustees Know Your Responsibilities During Volatile Market Conditions
bull Dwight Dee ndash ddeemillerthomsoncom
bull Darren Lund - dlundmillerthomsoncom
5
-
Have You Heard What The Judges Did Now to Alter
Testator Intent
Jacklynn Pivovar and Pia Hundal
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Ways to Alter Testator Intent bull Family maintenance and support claims
bull Challenges of will formality requirements
bull Challenges of capacity and undue influence
bull Joint property
bull Financial abuse
7
Family Maintenance and Support bull Who can make a claim varies between provinces
bull Responsibilities that flow from relationships and individuals borne from them
bull Applicants are entitled to apply for dependents support from the an estate if
the deceased does not make ldquoadequate provisionrdquo for their proper
maintenance or support
bull Claims of a ldquodependentrdquo or ldquofamily memberrdquo may override testamentary
freedom
8
Wills Formality Requirements bull Due execution
bull Knowledge and acceptance
bull Capacity
bull No undue influence or fraud
9
Capacity and Undue Influence Capacity
bull If the will-maker is found to not have capacity the Will is invalid and the estate
passes on intestacy
bull Varying degrees of capacity
Undue Influence
bull Requires the actual exercise of coercion such that the free will of the will-
maker is overborne and the will-maker creates a Will or gift that they did not
intend
10
Joint Property bull Significant cause of estate litigation
bull Can apply to wealth transfers such as bank accounts or real property
bull Joint Tenancy with adult children or any other person other than the
spouseadult interdependent partner gives rise to a presumption of a resulting
trust
11
Factors to Consider for Joint Tenancy bull Consider tax consequences usually treated as a disposition of one-half of
property for income tax purposes
bull Exposure to creditors of the joint tenant including family law claims
bull Loss of unilateral control of property
12
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Todayrsquos Panelists Have You Heard What The Judges Did Now to Alter Testator Intent
bull Jacklynn Pivovar ndash jpivovarmillerthomsoncom
bull Pia Hundal ndash phundalmillerthomsoncom (case examples)
Trustees Know Your Responsibilities During Volatile Market Conditions
bull Dwight Dee ndash ddeemillerthomsoncom
bull Darren Lund - dlundmillerthomsoncom
5
-
Have You Heard What The Judges Did Now to Alter
Testator Intent
Jacklynn Pivovar and Pia Hundal
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Ways to Alter Testator Intent bull Family maintenance and support claims
bull Challenges of will formality requirements
bull Challenges of capacity and undue influence
bull Joint property
bull Financial abuse
7
Family Maintenance and Support bull Who can make a claim varies between provinces
bull Responsibilities that flow from relationships and individuals borne from them
bull Applicants are entitled to apply for dependents support from the an estate if
the deceased does not make ldquoadequate provisionrdquo for their proper
maintenance or support
bull Claims of a ldquodependentrdquo or ldquofamily memberrdquo may override testamentary
freedom
8
Wills Formality Requirements bull Due execution
bull Knowledge and acceptance
bull Capacity
bull No undue influence or fraud
9
Capacity and Undue Influence Capacity
bull If the will-maker is found to not have capacity the Will is invalid and the estate
passes on intestacy
bull Varying degrees of capacity
Undue Influence
bull Requires the actual exercise of coercion such that the free will of the will-
maker is overborne and the will-maker creates a Will or gift that they did not
intend
10
Joint Property bull Significant cause of estate litigation
bull Can apply to wealth transfers such as bank accounts or real property
bull Joint Tenancy with adult children or any other person other than the
spouseadult interdependent partner gives rise to a presumption of a resulting
trust
11
Factors to Consider for Joint Tenancy bull Consider tax consequences usually treated as a disposition of one-half of
property for income tax purposes
bull Exposure to creditors of the joint tenant including family law claims
bull Loss of unilateral control of property
12
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
-
Have You Heard What The Judges Did Now to Alter
Testator Intent
Jacklynn Pivovar and Pia Hundal
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Ways to Alter Testator Intent bull Family maintenance and support claims
bull Challenges of will formality requirements
bull Challenges of capacity and undue influence
bull Joint property
bull Financial abuse
7
Family Maintenance and Support bull Who can make a claim varies between provinces
bull Responsibilities that flow from relationships and individuals borne from them
bull Applicants are entitled to apply for dependents support from the an estate if
the deceased does not make ldquoadequate provisionrdquo for their proper
maintenance or support
bull Claims of a ldquodependentrdquo or ldquofamily memberrdquo may override testamentary
freedom
8
Wills Formality Requirements bull Due execution
bull Knowledge and acceptance
bull Capacity
bull No undue influence or fraud
9
Capacity and Undue Influence Capacity
bull If the will-maker is found to not have capacity the Will is invalid and the estate
passes on intestacy
bull Varying degrees of capacity
Undue Influence
bull Requires the actual exercise of coercion such that the free will of the will-
maker is overborne and the will-maker creates a Will or gift that they did not
intend
10
Joint Property bull Significant cause of estate litigation
bull Can apply to wealth transfers such as bank accounts or real property
bull Joint Tenancy with adult children or any other person other than the
spouseadult interdependent partner gives rise to a presumption of a resulting
trust
11
Factors to Consider for Joint Tenancy bull Consider tax consequences usually treated as a disposition of one-half of
property for income tax purposes
bull Exposure to creditors of the joint tenant including family law claims
bull Loss of unilateral control of property
12
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Ways to Alter Testator Intent bull Family maintenance and support claims
bull Challenges of will formality requirements
bull Challenges of capacity and undue influence
bull Joint property
bull Financial abuse
7
Family Maintenance and Support bull Who can make a claim varies between provinces
bull Responsibilities that flow from relationships and individuals borne from them
bull Applicants are entitled to apply for dependents support from the an estate if
the deceased does not make ldquoadequate provisionrdquo for their proper
maintenance or support
bull Claims of a ldquodependentrdquo or ldquofamily memberrdquo may override testamentary
freedom
8
Wills Formality Requirements bull Due execution
bull Knowledge and acceptance
bull Capacity
bull No undue influence or fraud
9
Capacity and Undue Influence Capacity
bull If the will-maker is found to not have capacity the Will is invalid and the estate
passes on intestacy
bull Varying degrees of capacity
Undue Influence
bull Requires the actual exercise of coercion such that the free will of the will-
maker is overborne and the will-maker creates a Will or gift that they did not
intend
10
Joint Property bull Significant cause of estate litigation
bull Can apply to wealth transfers such as bank accounts or real property
bull Joint Tenancy with adult children or any other person other than the
spouseadult interdependent partner gives rise to a presumption of a resulting
trust
11
Factors to Consider for Joint Tenancy bull Consider tax consequences usually treated as a disposition of one-half of
property for income tax purposes
bull Exposure to creditors of the joint tenant including family law claims
bull Loss of unilateral control of property
12
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Family Maintenance and Support bull Who can make a claim varies between provinces
bull Responsibilities that flow from relationships and individuals borne from them
bull Applicants are entitled to apply for dependents support from the an estate if
the deceased does not make ldquoadequate provisionrdquo for their proper
maintenance or support
bull Claims of a ldquodependentrdquo or ldquofamily memberrdquo may override testamentary
freedom
8
Wills Formality Requirements bull Due execution
bull Knowledge and acceptance
bull Capacity
bull No undue influence or fraud
9
Capacity and Undue Influence Capacity
bull If the will-maker is found to not have capacity the Will is invalid and the estate
passes on intestacy
bull Varying degrees of capacity
Undue Influence
bull Requires the actual exercise of coercion such that the free will of the will-
maker is overborne and the will-maker creates a Will or gift that they did not
intend
10
Joint Property bull Significant cause of estate litigation
bull Can apply to wealth transfers such as bank accounts or real property
bull Joint Tenancy with adult children or any other person other than the
spouseadult interdependent partner gives rise to a presumption of a resulting
trust
11
Factors to Consider for Joint Tenancy bull Consider tax consequences usually treated as a disposition of one-half of
property for income tax purposes
bull Exposure to creditors of the joint tenant including family law claims
bull Loss of unilateral control of property
12
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Wills Formality Requirements bull Due execution
bull Knowledge and acceptance
bull Capacity
bull No undue influence or fraud
9
Capacity and Undue Influence Capacity
bull If the will-maker is found to not have capacity the Will is invalid and the estate
passes on intestacy
bull Varying degrees of capacity
Undue Influence
bull Requires the actual exercise of coercion such that the free will of the will-
maker is overborne and the will-maker creates a Will or gift that they did not
intend
10
Joint Property bull Significant cause of estate litigation
bull Can apply to wealth transfers such as bank accounts or real property
bull Joint Tenancy with adult children or any other person other than the
spouseadult interdependent partner gives rise to a presumption of a resulting
trust
11
Factors to Consider for Joint Tenancy bull Consider tax consequences usually treated as a disposition of one-half of
property for income tax purposes
bull Exposure to creditors of the joint tenant including family law claims
bull Loss of unilateral control of property
12
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Capacity and Undue Influence Capacity
bull If the will-maker is found to not have capacity the Will is invalid and the estate
passes on intestacy
bull Varying degrees of capacity
Undue Influence
bull Requires the actual exercise of coercion such that the free will of the will-
maker is overborne and the will-maker creates a Will or gift that they did not
intend
10
Joint Property bull Significant cause of estate litigation
bull Can apply to wealth transfers such as bank accounts or real property
bull Joint Tenancy with adult children or any other person other than the
spouseadult interdependent partner gives rise to a presumption of a resulting
trust
11
Factors to Consider for Joint Tenancy bull Consider tax consequences usually treated as a disposition of one-half of
property for income tax purposes
bull Exposure to creditors of the joint tenant including family law claims
bull Loss of unilateral control of property
12
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Joint Property bull Significant cause of estate litigation
bull Can apply to wealth transfers such as bank accounts or real property
bull Joint Tenancy with adult children or any other person other than the
spouseadult interdependent partner gives rise to a presumption of a resulting
trust
11
Factors to Consider for Joint Tenancy bull Consider tax consequences usually treated as a disposition of one-half of
property for income tax purposes
bull Exposure to creditors of the joint tenant including family law claims
bull Loss of unilateral control of property
12
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Factors to Consider for Joint Tenancy bull Consider tax consequences usually treated as a disposition of one-half of
property for income tax purposes
bull Exposure to creditors of the joint tenant including family law claims
bull Loss of unilateral control of property
12
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Y helliphellip
Financial Abuse
Your mom and I are
thinking about
giving you Power of
Attorneyhellip
YES YES
YES
Irsquom Rich Rich
hellip and now strangely
Irsquom having
second thoughts
13
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Power of Attorney Disputes bull Joint and several attorneys
bull Opportunities for bringing people together
14
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Beneficiary Designations RRSP RRIF Part II of the Succession Law Reform Act (Ontario) governs the designation of beneficiaries of interests in funds or plans including RRSPs and RRIFs Section 51 of the SLRA states
Designation of beneficiaries
51 (1) A participant may designate a person to receive a benefit payable under a plan on the participants death
a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction or
b) by will
and may revoke the designation by either of those methods
Idem
(2) A designation in a will is effective only if it relates expressly to a plan either generally or specifically
15
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Beneficiary Designations RRSP RRIF bull On December 31 of the year the annuitant turns 71 the RRSP automatically
converts to a RRIF
bull What happens to the beneficiary designation for the RRSP
16
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Beneficiary Designations RRSP RRIF What happens to the beneficiary designation for the RRSP
bull Tension in the case law
bull Bramley v Bramley Estate 2003 BCSC 313
bull Boulos v Duca Financial Services Credit Union 2020 ONSC 1946
17
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Section 7 of the Charter amp Testamentary Freedom Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
18
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull Issue
Are provisions of the Nova Scotia Testatorsrsquo Family Maintenance Act (ldquoTFMArdquo)
which allow non-dependent adult children to make a claim for support against
the estate unconstitutional
Section 7 of Charter of Rights and Freedom
Life liberty and security of person
7 Everyone has the right to life liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice
19
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Section 7 of the Charter amp Testamentary Freedom (contrsquod)
Lawen Estate v Nova Scotia (Attorney General) 2019 NSSC 162
bull The Court held that the testators right to absolute freedom to dispose of their property is a
constitutionally protected right when Justice Bodurtha found two provisions of TFMA to be
unconstitutional to the extent they allowed non-dependent adult children to make a claim for
support under the Act
bull Testamentary decisions are fundamental personal choices that are undermined by TFMA
bull Those fundamental personal choices were found to be worthy of protection under s 7 of the
Charter
bull This appears to be the first case in Canada granting constitutional protection for testamentary
decisions Other courts have been reluctant to find that section 7 protects economic or
property rights so it may well be overturned on appeal
20
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Careful Planning is Your Protection
Trusts
Inter Vivos
Testamentary
Planning for Incapacity
Financial
Healthcare
Updated Wills
Trusts
Inter Vivos
Testamentary
21
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Ways to AvoidMinimize Claims Reduce Assets in the Estate on Death
bull Joint Tenancy (document intention)
bull Execute a Deed of Gift to ensure gift will not be held on resulting trust
bull Give property as gifts outright during lifetime
bull Beneficiary and Insurance Designations
bull Alter Ego TrustsJoint Spousal or Common Law Partner Trusts
Explain the Dispositions in the Will
bull Valid and rational reasons in writing
bull Independent Legal Advice
22
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Protecting Against Capacity and Undue Influence Challenges Capacity Undue Influence
bull Lawyerrsquos questions and notes bull Meet with the lawyer alone
Independent Legal Advice bull Witnesses
bull Notes from lawyer bull Obtain a medical opinion
bull Documentation of intention
23
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Jacklynn Pivovar Edmonton Office
7804299709
Bio
jpivovoarmillerthomsoncom
24
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Pia Hundal Toronto Office
416-596-2116
Bio
phundalmillerthomsoncom
25
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Questions
Contact Us
Jacklynn Pivovar ndash jpivovarmillerthomsoncom
Pia Hundal - phundalmillerthomsoncom
26
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
-
Trustees Know Your Responsibilities During Volatile Market Conditions
Dwight Dee and Darren Lund
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Market Volatility ndash Headlines bull TSX plummets 12 in biggest single-day drop since 1940
(March 12 2020 BNN Bloomberg)
bull Coronavirus stock-market volatility is creating the largest daily price
swings since 1929 crash
(April 8 2020 Marketwatch)
bull An Epic Reversal of Fortune
(July 1 2020 NY Times)
28
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Trusteersquos General Duties bull Follow the terms of the trust deed
bull Act in the best interests of the beneficiaries
bull Act impartially among beneficiaries
bull Act honestly and with the level of skill and prudence which would be expected
of a reasonable person administering their own affairs
bull Not delegate their office to others (with some exceptions)
bull Not profit personally from their dealings with trust property
29
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Investments ndash The Prudent Investor Standard Statutory duties ndash Provincial Trustee Acts
bull Trustee Act (British Columbia) RSBC 1996 c 464
Investment of trust property
151 (1) A trustee may invest property in any form of property or security in which a
prudent investor might invest including a security issued by an investment fund as
defined in the Securities Act
hellip
30
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Investments ndash The Prudent Investor Standard (contrsquod)
Standard of care
152 In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Trustee not liable if overall investment strategy is prudent
153 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment
of the trust property comprising reasonable assessments of risk and return that a prudent
investor would adopt under comparable circumstances
31
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Diversification bull ldquoIt is true that in some jurisdictions particularly those retaining the prudent man
standard there is room for argument as to whether the trustee has the duty to
diversify The new prudent investor standard based on modern portfolio
theory leaves less room for argument diversity is inherent in modern
portfolio theory Even so the circumstances of a trust might be inconsistent
with diversification For example if a trustee is expected to hold property only
for a few weeks it might not be prudent to expose the assets to the volatility
which inheres in equity investments [emphasis added]rdquo
32
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
What Does it Mean to Invest as a Prudent Investor bull Miles v Vince 2014 BCCA 289
bull Fales v Canada Permanent Trust Co ([1977] 2 SCR 302)
bull This standard of course may be relaxed or modified up to a point by the terms
of a will and in the present case there can be no doubt that the co-trustees
were given wide latitude But however wide the discretionary powers
contained in the will a trustees primary duty is preservation of the trust assets
and the enlargement of recognized powers does not relieve him of the duty
of using ordinary skill and prudence nor from the application of common
sense [emphasis in original]
33
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Prudence Is a Virtue bull Ontario Trustee Act establishes the prudent investor as the legal standard for
trustee conduct in investments rarr s 27(1) and (2)
Investment standards
27 (1) In investing trust property a trustee must exercise the care skill diligence and
judgment that a prudent investor would exercise in making investments
Authorized investments
(2) A trustee may invest trust property in any form of property in which a prudent investor
might invest
34
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Have You Thought of This bull A trustee must consider certain criteria in planning the investments of the trust
property rarr s 27(5) Trustee Act
1 General economic conditions
2 The possible effect of inflation or deflation
3 The expected tax consequences of investment decisions or strategies
4 The role that each investment or course of action plays within the overall trust
portfolio
5 The expected total return from income and the appreciation of capital
6 Needs for liquidity regularity of income and preservation or appreciation of capital
7 An assetrsquos special relationship or special value if any to the purposes of the trust or to one
or more of the beneficiaries
35
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Thatrsquos a Lot of Eggs in That Basket bull Trustees have a statutory duty in Ontario to diversify their investments with
regard to specific criteria rarr s 27(6) Trustee Act
Diversification
(6) A trustee must diversify the investment of trust property to an extent that is appropriate to
(a) the requirements of the trust and
(b) general economic and investment market conditions
36
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
You Can Rely On Me bull A trustee can rely on investment advice if a prudent investor would rely on the
advice rarr s 27(7) (8) Trustee Act
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust property
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained under subsection (7) if a
prudent investor would rely on the advice under comparable circumstances
37
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
But What Did The Settlor Say bull The provisions of the trust instrument are paramount rarr s 27(9) Trustee Act
Terms of trust
(9) This section and section 271 do not authorize or require a trustee to act in a manner that is
inconsistent with the terms of the trust
bull BUT the overarching fiduciary duty of a trustee does provide a limit
bull Departures from ldquotypicalrdquo investments should be clear and express and related to trustrsquos
requirements and purposes rarr freeze trust intended to hold private company shares exclusively
bull Do not rely on boilerplate trustee powers
38
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Time to Delegate bull Trustees may delegate investment functions to an agent pursuant to rules set
out in s 271 Trustee Act
bull Permitted to same extent a prudent investor acting in accordance with ordinary
investment practice would authorize an agent to exercise investment functions
bull Must be pursuant to a written plan or strategy that
bull Ensures the functions are exercised in best interests of beneficiaries
bull Comprises reasonable assessments of risk and return
bull A prudent investor could adopt in comparable circumstances
bull Must be a written agreement between trustee and agent requiring agent to act in
accordance with investment plan or strategy and to report to trustee at regular intervals
bull Trustee must exercise prudence in selecting agent establishing terms of agentrsquos
authority and monitoring agentrsquos performance
39
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Am I In Trouble bull The prudent investor standard is a test of conduct rather than a test of
investment return rarr s 28 Trustee Act
Protection from liability
28 A trustee is not liable for a loss to the trust arising from the investment of trust property if
the conduct of the trustee that led to the loss conformed to a plan or strategy for the
investment of the trust property comprising reasonable assessments of risk and return
that a prudent investor could adopt under comparable circumstances
bull However investment returns may be related to the reasonableness of
assessments of risk and return and the degree of diversification or lack of
diversification in the investments
40
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Mowry v Groome 2016 ONSC 7850 Key Facts
bull Residue of estate to be held in trust for education expenses of issue
bull Net value of estate is $436289 rarr main asset is LIF of $408214
bull Trustee set investment account objectives as 10 growth and 90 ldquospeculativerdquo and risk
tolerance as 10 medium and 90 high
bull Investment advisor confirmed overall risk profile of portfolio was high due to over
concentration in the energy sector
bull Trustee made two investments on margin in a company called Yellow Media with total value
of $98335 (second investment is contrary to investment advisorrsquos advice)
bull Trustee retained home with equity of only $5000 to renovate and rent
bull Losses of $164983 in December 2014 when energy stocks crash
bull Yellow Media stocks worthless by Fall 2014
41
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Mowry v Groome 2016 ONSC 7850 (contrsquod)
Key Holdings bull Trustee did not adequately diversify the investments rarr retention of the home and
investment in Yellow Media do not excuse or mitigate the risk of over concentration in the energy sector
bull Retention of the home not a wise investment
bull Investing on margin is an unacceptable risk for a trustee
bull Purpose of diversification is to mitigate risk of unanticipated market events
bull Provisions of will do not override duty to exercise care skill diligence and judgment of a prudent investor or to diversify the investments
bull Trustee did not meet prudent investor standard rarr removed as trustee and ordered to repay 50 of portfolio losses and 100 of Yellow Media losses
bull Recognition that a properly diversified portfolio would also include losses from energy stocks
42
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Practical Tips bull Review terms of trust its purpose and investment instructions in the trust
instrument rarr are you in compliance
bull Obtain professional investment advice
bull If investment functions are delegated review compliance with statutory
requirements ensure proper oversight and communication with agent
bull Consider whether additional professional advice required such as tax or legal
advice rarr eg to understand trust terms
bull Maintain clear and detailed written records of professional advice obtained
43
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Practical Tips (contrsquod)
bull Ensure proper diversification of investments
bull Document decisions in writing with reasons and with reference to relevant
trust provisions and statutory criteriastandards
bull Communicate with beneficiaries proactively and consider providing regular
updates during period of volatility including response to COVID-19
44
Dwight Dee Vancouver Office
6046431292
Bio
ddeemillerthomsoncom
45
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VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Dwight Dee Vancouver Office
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Darren Lund Toronto Office
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Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
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Private Client Services Newsletter
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Wealth Matters
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M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Darren Lund Toronto Office
4165958640
Bio
dlundmillerthomsoncom
46
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
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M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Questions Dwight Dee ndash ddeemillerthomsoncom
Darren Lund - dlundmillerthomsoncom
47
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
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M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
Private Client Services Newsletter
Stay Informed
Wealth Matters
48
-
M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
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M I L L E R T H O M S O N C O M
copy 2020 Miller Thomson LLP All Rights Reserved All Intellectual Property Rights including copyright in this
presentation are owned by Miller Thomson LLP This presentation may be reproduced and distributed in its
entirety provided no alterations are made to the form or content Any other form of reproduction or distribution
requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s)
This presentation is provided as an information service and is a summary of current legal issues This
information is not meant as legal opinion and viewers are cautioned not to act on information provided in this
publication without seeking specific legal advice with respect to their unique circumstances
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTREacuteAL
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