Tag: estate planning
Recent reports indicate that Chadwick Boseman is the latest celebrity to die without a Will. His wife is currently seeking to be appointed administrator of his Estate.
This certainly shows that many people, including those with significant assets, often procrastinate when it comes to preparing a Will. The fact is that, no matter how many assets you have, a sound estate plan can help you address any potential tax liabilities, take advantage of certain planning strategies and otherwise make life much easier for your beneficiaries, as addressing an intestate estate can often have its challenges.
The benefits of making a Will are numerous, including (but not limited to) the ability to:
- Decide who gets certain personal items after your death;
- In contrast to an intestacy, provide for your children (if any), particularly if they are minors;
- Consider whether there are any parties who can complicate the distribution of your estate and address potential strategies in response to that;
- Appreciate what assets will form a part of your estate and what assets will flow outside of your estate, as well as the benefits associated with either;
- Take care of any pets that you may have (particularly those that may be expensive to maintain); and
- Decide who will be in charge of administering your estate.
Without a Will, you essentially leave the decisions respecting your assets in the hands of others and more often than not, in the hands of the Court. In certain situations, having no estate plan may fuel disagreements between your heirs which may leave long lasting effects on family relationships.
I, for one, think these are great reasons to make an estate plan!
Incidentally, it is “Make a Will Month” with the Ontario Bar Association. Click here for more details.
Thanks for reading.
Find this blog interesting? Please consider these other related posts:
Recent reports suggest that divorce and separation rates are on the rise during the pandemic (with rates of separation cited as having increased as much as 20% to 57% from last year, depending on the jurisdiction). This has been in part attributed to the stresses of lockdown and worsening financial situations.
Many Canadians may not be fully aware of the legal impact that separation and divorce have upon an estate plan, mistakenly believing that there is no real difference between marriage and a common-law partnership. However, the distinction in Ontario remains important from an estate planning perspective – for example:
- A common-law or divorced spouse does not have any automatic rights upon the death of a spouse who does not leave a will, whereas married spouses take a preferential share and additional percentage of a predeceasing married spouse’s estate on an intestacy;
- A married spouse has the right to elect for an equalization of net family property pursuant to the Family Law Act on death, whereas common-law spouses have no equalization rights on death;
- Marriage automatically revokes a will (unless executed in contemplation of the marriage), whereas entering into a common-law relationship has no such impact; and
- Separation (in the absence of a Separation Agreement dealing with such issues) does not revoke a will or any gifts made to a separated spouse, whereas gifts under a will to a divorced spouse are typically revoked and the divorced spouse treated as having predeceased the testator.
While top of mind for estate lawyers, lawyers practising in other areas of law and their clients may not necessarily turn their minds to the implications that separation and divorce may have on an estate plan, particularly soon after separation and prior to a formal divorce. With the potential for family law proceedings to be delayed while courts may not yet be operating at full capacity, combined with elevated mortality rates among certain parts of the population during the pandemic, it may be especially worthwhile in the current circumstances to remind our clients of the importance of updating an estate plan following any material change in family circumstances, including a separation or divorce.
Thank you for reading and stay safe,
Corporations and Estates – What happens when a Will gifts an asset that is actually corporately owned?
The use of privately held corporations to manage an individual’s assets or business interests seems to be an increasingly common strategy and tool. Although the use of privately held corporations offer a number of potential advantages to the individual both during their lifetime and as part of their estate planning, it does raise a number of novel issues for the administration of the estate which may not exist if these assets had been directly owned by the individual. Such potential issues manifested themselves before the Ontario Court of Appeal in the relatively recent decision of Trezzi v. Trezzi, 2019 ONCA 978, where the court was asked to determine the potential validity of a bequest in a Will of property that was not directly owned by the testator personally but rather owned by them through a wholly owned private corporation.
As privately held corporations are often wholly owned by a single individual owner the individual in question would be forgiven for thinking that any assets that are actually owned by the corporation are their own. Such a misconception could carry with it some significant legal issues however, as it ignores the important fact that at law the corporation and the individual owner are two distinctly separate legal entities, and that although the individual owner of the corporation can exercise almost absolute control over the corporation as the sole shareholder, and could through such control likely direct the corporation to take any action regarding any asset the corporation may own (subject to any obligations of the corporation), they do not personally “own” any asset that is in fact owned by the corporation. Such a distinction is potentially important to keep in mind when a person who owns assets through a private corporation is creating their estate plan, as they should be mindful of whether any specific asset which they wish to bequest is owned by them personally or through the corporation.
In Trezzi the testator left a bequest in their Will to one his children of all equipment and chattels that were owned by a construction company that was wholly owned by the testator. This bequest was challenged by certain of the residuary beneficiaries, who argued that as the equipment and chattels in question were not actually directly owned by the testator, but rather the corporation, the testator’s bequest of such items had failed and that the items in question should instead continue to form part of the corporation and be distributed in accordance with the residue clause to their potential benefit.
The Court of Appeal in Trezzi ultimately upheld the bequest in question; however, in doing so, noted that the language was potentially problematic and encouraged counsel to be more careful when drafting in similar circumstances (even including potential precedent language to follow from the Annotated Will program). In upholding the bequest the Court of Appeal was in effect required to do an interpretation application for the Will, noting that they placed themselves in the position of the testator and considered what his intention would have been when including the provision in question. The court ultimately concluded that it would have been the testator’s intention with such a provision that the executor was to wind up the corporation in question, with the assets being distributed to the beneficiary in question as part of such a process. In coming to such a conclusion the court states:
“While it is true that Peter, as the sole shareholder of Trezzi Construction, did not directly own the corporation’s assets, that does not complete the analysis. In substance, Peter’s shares in Trezzi Construction became part of the estate, and Peter effectively directed his executors to wind-up the company and to distribute its assets in accordance with his will, even though he did not own those assets directly. As already noted, the key question thus boils down to whether this was indeed Peter’s subjective intention in his will…” [emphasis added]
Although cases like Trezzi show that under certain circumstances a bequest of assets which are not directly owned by the testator but rather through a corporation can be upheld such a result cannot be guaranteed, as the Court of Appeal in Trezzi was required to resort to the rules of construction and place themselves in the position of the testator to uphold the bequest in question. As a result, a testator would be wise to take extra care when dealing with an estate plan that includes the potential bequest of assets that are corporately owned to ensure that the ownership of such assets is properly described and the executor is provided with any necessary authority and direction to deal with the corporately held assets on behalf of the estate.
Thank you for reading.
According to TheFreeDictionary.com, the idiom, “there’s no time like the present” dates back to 1562, and with the state of the world as it is, many people it seems, are scrambling to create Wills as soon as the present allows it.
Will planning requires honesty and is often regarded as an emotionally draining chore. While the drafting of a Will is, as the Romans would say, a Memento mori (a reminder of our mortality), it need not be a sad or troubling task. Planning for one’s estate can be much like the ultimate holiday shopping list. A Will allows us to make sure a treasured possession goes to the right person, and it ensures that our loved ones are provided for, in line with our wishes. Much like insurance, a Will can be thought of as preparing for the worst-case scenario. It can be thought of, particularly in times of strife, as a way to be of service to those people and organizations that we hold dear. “Yet,” as my grandmother would say, “there can always be a little room for whimsy.”
“To my nephew Phillip who wanted to be in the Will, “hello you’re in the Will.”
In a 2015 collection of the “Strangest Wills of All Time,” The Guardian UK compiled 10 Will provisions where, they said, “the temptation to cause mischief or raise a smile from beyond the grave was too much to resist.” Here are but two examples.
After legendary comedian Jack Benny died in 1974, his widow, Mary Livingstone had a single red rose delivered to her every day. She would later learn that Jack had provided for flowers in his will. “A single red rose, delivered to Ms. Livingstone, for the rest of her life.”
When Roger Brown of Whales died in 2013, he left his seven closest friends, friends of 40 years, a bequest of £3,500 with the proviso that they go on a European holiday, and raise a glass together.
While a Last Will and Testament is a serious document that ought to be treated as such, it does not have to be a dreary and dark affair, where all we think about is death and endings.
It is, after all, but one more way to look out for each other.
Thanks for reading,
Suzana Popovic-Montag and Daniel Enright
Life insurance can be an important part of an estate plan, be it taken out to fund payment of anticipated tax liabilities triggered by death, to assist in supporting surviving family members, or to equalize the distribution of an estate within the context of the gift of an asset of significant value (such as a family business) to one child to the exclusion of another, who can be designated as beneficiary of the policy.
In a time when many Canadians are facing their mortality and taking the pause from normal life as an opportunity to review and update estate plans, many Canadians are turning their minds to other aspects of estate planning, including supplementing an estate plan with life insurance. A recent Financial Post article suggests that life insurance applications have doubled during the pandemic, as more Canadians take steps to plan for the unexpected during this period of uncertainty.
At the same time, premiums for new permanent life insurance policies have increased by as much as 27%. While term life insurance policies may remain a more affordable option, they too are anticipated to become more expensive, with upcoming premium increases of up to 20%. The increase in premiums has been linked to lowering interest rates and restrictions to the investment options available to insurance companies.
Other changes to life insurance during the pandemic include the exclusion of the standard medical examination required in order to obtain some types of coverage. The maximum coverage offered by many providers without a medical exam has increased to reflect limitations to the ability for applicants to safely attend an in-person examinations. For other providers and types of plans, medical examinations are simply on hold.
Lastly, insurance companies have updated intake questionnaires to include COVID-screening questions. If an applicant is experiencing potential symptoms, they may be required to wait two weeks before taking out the policy, but are not typically ineligible from coverage altogether. Some insurers, however, are no longer offering new coverage to seniors or others who are at a higher risk of complications during the period of the pandemic.
One life insurance provider has already doubled its projected COVID-19-related payouts during 2020 from the figures it had released earlier this year. While there may have been changes to certain eligibility requirements and the cost of life insurance, it remains a suitable estate planning tool for many Canadians.
Thank you for reading,
Other blog posts that you may enjoy reading:
A recent decision out of Alberta on holograph wills is interesting. The Alberta Court of Queen’s Bench decision released on February 20, 2020 in Edmonton in the Estate of Dalla Lana, 2020 ABQB 135 starts with the following :
“Mr. Dalla Lana made a will in 1997. On March 1, 2018 (four days before he died) and via notes made on two sticky notes, he made what he described as “changes to my earlier will”. The “changes” if valid, effectively rewrote the entire will.”
The decision then goes on to find that the “two sticky notes” were a valid will. This was one more decision in a long line of cases (in substantial compliance jurisdictions, unlike Ontario) with wills being upheld when written on everything from napkins to tractor fenders.
If a valid will can be done on a sticky note, one should ask is there any reason now why an electronic will could not be done on an iPad or smartphone?
Pandemic emergency Orders in Ontario have recently accepted wills being signed and witnessed by video conference or by counterpart. However, there is still a requirement for a “hard copy” of the will. A purely electronic will with a digital signature is still not permissible.
Some jurisdictions have already allowed electronic wills into probate. In Australia, the High Court of Queensland gave probate to a will in 2013 contained in the iPad of the deceased, in Yu Estate 2013 QSC 322.
Although digital electronic signatures have been allowed in Ontario for use in some business situations for many years, there are some restrictions on doing electronic will signatures which are found in the Electronic Commerce Act, 2000, SO 2000, c 17,
31 (1) This Act does not apply to the following documents:
- Wills and codicils.
- Trusts created by wills or codicils.
- Powers of attorney, to the extent that they are in respect of an individual’s financial affairs or personal care.
Given the emergency statutory provisions triggered by the pandemic, it seems inevitable that a meaningful debate will soon ensue about the merits of electronic wills and the broader question of whether Ontario should adopt substantial compliance in its estates legislation.
Thanks for reading.
Please enjoy these blogs on the subject:
As we know, due to the COVID-19 pandemic, Ontario has passed emergency legislation allowing for Wills and powers of attorney to be executed and witnessed virtually, and in counterparts. This legislation will remain in effect for the duration of the declared emergency. Although Premier Doug Ford recently announced a plan for reopening Ontario, the timeline for doing so is still vague, and it’s unclear when the emergency will be declared to be at an end. Once the emergency is over, the normal rules for execution of Wills and powers of attorney, as set out in the Succession Law Reform Act, R.S.O. 1990, c. S.26, and the Substitute Decisions Act, 1992, S.O. 1992, c. 30, will once again govern how such documents may be validly executed.
Before coronavirus became such a pressing concern, there was some discussion in the United States, of allowing Wills executed electronically to be considered valid testamentary documents. According to this article in The New York Times, entitled “A Will Without Ink and Paper”, at the time the article was published in October 2019, some states already had laws to allow e-signatures on Wills, and others were looking to adopt similar laws this year.
In the US, the Uniform Law Commission has proposed the Uniform Electronic Wills Act, which is intended to serve as a model for states who wish to enact such legislation. The law would allow testators to complete the entire Will-making and execution process online, without a lawyer or notary present. There are already online services, currently serving states that already have laws allowing electronic Wills, which provide a platform for the creation of these digital Wills.
According to The New York Times article, the process of creating an electronic Will involves a testator creating a Will online, and then having a video-conference call with a notary. The notary will review the document, ask questions of the testator, notarize it, and send it back.
Although the concept of electronic Wills seems convenient, the costs may ultimately outweigh the benefits. As one lawyer quoted in the article states, signing a Will “is not like getting toilet paper delivered by Amazon instead of going to a supermarket…This is a solemn thing that people don’t do every day.” The “inconvenience” of consulting a lawyer, having a Will professionally drafted, and executed in the traditional way, will likely be worth the trouble for most testators, particularly when you consider that this is not a task that needs to be done repeatedly, at frequent intervals (like going to the grocery store to buy toilet paper).
The article mentions a number of points as to why electronic Wills may not be such a great idea. Without a lawyer’s involvement, there is a heightened risk for undue influence to go undetected. Testators with significant assets that may be structured in complicated ways, or who have unique family situations, such as a blended family, are not likely to be well-served by the creation (let alone the execution) of a Will online, without estate planning advice from a lawyer.
Desperate times call for desperate measures, and it is helpful to have alternate methods of executing Wills and powers of attorney in these unprecedented times. But when life goes back to normal, I think we can be comfortable with the return to the “old-fashioned” way of executing Wills and powers of attorney. Although some may consider the process to be cumbersome, the added protection for testators, and the comfort of an estate plan that takes into account each testator’s unique situation, is worth the price.
Thanks for reading,
You may also enjoy these other blog posts:
Does a testator have to sign his or her own Will to be valid? A little used provision of the Succession Law Reform Act permits a Will to be signed by some other person (an “amanuensis”) in testator’s presence and by the testator’s direction.
Our managing partner, Suzana Popovic-Montag, wrote several on this very topic.
With the logistical issues associated with execution of wills by video-conference, it may be that this manner of execution may become more widely used.
If this is to be done using presence by video conference, we have come up with some suggestions in our Hull e-State Planner Blog. (click here)
Note that the Substitute Decisions Act, 1992 does not specifically permit execution by an amanuensis for Powers of Attorney.
We continue in unchartered waters and we welcome any suggestions or comments.
We have blogged over these past couple of weeks about the novel issues which have arisen with the drafting and execution of Wills during the COVID-19 pandemic. Although we remain hopeful that there will be guidance and/or legislative changes from the government soon regarding how to address issues such as the witnessing of Wills for individuals who are in quarantine or self-isolation, a recent article from Dale Barrett in Lawyers Daily notes that it may not all be doom and gloom surrounding estate planning during the COVID-19 pandemic, as the recent significant drop in the stock market could make it an ideal time for certain individuals to complete an “estate freeze”.
An estate freeze at its most basic accomplishes exactly what the name implies, insofar as it “freezes” the value of an individual’s assets at a particular date and time prior to their death, with any “future growth” on the assets being attributed to someone else (often the individual’s children). The use of an estate freeze is often done as a tax planning tool, with the underlying rationale being an attempt to reduce the potential taxes associated with the deemed disposition of their assets upon their death, which is accomplished by “freezing” the value of the assets at their current value such that the growth is not as great as it otherwise may have been (assuming the asset would continue to grow in the future). Although the structure that is required to accomplish this is somewhat complicated and will require the involvement of professionals, in a very basic overview it is typically accomplished by having the individual create a new company that will ultimately hold the assets being “frozen”, with two classes of shares being created the first which is retained by the individual implementing the freeze and fixed at the value of the assets on the day the of the freeze, with the second class of shares being attributed any “gain” in value of the assets after the freeze attributed to someone or something else other than the individual carrying out the freeze (often ultimately benefiting their children). The implementation and steps required is more complicated and nuanced than the description above suggests, and will almost certainty require the involvement of professionals to ensure that the individual does not go offside complex tax rules, but you get the basic idea.
Although the availability and potential use of an estate freeze is not for everyone, the recent drop in the stock market associated with COVID-19 could create a potential advantage and incentive for people considering an estate freeze to do so now as they could potentially “freeze” the value of their assets at a lower value than they otherwise may have been able to. If you are considering an estate freeze you may wish to speak with a professional now about whether it may be an opportune time to do so and to ensure that it is properly implemented.
Thank you for reading and stay safe and healthy.
There are numerous resources available to estates and trusts lawyers to help them navigate their practice during these COVID-19 times. As there does not yet seem to be one amalgamated repository, I thought I would use today’s blog to highlight some sites that I tend to be frequenting:
The Law Society of Ontario
The LSO has created an easy to read list of FAQs. Certain questions that I have found particularly helpful include: the requirements regarding commissioning an affidavit, including affidavits of service; the use of virtual means to identify or verify the identity of a client; whether virtual means can be used to assess a client’s capacity; and, what are the best practices for using video conferencing in providing legal advice or services.
LawPRO is continuing to update avoidaclaim.com. Given that new claims reports continue to come in at pre-crisis numbers, lawyers must remind themselves that although the physical location of their practice may have changed, the level of service provided must not.
Hull & Hull LLP
If you are reading this blog, you are probably already aware of the comprehensive resources being provided by Hull & Hull LLP, which can be found here. If not, we are covering everything from estate planning to estate litigation, including the execution of wills and how to have litigious matters heard by presiding judges.
Ontario Bar Association
The OBA has set up a COVID-19 Action Centre. While helpful information continues to be provided, I find myself continually looking forward to their ‘mindful moments’ which arrive daily in my inbox.
Stay safe and wash your hands,
If you consider this topic interesting, please consider these other related sites: