A recent survey commissioned by HomeEquity Bank suggests that the majority of older Canadians plan on staying in their homes as they age (otherwise known as aging in place) rather than downsizing and/or moving into assisted living or retirement communities. 93% of survey respondents aged 65 or older felt that it was important that they remain at their current home throughout retirement. 69% of them advised that their primary reason for wishing to remain at home was to maintain independence as they age.
The older respondents (75 years or older) advised that it was important to them that they remain in their current home to stay close to family, friends, and/or the community (51%) and that emotional attachment and memories were also contributing factors (40%).
In order to remain living at home as long as possible into retirement, advance planning in terms of finances and logistics may be necessary. A recent article appearing in Forbes suggests that the following steps, unrelated to financial planning, may be especially useful in facilitating successful aging in place:
- Maintaining social connections to avoid social isolation;
- Identifying who will help, whether family members, friends, or public services;
- Planning for the transition as needs change over time and identifying the resources and services available in the community;
- Preparing the home to accommodate increased needs (for example, by installing grab bars and a chair in the shower);
- Reviewing and updating the plan to age in place as may be necessary (due to a change in health, available support, or financial constraints).
Notwithstanding one’s plans to continue living at the family home, increasing longevity, a lack of liquidity, unrealistic expectations in terms of income sources after retirement, and the high cost (or local inaccessibility) of caregiving services may contribute to a decision to sell the home and relocate earlier than intended.
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A life-interest allows a testator to gift the ultimate benefit of real property, while providing in the interim for a loved one during their lifetime. For example, a woman may want to allow her common law spouse to live in her home for his lifetime but ultimately want her children from a previous relationship to receive it. In order to accomplish this, the woman would give her common law spouse a life-interest in the house; after his death, the house would belong to her children, the ultimate beneficiaries. The person with the life-interest is called the life-tenant; the ultimate beneficiaries are known as the remaindermen.
While this approach allows a testator some control of their property after death, it can raise disputes regarding who is responsible for paying certain expenses associated with the real property during the lifetime of the life-tenant.
The general rule – as noted in Widdifield on Executors and Trustees, 6th ed, and demonstrated in Re Goodfriend Estate,  OJ No 4291, 4 ETR (3d) 10 at
para 22 – is that “ordinary outgoings of a recurring nature” are the responsibility of the life-tenant. But any expenses that are not ordinary outgoings (i.e. capital expenses) are to be borne by the real estate itself and therefore at the expense of the remaindermen. Both rules are subject to contrary intentions expressed in the testator’s will.
Ordinary outgoings include: heat and hydro, taxes and interest on mortgage debt (but not the principal). In the above example, the common law spouse would be responsible for these expenses. Capital expenses, which are to be borne by the remaindermen, include the following: upkeep/repairs (such as the repair of a roof), expenses of legal proceedings (unless legal proceedings are for the life-tenant’s sole benefit), trustee’s costs and expenses, appointment of new trustees and investment advice.
However, as mentioned above, a testator can express a contrary intention. A testator may direct that ordinary outgoings of a recurring nature be paid out of the property or that capital expenses be paid by the life-tenant. A court will generally enforce the intentions of the testator if those intentions are clear or can be inferred from a reading of the will as a whole.
When a testator considers leaving a life-interest in a piece of real property, it is important to address the issue of payment of various expenses associated with the property in order to avoid conflicts between the life-tenant and the remaindermen.
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Yesterday, I blogged on a case that considered whether a cottage could be considered a second “matrimonial home” for equalization purposes under the Family Law Act. Today, I would like to consider a case that addresses whether a home that was vacated by a claimant prior to the spouse’s death could be considered to be a “matrimonial home”.
In Brash v. Zyma, 2013 ONSC 2800 (CanLII), the 90 year old widow vacated the home and moved into an assisted care facility as a result of her medical condition. Her husband remained in their home. The husband subsequently died. The surviving spouse commenced an equalization claim under the Family Law Act. The husband’s estate argued that the home was not a “matrimonial home” at the time of death, and therefore the value at the date of marriage should be deducted from the husband’s NFP.
The court considered the wording of s. 18(1) of the Family Law Act, and the question of whether the fact that the spouse was not residing at the property on the date of death impacted on her claim for equalization.
Section 18(1) reads: “Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home.”
The court had to consider whether, at the time of “separation”, the property was ordinarily occupied by the wife and her spouse. The court noted an earlier decision of Gray v. Brusby, 56 R.F.L. (6th) 165, where Greer J. stated that “there are many cases where only one of the spouses remains in the home, either on consent of the parties or under court Order. In those cases, the matrimonial home remains such for NFP purposes.” The court went on to observe that physical separation does not equate to a separation of the parties. Here, the parties never intended to separate, or ceased to be married, or ceased to be a couple, or commenced living their lives without the other.
As the widow ceased to reside in the matrimonial home as a result of her deteriorating medical condition, and not by reason of any intention on her part, the court concluded that the home was “ordinarily occupied” by her on the date of death, and thus was a matrimonial home, and the value of the home at the date of marriage could not be deducted in the equalization calculation.
Have a great weekend.
At a recent Trusts and Estates Brown Bag Lunch (held on the third Tuesday of most months at various locations: see the OBA web page, here), we discussed the case of Egan v. Burton, 2013 ONSC 3063 (CanLII).
There, in the context of a family law proceeding, the issue was whether a cottage was a matrimonial home, thereby affecting the spouses’ Net Family Property and equalization. If the cottage was a “matrimonial home”, then the husband, who owned the cottage, would not get the credit for the value of the cottage at the time of marriage.
The court held that a two-part test should be applied to determine whether the cottage was a “matrimonial home”. Firstly, was the cottage ordinarily used by the spouses, and secondly, was it used as a family residence.
Here, the court found that the first part of the test was met: the cottage was used by the spouses. However, with respect to the second part of the test, the court found that the wife never treated the cottage as a family residence. The wife treated the cottage differently than the family home. She made no contribution to the operation or maintenance of the cottage. She did not show the same interest in the cottage that she showed to the home. “If she had been asked prior to separation about her intention regarding the cottage, I am satisfied that she would have said that it was his cottage and his alone.” Here, unlike other cases where the cottage was found to be a matrimonial home, there was no evidence of an intention to treat the cottage as a family home.
In the estates context, in advancing or defending a claim for equalization under s. 5(2) of the Family Law Act, consideration should be given to not only the use of a secondary residence, but also the intention of the parties and how the second residence was treated by them.
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Recently, I was looking over some of the leading cases in life estates. One of the questions that stood out in my mind was whether or not a life estate has a quantifiable value.
Aho v. Kelly, was heard in British Columbia in 1998, but remains a leading Canadian case that is often referred to when the valuation of life estates are being considered.
In Aho v. Kelly the wife and two children of the deceased were each left a 1/3 interest in the matrimonial home of the deceased. The court confirmed that the wife of the Deceased also held a life interest in the same matrimonial home, as per the jurisprudence in British Columbia. The wife commenced an application seeking a court order that the property be sold and the proceeds be unequally divided amongst the three owners of the property.
The wife argued that the proceeds should be unequally divided because she was entitled to further compensation as she had to be paid out for her life interest.
The Court held that a life estate is a property interest that has “some value”. The Honourable Justice Bauman stated that at common law a life estate is alienable, and that upon its transfer to another party it becomes an “estate pur autre vie” (that other life being the original life tenant). The Court concluded that the life interest has a value capable of capitalization, and that this value should be paid out of the proceeds from the sale of the house.
Aho v. Kelly is not binding in Ontario, however it goes a very far way in establishing the framework by which the value of the life interest can be calculated.
Thank you for reading and have a great day,
Rick Bickhram – Click here for more information on Rick Bickhram.
BBC News recently commented on a study published in the Lancet journal that shows more than half the babies now born in the UK and other wealthy nations will live to be 100 years old. The data from the study indicates that these extra years would be spent with less serious disabilities for the elderly.
The researchers, from the Danish Aging Research Center, refer to “four ages of man”-child, adult, young old age and old old age. Surprisingly, there was little evidence that those who belonged in the old old age group were unhealthier that those in the young old age group likely because the frailest elderly died first leaving the more robust to survive past the age of 85. Danish and American studies show that about 30%-40% of those falling into the old old group live independently.
Of course, such a development requires countries to reform their health-care services, employment practices, and care services. In the U.K., with an election looming, the Tory party has promised a Home Protection Plan that would allow people at the age of 65 to make a one time payment plan of £8,000 pounds in exchange for free full-time residential care in later life. This proposed policy addresses the issue of the elderly having to sell their houses in exchange for funding care giving services.
A significant longer life expectancy requires careful retirement and estate planning. If this trend towards increased life expectancy continues, long standing assumptions will have to be altered.
Thanks for reading,
Diane Vieira – Click here for more inforamtion on Diane Vieira.
In a captivating article authored by Kent Sepkowitz, an infectious-disease specialist at a Cancer Center in New York City, he recounts the practical difficulties when someone dies at home – doing it yourself can be thorny and chaotic without the administrative help of Hospitals.
Specifically, when someone dies at home, a licensed professional must determine that the person is indeed dead. While this should be arranged in advance with the doctor, the timing may not ultimately work out. If no doctor is available, the other option is to call an ambulance…for a dead person. There are reportedly other annoyances as well, including:
· the death certificate must be completed in black ink (using only certain approved diagnoses);
· an undertaker needs to be selected; and
· law enforcement must be called to establish that no foul play occurred – not an investigation anyone wants to deal with after just losing a loved one.
Mr. Sepkowitz notes that, with the active support of hospice care, savings could come from facilitating the wishes of those who choose to die at home. He also considers what is likely the more important benefit of assuring tranquility and dignity for the person dying and their family.
Thanks for reading and have a great weekend!
Natalia Angelini – Click here for more information on Natalia Angelini.
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 Asset Particulars
This week on Hull on Estate and Succession Planning, Ian and Suzana talk about the importance of keeping track of asset details.