Within the next twenty years, Canada’s baby boomers are in line to inherit a substantial fortune, which will represent the largest transfer of wealth from one generation to the next.
In an article written by Jennifer Power Scott and published in Canadian Living, Ms. Scott discusses the bittersweet bonanza that many heirs face and cautions the impulsive spender: "There are a lot of people in this world who might go out and blow the whole thing in a week, and that’s not appropriate. Unless you’re well-heeled to begin with, flushing the funds into trips to Las Vegas, sexy cars and plush home theatres probably isn’t the smart way to go."
In her article, Ms. Scott stresses the importance of carefully planning what to do with your inheritance, so that your inheritance can turn into a gift that lasts. Ms. Scott urges those who have received a windfall inheritance to:
- Take a breath. Put your inheritance somewhere safe that earns a good guaranteed rate of interest for a few months while you think things through
- Once you are ready to make a decision, speak to a certified financial planner
- Consider your option, such as satisfying outstanding debts, investing into an RESP for your children, or an RRSP or RRIF for yourself
Essentially Ms. Scott’s article forces her readers to consider their long-term goals as opposed to their short-term goals. "It pays to step back a little bit. Some people will immediately say, I’ve got this money, I don’t deserve it all, and maybe I should start helping out my kids right away. But they need to make sure that their financial future is properly secured before they do that."
Thank you for reading, and have a great day,
Rick Bickhram – Click here for more information on Rick Bickhram.
As most of us return to our offices from a long weekend, I would like to share with you an interesting case, which I read over the weekend and deals with an Application to declare a family member unworthy to inherit. S.R. (Succession de), 2008 QCCS 4015, is a decision released by the Quebec Superior Court.
In, S.R. (Succession de), the Deceased was survived by his spouse and four children. The Deceased was a savvy businessman who, during his lifetime, was quite successful. In 1995, the Deceased asked a notary to prepare a Will. A draft Will was sent to the Deceased for his review but it appears that he never executed the Will. In 2000, the Deceased was diagnosed with cancer and subsequently died in 2003.
After the Deceased died, the children looked for their father’s Will in the home and at the Deceased’s office with no success. We are given to understand that all of the children, searched, under the bed, every closet, every brief case belonging to the Deceased, but were unable to recover a Will.
One of the daughters prepared a proposal requesting the siblings to acknowledge that the Deceased promised to transfer a certain property to her. This would have the effect of increasing her entitlement under the Deceased’s estate. Her siblings refused to sign the acknowledgement, which led to the ensuing dispute. The disgruntled daughter, subsequently informed everyone that she had in fact, located a Will of the Deceased in an old briefcase, which was allegedly in the bedroom closet of the Deceased’s residence.
The discovered Will was similar to the draft Will prepared earlier, except that it included two additional provisions which favoured the disgruntled daughter, in the amount of $2.4 million dollars and was apparently executed by two witnesses from New York.
The disgruntled daughter tried to probate this Will, but it was contested by her siblings and it was ultimately ruled that the Will could not be probated by the Honourable Justice Gagnon. Justice Gagnon held that there were all the sorts of question marks surrounding the validity and execution of the Will.
After the Application for probate was refused, the disgruntled daughter then produced a document which was a blank cheque allegedly signed by the Deceased and which purported to give the disgruntled daughter her share in a building that she coveted and various other monies for her home. The siblings refused to admit the authenticity of the blank cheque and commenced proceedings against the disgruntled daughter to have her declared unworthy to inherit under the Deceased’s estate.
Under the section 621 of the Civil Code of Quebec, it states that a person “may be declared unworthy of inheriting where a person is guilty of cruelty towards the deceased, and where the person has concealed, altered or destroyed in bad faith the Will of the deceased, or a person who has hindered the testator in the writing, amending or revoking of their Will.”
In relying on this provision, the children advocated that the disgruntled should be precluded from inheriting because she concealed and altered, in bad faith the alleged Will of the Deceased.
The court held that the disgruntled daughter had likely altered the Deceased’s Will, had taken the draft prepared by the notary and added some typewritten additions that benefited her to the detriment of her siblings and mother. The court further held that the disgruntled daughter likely had taken the blank cheque from the Deceased’s home and also forged that after his death.
Accordingly, the disgruntled daughter was declared unworthy to inherit and her claims against the estate were dismissed.
An interesting point, in Ontario we do not have any similar case law or legislation that would actually allow someone to commence a proceeding, seeking to have someone else precluded from receiving their entitlement absent criminal activity such as murder.
Have a great day,
Rick Bickhram – Click here for more information on Rick Bickhram.
It’s Friday in late April. The May long weekend and all that cottage fuss is just around the corner. (I like the cottage, but understandably a lot of people choose the backyard.)
In Ontario, we do not have inheritance tax like they do elsewhere, including the United Kingdom. In some cases, the several-generation home has to be sold to cover a £14,000 tax bill or, in one instance, a painting donated in lieu of inheritance tax of £700,000.
To be certain, we have taxes here. At death, often there is a deemed disposition of property unless steps have been taken in advance. An article from last year provides some thoughts on how one might plan to avoid the situation where the capital gains tax cripples an estate or the next generation.
Apparently, and maybe not surprisingly, the cottage market may be down by about 20% this season. Good news for buyers. Maybe it is also good news for those who are looking at estate planning this year.
If the goal is to keep a cottage in the family, relative to the previous few years it might be an opportunity to trigger a disposition by transferring the property this season and, presumably, incurring a lower capital gain. Each situation requires specific tax advice.
The economy is lousy but it might be a chance to avoid financial strain and family tension for the next generation.
Have a safe weekend, wherever you spend it.
Listen to Talking About Wealth and Personal Finance.
This week on Hull on Estates Suzanna and Ian review the pullout in March 18th’s New York Times and talk about the importance of dialog before and after death.
Listen to "Protecting Your Children’s Inheritance"
Read the transcribed version of "Protecting Your Children’s Inheritance"
During Hull on Estate and Succession Planning Podcast #49, Suzana Popovic-Montag and Jordan Atin discuss considerations and techniques to ensure the proper use of inheritances. Some of these techniques include staggered inheritances, incentive trusts and charitable foundations.