Category: Estate Planning
Checklists are wonderful things when it comes to the practice of law (list makers would argue that that is true in life as well). In today’s busy practice, a checklist can ease the troubled legal mind.
I was looking at several estate planning information checklists earlier this week. It is worthwhile to highlight some issues/items that can be easily overlooked but which a thorough solicitor should ensure is on his/her checklist:
· If you are acting for both spouses/partners, advise the clients that you cannot act for one at a later date without the other’s knowledge;
· Is the estate trustee to manage funds for minors and distribute monies to the guardian for care, maintenance and education of minor children. Who is the guardian;
· If they can be transferred, who gets air mile/loyalty points. What about transferable equity in hunting/fishing lodges or sports clubs;
· Joint Assets and the presumption of a resulting trust – is there a clear intention of ownership;
· For foreign property, consider the necessity of executing a separate will or appointment of a local estate trustee;
· Ensure every life interest is coupled with a remainder interest; and
· Ensure any charitable organization named as beneficiary is still in existence and properly described.
Have a great weekend and for all those skiers out there, let it snow, let it snow, let it snow.
The oft-repeated phrase "unprecedented transfer of wealth" has been invoked by estate planners and financial advisors alike to describe the pending inheritance by the children of baby-boomers. But what if they don’t inherit that wealth? Several months back, Warren Buffett raised more than a few eyebrows when he very publicly announced a commitment to benefit the Bill & Melinda Gates Foundation, rather than his children, with the bulk of his estate. And he is not alone.
Enter "The Trust Fund Whisperer" as Dr. Lee Hausner was described in a recent article in The Globe and Mail (October 16, 2007), Dr Hausner is a psychologist who, as Siri Agrell so succinctly put it in her article, "is paid to tell families how to avoid screwing up their children with their cash." A lot of cash, that is, if the title of her book Children of Paradise: Successful Parenting for Prosperous Families is anything to go by. Essentially, Hausner challenges what she sees as a culture of entitlement enjoyed by the wealthy elite by arguing in favour of fostering a strong work ethic. Agrell’s article provides a well organized summary of Hauser’s approach together with some of her key recommendations such as: (i) paying for expenses rather than transferring substantial wealth to a child during their career building years and (ii) when transferring cash, spreading the payments in three installments over a prolonged period rather than in one lump sum.
Certainly, trust and estate practitioners play a key role in implementing such recommendations. The increasing popularity of such estate planning techniques as incentive trusts (detailed in a transcribed podcast and an audio podcast on our website) can be seen as a response to the thesis espoused by Hauser and others.
Thanks for reading,
Welcome to my week of blogs! As you may have gathered, lawyers at Hull & Hull alternate weeks when it comes to blogging. The hope is to provide you with a cornucopia of perspectives on various issues of interest to the estate bar and the profession generally. We try to mix light-hearted topics with serious ones.
Turning to today’s blog, I read with interest that Pavarotti’s Will was recently opened. The great tenor ultimately succumbed to pancreatic cancer. Pavarotti was colourful both on and off the stage. He was married twice and sired 4 children. It now turns out that Pavarotti’s estate is as rich as his voice.
Pavarotti left the bulk of his estate to his second wife and four children pursuant to a recent June 13th Will (his youngest and only child from his second marriage is four years old). In a second Will dated July 29th Pavarotti apparently created a trust in favour of his second wife of approximately €15 million. This was a surprise to his friends and family. The second Will dealt with Pavarotti’s three New York apartments as well as personal items, including paintings by Matisse. The family has denied rumours in the Italian press that Pavarotti’s first and second families were at odds. Like so many, Pavarotti waited until the end of his life to deal with his Estate. No doubt, the opera star was reluctant to confront his own death (though death looms large in many operas).
The reading of a Will by family members is often fertile ground for surprise and disappointment. Many testators use a Will to settle old scores, reward or punish behaviour, or favour those who nursed the testator through illness or old age.
I struggle with whether to advise a client to reveal the contents of his/her Will to family members before death. Overcoming the trepidation to execute a Will is one thing, but to then reveal its contents to family members, who may benefit unequally, is an entirely different matter. For example, a disappointed son or daughter may punish their parents by no longer seeing them or cutting off access to grandchildren. However, if the Will comes as a surprise after the testator’s death and is a disappointment, the potential for litigation is rife. A disappointed beneficiary will justify litigation by claiming that they are only doing “what mom really wanted”. Emotions come into play, judgment becomes clouded, and lawyers are retained.
In the end, there is no easy answer as to whether to advise your client to reveal the contents of his/her Will.
Listen to "The Family Cottage and Capital Gains Taxes"
Read the transcribed version of "The Family Cottage and Capital Gains Taxes"
This week on Hull on Estate and Succession Planning, Ian and Suzana discuss different options for dealing with capital gains tax as it pertains to investments like ‘The family cottage’.
Listen to "The Distribution of Assets"
Read the transcribed version of "The Distribution of Assets"
In Episode #62, Ian and Suzana discuss the treatment of assets in second marriages with children. They cover the necessity of proper communication and documentation of intent, as well as the impact of the Succession Law Reform Act over the distribution of assets.
Ian and Suzana also discuss the strategy of using trusts to pass on assets in a controlled and managed way to desired beneficiaries.
With the long weekend nearly upon us, what better time to discuss the family cottage?
If you transfer your cottage to your children while you are living, you will be deemed to have disposed of it at its fair market value and be liable for the resulting capital gains tax which, depending on how long you have owned the cottage and how much it has appreciated, might be astronomical.
One way of reducing tax liability is to take advantage of the principle residence exemption. In doing so, the size of the capital gain will be calculated using a formula involving the number of years you have owned the cottage and the number of years it has been designated as the principal residence.
Keep in mind, however, that after 1982, spouses could no longer designate different properties as their principal residences and, as a result, consideration should be given to the increase of value in your city residence – if the capital gain on it is greater than on your cottage, designating your cottage as your principal residence may end up increasing, not decreasing your tax liability.
Another option, of course, is to simply allow your children to inherit the property after both you and your spouse have died. At that time, there will hopefully be sufficient assets in the estate to pay the capital gains taxes which arise.
In any event, if you have a cottage which has increased substantially in value, it might be worth your while to discuss ways to reduce tax liability with an expert in estate planning.
Have a great long weekend!
Read the transcribed version "Separated Spouses and Estate Planning Issues"
During Episode #58, Ian and Suzana discuss estate planning and separated spouses including the equalization process, the importance of valuation on the day of separation, and how issues of spousal support and child support can dovetail into estate planning.
Suzana mentions the case of A.A. v. B.B., 2007 ONCA 2 from the Ontario Court of Appeal, wherein a child may have three parents.
It’s tax season. That wonderful time of year for number crunching, hunting for receipts and depending on your situation, hair pulling.
If you are an executor of the estate of a deceased person, you also have the responsibility of filing the deceased’s "final return." To borrow from a popular expression, the two certainties, death and taxes, follow each other. Final tax returns for those who die during the period from January 1 to October 31 are due April 30 of the following year.*
While there are no inheritance taxes in Canada there are a number of taxes that arise as a result of your death and must be included in the final return. Some of those taxes include the following:
Capital Gains Tax. For the purpose of calculating tax, the CRA deems a deceased to have disposed of all her capital property immediately before her death. This is referred to as a “deemed disposition.“ Depending on the deemed proceeds of disposition, there may be a capital gain or loss. Certain types of capital property are exempt from this rule and an expert should be consulted for specific advice.
RRSPs and RRIFs. These tax sheltered investment vehicles lose their status as such at death. When you die, the tax holiday ends and your RRSPs and RRIFs are collapsed. There is a deemed sale of any securities held in the RRSP or RRIF and any income made in the year preceding your death must be included in the final return. There are a few notable exceptions to this rule, such as a spousal rollover and transfers of your plan to minor and/or mentally infirm children.
There are many creative ways of reducing the taxes that surface after your death. The benefits of doing so may be substantial and result in considerable savings for your estate. When you consider the fact that you spend a lifetime building your assets, speaking to a profession about your estate is advisable. Your beneficiaries will thank you.
*For more information on how to file a final return, visit the Canada Revenue Agency’s website
Listen to "Estate Planning Issues for Separated Couples"
Read the transcribed version of "Estate Planning Issues for Separated Couples"
During Hull on Estate and Succession Planning Podcast #56, Ian and Suzana discuss the circumstances surrounding separated couples, remarriage and common law separations.
They discuss the impact that these separations have on estate planning including financial, tax and property ownership considerations.
Listen to "Insurance Planning"
Read the transcribed version of "Insurance Planning"
During Hull on Estate and Succession Planning Podcast #55, Ian and Suzana discuss insurance planning in the context of wealth and estate planning strategies.
They cover the advantages of integrating insurance policies into your estate plan focusing on disability insurance, critical care insurance and life insurance.