In case you haven’t read or heard enough about the legalization of cannabis in Canada this week, here’s more.
The legalization of cannabis in Canada may have a significant impact on estate planning. Specific issues include:
- Impact on Testamentary Capacity
Today’s marijuana is not the same as marijuana from “back in the day”. The average potency of marijuana has risen from 3.9% THC in 1983 to 15.1% in 2009. On the OCS website, the only legal retailer of recreational marijuana in Ontario, cannabis is available with a labelled THC content of 17 to 28%.
The long term effect of cannabis on cognitive functions has been documented. The immediate and long term effects of cannabis use may have an impact on testamentary capacity, much like other intoxicants or mind-altering substances.
- Impact on Bequests Conditional on Non-Use of Illegal Drugs
The use of incentive trusts is not common, but they do exist. See our blog, here, and our podcast on the topic, here. These trusts can be used to limit or restrict distributions to a beneficiary based on prohibited behavior.
An issue arises if the trust is designed to disincentive use of “illegal drugs”. The effect of the legality of marijuana may undermine the testator’s intentions.
- Insurance Issues
Numerous issues arise in the context of health and life insurance. Issues include:
- Disclosure of cannabis use and the effect on insurability and rates
- The implications of being a medical user, as opposed to a recreational user
- Whether the purchase of medical marijuana is covered by health insurance. (See our blog on this topic, here.)
- Whether a loss arising from the use of marijuana would be covered.
- Administration Issues Related to Cannabis
Issues related to administration include:
- What does the estate trustee do with cannabis possessed by the deceased?
- How is the cannabis to be valued for Estate Administration Tax purposes? (However, in light of the possession limits, this might be de minimus.)
These matters may be of greater concern in the US, where some states have legalized marijuana, while it remains illegal under federal legislation.
For a more detailed discussion of these issues from an American point of view, see “Joint wills and pot trusts: Marijuana and the Estate Planner” by Gerry Beyer and Brooke Dacus.
Have a great weekend.
Although knowledge and understanding of the issue of elder abuse is growing, I don’t think we have yet arrived at a point where it is openly discussed among different groups of people, or where victims of abuse feel completely comfortable coming forward.
In New Brunswick, the Abuse and Neglect of Older Adults Research Team (ANOART) is conducting research into abuse of older adults, and specifically looking at how abuse affects older men and women differently. This article discusses ANOART’s work and an upcoming conference on this topic.
According to the ANOART, older men more often suffer abuse from their children, but older women are more likely to experience intimate partner violence. This specific type of abuse in relation to older women is not mentioned in discussions of elder abuse as often as other types of abuse, such as financial abuse, or general physical abuse. However, ANOART has found that intimate partner violence against women earlier in life does not stop later in life, but rather evolves.
Although the aggressor of intimate partner violence may be less physically capable of physical abuse as they age, the older woman who is being abused may still feel pressure not to speak out, as to do so may create tension or conflict within their family. Older women may also be financially dependent on their partner, which can be a significant barrier to reaching out.
Services for intimate partner violence are usually focused and targeted at younger women, leaving a gap when it comes to older women. ANOART is working to break the stigma surrounding intimate partner violence against older women, to spread information, and to raise awareness. The hope is that this will assist in reaching out to those who need help more effectively, and make it easier for olden women to seek help.
Thanks for reading,
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Have you followed the wellness industry lately? The New York Times recently published a lengthy feature on Gwyneth Paltrow and her wellness company Goop. In it, the author describes a number of the “therapies” she learned about in the course of interviewing Paltrow and writing the article.
These ranged from more conventional wellness tips (healthy eating, cleanses, meditation) to far more radical ideas (bee-sting therapy, psychic vampire repellent, and jade eggs for vaginal therapies). It’s a fascinating (and somewhat disturbing) article. You can read it here.
Paltrow is by no means the only wellness guru out there promoting what she calls “radical wellness.” There are many – with many products and treatments to purchase if you are willing to give them a try. And despite the lack of scientific evidence that these treatments work (one woman recently died from bee-sting therapy) and the resounding criticism of many alternative treatments from the medical community, alternative wellness is flourishing.
Why is that? I can see three reasons:
- Social media makes it easier than ever for wellness “ideas” to go viral;
- Many people are suffering from a mental or physical condition that conventional therapies haven’t cured – and are desperate for answers; and
- The placebo effect results in many claims that a treatment “works” – and those good news stories are fed into the social media cycle.
Of course, some therapies may in fact work – but how can you tell truth from fiction? While there are hundreds of scientific studies that prove the health benefits of things like exercise, healthy eating and meditation, alternative therapies typically have only anecdotal evidence to back them up.
All to say, before you wade into a swarm of bees, get the facts first. This U.S. website lists five reliable online medical resources (such as the Mayo Clinic) that you can trust for information.
Thanks for reading!
In today’s podcast, Paul Trudelle and Sayuri Kagami discuss the recent decision of Re Milne Estate, 2018 ONSC 4174, where Justice Dunphy of the Ontario Superior Court found a Will to be invalid where it provided the Estate Trustee with the discretion to determine whether assets might fall under the Will or not. At the time of recording, it was unknown whether the decision would be appealed. It is now confirmed that the decision is under appeal.
Should you have any questions, please email us at email@example.com or leave a comment on our blog.
Although there are certainly some benefits that may result from making ownership of a property or other asset joint with another individual (e.g. avoiding payment of estate administration tax in relation to that property upon the death of one of the joint owners), there can also be risks associated with jointly-held property.
In the recent British Columbia Supreme Court decision in Gully v Gully, 2018 BCSC 1590, a mother added her son as a joint tenant on real property that she owned (the “House”). Her decision to do so was based on estate planning advice that she had received. The mother did not tell her son that she had added him as a joint tenant, and the son did not contribute to the House in any way, either before or after it was transferred into joint tenancy. Contemporaneously with the registration of title to the House in joint tenancy, the mother also executed a last will and testament specifically setting out that in naming her son as a joint owner, she intended that the asset would belong to him upon her death.
A couple of years after the mother had added the son as a joint tenant on her House, the son and his software company consented to judgment in favour of a creditor in the amount of $800,000.00. At the time he consented to judgment, the son was still not aware that he was a joint owner of his mother’s House. The creditor subsequently registered a certificate of judgment on the son’s undivided half interest in the House.
The mother brought an application seeking a declaration that the son held his interest in the House on a resulting trust in her favour. The court stated that the proper evidence of a transferor’s intention is at the time of the transfer, because a transferor can change his or her mind subsequent to the transfer, but may not retract a gift once it has been made. In this case the court concluded that the mother did intend to gift an interest in the House to her son at the time the joint tenancy was registered on title, and that the son did not hold his interest on a resulting trust in favour of the mother.
Further, the court stated that even if it had found that the mother had not intended to gift the House to the son, the fact that the joint tenancy was registered on title to the House meant that the creditor could rely on title to enforce its judgment against the son’s interest in the House. Although the issue of whether or not a resulting trust arises in the circumstances may be relevant as between family members or beneficiaries of an estate, it is not applicable in the case of a third party creditor claiming against a registered interest in land. As a side note, the creditor in this case did advise the court that it did not intend to execute the judgment against the House while the mother was still living there.
Before making any changes to ownership of an asset, it is crucial to obtain comprehensive advice as to all of the possible consequences of doing so—both positive and negative. Communication regarding joint tenancy is also important. This will help ensure that all parties are aware of the assets in which they may have an interest and the nature of any such interest, so they are in a position to manage their affairs accordingly.
Thanks for reading,
Other blog posts that you may find interesting:
Last year I blogged about some possible changes to the CRA’s Voluntary Disclosure Program (“VDP”). The new VDP rules came into effect March 1, 2018.
One of the concerns that had been raised in relation to the VDP changes in advance of them coming into effect, is that it seemed the CRA was attempting to make the VDP less accessible for taxpayers. For example, the changes created a “tiered” system for VDP applications, meaning that applications would fall under either the “general program” (for more minor non-compliance) and the “limited program” (for major non-compliance). Another example is the apparent elimination of the “No-Name” method for submitting disclosure (which allows the taxpayer to gain some understanding of how their situation may be treated by CRA in advance of officially submitting his or her application).
According to this article, in July and August 2018, the CRA responded to the first round of disclosure applications that had been filed under the new rules. The CRA’s approach in practice was troubling to the article’s authors.
In particular, the CRA appears to be taking the position that it will be rejecting VDP applications if the relevant tax returns aren’t enclosed. This seems to be contrary to the guidelines set out in CRA’s Information Circular IC00-1R6. While CRA takes the position that it will reject applications that do not enclose tax returns, the Information Circular seems to indicate that a taxpayer may submit additional information or documentation to complete the VDP application up to 90 days from the day that the CRA receives the application. The article’s authors are of the view that the language of the Information Circular in this regard would include the relevant tax returns, as these are clearly documents required to complete the disclosure. The position taken by CRA provided confirmation to the authors that CRA was seeking to make the VDP inaccessible for taxpayers.
As we previously set out in this blog, the VDP can be relevant to an Estate Trustee if the deceased was not in compliance with his or her obligations to the CRA, such as failure to file income tax returns, or reporting of inaccurate information. The VDP may allow an Estate Trustee to voluntarily disclose such non-compliance and avoid penalties. Unfortunately, with the new VDP rules in effect, and the apparent uncertainty regarding how the CRA will apply its guidelines, it may be tricky for Estate Trustees to make effective use of the VDP. It will be interesting to see how the new VDP rules develop, and any further feedback to their practical application.
Thanks for reading,
Other blog posts that may be of interest:
According to an article in Psychology Today, writing your own obituary can be therapeutic and inspiring. It can help you prepare for the inevitability of death. It can inspire you to not just be simply swept along with the currents of life, but to consider the bigger picture, and the purpose of your time here. It can remind you to live “intentionally”, rather than just drift along. It might spurn you on to, in the words of country music’s Tim McGraw, “live like you were dying”.
As stated in the Psychology Today article, “[a] good obituary can be a great tool for living intentionally. It can give you clarity, direction, understanding and a great sense of purpose.”
Tips from “obituaryguide.com” on writing your own obituary include:
- Just get started
- Read other obituaries for ideas
- Say what your life means to you
- Find three words to sum up your life
- Use the obituary writing process to inspire yourself
- Include a recent photo
- Make sure your obituary is readily accessible upon your death
- Update as required
Another option is to create an “ethical will”. This is a document that outlines a person’s values, life lessons learned, and hopes for the next generation. (My ethical will focusses mainly on the issue of pineapples on pizza.)
Once the obituary is done, ask yourself the following questions, according to author/blogger Marelisa Fabrega:
- If I died today, would I die happy?
- Am I satisfied with the direction in which my life is headed?
- Am I happy with the legacy that I’m creating?
- What’s missing from my life?
- What do I need to do in order for my obituary to be “complete”?
It may not be too late to develop new content for your obituary.
Have a great weekend.
A decision released earlier this week highlights the importance of a complete Management Plan supported by evidence when seeking one’s appointment as guardian of property.
Sometimes, the necessity of filing a Management Plan is viewed as a formality without proper attention to the details of the plan. However, the failure to file an appropriate Management Plan may prevent the appointment of a guardian of property, putting the administration of the incapable’s property in limbo.
In Connolly v Connolly and PGT, 2018 ONSC 5880 (CanLII), Justice Corthorn declined to approve of a Management Plan filed by the applicant and, accordingly, refused to appoint her as guardian of property. The Management Plan was rejected for the following reasons (among others):
- it did not address an anticipated increase in expenses over time (including when the applicant was no longer available to serve as the incapable’s caregiver and he may incur alternate housing costs);
- there was no first-hand evidence from BMO Nesbitt Burns or Henderson Structured Settlement with respect to the net settlement funds in excess of $1.4M and their payout and investment in a portfolio on the incapable’s behalf;
- the Court was concerned that stock market volatility could threaten to deplete the invested assets;
- the Public Guardian and Trustee had strongly recommended that the applicant post security, the expense of which was reflected as a deduction from the incapable’s assets (while not suggested that this was unreasonable, Justice Corthorn took issue with the absence of any case law or statutory provision cited by the applicant in support of the payment of the expense by the incapable rather than the applicant herself); and
- while the applicant had agreed to act as guardian without compensation, the plan did not contemplate how compensation would be funded if claimed by a potential successor guardian.
Notwithstanding that neither the incapable nor the Public Guardian and Trustee had opposed the Management Plan or the appointment of the applicant as guardian of property, Justice Corthorn found that the appointment of a guardian to manage over one million dollars in settlement funds was “contentious” and, accordingly, under Rule 39.01(5) of the Rules of Civil Procedure, direct evidence from a representative of the financial institution was required. In short, although the applicant was accepted as being a suitable candidate for appointment as guardian of property (and it was anticipated by the Court that she would ultimately be appointed), the Court was not satisfied on the evidence available that the management of the incapable’s property in accordance with the contents of the Management Plan was consistent with the man’s best interests.
While Justice Corthorn declared the individual respondent incapable and in need of assistance by a guardian of property, Her Honour adjourned the balance of the matter, suggesting that the applicant’s appointment as guardian of property could be revisited once additional evidence was filed in support of the contents of the Management Plan and/or the plan was further revised.
Thank you for reading.
Other blog entries and podcasts that may be of interest:
As estate litigators, we’ve seen a lot of bad estates and bad estate situations. The good news is because we know the bad, we can advise clients on how to avoid it and make their estate a great one. No uncertainty, no delays, no conflicts, no nasty tax surprises.
If you want to make your estate a great one, here are five essential elements that can make it happen.
- You’ve provided a clear path to the documentation
Ideally, your executor needs the original copy of your will – as do courts to ensure a smooth probate process. So, don’t make your will (and any other estate documents) hard to locate. Whether it’s stored at your lawyer’s office, or registered with the court, or stored in a filing cabinet at home, make sure that you and your loved ones remember where your will is and know how to access it. We discuss this issue in more detail here.
- Your estate assets are easy to identify
Don’t assume your family and your executor know what you own. Many of us scatter our assets and accounts more than we realize. Make a list of all bank and investment accounts, insurance policies, major assets, and any virtual assets of value and keep this list with your will or ensure your named executor has a copy.
- Your executor is trustworthy and can access the help they need
When choosing an executor, trust is essential as the person selected must be capable of acting impartially on behalf of your estate – regardless of their personal feelings about your estate and the beneficiaries.
While your executor doesn’t need to be an accountant or lawyer or investment advisor, they do need to be able to hire the expertise that your estate might require. In other words, they need to know what they don’t know, and have the common sense to seek out the tax, accounting, and legal expertise that may be needed.
This article provides a great “quick list” of things to consider when choosing an executor.
- Everyone knows what’s in your will – in advance
It is dangerous to assume that your intended beneficiaries know what is in your will and have no questions or concerns. Talking today about your intentions and your family members’ expectations lets you address any contentious issues while you’re alive – and avoid potential conflicts after you’re gone.
Even the most well-intentioned gifts – a charitable bequest, the china cabinet to a niece, the vintage hockey cards to a grandson – can lead to questions, hurt feelings and potential conflicts.
Don’t let it happen. Make sure that everyone who might be touched by your will at death knows exactly what’s in it.
- Tax planning in place – if needed
You’re deemed to have disposed of your capital assets at their fair market value when you die. This means your estate is liable for capital gains taxes on assets that have increased in value during your lifetime. Your executors may be forced to sell estate assets to pay for the tax liability – and a forced sale may mean the assets are sold for less than their fair value.
There are many strategies available to help cover an estate’s tax liability, from the use of trusts to the purchase of life insurance. Make sure you’ve considered whether tax planning is needed for your estate, and put a strategy in place if needed.
Thanks for reading … Have a great day!
Previous entries in our blog have covered inheritance taxes in the United States and other jurisdictions and President Trump’s proposed elimination of the tax altogether. Recent news coverage has zeroed in on how the family of the American president has allegedly evaded over half a billion dollars in tax liabilities that should have been paid on the transfer of significant family wealth.
Certain exceptions apply, but inheritance tax (more frequently referred to as “death tax” by President Trump himself) of 40% typically applies to assets of American estates beyond an initial value of $11.18 million. This means that estates up to this size are exempt from inheritance taxes, while the wealthy engage in complex planning strategies to minimize tax liabilities triggered by death (some of which mirror those used by Canadians in an effort to avoid payment of estate administration taxes on assets administered under a probated will).
Despite Trump’s previous statements that he has independently earned his fortune without reliance on prior family wealth, The New York Times reports that he and his siblings together received over $1 billion from their parents’ estates and that $550 million (55% under the old inheritance tax regime) ought to have been paid in taxes. However, in 1999-2004, during which years the estates of Fred and Mary Trump were administered, a rate of closer to 5% was paid in taxes. Whether the tax-minimizing methods used by the Trump family were legitimate or questionable remains unclear:
The line between legal tax avoidance and illegal tax evasion is often murky, and it is constantly being stretched by inventive tax lawyers. There is no shortage of clever tax avoidance tricks that have been blessed by either the courts or the I.R.S. itself. The richest Americans almost never pay anything close to full freight. But tax experts briefed on The Times’s findings said the Trumps appeared to have done more than exploit legal loopholes.
Sometimes, the line between legitimate tax-minimizing planning strategies and outright tax evasion can appear thin. It is important to avoid improper strategies that put the assets of an estate and their intended distribution at risk, and which may ultimately serve only to complicate and delay the administration of the estate.
Thank you for reading.