Category: Elder Law Insurance Issues
Last week, Suzana’s blog post discussed longevity planning and Powers of Attorney for Personal Care (POA PC). She mentioned that, while financial and estate plans tend to focus on assets, a longevity plan or a POA PC is important in order to address other issues such as quality of life planning and health care instructions. Long-term care insurance is one instance where these plans overlap.
As life expectancy increases, planning for retirement becomes more important. The possibility that you may have health care or long-term care expenses later in life is becoming increasingly likely. Long-term care could include in-home care or moving into a long-term care facility, both of which come with high costs.
As one article, Do you need long-term care insurance?, posted on MoneySense.ca points out, long-term care insurance is more common in the U.S. than in Canada. However, although some costs for long-term care may be publicly funded in Canada, most such expenses will need to be paid for by the individual. Thus, there are several options to choose from when considering how to fund long-term care:
- Save for retirement in amounts sufficient to cover any expenses which may arise;
- Rely on your children or other family members to contribute financially; or
- Purchase long-term care insurance
To illustrate the importance of thinking about how to fund possible long-term care, consider the example of a couple, one of whom becomes ill and requires long-term care in a facility. After funding this care, the other partner may be left with very few financial resources to pay for their own retirement or long-term care costs further down the road.
However, if you wait too long to purchase long-term care insurance, the premiums may be more expensive than you would like and could turn insurance into a non-viable option. This leads us back to the importance of planning. Whether you decide to purchase insurance, or save to cover any eventual expenses yourself, it is vital to plan ahead and keep in mind that the amount you may require during retirement may be greater than you expect, especially if you or your partner end up requiring care later in life.
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A recent study by the Bank of Montreal Insurance Company reveals that Canadians, on average, believe that they require life insurance coverage in the amount of at least $265,607.00 to satisfy their debts, funeral expenses, and to fund financial support for dependants after their death. Our of all provinces, residents of Ontario feel that they need the most coverage, with projected expenses averaging $418,879.00, over one and a half times the federal average.
The study linked greater perceived needs with participants who were married or in a common law relationship. However, the impact of children on perceived needs was surprisingly not clarified by the results of the study. Individuals who are single and do not have children, on average, responded in belief that they require less insurance coverage than those who do have children.
In addition to life insurance, which can assist in the payment of post-death expenses and debts, as well as the provision of support for dependants, many Canadians now choose to obtain critical illness and disability insurance, to secure non-employment income in the event that they are no longer able to work. Because of advances in medical understanding and technology, Canadians are now more likely to survive a critical illness, but may not be capable of returning to full-time employment. In fact, Statistics Canada reports that individuals who are diagnosed with a chronic condition can expect to live an average of ten years after diagnosis.
However, according to the BMO study, only 16% of Canadians have life, critical illness, and disability insurance coverage. The most commonly-cited reason for not purchasing all three types of insurance is the additional expense that such coverage represents while a person is living and healthy. Others who do not have coverage state that they are currently, and expect to remain, in good health. However, should these same individuals suffer the development of a critical illness or disability, obtaining adequate insurance to cover their increasing needs may no longer represent an affordable option. Further, in circumstances where life insurance is not considered until a person is experiencing decline in health, it will come at a much greater cost. When creating or updating an estate or incapacity plan, it may be a good idea to also consider the potential of insurance to compliment existing plans to secure for one’s own future, as well as that of dependants.
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One of the more unique features of practicing law in the field of estates, wills and trusts in Toronto is the distinct courts used for this specialized area: the Estates List. As the largest Canadian city, Toronto sees a very high volume of cases which stem from these areas of practice, and as expected, the number of cases involving trust, estate and capacity issues continues to grow, not in small part as a result of Canada’s aging population.
Elsewhere in the country, reforms are underway to address concerns over the increasing costs of estates litigation which are having pronounced effects due to the aging population. Recently, the Alberta Law Reform Institute released a report which aims to address several of the more prevalent issues which are causing concern in the estates litigation community.
Many of the reforms proposed by the report are aimed at the use of Powers of Attorney, which become active when someone has lost their mental capacity. The report suggests that acting attorneys ought to be able to renew existing beneficiary designations on insurance policies when they are transferred to other companies, or converted into different forms of funds. Such proposals hope to reduce the need for litigation to sort out whether such renewed designations were properly and legally carried out.
A concurrent issue with an aging Canadian population is the rise of elder abuse. Some estimates place the occurrence of elder abuse at around 10 percent of seniors having been victimized by this escalating crime. Often, such abuse results from the misuse of Powers of Attorney, where the abuser targets the life savings of the victim. Clearly, such concerns often give rise to litigation which further exacerbates an already overcrowded court system.
As the Canadian population continues to age, the nation’s many law reform committees and court systems will continue to adapt to combat these and other issues as they arise, as demonstrated by the many reforms which are already being drafted and proposed across the country.
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By all indications, the abuse of Powers of Attorney to misappropriate assets is on the rise.
When a grantor gives powers to an attorney to manage the grantor’s property, it allows the attorney to assist the grantor in managing property, and in fact to take over management of property altogether if the grantor does not monitor the situation. Often the very goal of the grantor is to allow someone else to completely take over management of one’s property due to age, potential incapacity or other reasons, so the grantor has no intention to monitor.
This is often a reasonable choice, and the law holds attorneys to a high standard to protect grantors. However, the potential for abuse is immense. Abuse can be willful or simply negligent, but in either case the damage can be devastating and irreversible. In many cases attorneys who stray from their duties are never made to account, although they have that obligation. Often they live with the grantor and have little or no oversight. The legal fees in securing justice are generally high, and the chances of recovering on a judgment can be low. In the result, legal proceedings might be impractical, however blatant abuse may be in a given case.
The best defence against this problem is awareness, so these varied results from a quick internet search are somewhat encouraging: a Florida law firm website; an excellent Vancouver Sun article; a synopsis of a TV news story; the New York Attorney General’s website; a news report of a Philadelphia trial; and a news release from Prince Edward Island’s provincial government commenting on the problem for World Elder Abuse Day.
This is the tip of a very large iceberg: by all indications lawyers, financial institutions, governments and of course the public will be wrestling with a growing problem for years to come.
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A massive $110 million lawsuit has been brought by the Attorney General’s office in California against a “living trust mill that tricked senior citizens into using their retirement savings to buy annuities that often made less financial sense for the elderly victims but earned the con artists substantial commissions and other income.”
Estate Planning Law Firms.com quotes the Attorney General as saying the following:
“The perpetrators of this fraud deceived seniors into using their hard-earned retirement nest eggs to buy unneeded annuities that actually undermined their financial security. Living trust mills such as this one violate not only the law, but the trust of their elderly victims.”
What surprised me was the apparent scope of the alleged organization being sued by the Attorney General: between 250 and 300 sales agents and another 80 telemarketers were involved, allegedly soliciting elderly consumers through mailings, seminars, telemarketing, presentations at senior centers and other means, marketing their services as a way to avoid probate and estate taxes, then eventually convincing seniors to buy annuities that were, according to the Attorney General, not in their best interest.
Without commenting on this particular case, there does seem to have been a disturbing and growing trend in recent years of attempts to deprive the elderly of the considerable wealth concentrated in their hands.
One more reason, if any were needed, to take great care in choosing investment and estate planning advisors.
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Section 72(1) of Ontario’s Succession Law Reform Act allows a court to deem various assets that may normally fall outside of a deceased’s estate, to be part of the estate for the purposes of satisfying a dependant support claim. This usually includes “any amount payable under a policy of insurance effected on the life of the deceased and owned by him or her”. However, as demonstrated in Madore-Ogilvie (Litigation Guardian of) v. Ogilvie Estate  E.G. No. 4654 (Div. Ct.), this provision will not normally capture insurance policies owned jointly by the deceased and a third party.
In Ogilvie Estate, the deceased was the father of six children (three of them minors) by five different women. Dependant support claims were made on behalf of two of the minor children. It was agreed that the deceased had failed to provide adequately for his minor children.
The issue before the court was whether a joint life insurance policy, issued to both the deceased and his spouse, could be included as part of the deceased’s estate under section 72(1) of the SLRA. The deceased and his spouse were both the owners and beneficiaries of the policy, which provided that the survivor of the two would receive the face amount of the policy on the death of the other. It was undisputed that the spouse had made the majority of the payments under the policy.
The applications judge held that the policy could be included as part of the estate. On appeal, a majority of the Divisional Court reversed this decision. The majority held that a jointly owned policy cannot be included as part of an estate merely because the deceased is one of the owners of the policy. The Court recognized that s. 72 of the SLRA was designed to counter the intentional depletion of an estate at the expense of dependants. However, there are transactions that “would be considered the normal personal commerce of an individual” and not necessarily undertaken to disenfranchise a dependant. In the case at hand, the majority ultimately decided that the contractual rights of the spouse to the joint policy trumped the needs of the deceased’s dependants.
Have a great day!
January 15, 2007 articles from the National Post and the Globe and Mail describe breakthroughs in Alzheimer’s research.
This encouraging news raises the possibility that we may be closer to a cure for this terrible disease, or at least treatments to slow the onset. Families struggling daily against the ravages of dementia can now see some light at the end of a very long tunnel.
Capacity law could be greatly affected as well. Current assessments to determine capacity, such as the capacity to manage property or the capacity to execute a Will, mix elements of science (such as cat scans) with the experience and judgment of the capacity assessor. Different assessors come to different conclusions in close cases.
As science can better identify and isolate genetic causes of dementia, we can expect more accurate tests. We might even see partial or comprehensive cures for dementia diseases. If so, patients who have lost capacity might recover it. Someone unable to sign a binding Will in 2006 could theoretically regain that ability in 2008.
This opens a Pandora’s box of fascinating questions. For example, if John Doe loses capacity in 2005 and regains it in 2010, who’s to say if he would name the same beneficiaries in 2011 as in 2004? Conceivably his personality may be significantly different after recovering capacity than it was before he lost it.
A beneficiary’s joy at recovering a loved one could be tempered by losing an inheritance.
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In Re Nesbitt Estates, an unreported 2005 decision of the Ontario Superior Court of Justice that is presently under appeal, the actions of an attorney under power of attorney were scrutinized by the Court in an unusual fact situation.
In this case, the attorney managed the property of his elderly aunt and uncle at their request and made a series of transfers of the aunt’s bank accounts into joint bank accounts held with her husband. The evidence suggested that the aunt was capable at all relevant times although there was admittedly sketchy evidence as to whether the aunt knew and approved of each and every transaction that placed her assets into joint ownership with her husband of sixty years. What was clear was that her testamentary intention throughout the period of the transfers was to benefit her husband with her entire estate. The wrinkle was that the aunt inexplicably changed her will shortly before her death to benefit, not her husband but, rather, a family friend.
During Hull of Estate and Succession Planning Episode 32, we continued to discuss the Elder Law Conference with an emphasis on what the Canadian Centre for Elder Law Studies is currently working on, highlighing their past work and discussing its mission of enriching and informing the elderly in the law.
During Hull on Estate and Succession Planning Episode 31, we discussed the various aspects of the Canadian Conference on the Elderly presented by the Canadian Centre for Elder Law including how the Courts are dealing with elder law and elder law situations.