Tag: estate law blog

08 Aug

How Can We Add Clarity to Inter Vivos Gifting?

Natalia R. Angelini Estate Planning, Joint Accounts, Uncategorized Tags: , 0 Comments

I was surprised to learn of a recent statistic indicating that about half of all singles in Toronto under age 34 are living with their parents – I thought this was just the way we do things in my family! But seriously, if you are a parent longing to cut the ties that bind, or if you just want to help your adult child get a head-start in life, you have probably considered doing so by way of a gift or loan. To avoid any confusion or worse, litigation, it is important to document the transaction and record the intention.

If the intention is to loan, a loan agreement should be used. If, however, the intention is to gift, keep in mind that to have a valid gift there are three necessary elements: (i) intention to donate; (ii) acceptance by the donee; and (iii) sufficient act of delivery and transfer. The onus of proving that a gift is valid is on the recipient of the gift, who must show a clear and unmistakable intention by the donor to have voluntarily given the gift. In order to ensure legal clarity, using a deed of gift is ideal.

The benefit of using a deed of gift is that it can provide an answer to any challenges that others may have to the transfer in question, which we often see in situations of transfers of property (bank accounts, real property etc.) into the joint names of the parent and child. Otherwise, upon death, the gift is usually presumed to form part of the parent’s estate unless proven otherwise by the child.

Other potential benefits to using a deed of gift include increasing the chances of protecting the funds upon marital breakdown (e.g. if the deed of gift stipulates that the funds are for the child alone, and not the married couple, this may prevent the monies from forming part of the family assets). It can also assist an estate trustee to correctly apply a hotchpot clause (which often requires the executor to take inter vivos gifts into account when making an equal distribution amongst the beneficiaries) and distribute the assets as the testator intended.

Thanks for reading and have a great day,

Natalia R. Angelini

Other articles you might enjoy:

https://hullandhull.com/2017/02/can-delivery-gift-precede-intention/

https://hullandhull.com/2016/10/validity-inter-vivos-gift/

https://hullandhull.com/2015/10/mortis-causa-gifts/

You may also enjoy the July 7, 2017 interview of Nicole Ewing, a TD Wealth business succession advisor and tax and estate planner, which can be found on www.moneytalkgo.com.

17 Mar

Relinquishing US status – how do you do it and what are the tax implications?

Natalia R. Angelini General Interest Tags: , , 0 Comments

Some American celebrities spoke of leaving the US depending on the outcome of the election.  I don’t know if anyone has actually followed through…yet.  Nonetheless, it got me thinking back to an interesting paper presented at the 2016 Six Minute Estates Lawyer by Britta L. McKenna.  The issues addressed in Ms. McKenna’s paper include what is involved in relinquishing US citizenship.  Here is how you do it:

  • Formally – A US citizen can formally renounce his/her citizenship at a US consulate, which process involves some initial communication and information exchange, followed by taking the oath of renunciation at the consulate. A final US tax return will need to be filed for the year of renunciation. The former citizen will be sent a Certificate of Loss of Nationality.
  • Informally – A US citizen can informally renounce his/her citizenship by engaging in an expatriating act with the intent of relinquishment. A bold example – committing an act of treason. A more benign example – taking an oath of office with a foreign government.

A person relinquishing their US citizenship will be subject to the US exit tax regime if any of the following is true (with limited exceptions): (1) his/her net worth at the time is US$2,000,000 or more; (2) his/her average US tax liability for the prior five years is US$161,000 or more; or (3) the individual cannot certify that all US tax filing obligations for the preceding five years have been complied with.  The tax consequences include a deemed sale of his/her assets for fair market value on the day before he/she ceases to be a US citizen, and all gains/losses are recognized.

Further, if one is subject to an exit tax regime, an inheritance tax is also imposed on certain gifts made by the expatriate (during life or death) after expatriation to a US citizen or resident.  The inheritance tax (assessed at the highest gift or estate tax rate at the time of receipt) is imposed on the recipient.

Finally, a former citizen who renounces, and who is determined to have renounced for the purpose of US tax avoidance, may be denied entry into the US pursuant to its immigration laws.  Ms. McKenna cites that enforcement was lacking, but that this may change. With the current political climate, I wonder if that change is already underway.

Thanks for reading and have a great weekend!

Natalia Angelini

You may also be interested in the following blog-posts:

The US Elections and Estate Tax 

US Inheritance Tax Deductions for Surviving Spouses

 

Tax Concerns for Snowbirds

16 Mar

What Can Reducing Probate Fees Cost You?

Natalia R. Angelini Estate Planning, General Interest, Joint Accounts Tags: , , 0 Comments

Although probate fees in Ontario are relatively modest (approx. 1.5% of the estate value), most wish to avoid or reduce them.

With respect to which assets you must pay probate fees on, section 1 of the Estate Administration Tax Act, 1998 defines the “value of the estate” as “the value of…all the property that belonged to the deceased person at the time of his or her death less the actual value of any encumbrance on real property that is included in the property of the deceased person”.  As joint-property vests in the co-owner of the property immediately before the time of death of their co-owner, the asset cannot be said to belong to the deceased person at the time of their death.  An exception, of course, is the rebuttable presumption of resulting trust expounded in Pecore v Pecore.

Although parents may wish to place assets in joint-ownership with an adult child to avoid probate fees, here are five ways that doing so can have negative consequences:

  1. No savings – If the resulting trust presumption that property transferred into joint tenancy by a parent to the parent and his/her adult child results to the deceased parent’s estate is not rebutted by showing a clear intention of a gift, the transfer may not work to save on probate fees.
  2. Loss of control – The property cannot be sold or mortgaged without the child’s consent.
  3. Negative tax consequences – the transfer of an asset with accrued gains to someone other than a spouse is a deemed disposition at fair market value. Further, if the property is the parent’s principal residence, half of the principal residence exemption may be lost for the years following the transfer during which the child is not living in the property.
  4. Spousal claims – The property may be exposed to claims against the child by his/her separated spouse.
  5. Creditor claims – financial troubles and/or declarations of bankruptcy can result in the child’s interest in the property being subject to creditor claims.

These and other potential pitfalls are reviewed in a recent piece in The Lawyers Weekly.

Thanks for reading,

Natalia Angelini

You may also be interested in the following blog-posts:

Joint Property and Intention Evidence

The High Cost of Probate

Does Jointly Owned Property Pass to the Surviving Spouse?

06 Oct

Is an Update to the Laws of Parentage Coming?

Natalia R. Angelini Ethical Issues, General Interest, In the News, Uncategorized Tags: , , 0 Comments

We do not have an automatic recognition of same-sex parents in Ontario, as the rules of parentage in section 1 of the Children’s Law Reform Act (“CLRA”) state that a person is the child of his or her “natural parents”.  The exception to this is where an adoption order has been made, which is what one or both same-sex parents would need to obtain in order to have their parentage recognized.

Father holding his child, changes to the Laws of Parentage
“On September 29, 2016, the All Families Are Equal Act was introduced, and, if passed, is expected to take effect in the New Year.”

On June 22, 2016, by way of a consent Order, the Court declared the CLRA to be in breach of s.1 of the Charter of Rights and Freedoms to the extent that “the legislation does not provide equal recognition and benefit and protection of the law to all children, without regard to their parents’ sexual orientation, gender identity, use of assisted reproduction or family composition, and to the extent that the legislation does not provide equal recognition and the equal benefit and protection of the law to all families.”

On September 29, 2016, the All Families Are Equal Act was introduced, and, if passed, is expected to take effect in the New Year.  Among other things, this new legislation will reportedly ensure the following:

  • where a child is conceived through assisted reproduction, the parents are the birth parent and the birth parent’s partner, if any, at the time of the child’s conception (no court order required);
  • the intended parents of a child born to a surrogate would be recognized without a court order if (i) the surrogate and the intended parent(s) received independent legal advice and entered into a written pre-conception surrogacy agreement; and (ii) the surrogate provides written consent to give up her parental status before conception and seven days after the child’s birth; and
  • a court can grant a declaration of parental status to a deceased person in relation to a child conceived after their death (the child can inherit and seek support from the deceased parent’s estate if born within three years of death).

I look forward to seeing how the legislation is interpreted, and whether the uncertainty that has long plagued this area of the law will be eliminated.

Thanks for reading,

Natalia Angelini

26 Aug

A Different Kind of Estate Legacy – Twenty Years in the Making!

Natalia R. Angelini Estate & Trust, Estate Planning, Executors and Trustees, General Interest, Trustees, Wills Tags: , 0 Comments

The 5th edition of the leading text in estates and trusts practice, Probate Practice, has recently been released.  This edition is co-authored by Hull & Hull LLP’s co-founder, Ian M. Hull and managing partner, Suzana Popovic-Montag.

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This practical guide to estate administration in Ontario has a long and celebrated history, with its first publication in 1953 by its original authors, The Honourable Ian Macdonell and Terence Sheard, Q.C.  It has been two decades since the last publication, with this new edition reflecting significant changes in the law, including several impactful court decisions on the issues of dependant support, multiple wills and holograph instruments.  The 5th edition also modernizes the text, removing references to decisions embodying outdated attitudes to family relationships.

Regrettably, Rodney Hull, Q.C. LSM, an author of the last edition, passed away in 2009.  His legacy continues with this new work.  The Honourable Maurice Cullity, Q.C., a co-author of a prior edition also shares in this proud accomplishment.

For those who are interested in purchasing The 5th edition of Probate Practice the book is available on the Carswell website.

Thanks for reading and have a great weekend,

Natalia Angelini

25 Aug

Is the Court of Appeal Denying Estate Trustees the Right of Indemnification?

Natalia R. Angelini Executors and Trustees, Litigation Tags: , , 0 Comments

In Brown, Dale and Shackleton v. Rigsby and Shackleton, which we have previously blogged about here, attorney and estate accounting litigation was settled save for the issue of costs, which issue was argued in the first instance by way of motion, with each party seeking substantial indemnity relief against the opposing side personally (the beneficiary applicants sought costs of approx.. $75,000.00, and the estate trustee respondents sought costs of approx. $80,000.00).  No one sought costs out of the estate assets, presumably because all of the parties were residuary beneficiaries of the estate and wished to avoid their interest being diluted by any such cost award.

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The Court applied the modern “loser pays” approach to costs, but nonetheless viewed the settlement as amounting to “divided success” such that each party was ordered to personally absorb their own costs.  The estate trustees appealed the decision, submitting that the motion judge erred in principle in finding that, as estate trustees, the appellants were responsible for their own costs.  They assert that they were duty bound to respond to the lawsuit and, absent serious misconduct or self-interested or unreasonable conduct, an estate trustee is entitled to costs payable out of the estate.

The Court of Appeal reviewed the applicable general cost principles, citing that, subject to the discretion of the court:

  • an estate trustee is entitled to indemnification from the estate for reasonably-incurred legal fees;
  • if an estate trustee acts in a self-interested or unreasonable manner, the entitlement of indemnification is lost; and
  • if an estate trustee recovers a portion of his or her costs from another person or party, he or she is entitled to indemnification from the estate for the remaining reasonably-incurred costs.

Although the Court of Appeal and the appellants appeared to agree on the legal principles, the appellants lost the appeal.  The estate trustees were criticized for not making timely disclosure to the beneficiaries, which in large part was the focus of the dispute.  Such conduct elevated the costs for all parties.  The Court found that the motion judge fairly characterized the appellants’ behaviour as unreasonable, and viewed their conduct as serving to protect their own interests over that of the estate and the other residual beneficiaries.

This case is a sobering reminder to estate trustees, particularly in cases where they are also beneficiaries of the estate, of the importance of fulfilling their fiduciary duty to act in the best interest of the beneficiaries as well as to be transparent in the administration.  The consequences otherwise can be dire.

Thanks for reading,

Natalia Angelini

23 Aug

Can you Ensure your Final Wishes are Honoured?

Natalia R. Angelini Estate Planning, Litigation, Wills Tags: , 0 Comments

Many Canadians have taken the precaution of making a will, and chances are most of those individuals will have their estates administered in accordance with its terms.  Still, some of those individuals will pass away with their estates becoming mired in litigation despite the terms of their testamentary documents.  Legal disputes over wills often arise out of unequal gifting, allegations of inadequate support for dependants, and/or a testator being viewed as mentally compromised and/or unduly influenced to make a will.  In many of these cases, a common theme is a lack of communication between the testator and the beneficiaries.  Some ways one can avoid their estate becoming the subject of the family fight include:

  • Know one’s assets and liabilities – prepare a comprehensive inventory of assets (e.g. real property, personal property, investments, savings etc.) and debts (e.g. mortgages, loans etc.) so one knows all of what will be dealt with upon his/her death; giving a copy of this to your executor will help him/her get the job done;6D91714AAE
  • Decide who is to administer and how one intends to distribute – choose the person or persons suitable to administer the estate, and determine how to best gift the assets.  Seek legal or financial advice to assist in gifting in the most cost-effective manner;
  • Document one’s intentions – documenting intentions is critical, as such documentation (e.g. a trust, a will or multiple wills) is the foundation of one’s wealth transfer plan;
  • Be timely – avoiding delay in estate planning can mean the difference between a smooth administration and one’s estate trustee(s) contending with allegations of mental infirmity and/or undue influence; and
  • Discuss estate planning – meeting with family members to explain one’s estate plan can reduce the chance of disputes; one’s legal and/or financial advisor can take part, which can keep tensions in check.  If the family members sign a document acknowledging the estate plan, which we have blogged about here, this can guard against the estate being the subject of legal proceedings.

Of the foregoing precautions, communications between testator and beneficiary (as well as with those who are excluded from the gifting) is likely the most difficult task to undertake, particularly in a family fraught with internal strife.  Drafting lawyers may want to keep in mind the proposal of a family conference in cases where it is evident that family discord will result from the will being made.  Although a trying process for the family to participate in, it may ultimately result in an estate saved from a lawsuit and in family harmony preserved.

Thanks for reading,

Natalia Angelini

30 Jun

Assisted Dying – Only the Beginning?

Natalia R. Angelini General Interest, News & Events Tags: , , 0 Comments

The issue of physician-assisted death has attracted national media attention, particularly over the course of the last year, and we have blogged on it throughout that time-frame, including most recently here.

Although the new legislation is in its infancy, it is already attracting criticism. A patient’s death must be “reasonably foreseeable” and the patient’s condition must be in an advanced state of irreversible decline in order to qualify.

6QJ9XJWICJBeth Lamb, a 25-year-old British Columbia woman, who suffers from spinal muscular atrophy, a progressive disease, is reported to be challenging the legislation. Her lawyers argue that the requirement that death be “reasonably foreseeable” unfairly excludes patients with chronic and untreatable conditions.  Some of the groups Ms. Lamb’s lawyers assert are left out include those with Multiple Sclerosis, Huntington’s disease and Parkinson’s disease.  They note that such individuals may be faced with the prospect of decades of suffering if they do not qualify for an assisted death.

The constitutional challenge has been filed to the B.C. Supreme Court, and it is expected that it may ultimately proceed before the Supreme Court of Canada. We will be watching to see how it unfolds.

A similarly sensitive and emotional subject area is one of making decisions to withdraw life support. This has recently been tackled by Shelley Hobbs (a lawyer with the Office of the Public Guardian and Trustee) in her award-winning play, A Good Death. This week’s edition of the Lawyers Weekly includes a nice article about the play, which revolves around a woman in her 30s left in a coma after being hit by a car, with conflict ensuing between her close friend and substitute decision-maker and her estranged mother. Although it may appear on the surface to be somewhat gloomy subject matter, the director describes the play as “life-affirming”. Perhaps something to check out at this year’s Toronto Fringe Festival.

Thanks for reading and enjoy the long weekend,

Natalia Angelini

28 Jun

Guardianship Bonds – to post or not to post?

Natalia R. Angelini Guardianship Tags: , 0 Comments

A property guardian of an incapable adult may be required by a court to post security “in the manner and amount that it considers appropriate”: see section 25 of the Substitute Decisions Act (the “SDA”). This discretion impressed upon a court can result in a wide variation in outcomes depending on the facts of the case under consideration.

Guardians residing outside of Ontario appear to have a higher hurdle to jump in order to avoid having to post a bond, given the requirement in section 24 of the SDA that a person residing outside of the province “shall not be appointed as a guardian of property unless the person provides security, in a manner approved by the court, for the value of the property”. That said, the legislation goes on to allow the court to dispense with the requirement or reduce the amount required to be posted, and make its order subject to conditions. In so R0C7A5M4WBdoing, the court is to consider the best interests of the incapable person. The size and complexity of the assets under guardianship will likely play a factor in the court’s decision. If there is more than one guardian and one of them resides in Ontario, this could be a particularly helpful reason to excuse the requirement to post a bond.

There is considerably less leeway when it comes to property guardianships over minors, with section 55 of the Children’s Law Reform Act (the “CLRA”) requiring a bond to be posted and payable to the child “in such amount as the court considers appropriate in respect of the care and management of the property of the child”, save and except where the guardian is the child’s parent and the court holds the opinion that the parent not be required to post a bond. Accordingly, if you are not the child’s parent the posting of a bond is mandatory.

With the court’s duty being to ensure that the incapable person and/or child and his/her property is protected, we can expect a fairly cautious approach being taken by judges considering requests to dispense with the bond requirement in guardianship situations, particularly in guardianships of minors.

Thanks for reading,

Natalia Angelini

 

22 Apr

What Does One Do When There’s a Lost or Defective Will?

Natalia R. Angelini Executors and Trustees, General Interest, Wills Tags: , , 0 Comments

As long ago stated by the Supreme Court of Canada in Lefebvre v. Major, where a will is traced
to the possession of the testator and cannot be found at the date of death, there is a
presumption that it was destroyed by the testator with the intention of revoking it. To overcome
this presumption, a person would need to apply to the court seeking to prove that the
will ought to be declared to be the last valid testamentary document of the testator.

Sorkos v. Cowderoy cites the following test that a party seeking to prove a lost will bears the
onus of satisfying on a balance of probabilities:

6ADA4360BE(a) due execution of the will;

(b) particulars tracing the possession of the will to the date of death, and afterwards if the Will was lost after death;

(c) rebuttal of the presumption that the will was destroyed by the testator with the intention of revoking it; and

(d) proof of contents of the lost will.

Often, just a photocopy of a will is located after a person’s death, absent the accompanying
affidavit of execution. Rule 74.04(1)(c) of the Rules of Civil Procedure requires an executor to
submit an affidavit of execution of the will (and of every codicil, where applicable) or, when one
does not exist and neither witness can be found, provide “such other evidence of due execution
as the court may require.” What would satisfy a court in this circumstance, as evidenced in the
Re Turner Estate decision, is an affidavit from one of the witnesses deposing that the two
witnesses were both present for the execution of the testamentary instrument, and that they
signed as witnesses in the presence of the testator and in the presence of each other.

Another way to cure the defect is if an original codicil exists, since the will can be republished by
virtue of such codicil. Re Turner Estate confirms that in order to republish a will, a codicil need
only contain some reference to the will. The codicil need not expressly confirm the will. This is
useful, as it can provide a fairly simple way to fix the problem, which will ensure that a person’s
testamentary wishes are given effect.

For a prior related blog on this topic, click here. Thanks for reading and have a great weekend!
Natalia Angelini

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