Category: Estate Planning
Your will sets out how your estate is to be divided upon your death, but it is up to your executor to settle your financial affairs and distribute the remaining assets to your beneficiaries. That is why choosing the right executor is so crucial. Here are some guidelines to help select who will perform this important role.
First, you may want to make sure the person lives in Canada. An estate is considered a trust, so there could be tax implications if it is controlled by a non-resident. Rules vary from province to province, so it is best to get someone close by since they will have to consult with your bank and lawyer when settling the estate.
Even with the simplest estate, your executor will have plenty of paperwork to complete. That includes gathering financial information required to file your final tax return, paying outstanding debts and estate expenses, and perhaps even applying to have the will validated by a court. Your executor should be comfortable with finances and dealing with government agencies. He or she should also not be afraid of asking for professional help when needed.
In many cases, trustworthiness is more important than expertise, as honesty trumps experience in this important role.
You will also want to make sure the person you appoint as executor is willing to devote the time and effort required to handle all these tasks, as the process can last for months, even years. In Ontario, more than one executor can be appointed under your will and you may want to consider obtaining consent before naming someone as an executor in your will.
If you are naming a single executor, however, it is wise to consider appointing an alternate. There is always the risk of your primary executor dying before you, or becoming ill, incapacitated or unwilling to act when it is time to settle your estate.
If you intend to leave the majority of your assets to a single person, such as your spouse, you may want him or her appointed as one of your executors. Adult children or other family members often serve in this role. That usually works well, but problems can arise if one family member feels he or she is performing more of the tasks than the others.
Tensions amongst surviving family members can cause problems within blended families, especially if a child from one marriage is put in charge of distributing your estate while those from another marriage watch suspiciously from the sidelines. Naming an executor from outside the family is definitely the better option in that situation.
There are also estate professionals who can be hired to act as executors. This may be a sensible alternative if your estate is complex, or if minors or disabled children have to be provided for through trusts. Having an outsider administer your estate may also be an effective way to avoid family conflict after you are gone.
Anyone serving as an executor of your estate can apply to the court for what is known as executor’s compensation, a form of remuneration for the work involved in settling an estate.
The age of your executor is also very important. While you may want a friend that you have known since childhood to be entrusted with this role, he or she may not be physically able to do the work that is needed when the time comes.
Just as you should be reviewing and updating your will on a regular basis, your choice of executor should also be revisited periodically. Personal circumstances change over time, and perhaps the person you chose to take on the task decades ago may not be as appropriate now.
Your estate is the last gift you will give to your family. Choosing the right executor ensures that the gift is distributed as you intended.
Thanks for reading … have a great day,
Broadcaster Larry King is once again in the news. This time, he is making news, not reporting on it.
Larry King died on January 21, 2021, at the age of 87. He left a will made in 2015. However, he apparently made a new, handwritten will dated October 17, 2019, just two months after he filed for divorce from his seventh wife, Shawn Southwick King. They were married for 22 years. In the codicil, he left his estate to his five children (two of whom died after the 2019 will was written) and cut Shawn out of his estate plan.
Shawn is now challenging the validity of the 2019 will. Shawn alleges that Larry King was of “questionable mental capacity” when the 2019 will was signed, and was subjected to undue influence from Larry King Jr. Shawn also alleges that the terms of the 2019 will violate the terms of two postnuptial agreements entered into by Larry King and Shawn
There is also a contest as to who should be appointed as estate trustee. Larry’s son, Larry Jr. is asserting that he be appointed as administrator. Shawn is also claiming entitlement to be administrator. Shawn is claiming that although Larry King filed for divorce, he was not pursuing it, and the couple was still speaking, engaged in counselling and there was a possibility of reconciliation. She argued that Larry Jr. was never involved in Larry King’s career or business. Apparently, Shawn was named as administrator in the 2015 will.
Larry King’s estate is estimated as having a value of $2m US.
Larry King was once quoted as saying, “Getting your house in order and reducing the confusion gives you more control over your life. Personal organization somehow releases or frees you to operate more effectively.” Unfortunately, his estate plan may not have been fully in order.
Thank you for reading.
Last Friday, February 12, 2021, the Attorney General for Ontario announced changes to the Estates Act that raise the limit of a “small estate” to $150,000.
“Right now, the process to apply to manage an estate in Ontario is the same, whether the estate is worth $10,000 or $10,000,000. The process can be time-consuming and costly, deterring people from claiming smaller estates – and that isn’t right,” said a press release.
The new regulation, introduced in the Smarter and Stronger Justice Act, does not come into effect until April 1, 2021, but will make it easier to file a probate application for small estates and removes the requirement for a security bond in many small estate probate applications.
Among the changes to simplify the probate process for small estates are allowing for the completion and filing of a new simpler application form; removing requirements for certain supporting documents to be filed (for example, a commissioned affidavit of service); and more guidance for applicants on the process to file a probate application for a small estate.
Estate administration tax is still applicable to the portion of the small estate that is larger than $50,000, but these changes to procedure represent a positive step for grieving families who might otherwise leave a small estate unclaimed.
It’s worth noting that banks and other financial institutions often can’t take instructions from an estate trustee unless probate has been granted. By raising the limit for small estates, and simplifying the probate procedure, many estates will be settled sooner and with fewer burdens or costly hurdles for grieving families.
Thanks for reading
Ian Hull and Daniel Enright
This week on Hull on Estates, Natalia Angelini and Sanaya Mistry discuss the fiduciary duty and obligations of attorneys for property and the recent decision in Public Guardian and Trustee v. Cherneyko et al., 2021 ONSC 107.
Should you have any questions, please email us at email@example.com or leave a comment on our blog.
It’s often referred to as the largest transfer of wealth in human history. “Baby boomers,” the post-war generation born between 1944 and 1964, are expected to transfer what Forbes has called “jaw-dropping amounts” to younger generations. Over the next 20 years, the United States alone will see a transfer of $30 trillion dollars. A 2020 Bloomberg opinion article points out that the top 1% of US households will receive 35% of all inheritances. In Canada, however, half of all Canadians expect to receive an inheritance, and 63% expect to leave one.
So how do these numbers breakdown?
- Canadians who are married, own property, and have an income of $80,000 or more are most likely to leave an inheritance.
- Only 69% of those planning to leave a legacy use a financial professional for their testamentary strategy.
- The average inheritance in Canada, according to a 2014 BMO survey, is just under $100,000.
It’s not all good news. The Office of the Superintendent of Financial Institutions (“OSFI”) is an independent agency of the Government of Canada that supervises and regulates federally regulated banks, insurers, trust and loan companies. In July of 2020, the OSFI released data showing that Canadian seniors are achieving record debt levels through reverse mortgages: $4.5 billion. An increase of $4 billion in 10 years. Reverse mortgage interest can be high. The December 2020, 5-year interest rate on a traditional mortgage was 1.69%, while the 5-year reverse mortgage rate was closer to 5%. Reverse mortgage rates compound and balloon and it’s easy to see how the collected debt could skyrocket. This is particularly so older Canadians are able to stay in their homes for longer.
So while so many younger Canadians are expecting an inheritance, and indeed that expectation is forming part of their long-term financial plans, caution and careful planning should be encouraged if that inheritance is already saddled with debt. While this blog has encouraged estate discussions between family members in the past, it’s important to make your heirs aware of any responsibilities and options for settling your reverse mortgage debt when the time comes.
Thanks for reading!
Ian Hull and Daniel Enright.
 Ian Hull also discusses the subject of the family conference in his book, Advising Families on Succession Planning – The High Price of Not Talking
Ah, January. A new year, a new start. This year, more than any other, people are putting 2020 behind them with ‘extreme prejudice’, and planning for a much different and much better year ahead.
Some will be giving up sugar, others will take up running, or tackling that Spanish language textbook that’s been sitting in the corner since the first season of Narcos. Some of us will even get our estate affairs in order.
With that in mind, we present a few considerations for 2021 when making sure our affairs are all set.
A Power of Attorney: Nobody expects to lose the ability to make financial decisions. But it does happen, and as we age, the risks increase. Giving someone you trust the power to make decisions for you in the event you’re no longer able to do so, can save a lot of time down the road, and a lot of money in legal expenses.
A Will: Without one, your assets will be divided according to provincial law. If you have children, and no Will, your kids may be placed in the care of a guardian who is maybe not your first choice. It is your “last word” and the single most important document in your estate files. Our colleague, Kira Domratchev, blogged about the importance of a Will in November of 2020.
Banking Information: According to the Bank of Canada at the end of 2019, there were approximately 2.1 million unclaimed balances, worth $888 million, sitting in unclaimed bank accounts across the country. Have a list of your banks and accounts, including safety deposit boxes, and ensure that your family knows where it is.
Insurance Policies: Many insurance plans provide benefits for funeral plans or list a chosen beneficiary who is entitled to the policy. Make sure that your insurance plan is up to date, and keep copies close to your Will. This also applies to any RRSPs or pension plans that may include a benefit to someone in the event that something were to happen.
Proof of Ownership: Whether it’s the family cottage, that 1965 Mustang GT 390 Fastback, or your condo in Kitsilano: Without proof of ownership, your family may not know what you have or where it is.
Passwords: As we have blogged in the past, your online presence needs proper safeguards, but also creates important considerations for your executor or trustee who will need access to your online information and/or assets. Whether you use an online password manager, such as these, or keep an old-fashioned paper list, make sure it can be found by your family if needed.
Finally, these documents are important and need to be kept safe. Thankfully, in January of 2020, the New York Times undertook an investigation to determine the best fireproof documents safe. You can read about the results here.
We wish you all the very best in 2021, and thanks for reading!
Ian Hull and Daniel Enright
Consider the fact that a resulting trust will not apply just because you later change your mind.
In the recent decision of Hertendy v Gault, 2020 ONSC 7555, the Superior Court of Justice confirmed that in a situation where a parent transfers property to an adult child, the principles of a resulting trust do not apply in cases where the transfer is a true gift.
In this case, the mother, Ms. Hertendy, was seeking summary judgement against the daughter, Ms. Gault, to recover legal ownership of land in Smiths Falls (the “Property”). The Court found that the mother had agreed to and did transfer the Property as a gift to the daughter in April 2012, with the stipulation that the mother would retain a life interest in the Property and that the daughter and her husband would help pay for the on-going household expenses of the Property.
While the mother argued that there was no payment or consideration for this transfer (among other things), the daughter argued that the transfer was done for consideration, namely, the promise to help pay for the on-going expenses when requested to do so by the mother.
Among other things, the Court considered the fact that in the mother’s Will, dated 2011, the Property was to be transferred to the daughter after her death. In 2017, the mother removed her daughter from the Will and stated to Mr. Greenall (her other daughter) that she “changed her mind about transferring the home”.
The Court confirmed that the presumption of a resulting trust will apply to gratuitous transfers and where a transfer is made for no consideration, the onus is on the transferee to demonstrate that the gift was intended. Quoting Pecore v Pecore, 2007 SCC 17, the Court noted that “the focus in any dispute over a gratuitous transfer is the actual intention of the transferor at the time of the transfer…The presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities.”
As such, the issue in this case was whether, at the material time the mother intended the transfer. The Court considered whether any person would gift their home to someone (even family) in return for a vague pledge of assistance for payment of expenses. The Court found that in this case, the fact that the mother signed the transfer document, she intended to sign the document, she received a benefit from signing the document (even though the benefit was modest compared to the value of the Property), and she paid the lawyer for the transfer, was sufficient to uphold the gift. The court also pointed out that the mother made no complaints about the transfer until at least three years later and her explanation for doing so was that “in hindsight [she] should have asked more questions.”
Thank you for reading.
A recent B.C. Court of Appeal decision, L.T. v. D.T. Estate, 2020 BCCA 328 (CanLII) clarifies the ability to harvest and use reproductive material from a deceased individual. The decision makes it clear that the material cannot be collected unless the deceased consented to the removal of the material prior to death. The consent must be informed, and in writing.
The unfortunate facts are that Mr. and Ms. T were in a long-term relationship. They married three years before Mr. T’s death, and had one child together. They had discussed having another child. Mr. T died suddenly and unexpectedly. Ms. T brought an emergency application to allow for the removal of Mr. T’s reproductive material. The application was allowed, on the condition that the material not be released until the court could consider the matter further. The application judge then heard the matter and found that the removed reproductive material could not be used. The order was stayed pending an appeal to the B.C. Court of Appeal. “With regret”, and “aware of the painful and tragic circumstances confronting Ms. T’s family”, the B.C. Court of Appeal dismissed the appeal.
The B.C. Court of Appeal found that the clear wording of the Assisted Human Reproduction Act, S. C. 2004, c.2. applied. Section 8(2) of the Act mandates a clear prohibition on the removal of human reproductive material after the donor’s death without the donor’s written consent, to be given in accordance with the regulations.
The Court of Appeal distinguished a prior decision where material was allowed to be used notwithstanding the fact that the consent did not comply with the Act. In K.L.W. v. Genesis Fertility Clinic, 2016 BCSC 1621, (which Natalia Angelini and Nick Esterbauer podcasted on, here) the deceased had stored reproductive material before he died. He did not, however, give formal consent to its use posthumously. The court in K.L.W. held that the material was “property” and that it passed to the surviving spouse. While not commenting on the “reproductive material as property” argument, the Court of Appeal challenged the correctness of the K.L.W. decision. “The case should be treated as having been overruled insofar as it contemplates the possible use of reproductive material where the statutory conditions have not been complied with.”
The B.C. Court of Appeal stayed its own order to permit the parties to consider an appeal to the Supreme Court of Canada.
A consideration of the possible posthumous use of reproductive material should be a part of most estate plans. If you want to be able to use it, ensure that the requirements of the Assisted Human Reproduction Act have been complied with.
Thanks for reading.
Jordan Atin and e-State Planner are excited to announce the launch of the eState Academy – a free online estate planning education site for lawyers.
The goal of the Academy is to provide a space for learning and collaboration between lawyers where not only substantive legal issues are discussed, but practice tips. The course will provide its attendees with basic planning frameworks, as well as practical advice regarding client management.
New courses will be added throughout the year so that subscribers can both refresh their understanding of various estate planning topics, but also keep up with recent developments in the law.
The Academy offers a series of short video lessons, presentations and quizzes.
Thanks for reading and happy learning!
Recent reports indicate that Chadwick Boseman is the latest celebrity to die without a Will. His wife is currently seeking to be appointed administrator of his Estate.
This certainly shows that many people, including those with significant assets, often procrastinate when it comes to preparing a Will. The fact is that, no matter how many assets you have, a sound estate plan can help you address any potential tax liabilities, take advantage of certain planning strategies and otherwise make life much easier for your beneficiaries, as addressing an intestate estate can often have its challenges.
The benefits of making a Will are numerous, including (but not limited to) the ability to:
- Decide who gets certain personal items after your death;
- In contrast to an intestacy, provide for your children (if any), particularly if they are minors;
- Consider whether there are any parties who can complicate the distribution of your estate and address potential strategies in response to that;
- Appreciate what assets will form a part of your estate and what assets will flow outside of your estate, as well as the benefits associated with either;
- Take care of any pets that you may have (particularly those that may be expensive to maintain); and
- Decide who will be in charge of administering your estate.
Without a Will, you essentially leave the decisions respecting your assets in the hands of others and more often than not, in the hands of the Court. In certain situations, having no estate plan may fuel disagreements between your heirs which may leave long lasting effects on family relationships.
I, for one, think these are great reasons to make an estate plan!
Incidentally, it is “Make a Will Month” with the Ontario Bar Association. Click here for more details.
Thanks for reading.
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