Williams Estate (Re), 2013 NSSC 167

SUPREME COURT OF NOVA SCOTIA Citation: Williams Estate (Re), 2013 NSSC 167 Date: 20130604 Docket: Hfx 414544 Registry: Halifax IN THE MATTER OF : An Application of THE MANUFACTURERS LIFE INSURANCE COMPANY, in relation to the Estate of the late EUNICE CATHERINE WILLIAMS Applicant - and - IN THE MATTER OF : Insurance Act, R.S.N.S. 1989,c. 231 Respondent Judge: The Honourable Justice Patrick J. Duncan Heard: April 23, 2013, in Halifax, Nova Scotia Final Written Submissions: May 15, 2013 Counsel: Tricia L. Avery, for the applicant John S.

MacFarlane Q.C. , for residual beneficiaries of the Estate of Eunice Williams and beneficiaries of a Manufacturers Life Policy Derrill Hynick, in person, Executor of the Estate of Eunice Williams. By the Court : [ 1 ] During the incompetency of Eunice Williams, her now Executors and formerly her Attorneys acting under a lawful Power of Attorney, invested funds on her behalf with Manufacturers Life. They designated Ms. Williams ’ four children as beneficiaries of that Policy. This conformed exactly to the beneficiary designation in Mrs. Williams ’ Will.

[ 2 ] In 2012, Mrs. Williams passed away and a claim was filed by her children for payment of benefits of the Manufacturers Life Policy. [ 3 ] Manufacturers Life questioned the authority of someone acting under a Power of Attorney to designate the beneficiaries of the Policy. The company sought certain indemnifications from the Executors, which the Executors have been unable to provide pending receipt of Clearance Certificates from the Canada Revenue Agency. [ 4 ] Manufacturers Life brought an application pursuant to

section 27 of the Insurance Act , R.S.N.S. 1989, c. 231, as amended which I considered on April 23, 2013, the purpose of which was to see the Policy proceeds paid into Court and to be held there pending determination of the appropriate party or parties to receive the distribution. [ 5 ] Following submissions from counsel for Manufacturers Life, counsel for the intended beneficiaries, and from the Executors in person, I concluded that it was appropriate to grant the application and I ordered the funds paid into Court. [ 6 ] The Executors expressed concerns that they would not be able to obtain necessary Clearance Certificates from the Canada Revenue Agency if the monies paid into Court continued to earn interest.

To avoid this possibility they requested an Order that the funds be held in a non-interest bearing account. [ 7 ] The intended beneficiaries opposed this request saying that they are, prima facie , the “ owners ” of the proceeds together with any interest earned thereon and that they should not be deprived of the right to that interest, simply because Manufacturers Life is uncertain as to the validity of the designation. [ 8 ] I requested the parties provide me with further submissions, in particular as to the law of income tax as it applies to an estate in these circumstances. [ 9 ] Having received those submissions, I have reached the following conclusions. [ 10 ] There has been no determination that the beneficiaries are disentitled to the proceeds.

If the funds are distributed directly to them as beneficiaries of the Policy, or eventually to them as beneficiaries of the Estate, then they are entitled to and should have the benefit of the interest earned on those funds. Therefore, to place the funds into Court in an non-interest bearing account is going to prejudice the beneficiaries whether they receive directly or as beneficiaries of the Estate. [ 11 ] There is no prejudice to the Estate.

Once a determination is made as to the entitlement to the proceeds, then the Estate will be able to distribute, whether or not it takes into the Estate the monies in question under the Manufacturers Life Policy. [ 12 ] The information indicates that the Executors should, whether or not the monies are held in an interest bearing account, be able to obtain a personal tax Clearance Certificate.

There also appears to be reasonable avenues that can be pursued to ensure that the payment of interest will not forestall the ultimate granting of an Estate Clearance Certificate by Canada Revenue Agency. [ 13 ] Concerns have been raised by the Executors that paying the monies into Court would somehow have the potential to trigger increased fees for probate of the Estate. It is true that if the funds are more properly paid into the Estate, the Estate value will increase and probate fees may be impacted.

It is also true that monies paid into the Estate will be available to the creditors of the Estate, if any, prior to distribution to the residual beneficiaries. These are not reasons, in my view, to deny either the application to hold the monies in Court, nor to do so in an interest bearing account. [ 14 ] This case calls for a resolution as to the validity of the designation of the children as beneficiaries of the Manufacturers Life Policy.

[ 15 ] It has been suggested by the Executors that the monies should be left with Manufacturers Life while this is resolved.

It has been pointed out that this solution creates a problem because the nature of the investment causes it to be constantly fluctuating giving rise to potential for accumulation of growth in the account. [ 16 ] The intended beneficiaries of the Policy, have not taken issue with the monies being paid into Court and since they are ultimately the ones who stand to be impacted by the ultimate determination of the validity of the designation, I accepted their position which resulted in granting of the application to pay into Court. [ 17 ] Having regard to the submissions that have been made outlining the problems in resolving the issues to this point, it seems that the distribution can be made to the intended beneficiaries by agreement of the affected parties.

Otherwise, a Court determination will be required. An application for that determination has not been made at this time, but if necessary, will need to be initiated by one of the affected parties. [ 18 ] In conclusion I grant the application of Manufacturers Life to pay the Policy proceeds into court, where they are to be held in an interest bearing account pending further order of the court. [ 19 ] Order accordingly. Duncan J.

SUPREME COURT OF NOVA SCOTIA Citation: Williams Estate (Re), 2013 NSSC 167 Date: 20130618 Docket: Hfx 414544 Registry: Halifax IN THE MATTER OF : An Application of THE MANUFACTURERS LIFE INSURANCE COMPANY, in relation to the Estate of the late EUNICE CATHERINE WILLIAMS Applicant - and - IN THE MATTER OF : Insurance Act, R.S.N.S. 1989,c. 231 Respondent

Revised Decision: The text of the original decision has been corrected according to the appended Erratum dated June 18, 2013 Judge: The Honourable Justice Patrick J. Duncan Heard: April 23, in Halifax, Nova Scotia Counsel: Tricia L. Avery, for the applicant John S. MacFarlane Q.C. , for residual beneficiaries of the Estate of Eunice Williams and beneficiaries of a Manufacturers Life Policy Derrill Hynick, in person, Executor of the Estate of Eunice Williams. Erratum: [1] Page 2, paragraph [4] of the decision reads: “ Manufacturers Life brought an application pursuant to

section 27 of the Insurance Act, R.S.N.S. 1989, c. 231 ... ” It should read : “ Manufacturers Life brought an application pursuant to

section 217 of the Insurance Act, R.S.N.S. 1989, c. 231 ... ” Duncan, J. `