It is often the case that a testator may wish to make a significant inter vivos gift to one or more of their children. He or she may intend that such a gift is to be taken as either an advancement or in addition to a later inheritance. If, in preparing a Will and/or estate plan for a testator, a solicitor becomes aware of prior inter vivos gifts to the testator’s children, the solicitor should inquire further into the testator’s intention in this regard in the context of the estate plan.
Sometimes the dynamics in a family are such that any inequality as between siblings can become a serious issue, potentially leading to estate litigation following a testator’s death. If a testator is aware of this possibility, the testator should be alerted to the possible financial consequences of such a dispute. Of course, there is no way to guarantee that estate litigation will be avoided, but there are steps that can be taken in an estate plan to try to make the administration and distribution of an estate as smooth as possible.
One simple way of at least addressing the issue is to include a clear statement of the testator’s intentions in the Will, such as an indication that any gifts given during the testator’s lifetime are to be considered an advance, or should be given in addition to the child’s entitlement under the Will. Unfortunately, this will not necessarily avoid a fight amongst siblings if any of the children who have not received inter vivos gifts are not happy with the outcome, or if the child who did receive a gift expected to also receive an equal share of the parent’s estate.
An option for ensuring a truly equal distribution is a hotchpot clause. This is also an option if the testator does, in fact, intend that inter vivos gifts were to be given as an advancement on the child’s future inheritance, as is often the case.
A “hotchpot” clause will operate to take into account the value of gifts given during the testator’s lifetime in calculating the division of the estate, with any gifts previously given being subtracted from the portion given to the child in question. Effectively, the value of any substantial inter vivos gifts will be clawed back into the estate for the purpose of determining the value of the estate and the ultimate entitlement of the child or children who received such gifts. The end result of a hotchpot calculation will be that each child will receive from their parent, either inter vivos or from the estate, a share of exactly equal value. Hotchpot can be in relation to inter vivos gifts given, or to the forgiveness of outstanding loans given during the testator’s lifetime.
The concept of hotchpot is based on the equitable doctrine of ademption by advancement, also known as the presumption against double portions. This principle presumes that a parent intends equality between his children, such that if he or she leaves the residue to his or her children equally, but also made an inter vivos gift or advancement to one of the children, the rule will apply to bring the gift into hotchpot so that the intention of equality will not be altered.
Hotchpot, or ademption by advancement, also applies in the case of an intestacy. Section 25 of the Estates Administration Act, R.S.O. 1990, c. E.22, provides that if the child on an intestacy has been advanced assets, with such advancement being expressed by the deceased or acknowledged by the child in writing, the value of the advancement will be considered, for the purposes of s. 25, to be part of the estate to be distributed.
Accordingly, the default position when it comes to inter vivos gifts to a testator’s children will likely be equality, and as a consequence, some form of hotchpot calculation. Chances are that parents usually do intend to divide their estate equally amongst their children, so this rule will probably operate in line with the testator’s intentions in most cases. If a testator does wish to treat their children unequally, the estate plan must be carefully prepared with a view towards all possible consequences.
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When one thinks of a “trust fund baby“, images of a lavish lifestyle supported by family wealth probably come to mind. But with the images likely comes the sad realization that such a lifestyle will not be enjoyed be you; either you are born into such wealth or you are not. But is this necessarily true? Could you be adopted into a trust, and with it adopt the lifestyle of a trust fund baby? If a trust has been set up which provides that the beneficiaries of the trust are to be the issue (i.e. children) of a specific individual, if such an individual legally adopts you, would you become a beneficiary of the trust?
In Ontario, the legal status of adopted children is governed by the Child and Family Services Act (the “CFSA“). Section 158(2) of the CFSA provides that, for the purposes of the law, upon an adoption order being granted the adopted child becomes the child of the adoptive parent and ceases to be the child of the person who was his or her parent before the adoption order was granted.
With respect to the question of whether an adopted child gains status under any will or trust, section 158(4) of the CFSA provides:
“In any will or other document made at any time before or after the 1st day of November, 1985, and whether the maker of the will or document is alive on that day or not, a reference to a person or group or class of persons described in terms of relationship by blood or marriage to another person shall be deemed to refer to or include, as the case may be, a person who comes within the description as a result of an adoption, unless the contrary is expressed.” [emphasis added]
Simply put, so long as the will or trust deed does not specifically preclude adopted children from becoming included as part of any class of persons described by relationship by blood or marriage, an adopted child would be treated no differently than a biological child in determining who forms part of such a class. As a result, presuming that the trust in question does not bar adopted children from becoming beneficiaries, should the wealthy individual contemplated in the hypothetical above legally adopt you, you would become a beneficiary of the trust.
Your dreams of living as a trust fund baby may not be over yet. Thank you for reading.
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.
Thank you for reading.
A recent article regarding a study by the University of South Australia suggests that the majority of family farms that are being passed on from one generation to the next are being left to sons rather than daughters.
According to the article, only about 10% of Australian farms are currently being bequeathed to daughters. The preliminary results of the study have revealed that it is common for farm owners to leave farm property to male descendants, while other, non-farm assets are instead left to females.
The article also notes that, traditionally, sons would be required to carry on family farms (whether they wanted to or not), while daughters would rarely have the opportunity to continue living and working on a farm (even if they so desired). In Australia and elsewhere, it appears that tradition still plays a strong role in how families are structuring their estate planning.
In other parts of the world, it has been suggested that the inattention to farm succession planning is a serious problem for farming families. A survey conducted among farmers living in Ulster, Ireland suggests that nearly half (48%) of farmers do not have any plan regarding the inheritance of farm property. Only 20% of survey respondents indicated that he or she had chosen a successor and executed a last will and testament to implement the related wishes.
Within the context of an aging population, it will become increasingly important that farmers take the time to obtain assistance in creating an estate plan to ensure that family farm properties are left to their intended beneficiaries.
Have a great weekend.
Our population is aging but living longer. This has resulted in an increase in the prevalence of dementia and other aging-related conditions associated with cognitive decline, and a corresponding increase in the use and activation of powers of attorney.
As estate litigators, our firm is beginning to see a rise in power of attorney disputes between siblings and other family members. These types of disputes are often emotionally fuelled by longstanding sibling rivalry or distrust among family members, and can result protracted litigation and expensive legal bills.
Often a sibling or other family member will have concerns that the appointed attorney is acting improperly or is failing to fulfill his or her duties. In these circumstances, the sibling or family member may have concerns with respect to a lack of transparency or feel that they are being left out of the decision-making process.
It is useful for these individuals to know that the Substitute Decisions Act, 1992 (the “SDA”) imposes certain obligations upon an attorney, which may assist in addressing these concerns.
The SDA states that an attorney has a duty to consult with family members and keep them informed as to the incapable person’s health and wellbeing (ss. 32(5)) and that an attorney has a duty to foster personal contact between the incapable and his or her supportive family members (ss. 32(4)).
The SDA also states that an attorney has a duty to keep proper records and to provide updates regarding the incapable person’s financial circumstances (ss. 32(6)).
The SDA also states that an appointed attorney must also obtain and review a copy of the incapable person’s Will (s. 33.1). If the Will provides that a specific item of property is to be given to a particular beneficiary, the attorney must retain that property for that beneficiary unless it is essential to sell the item in order to satisfy the incapable person’s legal responsibilities or otherwise provide for the incapable person (ss. 35.1(1)).
These duties are ongoing and an attorney can generally be held personally liable for any damages that results from a breach of his or her duties.
The Office of the Public Guardian and Trustee has published a brochure that outlines the duties and powers of an appointed attorney for property in greater detail, which can be viewed here.
Communication is often the key to resolving these types of disputes between family members. However, where there is a breakdown in communication, the assistance of a litigator or mediator who specializes in this practice area is often helpful.
Thank you for reading.
I recently tweeted an article from the Wall Street Journal entitled Five Steps to Prepare for a Decline in Your Financial Cognitive Ability. The article points out that, although we easily consult health-care providers with respect to our physical health, we may have more difficulty recognizing our limitations and changes in our financial health. As we live longer lives, the likelihood of mental and cognitive decline increases, and accordingly, the need for a plan with respect to how to cope with such a decline increases as well.
During the holidays, many of us host and attend family gatherings, which may provide a good opportunity to discuss your plans and wishes with your loved ones, at a time when everyone is together in a relaxed, low-pressure environment. While such conversations are not always easy, they are a necessity to ensure that your wishes will be carried out, and that your family will not be stressed in attempting to discern exactly what your wishes are.
The first of the five steps suggested in the article is to talk to your spouse to ensure that both parties are in agreement with respect to your financial plan. The second suggestion is to organize your finances as clearly and simply as possible. If your finances are spread out over several banks or institutions, consider consolidating accounts. At the very least, it may be wise to create an inventory of all accounts, investments, and assets so everything can be easily located and accounted for.
The next step is to review your Will and your Power of Attorney for Property, or if you do not yet have either of these documents, arrange to have them prepared by a lawyer. With respect to your Will, ensure that you have clearly thought out your choice of executor, the bequests to beneficiaries, and anyone you may be leaving out. With respect to your Power of Attorney, of course, the most vital element is that you choose a trustworthy Attorney.
The fourth suggestion is to assign roles to your family members. This involves asking the individual if they would be willing to assume the role you have selected, and communicating within your family with respect to who will be responsible for which tasks. By having this conversation in advance, and explaining the reason for your choices, you may be able to avoid any surprised or hurt feelings at a later date, based on who has, or has not, been selected for a particular role.
The last suggestion included in the article is to seek professional assistance and advice from a lawyer and/or a financial professional. They can help you feel comfortable with the planning you have put in place and give you, and your family, peace of mind.
Thanks for reading.
On Tuesday, I referred to an article, “Are You Related to This Violinist? If So, You Could Be a Millionaire”, which first got me thinking about the idea of inheritances received from distant (and potentially unknown) relatives who die intestate. Thursday’s blog focused on the use of DNA evidence in establishing and disproving relatedness and how this technology may apply to the context of estate litigation and claims that a party is the next of kin of a person who has died intestate.
Further to yesterday’s post, it is worth mentioning that the Court will not always order a DNA test to establish a family relationship. Earlier this year, in Re Branson Estate, the Alberta Court of Queen’s Bench refused to order the applicant to undergo genetic testing when such an order was sought by the respondent to the proceeding. Both parties asserted that they were the biological sons of the deceased, who died intestate. The respondent raised doubts with respect to whether the applicant was actually related to the deceased. The applicant had produced his birth certificate, which identified the deceased as his father in support of this family relationship, but the respondent alleged that the applicant was the product of their mother’s affair with a man other than the deceased. The Court ruled the hearsay evidence cited by the respondent inadmissible and determined that the applicant and respondent were both entitled to a 50% share in the estate of their father. While DNA testing may be a viable way to dispute relatedness that forms the basis of a beneficiary’s claim against an estate, it cannot always be relied upon where admissible evidence does not raise uncertainty with respect to one party’s relatedness to a deceased family member.
The violinist, Eugene Bergen, whose story is featured in the article referred to in Tuesday’s blog died intestate in 2013 in New York City, at the age of ninety-six and with savings of nearly four million dollars. Bergen played violin for the New York Philharmonic Orchestra and toured Europe with Glenn Miller during the Second World War. Although he left behind an impressive life story, he does not appear to have been survived by a spouse, issue, or any other relatives. As a result, the late musician’s estate is controlled by the Manhattan Public Administrator. City officials are still trying to locate Bergen’s next of kin. Eventually, if a living relative of Bergen cannot be found, the funds will be deposited with the city’s Finance Department. In the last three and a half years, the Finance Department has received over sixty-six million dollars in unclaimed estate funds. The author of the article that appeared in DNAinfo recommends keeping up-to-date genealogical records so that, if we are related to someone like Eugene Bergen, who has left a fortune but no Last Will and Testament or close family to inherit it, we do not miss out on an inheritance.
Have a nice weekend.
On Tuesday, I introduced the idea of receiving an inheritance from a long-lost relative who dies intestate. While the law allows distantly-related next of kin to benefit from a deceased intestate, in reality, practical barriers often present themselves.
When trying to assert one’s position as a very distantly-related next of kin, the challenge may become proving (or, in some cases, disproving) the relationship. It can be difficult or impossible to establish someone who was not recognized as a close relative of the deceased as the next of kin, absent DNA evidence.
In determining the degree of relatedness of one individual to another, geneticists use math models and averages. However, when DNA analyses are done, our genetic materials do not always follow expectations based on mathematical trends. For this reason, DNA test results may be inaccurate or inconclusive, suggesting that two individuals are more or less closely related than they actually are. What makes the ability to rely on genetic testing more difficult is the fact that fourth cousins (and beyond) often share no more genetic material than that shared with any other member of the population.
Another difficulty that may present itself in determining the relatedness of one person with another who is deceased is that DNA testing requires a sample (such as hair or saliva) from both test subjects. If the deceased has been cremated, a tissue sample may not exist at the time that the purported family member seeks evidence of their relatedness.
In Ontario, genetic testing can be used to support or dispute familial relatedness within the context of estate litigation. The Court can order a DNA test to disprove genetic relatedness of a purported beneficiary on intestacy under Rule 33 of the Rules of Civil Procedure, which allows the mental or physical examination of a party whose condition is in question in a proceeding. In Kelly Estate (Trustee of) v. Kelly, Justice Coats of the Ontario Superior Court of Justice granted leave for DNA testing of one party, an alleged daughter of the deceased, stating that “DNA testing is a highly reliable method of determining parentage.”
Thank you for reading.
An article published last week asks the question “Are You Related to This Violinist? If So, You Could Be a Millionaire“. We are all too familiar with spam emails alleging that we are the long-lost relatives of individuals of whom we have never heard. Such emails are generally accompanied by the promise of fortune in exchange for a small initial payment or upon providing detailed personal information. But how often do individuals actually benefit from the estate of a long-lost relative?
The Succession Law Reform Act refers to “degrees of consanguinity”. The table of consanguinity outlines who will become the beneficiary of an Ontario resident’s estate in the event that he or she is not survived by a married spouse and/or immediate family. The table begins with the closest degrees of kinship and usually expands to third cousins, three times removed, indicating which relatives rank above others with respect to the potential to benefit from the intestacy of a family member (whether close or distantly related). The Succession Law Reform Act, however, does not limit the rights of a very distantly-related family member from seeking to collect as a beneficiary on intestacy – it merely indicates that when a person dies without a will and is not survived by a spouse, issue, parent, sibling, nephew, or niece, the closest degree of next of kin who do survive the intestate will share the estate equally (if more than one of equal degrees of consanguinity survive) or absolutely (if only one next of kin survives the deceased). Although it may be rare, in theory, a third cousin, three times removed could become the sole beneficiary of an estate of a relative whom he or she never knew existed. Only in situations where there is no next of kin will estate assets become the property of the Crown.
Thursday’s blog post will explore the challenges associated with asserting one’s position as a very distantly-related next of kin.
Thank you for reading.
Estate litigation often involves not only financial, but emotional issues. Among the most common disagreements are those between family members, whether amongst siblings, or between siblings and a surviving spouse. In some cases, the parties cannot get along and they may require that the Court determine the matter in dispute. However, there are also situations where the disagreement can be worked out between the two sides, such as through an Alternative Dispute Resolution (“ADR”) process like mediation, without the extra time and expense that comes with a Court proceeding.
Another form of ADR used primarily in the family law context is Collaborative Family Law (“CFL”). CFL is structured in a series of four-way meetings between the parties and their lawyers. There is no mediator, arbitrator, or judge present, so CFL requires a high level of trust between the lawyers and clients. Candidates for this collaborative approach to dispute resolution are often parties who still get along reasonably well, and who are willing to cooperate with one another.
Based on the frequently emotional and familial aspects of estate litigation, it seems that CFL, or a form of CFL, could be applicable in the estates context. Back in 2010, as noted by this prior blog post, there seemed to be some interest in applying the CFL model to estate Law. This article in Canadian Lawyer from later that same year discussed why collaborative estate law didn’t seem to be catching on.
One of the key features of CFL that seems to make it unattractive in estate law is that, if after the series of four-way meetings, the parties cannot agree between themselves, they must start from scratch. The lawyers who participated in CFL cannot continue to represent the same client in court proceedings. All information produced in the CFL process has to be reproduced, including financial statements, expert reports, appraisals, etc. Although the best case scenario in CFL involves saving money as well as preserving relationships, the worst case scenario could possibly involve additional expenses and harm to relationships in any event.
However, perhaps the clause that restricts a lawyer from staying on the file after unsuccessful meetings could be removed, or at least modified. One possibility considered is to disqualify only the individual lawyer who worked on the file, and not the entire firm. This may make it more accessible to parties who would otherwise be good candidates for resolving their problem in a collaborative way, as opposed to an adversarial one.
Thank you for reading.