Tag: estate plan
High net worth individuals typically have more than enough money to live their desired lifestyle. But there’s an important element that even the wealthiest amongst us may be lacking – protection. According to recent research by Chubb, more than 50% of high net worth individuals worry that they are underinsured, and less than 30% look for insurers who are specialists in providing coverage for the affluent: https://www.canadianunderwriter.ca/personal-lines/insurance-providers-need-go-understand-needs-high-net-worth-individuals-chubb-1004110295/.
The simple fact is that those who have more, have more to lose. And they have assets and protection needs that go far beyond what an off-the-shelf property and liability policy can provide. Uncovered losses not only have day-to-day lifestyle implications, they could also impact estate values down the road.
Here are some of the coverages available in the Canadian market that high net worth individuals should consider.
- Coverage for high-end homes – As technology advances, home systems have become more sophisticated, and higher-end homes even more so. Assets and equipment that need protection can include state-of-the-art electrical and mechanical systems. back-up generators, pools, home theatres, climate-controlled wine systems, walk-in humidors, and showcase garages. These homes may also have unique architectural detailing that requires special protection.
- Personal security breach protection – Wealth and a higher public profile comes with its own risks – home invasions, stalking, violent threats, even kidnapping. Specialty insurance packages cover expenses related to these events, from loss of income to professional counselling, to additional security services.
- Protection for collectibles and leisure vehicles – An affluent lifestyle often includes vehicles that go beyond basic transportation needs. These can include antique, classic and collector cars, airplanes, speed boats, houseboats and yachts, and other recreational vehicles.
- Increased liability protection – The higher your public or professional profile, the greater the risk of liability claims, with libel, slander or defamation claims being an obvious example. Higher-end insurance policies often include worldwide umbrella liability coverage that extends the range of liability protection available.
This recent Globe and Mail article highlights some other protections that those with an affluent lifestyle might consider: https://beta.theglobeandmail.com/globe-investor/globe-wealth/high-net-worth-lifestyle-brings-liability-tripwires/article34019994/?ref=http://www.theglobeandmail.com&.
Many insurance companies in Canada – such as Aviva and Chubb – offer exclusive protections and services for the high net worth market. An insurance broker can be invaluable in helping you find the right solution.
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We all know that bad people can do some very bad things. So, if your estate plan includes a continuing power of attorney for property (as it likely should), and you name someone to manage your affairs in the event you can’t, you’ll undoubtedly be choosing a “good person” to be your attorney, not the bad apple nephew with a spotted past.
But here’s the unfortunate thing: when it comes to a power of attorney, and access to money, some otherwise good people have been known to do some very bad things.
There are usually three reasons for this:
- First, there is opportunity, with a perception that there is little chance of detection, penalty, or consequences.
- Second, there is often rationalization, which can involve a sense that the attorney is “entitled to some financial help anyway” or that they “are the only ones looking after mom” so deserve more than the others.
- Third, there is often a financial need – children in post secondary school, mounting credit card debt, or other emerging financial stress.
A power of attorney is an extremely powerful document – in many cases, the objective of the grantor is to allow someone else to completely take over management of their property, due to age, potential incapacity, or other reasons. And while the law holds attorneys to a high standard to protect grantors (the attorney has a duty of utmost good faith to act in the grantor’s best interests), the potential for abuse is immense.
If someone suspects an attorney for property is abusing the granted legal authority to commit a financial crime, there are options available to protect the vulnerable person. Theft, fraud and forgery conducted under the guise of a power of attorney can be reported to the police and prosecuted under the Criminal Code. In addition, in Ontario, the Public Guardian and Trustee can be contacted to protect an incapable person being victimized by financial abuse.
In terms of steps that you can take in advance to safeguard your assets from abuse, this article highlights a recent Ontario case of theft under a power of attorney, and outlines some protection steps that individuals can include in their power of attorney to help guard against theft or fraud:https://estatelawcanada.blogspot.ca/search/label/theft%20by%20attorney.
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The topic of home ownership, and, particularly, the ability of young adults to buy their first home is a trending topic lately. According to a Globe and Mail article on whether millennials are being pushed “into a financial abyss of home ownership”, Manulife Bank has conducted a survey which revealed that 45% of millennial home buyers received a gift of money or loan from family, and that one-third of these lucky youngsters received more than $25,000.00.
Regardless of whether prospective first time home buyers are wasting money on delicious, but expensive, avocado toast as Tim Gurner may have controversially implied, home buyers with mortgages should give consideration to how they would want the mortgages on their properties to be satisfied upon their death.
Pursuant to section 32 of the Succession Law Reform Act, a mortgage on an estate property shall be proportionately satisfied through the interest of the beneficiaries of that property, if the deceased has not, by will, deed, or other document, signified a contrary or other intention. For each beneficiary of a property, “every part of the interest, according to its value, bears a proportionate part of the mortgage debt on the whole interest”. The Act is also clear that a general direction for the payment of all debts from the residue of the Estate does not suffice to rebut the application of section 32 unless “he or she further signifies that intention by words expressly or by necessary implication referring to all or some part of the mortgage debt”.
Regardless of the foregoing, nothing in section 32 of the Act shall affect the mortgagee’s right “to obtain payment or satisfaction either out of the other assets of the deceased or otherwise”.
Just for fun, here is a link to a CNBC article on some statistics related to millennials, their spending habits, and the average price of a single avocado.
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You’re planning a client’s estate. You’ve identified the assets and tax issues and planned accordingly. Most importantly, your client has provided clear instructions on her wishes for the distribution of her estate. You’ve prepared her will and it’s ready for execution. It’s taken some time to get things right, but it’s a job well done.
Or is it?
What about your client’s family – have they been kept in the loop about what the plans are? Your client undoubtedly has the best of intentions in distributing her estate, but even the best of intentions can be misunderstood.
In my experience, a successful estate plan is no longer solely developed from the top down; it also involves planning from the bottom up. Family members are far less likely to experience emotional distress or family discord – or challenge a will – if they have been given an explanation of the reasons for the distribution of property and have had a chance to express their opinions about that distribution.
This quick video on the Ontario Security Commission’s Get Smarter About Money website brings the point home well.
If you have clients currently in the estate planning process, have them build in some time for a family discussion. It could save a lot of heartache and litigation down the road.
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Last week, the family of Martin Luther King Jr. settled a dispute surrounding two cherished family artifacts: the late reverend’s personal travelling bible and 1964 Nobel Peace Prize medal. King’s three surviving children—Martin, Dexter, and Bernice—disagreed about whether or not to sell these treasured items. The two brothers, who wanted to sell to a private buyer, outvoted their sister, who had possession of the items and wished to keep them in the family. Former President Jimmy Carter acted as the mediator in the case.
Sadly, this kind of case is far too common. We have written about such “family wars” several times. Of course, no two family disputes will be exactly the same; each unhappy family is unhappy in its own way. Individual personalities and family dynamics as well as the significance of the issues in dispute make each family dispute different. The facts in this case are unusual because of the particular items in dispute. This family bible is significant not only to the family, but also to American history. The bible at issue was used by President Barack Obama during his inauguration in 2013. As well, not every family will have a former U.S. President act as mediator.
On the other hand, the themes represented in this case often arise in family disputes, no matter how celebrated or obscure the family. Here, the brothers desired to sell because the Estate needed the money. Bernice, however, could not conceive of selling her father’s cherished possessions. Conflict between sentimentality and more material considerations often fuel estate disputes.
As we have discussed before, it important for a lawyer to recognize the role of passion and sentimentality in estates disputes. Feelings should not be the sole driving force in litigation. As well, communication is the most effective tool to avoid estate litigation. Testators should speak to their families, particularly their children, about their wishes and the terms of their will, to avoid surprises and hurt feelings.
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The death of a celebrity will sometimes cause the media to focus enquiry on estate planning. We recently blogged about the circumstances surrounding Prince’s intestacy and the possible heirs of his estate. Anton Yelchin, a 27 year old actor best known for his role in the Star Trek movies, has passed away. His death has raised a number of interesting points.
First and foremost this case raises the importance of why it is a good idea to estate plan at a younger age.While there is no target age when a will should be written, estate planning is a consideration that Millennials should take into account. Yelchin was a successful young actor who accumulated a large amount of wealth in his career. His family and friends would likely have benefitted from the crafting of an estate plan as it would give them some direction pertaining to his wishes for his money and his legacy as an actor. It would have also saved his parents the uncertainty of trying to take control of his estate while coping with his death.
As Yelchin passed away without a will, the court will ultimately decide who is appointed to distribute his assets. Yelchin’s parents are currently applying to the court in order to oversee the distribution of Yelchin’s estate. If this estate were to be in Ontario Yelchin’s parents almost certainly would be appointed as estate trustees by applying for a Certificate of Appointment of Estate Trustee Without a Will. As per the Succession Law Reform Act in Ontario, if an individual dies with no surviving spouse or children (as is the case here), his or her parents would inherit his estate.
It is important to consider the possibility of crafting a will at a younger age in order to ensure one’s wishes are fulfilled, and as a preventative measure against costly and unnecessary litigation.
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Isn’t estate planning just for old, married, and rich people? This is a question that we face all of the time. The simple answer is – no.
Proper estate planning helps not only the old, but the young as well.
A recent US survey amongst 23 to 35 and 35 to 44 year olds indicates that, respectively, 80% and 67% of these groups do not have a Will. Closer to home, the percentages are quite similar. A Canadian survey found that 77.2% of 25 to 34 year olds and 67.9% of 35 to 44 year olds do not have a Will. A prior Hull & Hull blog highlights those Canadians that had a Will that needed updating.
Given that the leading cause of death amongst millennials is accidental and unintentional injuries, estate planning should not wait.
A recent article on Forbes highlights estate planning tips that every millennial should consider regardless of whether they are married, have dependants, or are still paying off student loans. Of course, professional advice should always be sought.
- Add beneficiaries to your accounts – designating beneficiaries on bank accounts and investments allows for the transfer of the asset to your intended recipient upon your passing. Including the recipient as a beneficiary, as opposed to a ‘joint owner’, ensures that they do not have access to the account (and funds), while alive leading to concerns of misappropriation. The Forbes author additionally suggests that these designations should be checked at least once a year in the event they need to be updated.
- Get a basic Will – nothing overly detailed or expensive is required. Carefully thinking through the choice of estate trustee(s) and the division of assets will not only ensure your wishes are followed, but will avoid the headache of proceeding with the administration of an intestate estate. The Forbes author additionally suggests having a secured list of your digital assets, along with the username and password.
- Consider life insurance to cover student loans – certain loans are not discharged upon death. Insurance helps alleviate the concern that a co-signatory, usually a parent, is not left with the burden of paying off the remainder of the loan.
In a recent Ontario Court of Appeal decision, Holgate v Sheehan Estate, 2015 ONCA 717, the court was asked to consider an appeal from a motion for determination of an issue under Rule 21.01(1)(a) of the Rules of Civil Procedure. The Rule 21 motion arose in the context of a trial with respect to the interpretation of the will and codicil of John Holgate, and particularly the meaning of the word “use”. The appeal also dealt with the trial judge’s jurisdiction to hear the mid-trial Rule 21 motion, but this blog will deal with the former issue.
Mr. Holgate had passed away and was survived by two sons from his first marriage (the “sons”) and his second wife, (“Mrs. Holgate”). Mr. Holgate’s will and codicil provided for a life interest in two trusts to Mrs. Holgate. Following Mrs. Holgate’s death, Mr. Holgate’s children were entitled to the remainder of the two trusts. The wording of the two trusts provided that the trust assets were to be held for “the sole use and benefit of my wife MAY HOLGATE during her lifetime”.
The sons brought an action against their father’s estate, Mrs. Holgate’s estate and Mrs. Holgate’s daughter personally, claiming that Mrs. Holgate’s life interest allowed her to use the money but not save it. They alleged that Mrs. Holgate had not only used trust assets, but had also saved money, thereby depleting the capital of the estate to their detriment and contrary to their father’s intention.
Three days into the trial, the trial judge invited counsel to bring a mid-trial motion either for determination of an issue or for directions in order to determine this critical issue with respect to the interpretation of the will and codicil, namely the meaning of the term “use”. Counsel agreed to bring a Rule 21 motion and asked whether the wording of the will and codicil precluded Mrs. Holgate from accumulating wealth from the trusts in her own name.
The trial judge concluded that:
- nothing in the will or codicil prevented Mrs. Holgate from saving and accumulating wealth;
- the language of the will came as close as possible to conferring an absolute gift on Mrs. Holgate; and
- neither of the trusts included any limitations on the use of the assets by Mrs. Holgate.
On appeal by the sons, the Court of Appeal agreed with the trial judge’s interpretation, that the words and phrases used in the trusts indicate a clear intention on Mr. Holgate’s part to allow his wife unrestricted access to the funds. They also cited Dice v Dice Estate, 2012 ONCA 469, which held that “[t]he golden rule in interpreting wills is to give effect to the testator’s intention as ascertained from the language that was used”.
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More than one in four (27%) UK adults hope to leave enough money for their family or pets to live comfortably after they’re gone.
The more specific stats are as follows:
- Enough for family or pets to live comfortably 27%
- Enough to boost child/grandchild’s savings 19%
- Enough for child/grandchild to put a deposit on a house 15%
- Enough to fund child/grandchild through university 11%
- Enough to fund child/grandchild’s wedding 7%
With respect to the composition of their expected estates, "nearly two thirds of UK adults expect to have a property (63%). Of those, 55% expect the value of the home they leave to be worth £100k or more. Over half (51%) expect to leave jewellery, antiques and paintings and nearly one in ten (9%) expect to leave a business behind."
David M. Smith – Click here for more information on David Smith.
You may remember that my colleague, Chris Graham, blogged on the death of the actor, Heath Ledger and the pending litigation involving his estate (Link to Chris Graham’s Blog).
It has been well reported that Ledger last made a Will in 2003, before the birth of his daughter Matilda (in 2005) and before his claim to fame. Under the 2003 Will, Ledger left all of his possessions to his parents and sister. He subsequently stared in several hit films which vastly increased the size of his net value. Subsequent to his passing, the question that was considered was what would happen to Matilda, as she was not provided for in the 2003 Will?
There had been discussion that Matilda’s mother would likely commence a claim on Ledger’s estate, which could have tied up the Estate in litigation for years. However, now it is widely reported that Ledger’s entire estate will all go to two year old Matilda (click here for the report).
Estate planning is like doing our taxes. No one wants to do them, but Ledger’s story teaches us an important lesson. It reminds us of the uncertainty of death and the consequential need to ensure that our estate plans are updated to protect those that we care for.