An article that appeared in the Wall Street Journal this past weekend highlights an important issue that is often overlooked when individuals plan for the distribution of their wealth after death.
The article suggests that 70% of wealth inherited by a younger generation is lost, and that, by the time that the inherited wealth makes it to a subsequent generation, only 10% of its original value typically remains.
In Canada, where 40% of individuals rely on a family inheritance to fund their retirement, such poor rates of intergenerational wealth preservation could present a serious problem.
In addition to obtaining formal lawyer assistance in creating a formal estate plan, the article refers to a new approach to preserving wealth called “heritage design”.
Heritage design uses “pre-inheritance” intergenerational experiences to foster the preservation of family wealth. This approach, which supplements estate planning, involves annual meetings with the testator and his or her beneficiaries, at which time family values and traditions are reinforced and younger generations learn how to manage funds which they can expect to eventually inherit.
Family meetings during which an estate plan is discussed and explained to beneficiaries has the potential not only to assist in the preservation of family wealth from generation to generation, but also can help prevent disputes over the intended distribution of an estate after death.
Thank you for reading.
In estate litigation we often have to explain to the court, in detail, the relationship between different family members. When a client says that a person is their brother or mother, that is usually pretty straightforward.
One of the most confusing terms used to describe a familial relationship is the word “cousin”. We use the word to describe, obviously, our relationship to the children of our aunts and uncles (our true cousins). However, sometimes people also say that someone is their “second cousin twice removed”. That can make anyone quite confused about what the specific family tree should look like.
In my quest for some clarity, I came across a helpful site. It explains that if someone is your first cousin (so picture your ‘regular’ cousin) then his or her child would be your “first cousin once removed.” The term once or twice removed always means one or more generation levels different from you.
All of your regular cousins (and some can be called first, second, third etc. but I will discuss that aspect tomorrow) are at the same generation level as yourself. Those at different generational levels are referred to as “removed.”
Stay tuned for tomorrow’s blog on First, Second and Third Cousins!
Today on Hull on Estates, David Smith and Stuart Clark discuss family law in trusts and estates litigation.
If you have any questions, please e-mail us at email@example.com or leave a comment on our blog page.
A September 8, 2009 endorsement of Justice D.M. Brown helps to clarify the costs of capacity litigation.
Fiacco v. Lombardi, 2009 CanLII 46170 (ON S.C.) involves four siblings who disputed the management of their mother’s property. She executed a continuing power of attorney for property appointing all four of her children as her attorneys to act jointly. That didn’t go so well.
The mother suffers from dementia. In 2008, the four children entered into contested guardianship litigation over their mother; two were appointed guardians by on January 23, 2009 by Order of Cameron J. That round of litigation cost the mother $30,022.22.
The two children who were not appointed were ordered to provide information about their mother’s assets and the original will of their mother to the guardians, and to transfer assets to the guardians. They did not act quickly.
Justice Brown states, at paragraph 14, that “The view…that the Order did not require compliance forthwith was dead wrong: when a court appoints guardians of the property of an incapable person, any other person with notice of the order is required to deliver up immediately to the guardians all property of the incapable person that he or she might possess.”
At paragraph 10, His Honour states that the “respondents acted contrary to their obligations under the SDA [Substitute Decisions Act] and they obstructed their mother’s guardians in discharging their statutory duties.”
The SDA at sections 33.1 requires guardians to make reasonable efforts to determine if an incapable person has a will; and sections 33.2(1) and (2) require a person who has the incapable person’s will to deliver it to the guardian “when required by the guardian.”
The Court did not approve of the children seeking further funds ($29,154.14) from their mother’s estate to “fund their continuing sibling rivalry.”
Justice Brown emphasized that “capacity litigation should reflect the basic purpose of the SDA – to protect the property of a person found to be incapable and to ensure that such property is managed wisely so that it provides a stream of income to support the needs of the incapable person: SDA, sections 32(1) and 37.”
His Honour states that members of the Bar should not presume that all parties to contested capacity litigation will have their costs paid by the estate of the incapable person.
This endorsement emphasizes that family fights cost everyone involved.
Enjoy the weekend.
Jonathan Morse – Click here for more information on Jonathan Morse.
I recently had the opportunity to meet with a gentleman named Franco Lombardo from Vancounver B.C. who has pioneered the concept of "authentic wealth" in the context of succession planning. Franco has written two books: Life After Wealth and Money Motto both of which deal with and elaborate on his core concepts of devising strategies for individuals who want to create a meaningful personal legacy.
In Lombardo’s words: "Authentic Wealth involves seeing, understanding and releasing fears around money, and, at the same time, embracing a deeper understanding of who we are, why we are here, and how we create meaning through the choices we make every day"
Franco has founded Veritage, a company through which he consults with clients with a view towards a more holistic succession planning strategy. The concept of collaboration between a testator and his or her beneficiaries in realizing family objectives has also been explored by Ian Hull of our office and his concept of the Family Conference as a means of avoiding estate litigation.
David M. Smith
This year’s trusts and estates section of the Institute was held on Tuesday, February 3, 2009. The programme featured a broad and interesting selection of topics by experienced practitioners.
- Estate planning for ‘complex’ families
- Environmental liability issues for trustees, executors, attorneys and guardians
- Family law surprises
- Conflict of laws in cases of multi-jurisdictional families and their assets
- Developments in costs in estates and capacity litigation
- Trustee mistakes
- Rights of adult beneficiaries to receive support
- Capacity assessments
- Power of attorney pitfalls
The programme was informative and insightful and a great opportunity to meet and speak with leading estate practitioners. If you were unable to attend, the seminar materials are available from the Ontario Bar Association.
Have a great day!
Bianca La Neve
Listen to Deductions from Compensation.
This week on Hull on Estates and Succession Planning, Ian and Suzana finish up the discussion on the question of accounting by reviewing deductions from compensation and briefly sum up the procedure of the passing of accounts.
Listen to Declarations of Death Act
This week on Hull on Estates, Sean Graham and Rick Bickhram talk about the Declarations of Death Act. They discuss what happens when a person goes missing from a jurisdiction and some possible remedies.
Listen to Dependant Relief.
This week on Hull on Estates, Natalia Angelini and Craig Vander Zee discuss dependant relief and reference a variety of cases that utilized the Succession Law Reform Act.
Listen to Delegation in Investment Accounts
This week on Hull on Estate and Succession Planning, Ian and Suzana discuss delegation issues that arise when dealing with Investment Accounts and address a listeners question about the family cottage.