Category: Estate Planning
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.
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.
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.
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.
“No one likes to see a limitation period applied to dismiss a claim. That said, there are good reasons for limitation periods. This case is an example of why they exist.”
So says Justice Nakatsuru in the opening line of his decision of Sinclair v. Harris, 2018 ONSC 5718 (CanLII).
There, the estate trustees of the estate of Virginia Rock (“Rock”) sued Merilyn and Frederick Harris (“the Harris’s”), claiming an equitable interest in lands purchased by the Harris’s, as part of the funds for the purchase of the lands were provided by Rock.
There, the relevant time line was as follows:
July 12, 2000: Rock provides money to the Harris’s to buy a property
August 5, 2003: The Harris’s sell the property. Rock was apparently aware of this.
November 17, 2015: Rock dies
February 24, 2017: Rock’s estate trustees commence the action
Justice Nakatsuru found that the 10 year limitation period under the Real Property Limitations Act applied. He disagreed with the estate trustees’ position that no limitation period applies to a claim for resulting trust. As the claim was a claim for the recovery of land (or “money to be laid out in the purchase of land”), the limitation period in the Real Property Limitations Act applied.
The court held that the limitation period would have commenced on the date the funds were advanced. Alternatively, it would have run from the time when the Harris’s sold the property. Under either interpretation, the limitation period had passed.
The action was dismissed.
Justice Nakatsuru said that “No one likes to see a limitation period applied to dismiss a claim.” No one other than a defendant.
Footnote: Justice Nakatsuru has been called the “poetic” judge and lauded in Macleans Magazine for his “heartfelt, easy-to-read rulings”. For an excellent example of this, see his decision on a bail application in R. v. Sledz, 2017 ONCJ 151 (CanLII).
Have a great weekend.
Is it possible for today’s seniors to return to their hippie past? For some, plans are in the works.
Youth of the 1960s were a powerful social force that introduced a greater acceptance of community or “commune” living. While the concept never went mainstream, commune-type living is a niche arrangement that takes many forms today, from housing co-operatives in the city, to back-to-the-earth rural compounds, to religious groups seeking to live with their own kind.
If there’s a “hippie” feel to all of this, it’s for good reason. Many of these communities are progressive, socialist in leaning, and seeking a higher ideal in their living. It sure sounds like the 1960s.
Which takes us to commune living for seniors. I heard about this first from a group of men who played hockey together and lived in the same neighbourhood. Recognizing that many would need to “cash out” and sell their homes as they got older, the group lamented the possible loss of their community. One answer was to establish a single housing collective that everyone could move to to maintain their social bonds.
While that idea has never gotten beyond beer talk (at least not yet), I recently learned of another friend who was actively involved in a group that had moved beyond the talking stage and were scouting potential building sites. It may not be for me, but it certainly put the idea on my radar.
The push for senior communes
The attractiveness of senior communes is that it bypasses traditional retirement homes (too institutional) or living alone arrangements (no community, too lonely). A commune brings like-minded people together who can care for each other – and bring in help as needed as group members age.
Of course, there are countless hurdles to such arrangements that range from funding, to legal status, to rules relating to who can live in the complex and what the responsibilities of living there entail.
The Huffington Post ran an article about this recently.
One of the Toronto groups mentioned in the article, Baba Yaga Place, is in the process of making their community living project a reality. It’s modelled on a Paris commune of senior women that is up and running. The Paris commune took 13 years to establish, but Baba Yaga Place is hoping their development stage is quicker. You can follow their progress through their website.
Are you ready to channel your inner-hippie as you enter your senior years? You may soon have options.
Thanks for reading,
This week on Hull on Estates, Noah Weisberg and Garrett Horrocks review the decision in Steele v Smith, 2018 ONSC 4601, and discuss Benjamin Orders as a remedy for the estate trustee in the event that a beneficiary cannot be located.
Should you have any questions, please email us at firstname.lastname@example.org or leave a comment on our blog.
The court has the authority under the Substitute Decisions Act to appoint a guardian for property. However, does the court have the authority to appoint a temporary guardian for property? According to the decision in Ballinger v. Marshall, 2018 ONSC 3020, the answer is Yes.
In Ballinger, Ms. Marshall’s son applied for a declaration that Ms. Marshall was incapable of managing property and personal care, and for an order appointing himself as her guardian for property and personal care.
In an interim order, the court ordered that Ms. Marshall be assessed. The court also ordered that counsel be appointed by the Public Guardian and Trustee to represent Ms. Marshall (“s. 3 counsel”).
Ms. Marshall refused to be assessed. A further motion was brought to compel Ms. Marshall to be assessed, which order was granted. Still, Ms. Marshall still refused to be assessed.
The court considered s. 25 of the Substitute Decisions Act, which sets out what may be contained in an order appointing a guardian. Section 25 provides that an order appointing a guardian for a person must include a finding that the person is incapable of managing property. Further, the court may make the appointment for a limited period as the court considers appropriate, and impose such conditions as the court considers appropriate.
The court held that this gives the court jurisdiction to make a temporary order. Support for this was found in the Divisional Court decision of Bennett v. Gotlibowicz, 2009 CanLII 33031 (ON SCDC).
In Bennett, a court-ordered assessment concluded that the person was incapable. In Marshall, there was no such assessment evidence: due to Ms. Marshall’s refusal to undergo an assessment. The court was, however, able to rely on the son’s observations with respect to his mother’s behavior to come to a conclusion that, on a balance of probabilities, Ms. Marshall did not have capacity to manage her property.
The son was appointed as guardian. However, the guardianship was only a temporary one, until:
- Ms. Marshall participates in a capacity assessment and the capacity assessment is returned to the court for consideration;
- the matter is returned to the court for further directions; or
- November 15, 2018.
The court also gave specific direction with respect to what the guardian could do with Ms. Marshall’ property. He was to sell her house, and pay her debts. The proceeds of the sale, after the payment of debts, was to be held in a law firm’s trust account pending the further order of the court. The son had proposed that an affordable condominium be purchased for Ms. Marshal as alternative accommodation. However, the court did not allow for this, stating that “I believe that it is best that this process proceed slowly”.
Have a great weekend.