Category: Estate Planning
Considering an application for partition or sale of real property that was bequested to you? Then consider the effect of s. 3(2) of the Partitions Act, R.S.O 1990, Chapter P.4.
The Partitions Act allows a joint tenant or tenant in common to bring an application or an action for the partition or sale of the land. However, s. 3(2) of the Act contains a prohibition on when such a proceeding can be commenced. In particular, where the land is held in joint tenancy or tenancy in common by reason of a devise or an intestacy, no proceeding shall be taken until one year after the decease of the testator or person dying intestate in whom the land was vested.
In Clayton v. Clayton, 2018 ONSC 1612 (CanLII), the court dismissed a motion for “partition and sale” of a property by the estate trustee of a joint holder of a property because it was brought before the expiration of one year after the death of the deceased applicant. As such, it was held to be a nullity.
The court dismissed the application for partition or sale without any reasons, other than a reference to s. 3(2) of the Partitions Act. It is not entirely clear, however, that the section applies, as the application was not brought by the beneficiaries of the estate, but rather, by the estate trustee of the estate. It is not entirely clear that the land was held in joint tenancy or tenancy in common “by reason of a devise or an intestacy”. It appears that the tenancy was between a husband and wife. The sole beneficiaries of the wife’s estate were her two children, who were not parties to the proceeding.
Clayton dealt with two other issues, as well. One issue was dismissed, and one was abandoned.
On the question of costs, the court held that as the respondent was entirely successful, he was prima facie entitled to costs. However, as there was no evidence that the applicant estate trustee was acting in breach of her duties to the estate or the beneficiaries, the court declined to make a costs award against the applicant personally. Further, as a costs award against the estate would ultimately come out of the pockets of the beneficiaries, the court declined to make a costs award against the estate. No order as to costs was made.
Keep s. 3(2) of the Partition Act in mind when considering any proceeding for partition or sale involving estate property.
Have a great weekend.
I came across another great post from brand guru Craig Postons recently, where he talked in part about the rapidly evolving success of Amazon.
With the holiday season just past, the message really hit home, as you couldn’t pass a Canada Post outlet (or the front porches of many homes) in December without seeing stacks of the Amazon-branded boxes with the smiley arrow ready for Amazon online purchasers to open. You can read the full blog here.
Postons’ point is a simple one: Amazon’s success isn’t based on what will change in the future, it’s on what won’t change in the future. Rather than try to predict future needs and attempt to meet them, Amazon looked at existing needs that won’t change and tried to meet those needs better than anyone else.
What were those unchanging needs? Amazon knows that its customers will always want low prices, a vast selection and fast delivery. With advancements like Amazon Prime, they blew it out of the water in terms of meeting those needs and enjoying record sales:
Are we too focussed on the future?
In our own financial and estate planning, it’s fun to think ahead to some of the exciting things that will change (southern retirement homes, grandchildren, freedom). But we also need to think about some of the less exciting things that won’t change, such as declining health as we grow older, death, and paying taxes on investment gains. You can take things a step further to include the needs of your adult children that will likely always be there (help with their first down payment, or ongoing support if they are disabled).
We all love the new shiny baubles in our lives, but when it comes to successful planning, it’s important to factor in those less exciting unchanging truths of life too.
Thank you for reading,
An insured may designate a beneficiary of the proceeds of a policy of insurance. This can be done by a beneficiary designation that is signed by the insured. No other formality is required.
An insured may also designate a beneficiary of a policy of insurance in a will.
What happens, however, if the will is found to be invalid?
Section 192(1) of the Insurance Act provides that a designation in an instrument purporting to be a will is not ineffective by reason only of the fact that the instrument is invalid as a will.
This may be due to the different procedural requirements of due execution of a will, versus the minimal procedural requirements of the execution of a beneficiary designation. Thus, a document signed by the testator/insured but not witnessed by two witnesses may be ineffective as a will, but may be effective as a beneficiary designation.
Different considerations may apply where the will is found to be invalid on the basis of lack of testamentary capacity. If the testator/insured is found to be incapable of executing a will, it may follow that he/she is incapable of executing a beneficiary designation. However, the applicable burden of proof may lead to a finding that one is incapable of signing a will, but capable of signing a beneficiary designation. In Fawson Estate v. Deveau, 2016 NSCA 39 (CanLII), the Court of Appeal was faced with a case where a will executed on April 23, 2004 was found to be invalid. The estate trustee then moved for summary judgment in a separate proceeding brought to declare beneficiary designations executed shortly before and after the execution of the Will invalid. The motion for summary judgment was dismissed, as the judge found that there was a genuine issue for trial. The Nova Scotia Court of Appeal agreed.
In dismissing the appeal, the Court of Appeal referred to the different burdens of proof. In the will challenge, the burden was on the will challenger to show suspicious circumstances. The burden then shifted to the propounder to show that the testator had testamentary capacity. In the challenge to the beneficiary designations, the burden was said to be on the challenger, throughout, to show that the insured did not have capacity to execute the beneficiary designations.
In a case of undue influence, a will found to be invalid due to undue influence may not necessarily mean that the insurance beneficiary designations were the result of undue influence: a separate analysis is required.
In conclusion, when considering rights and remedies in the face of a potentially invalid will, do not immediately assume that an invalid will means that insurance beneficiary designations contained in the will are invalid as well. A deeper analysis of the reason for the invalidity is necessary.
Thank you for reading.
There’s no shortage of bad news, and 2018 is starting off much the same. So how about focusing on some of the positives? There’s a lot of research showing that a focus on the things we’re grateful for is a key to greater happiness. Even the Harvard Medical School agrees.
So, let’s focus on the big picture, as Canadians. What are we grateful for? Here are five things you may want to ponder – and I’m sure there are many more:
- Democracy: We have to put this as number one. We are not beholden to a dictator or total state control. We vote in fair elections and we choose our leaders and lawmakers. Millions of people don’t enjoy this privilege. Whatever your political leanings, let’s be grateful for the ability to express our views freely.
- Water and energy: We have some droughts and some floods, and there are many legitimate environmental concerns, but we can drink from our taps and plug in our devices, and know that both water and energy are plentiful. So many in the world can’t say the same.
- Health care: It’s not a perfect system, but Canada delivers high quality, affordable health care to all. Good health is key to a good life. Our health care system helps deliver it, to rich and poor alike.
- Proximity to the United States: Yeah, I know, a bit of a controversial topic right now. But it’s kind of nice living beside the world’s largest and most innovative economy. Don’t let the political climate blind you to the fact that we benefit a huge amount by our trading relationship with our neighbour. Of course, it’s actual “weather” climate helps too – January in Palm Springs or Miami is awfully nice for those who can travel there.
- No inheritance tax: Hey, this is an estates blog after all. Okay, this may not be a “top 5” gratitude item, but as estates professionals, this is one we’re grateful for. You can discuss the political merits of inheriting wealth, but inheritance taxes only serve to promote aggressive planning to avoid them. Our efforts are better spent building wealth rather than finding ways to protect it. Pay some capital gains taxes, fair game. But let’s pass on the wealth and put it to good use!
And if you want a slightly more light-hearted look at the benefits of being Canadian, CNN has 10 that you may want to consider.
Thank you for reading … have a great day,
Guardians of property (and attorneys for property) need to make reasonable efforts to determine whether the incapable person has a Will, and if so, to determine what the provisions of the Will are. This requirement is mandated by s. 33.1 of the Substitute Decisions Act (“the Act”).
Section 33.2 of the Act authorizes the guardian to obtain information from third parties with respect to the Will. The section requires that a person having custody or control of property belonging to the incapable person provide the person’s guardian with any information requested by the guardian that concerns the incapable person, and to deliver the property of the incapable person to the guardian when requested. “Property” is specifically deemed to include the incapable person’s Will.
Why is this important? Because a guardian is required to not dispose of property that is the subject of a specific bequest in the incapable person’s Will (other than money): s. 35.1 of the Act.
This prohibition is subject to certain exceptions. The property may be disposed of if the disposition of that property is necessary to comply with the guardian’s duties, or the guardian may make a gift of the property to the person entitled to it under the Will, if the gift is authorized under s. 37 of the Act. Section 37 sets out rules that apply to the making of gifts of the incapable person’s property.
In the event that property is the subject of a specific gift, and is disposed of by the guardian, the doctrine of ademption does not apply. Rather, the person who was entitled to the property under the Will is entitled to receive from the residue of the estate the equivalent of a corresponding right to the proceeds of the disposition, without interest: s. 36(1) of the Act. This is, however, subject to a contrary intention set out in the person’s Will.
The provisions relating to determining the terms of the Will and dispositions of property under a Will apply equally to attorneys acting under a Power of Attorney: s. 38(1) of the Act.
Have a great weekend.
For many Canadians, one or more life insurance policies represent an important component of an estate plan. If a policy cannot be honoured as a result of the cause of the insured’s death, this may completely frustrate his or her testamentary wishes.
The terms of life insurance policies typically address the issue of whether a beneficiary will be entitled to the insurance proceeds in the event that an individual commits suicide. Policy terms typically include a restriction as to the payout of the policy if the insured dies by his or her own hands within a certain of number of years from the date on which the policy is taken out (most often two years).
With the decriminalization of physician-assisted death, there was initially some concern regarding whether medical assistance in dying would be distinguished from suicide for the purposes of life insurance. The preamble to the related federal legislation, however, distinguishes between the act of suicide and obtaining medical assistance in dying.
As mentioned by Suzana Popovic-Montag in a recent blog entry, the Canadian Life and Health Insurance Association suggested in 2016 that, if a Canadian follows the legislated process for obtaining medial assistance in dying, life insurance providers will pay out on policies that are less than two years old. Since then, the Medical Assistance in Dying Statute Law Amendment Act, 2017 has come into force to provide protection and clarity for Ontario patients and their families. This legislation has resulted in amendments to various provincial legislation, including the Excellent Care for All Act, 2010, a new section of which now reads as follows:
…the fact that a person received medical assistance in dying may not be invoked as a reason to deny a right or refuse a benefit or any other sum which would otherwise be provided under a contract or statute…unless an express contrary intention appears in the statute.
The amendments provided for within the legislation introduced by the Ontario government represent an important step in the recognition of physician-assisted death as a right that is distinguishable from the act of suicide. They also confirm the right of individuals who access medical assistance in dying to benefit their survivors with life insurance policies or other benefits.
Thank you for reading,
Other blog posts that may be of interest:
Financial planning is a tricky business at the best of times – especially for longer-term goals like retirement and estate planning. But when the tax framework on which you’ve built your plan changes, that tricky business becomes that much harder.
If 2017 taught us anything, it’s that nothing lasts forever when it comes to financial planning for your future. For the hundreds of thousands of small businesses and professional corporations in Canada, the federal government’s new rules on income sprinkling and holding investment income in a corporation are creating both uncertainty and a need for many to go back to the drawing board and revise what they have in place. You can find a quick overview of the changes here.
While no one knows with certainty what future tax changes will be, we do know this: tax change itself is a certainty. The current tax framework in 2018 will not be the same in 2028. Governments will continue to tinker, creating new tax policies to address emerging needs and new tax policies to shutdown strategies that the government sees as “too tax effective” from a tax policy standpoint.
A recent article in the Globe and Mail highlighted a good example of what could change in the future – the TFSA. What began as a modest but very tax-effective savings vehicle is now almost 10 years old, with lifetime contribution limits approaching nearly $60,000 for those who were age 18 when TFSAs were introduced in 2009.
Is this one of the strategies that could be too effective to be sustainable long term? Time will tell. In the meantime, some suggestions for your financial planning:
- Diversify – avoid putting all your financial eggs in one strategy basket if possible, as your chosen basket may not look the same in 20 years;
- Monitor – make sure your financial planner or tax advisor has their ear to the ground in terms of proposed changes and possible impacts on you; and
- Be flexible – be prepared to change strategies, because future tax changes are a given and they could require you to change course.
Thank you for reading … Enjoy your day,
A recent article featured in the New York Times highlights the need to reconsider estate planning strategies in light of developments in the law of inheritance taxation.
As our blog has previously reported, during his presidential campaign, Donald Trump vowed to eliminate inheritance taxes, then payable on the value of American estates exceeding $5.45 million, altogether. To the disappointment of many wealthy citizens of the United States, President Trump has not carried out his promise and, while the exemption has been increased, inheritance tax remains payable in the United States in respect of estates of a size greater than $10 million.
The New York Times reports that these changes to the exemption in respect of inheritance taxation are temporary in nature and that the measures currently in effect will expire in 2026. At that time, Americans (and individuals who hold property of significant value in the United States) may need to amend their estate plans with a view to tax efficiency.
Gifts, including testamentary gifts, are not typically subject to taxation in Canada. While there is no Canadian estate or inheritance tax, assets that are distributed in accordance with a Canadian Last Will and Testament or Codicil that is admitted to probate will be subject to an estate administration tax (also known as “probate fees”). Many of our readers will already be aware of the relatively new requirement (as of 2015) that estate trustees in Ontario file an Estate Information Return with the Ontario Ministry of Finance within 90 days of the processing of a probate application. In some circumstances, details regarding both traditional estate assets and assets typically considered to pass outside of the estate are required, notwithstanding that the latter category may nevertheless be exempt from probate fees. Some anticipate that the law in Ontario may at some point be amended to require further details regarding assets passing outside of an estate in Estate Information Returns and/or the payment of estate administration tax or other fees in respect of these assets. Like variations in the exemptions to American inheritance tax, changes to estate administration taxes may in the future necessitate amendments to existing estate plans with a view to limiting the taxes payable on the transfer of wealth.
Thank you for reading,
Related blog posts that may be of interest:
In Marasse Estate (Re), 2017 ABQB 706 (CanLII), the Court of Queen’s Bench of Alberta recently ordered a man to make ongoing support payments to his dead spouse’s estate.
In that case, Tracy and Jean were married in October, 1998. They separated in April, 2012. A divorce was granted in March, 2015.
Tracy and Jean entered into a Separation and Property Agreement (“the Agreement”) in October, 2014. Both Tracy and Jean were represented by counsel.
The Agreement dealt with all issues of spousal support and the division of property. It provided that Jean was to pay support to Tracy in the amount of $3,000 per month, for 60 months. Jean’s obligations were secured by a policy of insurance in the event that Jean died before full payment was made. The Agreement provided that it was non-reviewable by the Court, and that it was binding on and would inure to the benefit of the estate of the parties. It was otherwise silent with respect to what would happen in the event that Tracy was to die before all payments were made.
Tracy, who was ill at the time of the negotiation of the Agreement, died in June, 2015. At the time of her death, only 8 of the 60 support payments had been made.
Tracy’s Estate Trustee brought a claim for the payment of the balance of the support payments. Jean opposed, arguing that:
(a) as Tracy died, there was no longer economic need on Tracy’s part; and
(b) Tracy’s right to support was personal to her.
The Court disagreed, finding that it was not clear that the support was “non-compensatory”. Nothing in the Agreement specifically addressed the conceptual basis for the support payments.
The Court held that the entitlement to support payments was contractual in accordance with the Agreement. While a claim for spousal support under statute may die with the Claimant, contractual rights do not necessary suffer the same fate.
The Court did not order a lump sum payment of the total of the outstanding payments, but rather, declared that Jean’s obligation to make ongoing payments to Tracy’s estate continued.
Have a great weekend.
The financial industry is relentless in encouraging Canadians to “plan for the unexpected” – and highlighting how anything can happen. You could lose your job, become disabled, lose your home to a fire, lose a loved one – the list of possible bad news seems endless.
The solutions that the industry is pushing – emergency funds, insurance, retirement savings – are all smart choices, and it’s important to have protections against bad news in place. But what about the good news? Do we need a plan of action when happy financial events occur?
The answer is absolutely. But luckily, your actions can take place after the good news. Unlike the bad news event, no advance planning is required.
Unexpected good financial news can come in many forms: an inheritance, large gift, work bonus or promotion, or a rapid rise in the value of shares that you own. And if you experience financial good fortune, it’s important to integrate the unexpected additional assets into your financial plan.
For example, with a more secure financial base, you may be more comfortable with investment risk, and more willing to adopt a more aggressive investment strategy to enhance your long-term returns. Conversely, if your savings are already aggressively invested to achieve your retirement goals, the additional wealth may allow you to structure a more moderate risk portfolio.
If you are currently retired, financial good fortune can also affect your retirement income strategy. If you draw on your new funds to meet your immediate cashflow needs, you’ll be able to withdraw less taxable income from your registered plans – and this could significantly lower the taxes you pay.
Of course, the most unexpected – and most unlikely – piece of good financial news is what nine Montreal co-workers received around Christmas: a $60 million lottery win, representing nearly $7 million each. The group seemed surprisingly tight-lipped in the press reports, not even disclosing where they worked. But you definitely get a sense that this is a savvy group who will plan well.
And while the article below contains advice for a lottery win, it really applies to any financial windfall.
Enough of the bad news – here’s to good financial fortune for you in 2018.
Thank you for reading,