Category: Estate Planning

19 Nov

Charity Case: Consider your Intentions!

Garrett Horrocks Charities, Elder Law, Estate & Trust, Estate Planning, In the News Tags: 0 Comments

A recent CBC article demonstrates the importance of having a testator regularly review, or at least consider, their current estate plan to ensure that it conforms to their testamentary intentions, and the potential pitfalls of failing to do so or of failing to seek legal advice.

Eleena Murray, of Vancouver, British Columbia, died leaving a Last Will and Testament dated sometime in 2003.  The Will provided cash legacies to various relatives, totaling approximately $440,000, and left the residue of Eleena’s estate to a charitable organization, the SPCA.

Although it is not clear, at the time the Will was drawn, it appears as if the residue of the Estate would have largely consisted of her interest in her house, situated in the Point Grey neighbourhood of Vancouver.  Presumably, although it is unclear, the total value of all of the cash legacies was likely close to the fair market value of the house, such that Eleena intended to divide her estate roughly equally between the legatees and the charity.

However, in the years since the Will was drawn, the real estate market in Vancouver saw massive growth, with property values rising significantly, and the value of the residue of Eleena’s estate along with them.  In 2017, perhaps recognizing what had become a considerable discrepancy between the values of the cash legacies and the value of the house, Eleena apparently drafted a handwritten note containing, among other instructions, an intention to limit the SPCA’s interest in her estate to a flat bequest of $100,000.

It is unclear whether the note was signed by Eleena or subscribed to by attesting witnesses (although two witnesses swore affidavits attesting to the fact that the note was prepared by Eleena).  Eleena died only months later, without having amended her Will to reflect her purported intentions by way of the note.  Although the value of the house, and therefore the residue of the Estate, increased significantly, Eleena never formally amended her estate plan.

Litigation has since ensued, with Eleena’s family members asserting that the handwritten note is a testamentary document that accurately represents her intentions.

Were this litigation taking place in Ontario, a court might find that the handwritten note would constitute a holograph will, assuming it was signed by Eleena.  A holograph will is a will that is made entirely in the handwriting of the testator and signed by them, without the need for attesting witnesses.

In British Columbia, the analysis is slightly more nuanced.  There is no equivalent provision under BC legislation that specifically recognizes the validity of holograph wills, as the Succession Law Reform Act does in Ontario.  That said, British Columbia’s Wills, Estates and Succession Act empowers a court to make an order that a record purporting to be a will if the court is satisfied that the document represents,

  1. The testamentary intentions of a deceased person;
  2. The intention of a deceased person to revoke, alter, or revive a will; or
  3. The intention of a deceased person to revoke, alter, or revive a testamentary disposition in a document other than a will.

The court is equally empowered to make an order that a will that is not made in conformity with the applicable legislation is equally as effective as if it had been.

In the case at hand, the prevailing question will likely be whether the court is satisfied that the handwritten note accurately represents Eleena’s testamentary intentions.  If so, the subsequent issue to be considered is whether the balance of the Estate that is not dealt with pursuant to the note passes by way of an intestacy, but that is a topic for another day.

Thanks for reading.

Garrett Horrocks

30 Oct

Distribution on Intestacy: The Preferential Share

Paul Emile Trudelle Estate Planning Tags: , , , 0 Comments

In Ontario, if a person dies without a will, the Succession Law Reform Act (“SLRA”) dictates how the person’s estate is to be distributed. Part II of the SLRA provides that if the person dies with a married spouse, that spouse receives a share of the estate. If there are no children, the spouse receives the estate outright. If the deceased has children, may be entitled to receive a share of the estate. If there is only one child, the spouse receives the “preferential share”, and half of any estate in excess of the preferential share goes to the spouse and the other half goes to the child (or the child’s issue, if the child has predeceased). If there is more than one child, the spouse gets the preferential share and one-third of the excess and the other children share the remaining two-thirds. Again, if a child has predeceased the deceased, the child’s issue enjoys that child’s share.

Things get a little more complicated where there is a partial intestacy. If the spouse receives assets under the will, the spouse’s preferential share is reduced by the value of the property received under the will.

Note that the intestate provisions pertaining to spouses in Ontario apply to married spouses only. Common-law spouses are not entitled to a share of the estate on an intestacy. However, they may be entitled to dependant support under Part V of the SLRA.

In Ontario, the value of the preferential share is not referred to in the SLRA. The value of the share is set by regulation: O. Reg 54/95. Since 1995, the value of the preferential share has been $200,000.

British Columbia intestacy legislation is somewhat different. The relevant legislation is the Wills, Estates and Succession Act, SBC 2009, c 13.

Firstly, in B.C., a spouse is defined as including a married spouse AND a person with whom the deceased lived in a marriage-like relationship for at least two years immediately before the death.

Secondly, in B.C., there are different calculations of the “preferential share”. If all of the children are children of BOTH the deceased and the surviving spouse, then the preferential share is $300,000. If all of the children are NOT “common” to the deceased and the surviving spouse, then the preferential share is only $150,000.

Thirdly, in addition to the preferential share, the surviving spouse is entitled to the “household furnishings”, which is defined as being the “personal property usually associated with the enjoyment by the spouses of the spousal home”. In Ontario, the value of the preferential share presumably includes the value of any household furnishings.

Fourthly, the B.C. legislation provides that if the estate is greater than the preferential share, then the surviving spouse gets half, and the deceased’s descendants get the other half, regardless of how many children there are.

Fifthly, the WESA provides for situations where there are more than one “spouse’. In such a case, the surviving spouses are to share the preferential share in the portion to which they agree, or failing agreement, as may be determined by the court. The WESA does not appear to give any guidance as to how that determination is to be made.

If you are short of things to think about this weekend, consider:

  1. Whether it is time to reconsider the value of the preferential share?
  2. Whether it makes sense to allow the spouse to have the household furnishings in addition to the preferential share. This personal property usually has nominal resale value, is difficult to evaluate, and often has sentimental or practical value to the surviving spouse.
  3. Whether Ontario should adopt a definition of “spouse” that includes common-law spouses for intestacy purposes, or whether resort to dependant support provides sufficient protection for common-law spouses?
  4. Whether the fact that the surviving children of the deceased are also the surviving children of the surviving spouse should impact on the value of the preferential share, as it does in B.C.?
  5. Whether the percentage of the estate in excess of the preferential share that the surviving spouse gets should vary depending on how many children the deceased had (that is, 50% if only one child, but only 33% if more than one child)?

Thank you for reading. Have a great weekend.

Paul Trudelle

27 Oct

Separation, Divorce, and COVID-19: Don’t forget to update your estate plan

Nick Esterbauer Estate & Trust, Estate Planning, In the News, Wills Tags: , , , , , , 0 Comments

Recent reports suggest that divorce and separation rates are on the rise during the pandemic (with rates of separation cited as having increased as much as 20% to 57% from last year, depending on the jurisdiction).  This has been in part attributed to the stresses of lockdown and worsening financial situations.

Many Canadians may not be fully aware of the legal impact that separation and divorce have upon an estate plan, mistakenly believing that there is no real difference between marriage and a common-law partnership.  However, the distinction in Ontario remains important from an estate planning perspective – for example:

  • A common-law or divorced spouse does not have any automatic rights upon the death of a spouse who does not leave a will, whereas married spouses take a preferential share and additional percentage of a predeceasing married spouse’s estate on an intestacy;
  • A married spouse has the right to elect for an equalization of net family property pursuant to the Family Law Act on death, whereas common-law spouses have no equalization rights on death;
  • Marriage automatically revokes a will (unless executed in contemplation of the marriage), whereas entering into a common-law relationship has no such impact; and
  • Separation (in the absence of a Separation Agreement dealing with such issues) does not revoke a will or any gifts made to a separated spouse, whereas gifts under a will to a divorced spouse are typically revoked and the divorced spouse treated as having predeceased the testator.

While top of mind for estate lawyers, lawyers practising in other areas of law and their clients may not necessarily turn their minds to the implications that separation and divorce may have on an estate plan, particularly soon after separation and prior to a formal divorce.  With the potential for family law proceedings to be delayed while courts may not yet be operating at full capacity, combined with elevated mortality rates among certain parts of the population during the pandemic, it may be especially worthwhile in the current circumstances to remind our clients of the importance of updating an estate plan following any material change in family circumstances, including a separation or divorce.

Thank you for reading and stay safe,

Nick Esterbauer

20 Oct

Keeping Your Spouse Informed: Estate Freezes

Doreen So Estate Planning Tags: , , , , 0 Comments

“Happy wife; happy life” is an adage that we are all familiar with.

I recently came across a decision of the Manitoba Supreme Court that I thought was worthy as an adage for estates and trusts practitioners.  What caught my eye was the way Justice Allen opened his reasons for the decision in Hamm v. Hamm (Estate of), 2014 MBQB 14:

“It is a very risky business for a farmer or business owner to undertake an estate freeze without informing his or her spouse of the plan and indeed, without arranging for independent legal advice to have the ramifications of the freeze explained. It is even riskier to divest oneself of the shares and shareholder loan received from that estate freeze, again without informing one’s spouse.”

The couple, in this case, were married for 41 years when the husband died.  The husband was a widower with two sons and a daughter from his first marriage.  The couple later had a daughter of their own.  The couple and their children lived a typical farm life.  In the late 90’s, the husband decided to pass the farm operation to his sons.  This was done by way of an estate freeze.  The sons were a part of some of the husband’s meetings with his lawyers and accountants, while his wife and daughters were not involved at all.

A NewCo was created in the course of the estate freeze.  Over time, the husband’s land, machinery, and farm equipment were transferred into NewCo in exchange for preference shares and shareholder loans from NewCo.  The husband also made a new Will that gave his interest in the NewCo to his sons.  The husband did not tell his wife about this either and she only found out when he died.

On death, the wife elected for equalization of assets under the Manitoba Family Property Act and she claimed that the value of the husband’s farm assets, notwithstanding the estate freeze, ought to be included in their family property for equalization purposes.

The wife won.  Justice Allen was not sympathetic to the Estate’s arguments that she ought to have known about the estate freeze, and made her claims earlier, by investigating further when she was told that NewCo was created for “tax purposes”.  This was particularly so because the husband continued to run the farm operations as if nothing had happened.

This case is a straightforward example of how testamentary intentions can be thwarted when a spouse is kept in the dark.  It is good practice for lawyers to advise their clients that their spouse should be informed and that their understanding should be documented with independent legal advice. In explaining why a spouse should know about an estate freeze, and the pitfalls of telling one’s spouse, this exercise will have the benefit of emphasizing to the client what he/she is truly giving up and bring “home” the realities of this rather legally complicated transaction.

Thanks for reading!

Doreen So

08 Oct

Heightened Death Awareness in the Midst of Covid-19

Ian Hull Estate Planning Tags: , , 0 Comments

The importance of regularly updating your will cannot be understated. A prudent individual should review their will upon significant life changes. An article on Forbes suggests that one’s estate plan should be reassessed at least every five years. A change in finances, the law or personal circumstances, such as marriage, divorce or a change in relationships, should prompt a review even sooner.

Covid-19 sparked a change in many people’s daily lives and personal attitudes. While death is not something pleasant to consider, Covid-19 has made many people more conscious of their own vulnerability and mortality. There is a psychological theory that describes this notion – Terror Management Theory. This phenomenon examines how people respond when death is made salient to them. In their book, The Worm at the Core, Sheldon Solomon and his colleagues explain how the Terror Management Theory begins with the notion that human beings have an innate need to survive, like other living organisms. However, while other organisms lack the intellectual ability to understand their impermanence, human beings do not.  Perhaps as a result of heightened death awareness spurred by Covid-19, estate planners were flooded by clients rushing to update (or create) their estate plans at the beginning of the pandemic.

As students in the GTA return to school, we are again seeing a steady and concerning increase in Covid-19 cases. Ontario Education Minister, Stephen Lecce, expressed concerns of a possible second wave of the virus in conjunction with flu season. It is important for individuals to again reconsider whether their personal circumstances have changed in a significant way and to review their estate plans to ensure they are sufficient and up to date. It is crucial that Canadians do not succumb to “pandemic fatigue.”

Thanks for reading!

Ian Hull & Tori Joseph

07 Oct

Modernizing Ontario’s Justice System, Probate Edition: Filing by Email

Sydney Osmar Estate Planning, In the News, Wills Tags: 0 Comments

An exciting announcement (for those in the field of wills and estates) came out of the Superior Court of Justice on October 6, 2020. There has been an amendment to the Province-wide Consolidated Notice to the Profession, Litigants, Accused Persons, Public and Media which provides for the electronic filing by email of probate applications, supporting documents, and responding documents with the Superior Court of Justice.

The email address for the court location in which the materials will be filed can be located here.

With regard to filing by email, the amendment provides the following guidance:

  • The application form and supporting documents (affidavits, consents, proof of death, etc.) should be submitted by email only;
  • Original documents filed in support of the application (i.e. wills, codicils etc.) and certified copies must be filed in hard copy by mail or courier to the SCJ location where the application was filed or provided at the court office;
  • Estate administration tax payments and any filing fees must be sent by mail or courier to the SCJ location or provided at the court office;
  • Certificates of Appointment of Estate Trustee will be electronically issued and delivered by email to the address provided by the applicant; and
  • Applicants must complete a new Information Form (located in the consolidated notice which is linked below) and email it to the court together with the probate application.

Probate applications filed prior to October 6, 2020 can be resubmitted to the court by email, which will allow Applicants to keep their place in the original queue while providing for the ability to receive electronic issuance of the Certificate of Appointment of Estate Trustee.

The amendment does not apply to estate litigation documents, which should continue to be filed through the Civil Submissions Online portal.

For further details on the amendment, including the new Information Form, and the SCJ’s specific requirements regarding the form of emails when filing for probate by email, please see here.

It appears that this amendment will not only provide for the streamlining and ease that comes with access to electronic filing (especially in a COVID-19 world), it may also bring the possibility of having applications from higher volume court locations processed by staff in lower volume court locations to assist those that may be currently experiencing backlog.

Thanks for reading, and happy filing!

Sydney Osmar

29 Sep

Bitcoin Estate Planning Considerations 101

Noah Weisberg Estate Planning Tags: , , , , , , 0 Comments

I tend to field a fair amount of questions regarding estate planning.  Nowadays, as many of my friends have diversified portfolios that include novel investments such as cryptocurrency, I see more and more estate planning questions regarding such investments.  While my friends who are reading this are still free to ask me directly, I thought I would use today’s blog to save them the trouble (and please note that this blog is not to be considered as legal advice).

Here are some cryptocurrency estate planning considerations as discussed in this Forbes article:

Security – one of the benefits of cryptocurrency is that it is considered highly secure since access is usually by way of private key, password, or seed phrase.  Although this information must be shared with the estate trustee so that they can access the currency post death, it cannot be provided in a way which publicizes the information.  The risk is that anyone who comes across this information can use the currency.  Testators have to be careful to ensure that the information is shared confidentially and securely.

Value – cryptocurrency can fluctuate widely in value, even in the course of one day just like precious metals and other commodities.  As such, the testator has to ensure that the estate trustee is ready to move following death.  Any delays in acting by the estate trustee can put the value in jeopardy, and expose the estate trustee to claims by beneficiaries.

Estate Trustee Powers – it is unclear if cryptocurrency falls afoul of the prudent investor rule.  If the testator knows that the estate trustee will be administering cryptocurrency, there should be specific provisions in the last will ensuring there is authority to do so.

Noah Weisberg

If you consider this blog interesting, please consider these other related blogs:

24 Sep

Corporations and Estates – What happens when a Will gifts an asset that is actually corporately owned?

Stuart Clark Estate Planning Tags: , , , , , , , , , , , , , , , , , 0 Comments

The use of privately held corporations to manage an individual’s assets or business interests seems to be an increasingly common strategy and tool. Although the use of privately held corporations offer a number of potential advantages to the individual both during their lifetime and as part of their estate planning, it does raise a number of novel issues for the administration of the estate which may not exist if these assets had been directly owned by the individual. Such potential issues manifested themselves before the Ontario Court of Appeal in the relatively recent decision of Trezzi v. Trezzi, 2019 ONCA 978, where the court was asked to determine the potential validity of a bequest in a Will of property that was not directly owned by the testator personally but rather owned by them through a wholly owned private corporation.

As privately held corporations are often wholly owned by a single individual owner the individual in question would be forgiven for thinking that any assets that are actually owned by the corporation are their own. Such a misconception could carry with it some significant legal issues however, as it ignores the important fact that at law the corporation and the individual owner are two distinctly separate legal entities, and that although the individual owner of the corporation can exercise almost absolute control over the corporation as the sole shareholder, and could through such control likely direct the corporation to take any action regarding any asset the corporation may own (subject to any obligations of the corporation), they do not personally “own” any asset that is in fact owned by the corporation. Such a distinction is potentially important to keep in mind when a person who owns assets through a private corporation is creating their estate plan, as they should be mindful of whether any specific asset which they wish to bequest is owned by them personally or through the corporation.

In Trezzi the testator left a bequest in their Will to one his children of all equipment and chattels that were owned by a construction company that was wholly owned by the testator. This bequest was challenged by certain of the residuary beneficiaries, who argued that as the equipment and chattels in question were not actually directly owned by the testator, but rather the corporation, the testator’s bequest of such items had failed and that the items in question should instead continue to form part of the corporation and be distributed in accordance with the residue clause to their potential benefit.

The Court of Appeal in Trezzi ultimately upheld the bequest in question; however, in doing so, noted that the language was potentially problematic and encouraged counsel to be more careful when drafting in similar circumstances (even including potential precedent language to follow from the Annotated Will program). In upholding the bequest the Court of Appeal was in effect required to do an interpretation application for the Will, noting that they placed themselves in the position of the testator and considered what his intention would have been when including the provision in question. The court ultimately concluded that it would have been the testator’s intention with such a provision that the executor was to wind up the corporation in question, with the assets being distributed to the beneficiary in question as part of such a process. In coming to such a conclusion the court states:

While it is true that Peter, as the sole shareholder of Trezzi Construction, did not directly own the corporation’s assets, that does not complete the analysis. In substance, Peter’s shares in Trezzi Construction became part of the estate, and Peter effectively directed his executors to wind-up the company and to distribute its assets in accordance with his will, even though he did not own those assets directly. As already noted, the key question thus boils down to whether this was indeed Peter’s subjective intention in his will…” [emphasis added]

Although cases like Trezzi show that under certain circumstances a bequest of assets which are not directly owned by the testator but rather through a corporation can be upheld such a result cannot be guaranteed, as the Court of Appeal in Trezzi was required to resort to the rules of construction and place themselves in the position of the testator to uphold the bequest in question. As a result, a testator would be wise to take extra care when dealing with an estate plan that includes the potential bequest of assets that are corporately owned to ensure that the ownership of such assets is properly described and the executor is provided with any necessary authority and direction to deal with the corporately held assets on behalf of the estate.

Thank you for reading.

Stuart Clark

11 Sep

To Forgive and Forget, or Gone But Not Forgotten?

Paul Emile Trudelle Estate Planning Tags: , , , 0 Comments

A recent decision of the Court of Appeal illustrates the importance of documenting intentions with respect to inter-familial loans. It also addresses the importance of solicitors’ evidence in establishing the wishes and intentions of a testator.

The case, Middleton Estate v. Middleton, 2020 ONCA 552 (CanLII), involves a promissory note given by the deceased’s daughter to the deceased. The daughter was borrowing $142,000 to buy an interest in a cottage. A promissory note was signed by the daughter on July 16, 2014. Prior to signing, the note was reviewed by the deceased’s lawyer. The daughter discussed the note with the deceased and added a clause stating that the loan was to be forgiven upon the deceased’s death. The deceased’s lawyer reviewed this revision and advised against it. The deceased took the forgiveness term out of the promissory note, and the daughter signed it.

Following the deceased’s death, the daughter produced a second promissory note dated July 22, 2014. This promissory note provided that the loan was to be forgiven upon the deceased’s death. The daughter gave evidence that she discussed the loan with the deceased and the deceased had originally wanted to put a forgiveness clause in her will, but after having second thoughts, decided to have the forgiveness clause put into the second promissory note.

In rejecting the validity of the second promissory note, the lower court found that the deceased relied on the first promissory note only when advancing the funds. The second note was never discussed with her lawyer after the first note was signed. The deceased then went to another lawyer to discuss her estate plan. This second lawyer was given a copy of the first promissory note by the deceased, and there was no mention of the second promissory note.

Thus, while the second promissory note was signed by the daughter, there was insufficient evidence to convince the court that the deceased had accepted those terms.

Thank you for reading.

Paul Trudelle

 

21 Aug

The Dog Days and The Family Cottage

Suzana Popovic-Montag Estate Planning Tags: , , , 0 Comments

After our recent blog about estate matters in Ancient Rome, I was reminded that to the Ancient Greeks, the “dog days” happened when the star ‘Sirius‘ appeared to rise just before the sun in late July and August. The Greeks referred to these days, the hottest days of the year, and a period that could bring fever or even catastrophe, as The Dog Days of Summer.

Cottages, if not carefully considered in estate planning, can often bring fever and catastrophe, to families when their transfer is not properly planned in estate plans. Be it an unexpected tax liability, or unhappiness amongst siblings, cottages can cause great pains. 

Today, we look at two scenarios of cottage transfer, specifically the living gift (inter vivos) and the testamentary gift (after death).

Emotion and attachment to the family cottage can run deep and go well beyond the financial value of the property. As we discussed here in 2013, proper planning is essential to avoid the kind of strife that was examined in our blog post, “Perils in the Succession of the Family Cottage.”

One way to clearly establish your wishes and see them carried out is to gift the cottage while still alive. A “gift inter vivos” is Latin for a gift among the living and is a common way of transferring ownership, particularly if you no longer use or visit the cottage. A tax advisor is an important and necessary resource when considering such a gift, as the gift of a cottage can give rise to a tax burden on the giftor.

It’s important to remember that once the cottage gift is complete, it is, technically, no longer yours and the receiver of the gift, be it a child or sibling, would be free to do as they wished…. even sell it. So it’s not necessarily the right vehicle for transfer, as it were, for every family.

Another very common means of transfer is by Will.

You are free to name your heirs to the cottage as you so choose, but often when there is more than one child inheriting, for example, a trust becomes a very good way to address possible conflicts that might otherwise arise. It also insulates the property from potential legal disputes like bankruptcy or divorce.

A trust also becomes a good way to establish responsibility for the cottage and its expenses. The Will can stipulate that funds are set aside for maintenance or yearly upkeep and those funds can ease the burden on a beneficiary who may not be in the best financial position to inherit such a gift.

As the Dog Days of Summer roll on and another cottage season soon comes to a close, proper planning for that beloved family cottage can prevent the fever and catastrophe that the Greeks were so alive to each time that Dog Star came bounding across the sky.

Thanks for reading and enjoy the sun!

Suzana Popovic-Montag & Daniel Enright

SUBSCRIBE TO OUR BLOG

Enter your email address to subscribe to this blog and receive notifications of new posts by email.
 

CONNECT WITH US

TRY HULL E-STATE PLANNER SOFTWARE

Hull e-State Planner is a comprehensive estate planning software designed to make the estate planning process simple, efficient and client friendly.

Try it here!

CATEGORIES

ARCHIVES

TWITTER WIDGET