Tag: life-estate

17 Mar

New Wills Needed With Later-in-Life Marriages

Ian Hull Estate Planning Tags: , , , , , , , 0 Comments

There are some important milestones in life when it is imperative for a person to update their will. A later-in-life second marriage certainly is one of them.

If your first marriage ended in divorce, the provisions in your will that refer to your spouse are automatically revoked, as provided by s. 17(2) of the Succession Law Reform Act. Your former spouse will no longer be your executor or trustee or even a beneficiary of your estate unless there is an explicit reference in your will to this.

Keep in mind the same is not true for beneficiary designations relating to assets, such as RRSPs, RRIFs, life insurance policies and pensions. Those will still flow to the individual named in those plans unless you take steps to name new beneficiaries.

If you are separated but not divorced, your will remains entirely valid upon death, in the absence of a separation agreement delineating a married spouse’s entitlement. Therefore, any bequests previously made by a spouse to a surviving spouse remain valid. This situation is not ideal either, since you want to avoid having assets flowing to a person when you are no longer involved with them.

A complicating factor with later-in-life marriages is that they can bring together children from previous relationships. From an estate-planning perspective, this can create complexities.

Perhaps the children from a first relationship resent a step-parent and feel that their step-siblings are now unfairly in line for the estate. Conversely, a step-parent may welcome a spouse’s child as their own or the couple may have a child of their own or adopt one. Where does that leave the other children from previous marriages from an estate distribution perspective?

Aside from the financial implications of having your family members squabble over your estate, there is an emotional component to consider. Children may feel slighted if they do not inherit what they consider to be their fair portion of the estate, even if the intention is that the surviving spouse, in turn, leaves assets to the children upon their death. This approach leaves room for uncertainty, which is the last thing you want to create when drawing up an estate plan.

A common practice for estate planning when it comes to second marriages is to provide a “life estate” to the surviving spouse and a “gift over” to the testator’s children. If the father were to die in this scenario, the matrimonial home and all of his money would be held in trust for his widow for life. She could then make use of these assets but would not have the right to gift them to beneficiaries of her own estate, as the assets would be given to his children upon her death.

Almost any blended-family situation creates tension that can explode into estate litigation if the will is not carefully drafted to address the family’s circumstances. It is important to be clear about your wishes with the lawyer revising your estate plan, taking into account how everyone in your blended family will react to the arrangement.

To sum up, it is crucial to seek the advice of legal counsel about wills before entering into a late-life marriage. Those that do will discover estate planning will be much different than with a first marriage when they had fewer assets and beneficiaries.

Thanks for reading … have a great day,

Ian Hull

13 Jul

Life-Tenants, Remaindermen and Home Expenses

Suzana Popovic-Montag Common Law Spouses, Estate Planning Tags: , , , , 0 Comments

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, [2003] OJ No 4291, 4 ETR (3d) 10 at
POQ7B631M3para 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.

Thank you for reading.

Suzana Popovic-Montag

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