Tag: inter vivos gifting

28 Jul

Estates, Art and Valuations

Suzana Popovic-Montag Estate Planning Tags: , , , 0 Comments

This week, we thought it would be interesting to touch on the intersection of law and art in estate planning.

Artwork collections, whether they are comprised of a multitude of works or just one piece, are often a treasured possession of their owners, carrying deep emotional significance and/or high monetary value.

In estate planning, the sentimental and financial aspects of an art collection can become intertwined. Testators and beneficiaries may have competing views. As a simple example, there could be disagreement on whether the art should be sold or kept within the family. That being said, the valuation of artwork is an issue that may often fly under the radar.

The value of an artwork collection can have serious repercussions on the administration of an estate, especially where the estate lacks liquidity to address expenses, such as estate administration taxes.

However, the valuation of art may not always be a clear cut issue, as discussed by Mr. Ronald D. Spencer, Esq. in this article. Value can vary drastically over time, and even where the value remains stable, there may be significant challenges in finding buyers, especially where the collection is large or mostly one artist, potentially burdening the estate with tax liabilities and no certain financial benefit in exchange.

Understanding and articulating one’s wishes concerning their art collection is the first step in minimizing the impact of some of these issues. You will want to set out your intentions and wishes clearly in your will.

Avoiding uncertainty can be achieved through several means. The collection can be distributed through testamentary or inter vivos gifts where appropriate beneficiaries exist. It can be sold, which may carry advantages where the valuation and marketability of the collection is uncertain over time and a potential buyer has been found. Donation to a charitable organization is also an option, with many registered charities dedicated to art.

Whatever path one chooses, it is important to understand the implications from a tax and transactional perspective to ensure the most efficient execution of the testator’s intentions.

For those interested in further reading on art and law, our colleagues at Hull & Hull LLP have written some excellent blogs on the topic here and here.

Thank you for reading and have a great day!

Suzana Popovic-Montag & Raphael Leitz

21 Aug

The Dog Days and The Family Cottage

Suzana Popovic-Montag Estate Planning Tags: , , , 0 Comments

After our recent blog about estate matters in Ancient Rome, I was reminded that to the Ancient Greeks, the “dog days” happened when the star ‘Sirius‘ appeared to rise just before the sun in late July and August. The Greeks referred to these days, the hottest days of the year, and a period that could bring fever or even catastrophe, as The Dog Days of Summer.

Cottages, if not carefully considered in estate planning, can often bring fever and catastrophe, to families when their transfer is not properly planned in estate plans. Be it an unexpected tax liability, or unhappiness amongst siblings, cottages can cause great pains. 

Today, we look at two scenarios of cottage transfer, specifically the living gift (inter vivos) and the testamentary gift (after death).

Emotion and attachment to the family cottage can run deep and go well beyond the financial value of the property. As we discussed here in 2013, proper planning is essential to avoid the kind of strife that was examined in our blog post, “Perils in the Succession of the Family Cottage.”

One way to clearly establish your wishes and see them carried out is to gift the cottage while still alive. A “gift inter vivos” is Latin for a gift among the living and is a common way of transferring ownership, particularly if you no longer use or visit the cottage. A tax advisor is an important and necessary resource when considering such a gift, as the gift of a cottage can give rise to a tax burden on the giftor.

It’s important to remember that once the cottage gift is complete, it is, technically, no longer yours and the receiver of the gift, be it a child or sibling, would be free to do as they wished…. even sell it. So it’s not necessarily the right vehicle for transfer, as it were, for every family.

Another very common means of transfer is by Will.

You are free to name your heirs to the cottage as you so choose, but often when there is more than one child inheriting, for example, a trust becomes a very good way to address possible conflicts that might otherwise arise. It also insulates the property from potential legal disputes like bankruptcy or divorce.

A trust also becomes a good way to establish responsibility for the cottage and its expenses. The Will can stipulate that funds are set aside for maintenance or yearly upkeep and those funds can ease the burden on a beneficiary who may not be in the best financial position to inherit such a gift.

As the Dog Days of Summer roll on and another cottage season soon comes to a close, proper planning for that beloved family cottage can prevent the fever and catastrophe that the Greeks were so alive to each time that Dog Star came bounding across the sky.

Thanks for reading and enjoy the sun!

Suzana Popovic-Montag & Daniel Enright

05 Apr

Cheques and Balances: the Enforceability of Promises to Gift

Hull & Hull LLP Capacity, Estate & Trust, General Interest, Public Policy Tags: , , , , 0 Comments
The delivery of “signed, blank cheques cannot amount to a complete gift”, as the drawer retains an interest in the amount of the cheque until it is cashed.

In November 2017, my colleague, Sayuri Kagami, blogged about the Ontario Court of Appeal’s decision in Teixeira v Markgraf Estate, which considered the validity of a gift in the form of a cheque cashed after the death of the payor.  Today’s blog discusses similar facts in the court’s decision in Rubner v Bistricer. That is, whether pre-signed blank cheques cashed after the payor is declared incapable of managing property constitute either an enforceable promise to gift or, in the alternative, a valid inter vivos gift.

In the late 1960s, the patriarch of the Rubner family, Karl, purchased a 10% stake in a real estate development in Oakville known as the Lower Fourth Joint Venture.  Karl kept legal title to this interest in the name of his wife, Eda, with the intention that their three children, Marvin, Joseph, and Brenda, each receive beneficial ownership of a one-third share in the Lower Fourth interest.

Brenda subsequently renounced her share in the Lower Fourth interest to avoid triggering certain tax consequences.  Accordingly, her share reverted back to Eda, who then set up an account into which the income generated by Brenda’s former share would be deposited.  Notwithstanding that she had disclaimed her share, however, Brenda nonetheless wanted to retain the income that her share generated.  In 2014, Eda agreed to sign several blank cheques for the benefit of Brenda and her husband, allowing them to collect the income from Brenda’s former share without incurring the tax liability.

In November 2016, Eda was assessed as being incapable of managing property.  Shortly thereafter, Brenda’s husband filled in and deposited two of the blank cheques previously signed by Eda in order to prevent Brenda’s brothers from using those funds to pay for Eda’s expenses.

Brenda’s brothers subsequently commenced an application seeking, amongst other relief, a declaration that the funds withdrawn by Brenda after Eda became incapable were held on a resulting or constructive trust for Eda’s benefit.  Brenda took the position that Eda had intended that these funds be considered gifts for Brenda’s benefit. She claimed that at a family meeting in 2012 or 2013, Eda had specifically agreed to gift to Brenda all future income generated by Brenda’s former share in Lower Fourth.

The court was tasked with considering whether a purported promise of future gifts could constitute valid inter vivos gifts.  In order to establish a valid inter vivos gift, the recipient must show:

  • An intention to make a gift on the part of the donor, without consideration or expectation of remuneration;
  • An acceptance of the gift by the donee, and
  • A sufficient act of delivery or transfer of the property to complete the transaction.

The court held that the first step and third steps in this analysis could not be satisfied once Eda had been declared incapable of managing her property.  Eda was deemed to have been unable to formulate the necessary intention to make a gift with respect to the blank cheques.  Moreover, the court held that the delivery of “signed, blank cheques cannot amount to a complete gift”, as the drawer retains an interest in the amount of the cheque until it is cashed.  Once Eda became incapable of managing her property, the gift could no longer be perfected.  The blank cheques that were cashed after Eda was assessed as incapable of managing her property were held to be invalid, and Brenda was ordered to repay the amounts withdrawn.

Thanks for reading.

Garrett Horrocks

08 Aug

How Can We Add Clarity to Inter Vivos Gifting?

Natalia R. Angelini Estate Planning, Joint Accounts, Uncategorized Tags: , 0 Comments

I was surprised to learn of a recent statistic indicating that about half of all singles in Toronto under age 34 are living with their parents – I thought this was just the way we do things in my family! But seriously, if you are a parent longing to cut the ties that bind, or if you just want to help your adult child get a head-start in life, you have probably considered doing so by way of a gift or loan. To avoid any confusion or worse, litigation, it is important to document the transaction and record the intention.

If the intention is to loan, a loan agreement should be used. If, however, the intention is to gift, keep in mind that to have a valid gift there are three necessary elements: (i) intention to donate; (ii) acceptance by the donee; and (iii) sufficient act of delivery and transfer. The onus of proving that a gift is valid is on the recipient of the gift, who must show a clear and unmistakable intention by the donor to have voluntarily given the gift. In order to ensure legal clarity, using a deed of gift is ideal.

The benefit of using a deed of gift is that it can provide an answer to any challenges that others may have to the transfer in question, which we often see in situations of transfers of property (bank accounts, real property etc.) into the joint names of the parent and child. Otherwise, upon death, the gift is usually presumed to form part of the parent’s estate unless proven otherwise by the child.

Other potential benefits to using a deed of gift include increasing the chances of protecting the funds upon marital breakdown (e.g. if the deed of gift stipulates that the funds are for the child alone, and not the married couple, this may prevent the monies from forming part of the family assets). It can also assist an estate trustee to correctly apply a hotchpot clause (which often requires the executor to take inter vivos gifts into account when making an equal distribution amongst the beneficiaries) and distribute the assets as the testator intended.

Thanks for reading and have a great day,

Natalia R. Angelini

Other articles you might enjoy:

https://hullandhull.com/2017/02/can-delivery-gift-precede-intention/

https://hullandhull.com/2016/10/validity-inter-vivos-gift/

https://hullandhull.com/2015/10/mortis-causa-gifts/

You may also enjoy the July 7, 2017 interview of Nicole Ewing, a TD Wealth business succession advisor and tax and estate planner, which can be found on www.moneytalkgo.com.

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