It turns out that investing in wine cellars as an estate planning tool is more complex than one would think. The estates of Brits, for instance, who expected that a wine cellar would be valued at its purchase price as opposed to its market value for the purposes of inheritance tax may be in for a surprise, based on the information in this article.
Enterprising Brits may have been hoping their estates would pay inheritance tax based on the purchase price of their wine cellars while the appreciation in the wine cellar would be passed on tax-free to the beneficiaries. Alas, this is apparently not the case in England: Her Majesty’s Revenue and Customs ("HMRC" as they call it over there) are aware that wine can appreciate, therefore wine is not a wasting asset valued at its purchase price, and the wine cellar must be valued at its open market value for inheritance tax purposes.
While wine cellars may not have favourable tax treatment, at least in England, it strikes me as the sort of asset that may pass outside of probate more often than not.
Thanks for reading,
Chris M. Graham – Click here for more information on Chris Graham.
A testator who suffers from "insane delusions" may not have testamentary capacity. The case law provides numerous definitions and tests for insane delusions, but there is no single dedicated leading case. Perhaps the best way to grasp this principle is by starting with the classic statement from Banks v. Goodfellow (1870), L.R. 5 Q.B. 549 on testamentary capacity:
"It is essential to the exercise of such a power that a testator shall understand the nature of the act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and with a view to the latter object no disorder of the mind shall poison his affections, pervert his sense of right or prevent the exercise of his natural faculties; that no insane delusion shall influence his will on disposing of his property, and bring about a disposal of it which would not have been made otherwise."
An excellent recent examination of various statements of the principle is found in Royal Trust Corporation of Canada v. Saunders (2006), 2006 CanLII 19424 (On. S.C.), while Banton v. Banton (1998), 1998 CanLII 14926 (ON S.C.) provides a precise, thoughtful application of the principle.
My favourite case of a will invalidated by the testator’s insane delusions occured in Great Britain in 2007. The disinherited son of Branislav Kostic successfully challenged Mr. Kostic’s will, which gave 8.3 million pounds to the Conservative Party. Mr. Kostic had become a believer that the redoubtable Prime Minister Thatcher would "save the world from satanic monsters and freaks". Mr. Kostic had apparently written to Ms. Thatcher, appealing to her that she was the only person who could save the world from bestial creatures. Mr. Kostic also believed the female members of his family were out to do him in (poison), among other things.
Enjoy the week,
Christopher M.B. Graham – Click here for more information on Chris Graham.
David M. Sherman’s Basic Tax and GST Guide for Lawyers 2008-2009 (Toronto: Carswell, 2008) is a helpful resource for lawyers not specializing in tax law. The section on Wills and Estates (chapter 7) is concise, easy to follow, and the annotations are precise. The style is rule-driven and not overly burdened with qualifications (these appear in the Preface); it is not cluttered with lengthy paragraphs or run-on sentences.
One criterion I use to rate general texts is how helpful or interesting they are to me in areas outside my field. This book scores well on that basis. See, for instance, the section on deductibility of legal fees or health club memberships.
This text is highly recommended.
And my Friday blogs are always short for you.
Enjoy the weekend,
Chris M.B. Graham – Click here for more information on Chris Graham.
Actually, reading this blog really will help you live longer. One secret to living longer is to have a "higher purpose", according to researchers at the Rush Alzheimer’s Disease Center (which is part of the Rush University Medical Center in Chicago). Patricia Boyle, Ph.D. states in the news release announcing the study:
"The finding that purpose in life is related to longevity in older persons suggests that aspects of human flourishing—particularly the tendency to derive meaning from life’s experiences and possess a sense of intentionality and goal-directedness—contribute to successful aging,".
The study found a correlation between longevity and participant’s level of agreement with 3 particular statements in a "Purpose of Life" questionnaire:
- “I sometimes feel as if I’ve done all there is to do in life;”
- “I used to set goals for myself, but that now seems like a waste of time;” and
- “My daily activities often seem trivial and unimportant to me.”
Guess whether the correlation was positive or negative? Or read the study here, when it becomes published (it’s not posted yet, but this at least rates a reminder in Outlook) .
TGIF and find purpose in your weekend. You’ll live longer.
Beauty from sadness: DNA2Diamonds, LLC is a company that creates personal diamonds using the DNA of a loved one. That can be a spouse, pet, dear friend or even an entire family. The company takes a hair sample and uses it to grow the diamond from the DNA signature carbon in the hair. The deceased’s cremated remains can also be used. According to DNA2Diamonds, the laboratory-produced diamonds are optically, physically and chemically identical to Earth-mined diamonds.
One particularly poignant story was reported in a Toronto Star article where a husband and wife, having lost their baby son shortly after his birth, contacted DNA2Diamonds to create an eternal memento to their son’s too-short life.
This being an estates law blog, I must spoil the tranquility by pointing out that for estates planners, there’s potential for a new set of issues to grapple with. Executors have general authority and discretion to deal with the deceased’s body, subject to the usual bevy of qualifications and exceptions the Common Law generates. How would this principle be applied in the case of a Will directing the creation of a precious gem from the testator’s remains?
Enjoy your week,
Eighty years ago, at the height of the Great Depression, a wealthy Ohio businessman hid $182,000 in minted $50 bills in a wall in his house. There it hung peacefully by a wire in a green metal lockbox, disturbed only by inflation. A contractor discovered the money while tearing down the wall, and he honestly and very admirably informed the home owner.
Unfortunately, things spiralled out of control. First, the home owner and the contractor were unable to agree on a division of the money. She offered the contractor 10%, he asked for 40%. Then the story made it into Cleveland’s local news, and the estate of Patrick Dunne, the guy who hid the money, got involved (Patrick Dunne had 21 descendants). The dispute went to litigation.
For various reasons, the home owner dropped her claim. However, the county court probate magistrate ruled that $157,000 was clearly marked as Patrick Dunne’s property and therefore was the property of his estate. Of the remaining $25,000, the judge recommened the estate receive 83.3% and the contractor receive 13.7% – approximately $3,400.
CBS News produced an interesting podcast of the legal issues, posted here. More food for thought: $182,000 in 1930 is the equivalent of $2,384,341.68 according to the Bureau of labor Statistics inflation calculator. Of course, some of the rare bills are worth up to $500,000 to collectors…
There are a lot of lessons here.
Have a great week,
In our ongoing review of the phenomenally successful book, The Long Tail, we both thought long and hard about Anderson’s theory in respect of why we personally have decided to blog and podcast. As we see it, consistent with our general philosophy that providing quality content is the best way to demonstrate our own professional abilities, The Long Tail considers our approach to business development with Anderson providing some interesting insight on the topic.
At page 73 of The Long Tail, Anderson asks "Why do they do it?" Why does anyone create something of value without a business plan or even the prospect of a pay cheque? This question is a key to understanding The Long Tail, partly because so much of what populates the curve does not start with commercial aim. In fact, as we have thought for some time, the traditional business model needs to be reworked and we personally avoid the one-hit wonder approach to our business plan. Anderson goes on to explain this idea at page 74 of his book, when he cites Tim Wu, a Columbia law professor, who calls this phenomenon (at page 74 of his book) "exposure culture", pointing to blogging as an example:
The exposure culture reflects the philosophy of the Web, in which getting noticed is everything. Web authors link to each other, quote liberally, and sometimes annotate entire articles. E-mailing links to favourite articles and jokes has become as much a part of American work culture as the water cooler. The big sin in exposure culture is not copying, but instead failure to properly attribute authorship. At the centre of this exposure culture is the almighty search engine. If your site is easy to find on Google, you don’t sue – you celebrate.
We have provided at www.hullandhull.com a variety of articles that our firm has written over the years, plus a tremendous amount of resources in respect of articles that have been written by others. Futhermore, Ian and I believe that our new webpage (which will be arriving shortly) and our blogposts and podcasts only further demonstrate our commitment to always providing good content.
All the best, Suzana and Ian.
In Chapter 5 of The Long Tail Anderson reminds us that we now live in a society of new producers. He cites author Doc Searls, who calls this shift one from consumerism to participative "producerism":
The "consumer economy" is a product-controlled system in which consumers are nothing more than energy sources that metabolize "content" into cash. This is the absolutely corrupted result of the absolute power held by producers over consumers since producerse won the Industrial Revolution. Apple is giving consumers tools that make them producers. The practice radically transforms both the marketplace and the economy that thrives on it (page 64).
As Anderson notes, today millions of ordinary people have the necessary tools, such as the iPod, and the role models to become amateur producers. The Wikipedia phenomenon is a fascinating example of how amateurs are gaining credibility in "The Long Tail" consumer society.
At page 52 of his book, The Long Tail, Chris Anderson sums up his theory as follows: our culture and economy are increasingly shifting away from a focus on a relatively small number of hits (mainstream products and markets) which constitute the head of the demand curve, and moving interest toward a huge number of niches in the tail.
Anderson indicates that there are six themes of The Long Tail:
1. There are far more niche goods than hits.
2. The costs of reaching those niches is now falling dramatically.
3. Search techniques and the range of tools for ranking effectively filter the mass of products and enable customers to find what they desire, driving demand down the tail.
4. The demand curve eventually flattens. There are still hits and niches, but in less extremes.
5. There are so many niche products that, collectively, they can comprise a market rivalling the hits.
6. The natural shape of demand is revealed and it is far less hit-driven than we have been led to believe. Instead, it is as diverse as the population itself. In an effort to better understand this recent trend, Anderson highlights a speech given by News Corp. Chairman Rupert Murdoch in 2005. Murdoch proclaimed:
Young people don’t want to rely on a Godlike figure from above to tell them what’s important…They want control over their media, instead of being controlled by it.
Murdoch’s speech led Anderson to note that this positive change in our culture can be explained by the phenomenen of the Long Tail, where we can all be creators and producers of our own niche products. More on this in tommorrow’s blog.
Thanks, Ian and Suzana.