Tag: bequests

08 Jun

A Gift With A Catch: Bequests of Real Property and Mortgages

Paul Emile Trudelle Beneficiary Designations, Estate & Trust, Estate Planning, Trustees, Wills Tags: , , , 0 Comments

Assume that you are given real property in someone’s will, but the property is subject to a mortgage. Do you get the real property free and clear, or do you take it subject to the mortgage? Is the estate liable for paying off the mortgage?

The answer lies in s. 32 of the Succession Law Reform Act, and the terms of the will.

Pursuant to s. 32, the real property is primarily liable for satisfying the mortgage, unless there is a contrary or other intention in the will.

Section 32(1) provides:

Where a person dies possessed of, or entitled to, or under a general power of appointment by his or her will deposes of, an interest in freehold or leasehold property which, at the time of his or her death, is subject to a mortgage, and the deceased has not, by will, deed or other document, signified a contrary or other intention,

(a) the interest is, as between the different persons claiming through the deceased, primarily liable for the payment or satisfaction of the mortgage debt; and

(b) every part of the interest, according to its value, bears a proportionate part of the mortgage debt on the whole interest.

Thus, you take the property subject to the mortgage.

But, you may ask, what about the general direction to pay debts that is found in many wills? Isn’t that a “contrary intention”?

Section 32(2) states that a testator does NOT signify a contrary intention by a general direction for the payment of debts. Something more is needed.

While the property is subject to the mortgage, the mortgagee does not have to take action against the real property. Section 32(3) provides that nothing in s. 32 affects the right of a person entitled to the mortgage debt to obtain payment or satisfaction either out of the other assets of the deceased or otherwise.

When taking instructions for a will for a testator who owns property subject to a mortgage, the drafting lawyer should discuss the effect of s. 32 of the Succession Law Reform Act, and confirm whether this outcome is in keeping with the testator’s intentions. If it is not, and the testator wants the beneficiary to receive the property free of the mortgage, wording should be put into the will to set out this intention.

Have a great weekend.

Paul Trudelle

01 Sep

“Simply Musings of an Aging Lady” or Valid Changes to a Will?

Hull & Hull LLP Elder Law, Estate & Trust, Estate Planning, Hull on Estates, Trustees, Uncategorized, Wills Tags: , , , , 0 Comments

Pauline Palmer died on June 24, 2016 in British Columbia. She left a Will dated August 18, 1988. The Will left her estate to her cousin. The cousin predeceased Ms. Palmer.  Her estate would therefore pass to her next of kin, being her 6 nieces and nephews.

However, at some point, Ms. Palmer made changes to her Will. She changed the estate trustee to a second cousin, Allen Homeniuk, and deleted the name of the cousin, inserting wording that would seem to give the estate to Allen. Some of the changes were in blue ink, and some in black ink. The changes were not signed, but were initialled.

The handwritten changes did not comply with the formal requirements for altering a Will under B.C.’s Wills, Estates and Succession Act (“WESA”).  Allen moved for an order to cure the deficiencies under the curative provisions of the WESA. In particular, s. 58 allows a court to give effect to changes made that do not comply with the formal requirements. In considering the question of whether to allow the change notwithstanding noncompliance, the court will inquire into:

  1. whether the document in question is authentic;
  2. whether the document represents the deceased’s intentions;
  3. whether the document records a deliberate or fixed and final expression of the intentions of the deceased.

B.C. courts have noted that their curative power is inevitably and intensely fact-sensitive. The burden of proof is on a balance of probabilities. Factors relevant to finding a fixed and final expression of intention include the presence or absence of a signature, the deceased’s handwriting, witness signatures, revocation of previous wills, funeral arrangements, specific bequests and the title of the document.

Allen’s application to validate the changes was opposed by some of the nephews. They argued that the changes were not a deliberate or fixed and final expression of Ms. Palmer’s intentions, but rather, “simply the musings of an aging lady”.

In its decision reported at Estate of Palmer, 2017 BCSC 1430 (CanLII), the court concluded that it could not decide the question based solely on the conflicting affidavit evidence before it. Further, the court wanted to hear evidence as to Ms. Palmer’s capacity at the time the changes were made. A trial of the issue was ordered (perhaps unfortunately, as the estate had a value of only $200,000).  Further, it was ordered that all other potential beneficiaries be put on notice of the proceeding.

In Ontario, strict compliance with the requirements of executing and altering a will is required. There is no similar provision to the curative powers found in s. 58 of the WESA. For a discussion of the requirements for valid alterations to a will, see our blogs “Handwritten Alterations to an Executed Will” and “Handwritten Alterations to a Formal Will”.

Thank you for reading, and have a great long weekend.

Paul Trudelle

07 Jun

Giving money to charity? Know your options to maximize your impact.

Suzana Popovic-Montag Charities, Estate & Trust, Estate Planning, Uncategorized, Wills Tags: , , , , , 0 Comments

While direct donations of cash or securities are still king when it comes to charitable giving in Canada, there are many other ways to donate. If you’re considering a larger gift, it pays to look at some alternatives.

A little bit of planning and a look at different options ensures that charitable gifts are made in the most tax- effective manner possible, are directed to the charities you most want to support, and are best suited to your financial situation and needs.

Here are some options to consider.

Bequests

 A charitable gift made in your will can be claimed against up to 100% of your net income on your final two lifetime tax returns. If the bequest is too large to claim on the final return, the surplus can be carried back to the previous tax year. There are several types of bequests possible:

  • Specific bequests: an amount or specific piece of property paid out before any residual gifts
  • Residual bequests: a share or percentage of the residue of estate
  • Contingent bequest: the naming of an alternate charitable beneficiary in case the terms of an original bequest can’t be met 
  • Bequest subject to a trust: a trust established at death that typically provides lifetime income to one or more named beneficiaries, and a future gift to one or more charities.

Bequests can be tricky if not executed properly. This article provides details on the key pitfalls to avoid:

http://www.globalphilanthropy.ca/images/uploads/Bequests_-avoiding_problems_with_the_ultimate_planned_gift_May_14_2008_Ontario_Bar_Association.pdf

Life insurance

 There are several ways that you can make a substantial but affordable gift using life insurance. 

  • Buy a new life insurance policy and name your charity as the owner and beneficiary. The premiums you pay qualify for a charitable tax receipt. 
  • Donate an existing policy to a charity. You’ll receive a charitable tax receipt for the fair market value of your life insurance policy.
  • Name a charity as the beneficiary of an existing policy. Your estate will receive a charitable tax receipt when the proceeds are paid to the charity.

Private charitable foundation

 A private charitable foundation is a trust or corporation that you establish and operate for charitable purposes. It’s a permanent institution – carrying your name or legacy, or that of a loved one – through which charitable work may be funded. Because of the costs of establishing and operating a foundation, you likely need initial funding of several hundred thousand dollars to make the structure worthwhile.

Private charitable foundations can be complex structures to establish and administer, so make sure you rely on professional advice for your foundation’s creation and operation.

Donor-advised funds

 Donor-advised funds are a flexible and cost-effective alternative to establishing a private charitable foundation.

You start by donating a lump sum amount – typically $10,000 or more – to a charitable gift fund administered by either a charity or a financial institution. Like a private charitable foundation, you receive a tax credit for the full amount donated, up to 75% of your net income for the year. Any excess amounts can be carried forward for up to five years to generate tax credits in those years. Each year, you direct to what charities you want grant money given and in what amounts.

Here’s a detailed comparison of private charitable foundations versus donor-advised funds:

https://www.jlmphilanthropy.com/blog/2016/3/29/a-foundation-or-a-donor-advised-fund-which-way-to-go

Other options

There are a number of other planned giving options as well, from beneficiary designations of an RRSP or RRIF, to charitable remainder trusts, to charitable gift annuities.

But if you weigh all your options, and decide to make a simple direct gift, the Canada Revenue Agency’s charitable donation tax credit calculator is a great way to get an estimate of the tax impact of your donation:

http://www.cra-arc.gc.ca/chrts-gvng/dnrs/svngs/clmng1b2-eng.html

Thanks for reading,
Suzana Popovic-Montag

 

 

05 Jun

What Happened to My Gift: The Principle of Ademption – Hull on Estates Podcast #62

Hull & Hull LLP Hull on Estates, Hull on Estates, Litigation, Wills Tags: , , , , , , , , , 0 Comments

Listen to "What Happened to My Gift: The Principle of Ademption"

Read the transcribed version of "What Happened to My Gift: The Principle of Ademption"

During Hull on Estates Episode #62, Justin de Vries and Megan Connolly discuss the McDougald Estate c. Gooderham case decision of the Ontario Court of Appeal. They discuss what happens when attorneys for property sell assets that have been specifically gifted in a will.

What can a beneficiary do?

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