Tag: Inheritance

19 Mar

Two times a cousin, two times the inheritance?

Stuart Clark Estate & Trust Tags: , , , , , , , , , , , 0 Comments

When I was a kid I loved the song “I’m my own grandpa” from the Muppets. For those of you unlucky enough not to have grown up with such a lyrical masterpiece, the song tells the tale of someone who, as a result of his father marrying his wife’s daughter from a previous relationship, becomes his own grandfather. It is a masterpiece up there with the likes of any of Beethoven’s symphonies.

The song recently came flooding back into my memory when a question was posed to me regarding the inheritance rights of first cousins on an intestacy who, as a result of a quirk in the marriage patterns of their relatives, were first cousins to the deceased both on their maternal and paternal sides. The question which followed is, if you are a first cousin of an individual on both sides of the family, does that mean that you are entitled to double the inheritance in circumstances in which the estate is to be distributed to the first cousins on an intestacy?

The “double cousining”, if it can be called that, occurred as a result of one of the deceased’s father’s brothers marrying one of the deceased’s mother’s sisters. The children born to such a couple are first cousins of the deceased both on their maternal and paternal sides.

The issue of whether a “double cousin” receives twice the inheritance on an intestacy to those cousins unlucky enough to have only been related to the deceased once was dealt with by the court in Re Adams, (1903) 6 O.L.R. 697 (Ont. H.C.). In ultimately concluding that the “double cousins” do not receive double the inheritance, and that all cousins receive the same amount, Justice Meredith states the following:

Under the Devolution of Estates Act all the property in question is to be distributed as personal property is now distributable. And among collateral relatives in the same degree of kinship it is so distributable equally. They take in their own right, not by way of representation. And there is no question of quantity or quality of blood; those of the half-blood take equally with those of whole blood; and those of the double blood — if I may so name a relationship, in the same degree, on the part of both father and mother — take no more, for all are akin to the intestate, and all in the same degree of kinship.” [emphasis added]

Re Adams suggests that being a “double cousin” does not result in double the inheritance, and that a cousin related to the deceased both on the maternal and paternal sides receives the same as if they had only been related to the deceased once. Those of you looking to explore unorthodox family trees in a goal to maximize potential distributions to you on an intestacy will have to look elsewhere.

Thank you for reading.

Stuart Clark

26 Feb

An Update on U.S. Inheritance Tax

Nick Esterbauer Estate Planning, In the News, Wills Tags: , , , , , , , , , 0 Comments

A recent article featured in the New York Times highlights the need to reconsider estate planning strategies in light of developments in the law of inheritance taxation.

As our blog has previously reported, during his presidential campaign, Donald Trump vowed to eliminate inheritance taxes, then payable on the value of American estates exceeding $5.45 million, altogether.  To the disappointment of many wealthy citizens of the United States, President Trump has not carried out his promise and, while the exemption has been increased, inheritance tax remains payable in the United States in respect of estates of a size greater than $10 million.

The New York Times reports that these changes to the exemption in respect of inheritance taxation are temporary in nature and that the measures currently in effect will expire in 2026.  At that time, Americans (and individuals who hold property of significant value in the United States) may need to amend their estate plans with a view to tax efficiency.

Gifts, including testamentary gifts, are not typically subject to taxation in Canada.  While there is no Canadian estate or inheritance tax, assets that are distributed in accordance with a Canadian Last Will and Testament or Codicil that is admitted to probate will be subject to an estate administration tax (also known as “probate fees”).  Many of our readers will already be aware of the relatively new requirement (as of 2015) that estate trustees in Ontario file an Estate Information Return with the Ontario Ministry of Finance within 90 days of the processing of a probate application.  In some circumstances, details regarding both traditional estate assets and assets typically considered to pass outside of the estate are required, notwithstanding that the latter category may nevertheless be exempt from probate fees.  Some anticipate that the law in Ontario may at some point be amended to require further details regarding assets passing outside of an estate in Estate Information Returns and/or the payment of estate administration tax or other fees in respect of these assets.  Like variations in the exemptions to American inheritance tax, changes to estate administration taxes may in the future necessitate amendments to existing estate plans with a view to limiting the taxes payable on the transfer of wealth.

Thank you for reading,

Nick Esterbauer

 

Related blog posts that may be of interest:

30 Aug

Is there an inheritance you’re missing out on? Here’s why it’s not likely

Ian Hull Beneficiary Designations, Estate & Trust, Estate Planning, Trustees, Uncategorized, Wills Tags: , , , , , 0 Comments

While we don’t wish ill of anyone, one little dream that many people share is the long lost inheritance.

You have a distant aunt who lived happily in Europe until her death five years ago at age 100. You didn’t know you had a distant aunt until you travelled to Europe and visited the village that you knew your family was from. People in the village started talking: “maybe this is Giovanni” and the next thing you know, you’re being whisked to the village lawyer and told that you had a distant aunt who died five years ago and left you 100,000 euros. And the money’s been waiting for you all this time!

Such a win-win scenario – an aunt with a happy life, a potful of money to take home, and an introduction to relatives you barely knew you had. Could it happen to you?

Not likely, especially in today’s digital age. While any one of us could get an inheritance from someone who secretly names us in their will – a scenario that Euro currency bills, inheritance happens more frequently than you might think – if you are named in a will, it’s likely that you’ll find out soon after the person dies.

The reason is twofold: first, estate trustees (executors) have a duty to contact all beneficiaries, and they must make reasonable efforts to find unknown or missing heirs. So, the search is on quickly to find you if you are a beneficiary. You can read more about the duty of estate trustees to track beneficiaries here.

Second, in this digital age, it’s becoming less and less likely that you cannot be found, with search engines, social media and family history all available at the touch of a button. The internet has made those “so you’re Giovanni” moments few and far between.

That said, there may be situations where a somewhat distant family member has died and you think you might be a beneficiary. You wait for a month or two, but hear nothing. In addition, there have been more than a few family disagreements over the years, so you’re worried about your rights as a potential beneficiary and want to get information about the will.

In Ontario, this provincial government site provides a good overview of the estate settlement process, and where you can get information about a will. And this article by Newfoundland lawyer Lynne Butler provides some very practical steps that you can take to gain access to a will if it has not yet been made public.

Thank you for reading!
Ian Hull

10 Apr

What is a Disclaimer?

Ian Hull Beneficiary Designations, Estate & Trust, Estate Planning, Executors and Trustees, General Interest, Trustees, Wills Tags: , , , , , , , 0 Comments

Receiving an inheritance under a will is a gift, and there is no obligation, as a beneficiary, to accept it. It is possible for a beneficiary to waive their right, or “disclaim” their interest, to a gift under a will.

As established in Biderman v Canada, 2000 CanLii 14987 (FCA):

A disclaimer is the act by which a person refuses to accept an estate which has been conveyed or an interest which has been bequeathed to him or her. Such disclaimer can be made at any time before the beneficiary has derived benefits from the assets. It requires no particular form and may even be evidenced by conduct.

Furthermore, Biderman v Canada establishes that “there is no entitlement to an estate until it is opened since a testamentary gift can always be revoked until death. Once made, the disclaimer is retroactive to the date of death of the deceased.”

There is no prescribed form for drafting or implementing a disclaimer of inheritance. Generally, the waiver should be a written agreement, acknowledging the waiver of inheritance (preferably drafted by a lawyer). The disclaiming agreement should be signed by the beneficiary, and witnessed.

It is also important to ensure that the beneficiary waiving their right to inheritance was not improperly or unduly influenced to do.

The disclaimer, once signed, does not need to be filed with the court. It is important that the lawyer who acts for the estate or the estate trustee keeps the waiver.

If an inheritance is disclaimed, the gift will be deemed void and fall into the residue of the estate, which will then be distributed according to the deceased’s will, or pursuant to the intestacy provisions of the Succession Law Reform Act. When disclaiming a gift, the beneficiary does not have any control over who receives their part of the inheritance.

A beneficiary can not disclaim part of a gift; once you disclaim part of your interest in an inheritance, you disclaim all of it. In Re Skinner, 1970 CanLii 360, the Ontario Supreme Court established that “the law is clear that, where there is a single undivided gift, the donee must take the whole or disclaim the whole: he cannot disclaim part.”

Thanks for reading,

Ian M. Hull

Other Articles You Might Be Interested In
I Don’t Want That Gift! 

Hull on Estates #379 – Disclaimers of gifts under will

Testamentary Gifts of Personal Property: Avoiding “Sticky” Situations

10 Jan

Hull on Estates #501 – Can a foster child inherit from her foster parent’s estate?

Hull & Hull LLP Hull on Estate and Succession Planning, Hull on Estates, Podcasts, PODCASTS / TRANSCRIBED, Show Notes, Show Notes Tags: , , , , , 0 Comments

This week on Hull on Estates, David Smith and Laura Betts discuss a recent decision of the Queen’s Bench of Alberta, Matras Estate, 2016 ABQB 728

 Should you have any questions, please email us at webmaster@hullandhull.com or leave a comment on our blog.

Click here for more information on David Smith.

Click here for more information on Laura Betts.

16 Dec

Are Embryos Entitled To An Inheritance?

Laura Betts Estate & Trust, Estate Planning, In the News, Litigation, Trustees Tags: , , , , , 0 Comments

A rise in the use of assisted reproductive technologies has resulted in many novel legal issues.

It would appear that Modern Family actress, Sofia Vergara, is embroiled in the most recent case to push the boundaries in this area.

According to a recent article published by Global News, Vergara is apparently being sued by two frozen embryos, which she created with her former partner, Nick Loeb in 2013.

Following their split in 2014, Nick tried, unsuccessfully, to sue Vergara for custody of the embryos.

A new lawsuit recently commenced in Louisiana,  claims the embryos, which have been named Isabella and Emma, are being deprived of their inheritance from a trust by not being born.

The claim which is being advanced by the Trustee of the trust, is seeking that the embryos be transferred to Nick so that they can be born and receive their inheritance.

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Whether an embryo has a right to inherit is a question that has concerned estate practitioners for some time, particularly, in circumstances where an embryo is implanted and born after the donor’s death.

In Ontario, section 47(9) of the Succession Law Reform Act provides that descendants and relatives of the deceased conceived before and born alive after the death of the deceased shall inherit as if they had been born in the lifetime of the deceased and had survived the deceased. However, there is no legislation in Ontario which explicitly provides or denies children conceived after death the status of a child of the deceased. As such, without proper planning, children conceived and born through the use of assisted reproductive technologies may be unintentionally disinherited.

This case poses a novel argument which is clearly relevant to estate practitioners. It will be interesting to see how it is decided.

Thank you for reading.

Laura Betts

 

Other articles which may be of interest to you:

20 Sep

U.S. Inheritance Tax Deductions for Surviving Spouses

Nick Esterbauer Estate & Trust, In the News, Wills Tags: , , , , , , , 0 Comments

As we have previously discussed on our blog, the assets left behind by individuals who live and die in a number of jurisdictions other than Canada may be subject to an inheritance tax.  For example, in the United States, inheritance tax is payable on the value of assets beyond an initial $5.45 million exemption.

Inheritance tax may not be payable on all assets inherited by one’s surviving family members.  Tax-avoidance vehicles that are well known in Canada, such as joint ownership, inter vivos gifts, and trusts can be used in certain circumstances to limit one’s exposure to inheritance tax.  However, fewer of our readers may be aware that a limitation may also apply to inheritance tax payments in respect of assets being passed on to a surviving spouse.

Sub-section 2056(a) of the U.S. Internal Revenue Code specifies as follows:

For purposes of the tax imposed by section 2001, the value of the taxable estate shall, except as limited by subsection (b), be determined by deducting from the value of the gross estate an amount equal to the value of any interest in property which passes or has passed from the decedent to his surviving spouse, but only to the extent that such interest is included in determining the value of the gross estate.

Inheritance Tax
“In the United States, inheritance tax is payable on the value of assets beyond an initial $5.45 million exemption.”

The application of subsection 2056(a) would typically result in the exclusion of assets passing to a surviving spouse from the calculation of inheritance tax.  However, there are certain limitations to the marital deduction, which are described under subsection 2056(b) of the legislation.  For example, the marital deduction may not apply if the surviving spouse’s entitlement in an asset is limited to a life interest.

Litigation recently emerged in respect of the estate of author Tom Clancy, who altered his estate plan by executing a codicil that had the effect of qualifying the share of his estate being left for his second wife and her child for the marital deduction.  Clancy’s will established three trusts: (1) one for the benefit of his second wife, (2) one for the benefit of his second wife and their child together, and (3) one for the children of his first marriage.  The children from Clancy’s first marriage argued that, notwithstanding the terms of the codicil, the marital deduction should not apply to funds held in trust for both Clancy’s wife and their child.  If the second trust had not qualified for the marital deduction, the approximate $16 million in inheritance tax would have been deemed payable out of the assets of both the second and third trust, rather than exclusively borne out by the third trust.  The result would have increased the total inheritance taxes paid (from approximately $12 million), but reduced the tax burden to be paid out of the share left for Clancy’s children from his first marriage.  The matter proceeded to court in Maryland and it was determined (and upheld on appeal) that the codicil did, in fact, have the effect of qualifying the second trust for the marital deduction.

Thank you for reading.

Nick Esterbauer

05 Jul

How Can Life Insurance Supplement an Estate Plan?

Nick Esterbauer Beneficiary Designations, Elder Law Insurance Issues, Estate Planning Tags: , , , , , 0 Comments

Life insurance can be a useful tool in estate planning to offset tax liabilities and supplement the assets that may otherwise be available to leave to a surviving spouse or other family members.

An article by Michael Grob, featured in the most recent issue of the Step Journal, highlights the potential of life insurance in estate planning, with a focus on the utility of insurance within the context of high net worth individuals who have assets in multiple jurisdictions.

business, document, proposal, marketing, pen, office, desk, notepadLast year, the Canadian Life and Health Insurance Association released statistics from 2014, which suggests that the size of Canadian life insurance policies continues to grow, despite prolonged low interest rates and slower than average investment growth.  During 2014, the value of life and health insurance policies increased by 11.5% to $721.2 billion.  While these figures suggest that the use of life insurance in estate planning is increasing, Mr. Grob states that it is less commonly used to its potential in the cross-border context.

There are many reasons why life insurance policies are such an effective estate planning tool, and why they may be especially suitable when cross-border issues may also present themselves.  These reasons, which are highlighted within Mr. Grob’s article, can be summarized as follows:

  • Availability of liquid funds available for use by an estate upon death, including for the satisfaction of foreign taxes and/or inheritance tax, where there may otherwise be complications in obtaining probate that will delay the payment of these estate liabilities;
  • Tax concessions generally associated with life insurance (in Canada, life insurance proceeds are not typically taxable, nor are they normally subject to probate fees when a designated beneficiary other than the estate is identified);
  • Accessibility to life insurance in other jurisdictions, even if local access is limited, through international providers;
  • Variety of different options regarding policies and their terms; and
  • Equalization of inheritances left to survivors; for example, in circumstances in which a business will be left to one child and the testator wishes to establish a life insurance policy to benefit the other(s) or to provide a corporation with sufficient funds to buyout the business interests left to one or more shareholders.

With all of the benefits associated with the use of life insurance policies, it is important to consider the potential of life insurance in achieving clients’ objectives when assisting them with estate planning.

Thank you for reading.

Nick Esterbauer

11 Sep

Inheriting from Long-Lost Relatives – Part 3

Nick Esterbauer Estate & Trust Tags: , , , , 0 Comments

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.

Nick Esterbauer

10 Sep

Inheriting from Long-Lost Relatives – Part 2

Nick Esterbauer Estate & Trust Tags: , , , , , 0 Comments

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.

Nick Esterbauer

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