“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.
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One quality often overlooked in this frantic information era of texts, tweets, and instagrams is clarity. Our communications and responses are faster than ever, and you’ve likely seen first-hand how clarity can suffer. In a perfect world, we’d have a friend by our side objectively reviewing each communication and setting us straight when our message wasn’t clear.
“Don’t put it that way – it sounds like you’re angry,” or “It’s not clear where you’re meeting, better spell it out.”
Of course, there is no objective friend by our side 24/7. And in our daily back and forth with friends and family, the lack of an objective voice usually doesn’t matter. If there is confusion, it’s easily resolved by a follow-up message. We may live inside our own little bottles, but reading the label “right” the first time doesn’t matter that much in our day-to-day living.
Clarity in estate planning – get outside the bottle
But what about communications that can have a more profound impact, like our estate plan, where we detail our final wishes for end-of-life care and the distribution of our assets? There are few tasks in which clarity is more important. You can’t send a final “clarifying” text from the grave, so you have one chance to get it right. And if you don’t have objective, outside advice, it’s remarkably easy to get it wrong. What is crystal clear to you may not be to others.
The recent case of a dying Florida man is an excellent example. The 70-year-old man was found intoxicated and unconscious outside of his nursing home. When doctors took off his shirt, they found the words “Do not resuscitate” tattooed on his chest, with a tattooed signature underneath:
While the message was quite clear on its face, doctors faced a dilemma. They had an unconscious, dying man in front of them, with a tattoo that told them to take no further action. Was this what the patient truly wanted? Was it a legally valid instruction, or an ironic joke? Doctors were aware of a case reported in a medical journal where a man had “DNR” tattooed on his chest and was admitted to hospital. When doctors saw the tattoo, they asked him if that was indeed his wish, and he said it wasn’t at all – he had lost a bet in a poker game and the tattoo was the result.
So, when it comes to your own planning, make clarity a priority. Objective, professional advice can ensure that your “message to the world” about your estate will both reflect your wishes and be read accurately by others. Take a look at the four-step approach taken by Toronto firm Creaghan McConnell Group in helping Canada’s leading families preserve and pass on wealth. Their step number one? Family clarity.
Make it your priority too – and take a pass on the tattoos!
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BMO Wealth Management recently released a report entitled “Estate planning for complex family dynamics,” which details the findings of a survey commissioned to ask Canadians for their views on estate planning, inheritance, and communications about these topics within their families. The results of this survey illustrate the importance of communication in avoiding family conflict, particularly in situations where a parent is in a second marriage or common-law relationship.
Only 30% of respondents indicated that their parents had discussed their estate plans or shared details about their wills with them. The report suggests that parents who were separated or divorced were less likely to discuss their estate plans with their children.
The survey respondents were asked whether they believed the distribution of their parents’ estates had been fair. About half of the respondents believed the distribution had not been fair. The report states that respondents whose parents had any kind of relationship other than a first marriage were most likely to feel that the distribution was not fair. Of the respondents who believed the distribution was fair, three-quarters responded that their parents had divided the estate equally. The remaining quarter of respondents who thought their parents had distributed their estates in a fair way reported that the unequal distribution was justified.
When asked about what would constitute a fair distribution of assets, respondents to the survey gave a wide range of answers. Most respondents believed that children of a testator should be treated equally. A minority of respondents believed an unequal division might be fairer, for reasons such as financial need or a particularly close relationship with one child.
The dynamics of a blended family are fertile ground for conflict. Communication with all interested parties about what to expect after the death of a parent or spouse can help ease tensions and avoid surprises after death that often lead to estate battles.
You can find a copy of the full report on the BMO website.
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Last week, I wrote about the recent trend of Death Cafes. As a reminder, a “Death Cafe” is a place for people to gather and discuss death with others, often strangers, over tea and cake. The goal of the Death Cafe is provide a space for people to speak about death, which is a taboo subject for many. Because of this taboo, people often avoid speaking about their own death to their friends and family. This reluctance to think about and speak forthrightly on the subject of death might prevent people from creating an effective estate plan. The Death Cafe can act as a forum for individuals to get more comfortable with the concept of dying and planning for the distribution of their assets upon death.
The current trend is to host Death Cafes among strangers, but it is worth thinking about holding a death cafe with loved ones. One major problem in succession and estate planning is communication. As mentioned in The Family War, a major point of tension between families in an estate battle is that they did not communicate and gauge their family member’s intentions prior to their death. Holding a family Death Cafe would provide an opportunity for families to avoid a large amount of fighting and grief in the future.
The Death Cafe website has some helpful information about how to hold a death cafe. They suggest avoiding an overly structured session, instead allowing the conversation to find its direction by allowing everyone to say what they want to say first. After this free-form conversation, whoever is facilitating the death cafe might introduce some specific questions. This would be a good time to address specific expectations and wishes regarding the will or funeral arrangements. In hosting a death cafe among family members, some topics to touch on might include what to expect after losing a family member, how to prepare for loss, possible sources of support and guidance, and avenues of communication for close and more distant family members. By creating an open platform and place for communication, some family turmoil might be avoided.
The Death Cafe website has helpful resources including checklists, conversation topics, and a blog.
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Common problems in estate administration, which may lead to litigation, are a lack of planning or a lack of communication. Either someone dies intestate, subjecting their family to the arbitrary rules of intestate succession, or the deceased has left a will with unexpected provisions, without speaking to their family members about their wishes before their death. A possible reason that people might not wish to make a will or talk to their loved ones once they have prepared their will is a reluctance to talk about death.
A growing worldwide movement, “Death Cafe”, aims to remove the taboo surrounding talking about death. The Death Cafe website states its objective is “to increase awareness of death with a view to helping people make the most of their (finite) lives”. At a Death Cafe, people gather to discuss death with others, often strangers, over tea and cake. They are run by volunteers on a not for profit basis, with no agenda or product to sell. Facilitators are discouraged from mentioning their professions or businesses during the sessions.
It is important to note that these events are not counselling sessions, nor do they offer information on death or dying. In fact, guest speakers and information sessions are actively discouraged. The conversation is largely unstructured, with facilitators introducing questions to guide the conversation if necessary.
Death Cafe was started by Jon Underwood in England in September 2011. Since then, the idea has spread and gained in popularity. According to the website, there have been 3455 Death Cafes held across Europe, North America, and Australasia to date.
Death Cafes are regularly held in Toronto. Dates, times, and locations for upcoming Death Cafes can be found on their website. The next Toronto Death Cafe is scheduled for September 14, 2016 at the Belljar Cafe on Dundas St. W.
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A report released by the Vancouver City Savings Credit Union yesterday suggests that there is a disconnect between the intentions of testators and the expectations of family members who anticipate becoming the beneficiaries of their estates.
39% of millennials living in Vancouver expect to receive an inheritance of $300,000.00 or more from their parents. However, 66% of Vancouver parents expect to leave each of their children less than $100,000.00. Among reasons for the discrepancy are increased senior debt and longer life expectancies, which both play a role in the depletion of the assets available for distribution after death.
What may compound the expectation of children living in Vancouver is the obligation in British Columbia that a testator provide a benefit for his or her surviving adult children, whether they qualify as his or her dependants or not, absent a rational and valid reason not to do so. There is no such obligation in Ontario.
With the mean price of detached houses in Vancouver of $1.83 million, testators, especially those who intend to limit bequests to their children (rather than those with smaller estates), should consider whether their estate plans provide a sufficient benefit to their children. Testators in British Columbia and elsewhere should be encouraged to consider whether estate plans reflect all of their legal and moral obligations.
The results of this report highlight the need for more effective communication between generations with respect to estate planning. While approximately 80% of seniors in British Columbia have a will, less than half have discussed the transfer of their wealth with their children. Effective communication can be the key to managing the expectations of beneficiaries and avoiding family estate disputes.
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Listen to Talking About Wealth and Personal Finance.
This week on Hull on Estates Suzanna and Ian review the pullout in March 18th’s New York Times and talk about the importance of dialog before and after death.