In a recent recording, “Money in the Grave”, Drake asks that he be buried with his money. He sings:
In the next life, I’m tryna stay paid
When I die, put my money in the grave.
Several issues come to mind.
First, Drake’s wish to be buried with his money is not binding on his estate trustee unless it is in a properly executed testamentary instrument.
Second, even if the money is buried with Drake, his estate trustee may have to pay Estate Administration Tax on the buried money if the will is to be probated. Drake may want to consider multiple wills. (Well-considered primary and secondary wills might also avoid the payment of Estate Administration Tax on the value of all of his chains, and other bling.)
Third, the act of destroying money is illegal in many jurisdictions. In Canada, under the Currency Act, it is illegal to “melt down, break up or use otherwise than as currency any coin that is legal tender in Canada”. The Criminal Code creates an offence for defacing a current coin. There is no similar prohibition on defacing or destroying paper money. However, in the US, burning money or any other act that renders a note “unfit to be reissued” is illegal. Arguably, the act of burying money is not the same as destroying money.
(Read Stuart Clark’s blog, here, about a woman who cut up the equivalent of $1.4m CDN to disinherit her heirs.)
Fourth, Drake’s estate trustee might be accused of waste. He or she may want to seek the opinion, advice or direction of the court before they “Bury my [expletive] Chase Bank.”
More on point, in the US decision of Eyerman v. Mercantile Trust Co., 524 S.w.2d 210 (1975), the testator directed that her house be burned down, the lot sold, and the proceeds added to the residue of her estate. A neighbour wasn’t too crazy about the idea, and applied for an injunction. The injunction was, at first, denied. On appeal, the court held that the direction in the will was against public policy.
The court in Eyerman cited the decision of In re Scott’s Will, 88 Minn. 386 (1903). There, the testator directed his estate trustee to destroy money belonging to the estate. The court there found that the clause was void. The court also quoted from Restatement, Second, Trusts, 124, at 267.
“Although a person may deal capriciously with his own property, his self interest ordinarily will restrain him from doing so. Where an attempt is made to confer such a power upon a person who is given no other interest in the property, there is no such restraint and it is against public policy to allow him to exercise the power if the purpose is merely capricious.”
In Restatement, an example is given of a bequest from A’s estate to B in trust to throw the money into the sea. (Query: more lyrical or less lyrical than Drake’s direction?) “B holds the money upon a resulting trust for the estate of A and is liable to the estate of A if he throws the money into the sea.”
In another, earlier Drake ditty, “Crew Love”, Drake boasted about spending $50K on a vacation, and needing restaurant reservations for twenty. “I never really been one for the preservation of money. Much rather spend it all while I’m breathing.” It seems that he now has so much money that he may not be able to spend it all while living, and he is turning his thoughts to succession planning. He may want to get some professional estate planning advice.
Thank you for reading.
I noticed a rip in a twenty dollar bank note in my wallet the other day. I was struck by the rip because Canadian bank notes are now made with a polymer that is meant to last longer than paper bank notes. The idea that money can be accidentally damaged is a potential issue for estate trustees who are charged with the responsibility of gathering and preserving the assets of an estate until it’s distributed to the beneficiaries.
Luckily enough, The Bank of Canada has a policy on contaminated or mutilated bank notes. Under certain circumstances, The Bank of Canada will redeem bank notes that have become contaminated or mutilated beyond normal wear and tear and issue the claimant with replacement bank notes. The Bank of Canada will carefully scrutinize each note and the circumstances of each claim in order to determine whether the claim is legitimate.
According to The Bank of Canada, a claim will be rejected if it is their opinion that:
- the identity of the claimant cannot be substantiated;
- the notes are counterfeit or there are reasons to believe that the notes were acquired or are connected to money laundering or other criminal acts;
- there has been an attempt to defraud the Bank or there exists contradictory or improbable explanations about significant aspects of the claim, such as how the notes were damaged or how they came into possession of the claimant;
- any of the security features of the notes have been removed or altered or where the notes have otherwise been altered or damaged deliberately or in a systematic fashion, including dyed or chemically washed or treated, by a process that could be reasonably expected to have the effect of altering them.
While this particular problem might seem unlikely to occur, our blog has covered past instances where cash was found to have been destroyed. There is also a very thorough wikiHow on how to replace damaged currency in the U.S. with some practical tips for worldwide application, such as tips on how to package and deliver the damaged currency to the appropriate authorities.
Thanks for reading!
It never stops. Another year on the calendar turns, and we receive another jolting reminder of the years passing. It’s not just loved ones that we lose over time – our way of life is also constantly under threat.
This isn’t necessarily a bad thing. While we may miss some aspects of life in a nostalgic way (milk being delivered to your milk box twice a week), there are other aspects that we’re happy to leave behind.
So, what will we soon lose? Here are five things that could well (depending on your age) disappear in your lifetime.
Sweden may be the canary in the coal mine on this one. Half of the country’s retailers believe that Sweden will stop accepting cash by 2025. This has sparked calls for an e-currency and for actions needed to deal with this change (like what to do when electronic systems fail, or the power goes out). Read about it here.
It’s happening in Canada too of course. The thought of paying for a cup of coffee with a credit or debit card 10 years ago was laughable. Now it’s the norm. Bye-bye bank notes.
This is a change we all want – a cure for, or an end to, cancer. And there’s a new hope – the planting of immune cells from strangers into cancer patients to create the ultimate cancer-fighting treatment. Fingers crossed everyone. https://nationalpost.com/health/health-and-wellness/cancer-may-no-longer-be-deadly-in-future-say-british-researchers-announcing-breakthrough
- Car accidents
Okay, self-driving cars won’t eliminate traffic accidents completely – no technology is perfect or immune from outside attack. But just as traffic deaths in Canada have been cut in half since the 1970s due to safety measures such as seat belts and car seats, the move to the “auto-auto” will dramatically improve road safety. https://www.theatlantic.com/technology/archive/2015/09/self-driving-cars-could-save-300000-lives-per-decade-in-america/407956/
- Print newspapers
Yes, this is an obvious one – print newspaper subscribers are a dying breed. But what may also be reduced is the relevance and reach of news organizations in general, even those that have moved online. While many news organizations will survive post-print, this fascinating article explains how their influence could dramatically decline, even with a robust online presence. http://www.niemanlab.org/2018/09/what-will-happen-when-newspapers-kill-print-and-go-online-only-most-of-that-print-audience-will-just-disappear/
- Farm-raised meat
2018 saw the world’s first steak grown in a lab. There’s still work to be done on taste, texture and economic models, but real meat grown from cells is a new reality. There’s a good chance that “farm animals raised for slaughter” will seem as horrific to our grandchildren as medieval torture and gladiator death battles seem to us today. https://www.theguardian.com/environment/2018/dec/14/worlds-first-lab-grown-beef-steak-revealed-but-the-taste-needs-work
Thanks for reading!
About six months ago I blogged on aspects of wire transfers of money to beneficiaries in foreign jurisdictions. These transfers require some attention to issues like the applicability of the Harmonized Sales Tax (HST) or of Section 116 of the Income Tax Act to any portion of the inheritance and trustee or professional fees. As well, requirements for the SWIFT code or IBAN code number have to be fulfilled. This blog is an update to advise that in my experience there has been a noticeable change in the last couple of months involving bank wire transfers.
Banks have significantly increased their compliance, monitoring, and oversight practices. Transfers that were routinely completed in a couple of days in the past can now, in some cases, take weeks to complete. Clearly, additional procedures aimed at preventing money laundering and also designed to enforce sanctions against Russian and other entities are having an effect. These procedures have resulted in inconvenience and delay to those involved and it is best to be aware of the possibility of these delays and how they might impact one’s practice.
Thanks for reading,
It is not uncommon for Canadian estate trustees to make distributions to beneficiaries living in the U.S. In doing so, the U.S. Customs and Border Patrol (the “US CBP“) could be involved in a myriad of ways.
A recent story from CBC News is an example of what can go wrong if estate trustees are not aware of their US reporting obligations. An estate trustee in Ottawa mailed a bank draft worth $500,000.00 to a beneficiary in the U.S. U.S. border officials seized the bank draft because it was mailed without filing the appropriate customs declaration form. Almost a year later, the bank draft is still held at the border while the unfortunate beneficiary is sick and in need of money for his medical bills.
According to the U.S. Customs and Border Protection website, any time money exceeding $10,000.00 is sent to the U.S. from a foreign country, the sender is required to file a “Report of International Transportation of Currency or Monetary Instructions” (FinCEN Form 105) with the CBP before the money is sent. This applies regardless of whether the sender is acting personally or on behalf of another legal entity. This applies to money in the form of coins, currency notes, travellers checks, money orders, etc. This also applies to money sent by mail, courier, personal delivery, etc.
However, this particular US reporting requirement does not apply where the method of transfer does not involve physically transporting money over the border, such as wire transfers through banking institutions. If a wire transfer is used, the bank is responsible for satisfying the necessary reporting requirements.
In course of sending money worth $10,000.00 or more from Canada, there are corresponding Canadian customs requirements as well. If money is sent by mail, be sure to visit a Canada Post location and inquire about the necessary requirements. The applicable reporting form must be filled out and enclosed within the envelope or package and a copy of the same form must be submitted to the Canada Border Services Agency. If money is sent by courier, the courier is responsible for filing another reporting form while the individual sender is still responsible for providing the courier with the general reporting form.
Like the US CBP, Canada Border Services Agency has the authority to seize the funds and charge penalties if the Canadian reporting obligations are not satisfied.
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Once you have completed administration of all of the assets and dealt with all of the tax and other issues on an estate you then might face the problem of how to actually transfer money to a beneficiary resident outside of Canada. The wire transfer procedure will vary depending on which financial institution you use. Some will require double or multiple signatures on fax authorization documents. Others, with online cash management systems, will require duplicate approvals, often required to be on separate computers, with unique users and different passwords and logins.
Perhaps, most importantly, to transfer an international inheritance by wire you will need a SWIFT code designating the receiving bank branch. You will also need the name, address, and account number of your beneficiary and the name, address, and branch number of the receiving bank. SWIFT Codes are also called BICs and can be either 8 or 11 characters long.
What is a SWIFT code? The acronym SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. This organization has been designated by the International Organization for Standardization (ISO) as the bank registration authority pursuant to ISO 9362. SWIFT codes (also called BIC or Bank/Business Identification Codes) are used when transferring money between banks, particularly for international wire transfers. You should also be aware of the term International Bank Account Number (IBAN) pursuant to ISO 13616, as in the Eurozone, you’ll always need an IBAN and a SWIFT code. IBAN consists of up to 34 alphanumeric characters comprising: a country code; two check digits; and a number that includes the domestic bank account number, branch identifier, and potential routing information. Banks in the USA use SWIFT codes, but they don’t use IBANs. There are 35 countries in the extended Eurozone which are also within the SEPA (Single Euro Payments Area) which require IBAN numbers.
You will face other issues as well when doing an international money wire transfer, among which are what currency to transfer. Canada dollars or US dollars or Euros? What is the exchange rate and how will this be reflected in the amount received? What fee will your bank take for doing the transaction and will this fee amount be shown separately or taken off the funds transferred? What fee will be taken by the receiving bank? Is the receiving account able to receive the money in the currency sent or are there local restrictions? Are there issues with the receiving bank being sanctioned and subject to special restrictions?
One should take care with the transfer of money by wire internationally, which can be complicated and time consuming. But, the potential transfer of large sums of money into an incorrectly designated bank account is an error best avoided.
Thank you for reading this!
We’ve seen it first hand in many estates situations: families with property and assets in different countries. In the estate administration process, this can present a host of problems if proper planning hasn’t been done.
But just dealing with foreign property day-to-day has its challenges. And banking and currency issues are front and centre. Do you need to open a local bank account? What’s the best way to transfer money in different currencies? Is there an easy way to pay ongoing bills and taxes in your foreign country of choice?
Banks have had a lucrative monopoly over money transfers and foreign currency transactions for some time – and costs are high. If there was an area of banking that was ripe for innovation, this was one of them.
Enter TransferWise – a UK-based fintech company that has turned the currency conversion and transfer process on its head. The key innovation is that TransferWise doesn’t move money across borders. The system works on a peer-to-peer basis – if someone wants to convert their Canadian dollars to euros, TransferWise finds someone who wants to transfer money in the opposite direction (euros into Canadian dollars). As a result, Canadian dollars stay in Canada and euros stay in their euro country.
There are no fees hidden in the exchange. You get the mid-market exchange rate – the one you’ll find in the financial press. TransferWise then adds its fee to each transaction. The fee is clearly disclosed, so you know exactly what you’re paying. More importantly, the cost of the transfer is far less than what you’d get with one of the banks, the company claims up to 8 times less. You can find the Canadian site here.
International debit card coming
TransferWise just announced the next stage in its evolution – with the Canadian launch next year of a borderless debit MasterCard. The card will let you hold and spend a balance in multiple currencies, and, again, with lower fees than traditional banks.
TransferWise is just one of several innovative companies that are changing traditional banking in different parts of the world – but its focus on Canada sets it apart, at least for now. So, if you travel widely, or have assets abroad, you will soon have a new option for money management.
Thank you for reading,
While direct donations of cash or securities are still king when it comes to charitable giving in Canada, there are many other ways to donate. If you’re considering a larger gift, it pays to look at some alternatives.
A little bit of planning and a look at different options ensures that charitable gifts are made in the most tax- effective manner possible, are directed to the charities you most want to support, and are best suited to your financial situation and needs.
Here are some options to consider.
A charitable gift made in your will can be claimed against up to 100% of your net income on your final two lifetime tax returns. If the bequest is too large to claim on the final return, the surplus can be carried back to the previous tax year. There are several types of bequests possible:
- Specific bequests: an amount or specific piece of property paid out before any residual gifts
- Residual bequests: a share or percentage of the residue of estate
- Contingent bequest: the naming of an alternate charitable beneficiary in case the terms of an original bequest can’t be met
- Bequest subject to a trust: a trust established at death that typically provides lifetime income to one or more named beneficiaries, and a future gift to one or more charities.
Bequests can be tricky if not executed properly. This article provides details on the key pitfalls to avoid:
There are several ways that you can make a substantial but affordable gift using life insurance.
- Buy a new life insurance policy and name your charity as the owner and beneficiary. The premiums you pay qualify for a charitable tax receipt.
- Donate an existing policy to a charity. You’ll receive a charitable tax receipt for the fair market value of your life insurance policy.
- Name a charity as the beneficiary of an existing policy. Your estate will receive a charitable tax receipt when the proceeds are paid to the charity.
Private charitable foundation
A private charitable foundation is a trust or corporation that you establish and operate for charitable purposes. It’s a permanent institution – carrying your name or legacy, or that of a loved one – through which charitable work may be funded. Because of the costs of establishing and operating a foundation, you likely need initial funding of several hundred thousand dollars to make the structure worthwhile.
Private charitable foundations can be complex structures to establish and administer, so make sure you rely on professional advice for your foundation’s creation and operation.
Donor-advised funds are a flexible and cost-effective alternative to establishing a private charitable foundation.
You start by donating a lump sum amount – typically $10,000 or more – to a charitable gift fund administered by either a charity or a financial institution. Like a private charitable foundation, you receive a tax credit for the full amount donated, up to 75% of your net income for the year. Any excess amounts can be carried forward for up to five years to generate tax credits in those years. Each year, you direct to what charities you want grant money given and in what amounts.
Here’s a detailed comparison of private charitable foundations versus donor-advised funds:
There are a number of other planned giving options as well, from beneficiary designations of an RRSP or RRIF, to charitable remainder trusts, to charitable gift annuities.
But if you weigh all your options, and decide to make a simple direct gift, the Canada Revenue Agency’s charitable donation tax credit calculator is a great way to get an estimate of the tax impact of your donation:
Thanks for reading,
Often, beneficiaries of an estate allege that the deceased had a large sum of money kept in cash in his or her house. Upon death, it often turns out that this money is not to be found. Suspicions are immediately raised, and the allegations fly.
Courts have a difficult time in dealing with these types of claims. The burden is on those alleging the existence of the “money under the mattress”. That burden is on a balance of probabilities. However, to meet that burden, those alleging the existence of the money will have to lead substantial, convincing evidence. Those denying the allegation have the difficult time of trying to proving the negative.
Such a claim was considered in Barrick v. Lilliste, 2011 ONSC 1847 (CanLII). There, the deceased died at the age of 102, leaving 4 children. The court heard that the deceased was “distrustful” of banks. Following the deceased’s death, approximately $96,000 was found in a sock in the deceased’s home: a sock described as “sooty, grey, dirty and about one-and-a-half feet long with a knot closing it”.
However, three of the four children alleged that there was more; that the deceased had a box in his house that contained $210,000 or $230,000. The fourth child denied this.
The trial judge carefully weighed the evidence of all of the witnesses; and raised a number of questions about the credibility of the claim of the existence of the box. He queried, amongst other things, whether the deceased could have amassed such a fortune based on his known income and expenses; and whether, in any event, $210,000 could possibly fit into a box that was, at various points, described as a cardboard box, a shoe box, a wood box, a metal box or a “Watkins” box.
In the end, the trial judge found that he could not, on the evidence, find that the deceased had a box containing $210,000 in his bedroom, and consequently, could not find that the one child had wrongfully taken the money.
However, as the judge noted in the opening paragraphs of his decision, there will never be any happy resolution to the issue. “[The deceased’s] once happy family is torn asunder by the very thing he did not care about – money – or perhaps the very thing he cared to much about to protect his children from their fate of being siblings squabbling over money he may have had”.
Thank you for reading.
Paul E. Trudelle – Click here for more information on Paul Trudelle.
In an article published over the weekend, Alison Griffith of the Toronto Star writes that over 21 per cent of Canadian households had received an inheritance averaging $91,000. This amount is likely to jump as our society continues to age. As estate lawyers we are often so focused on the importance of advising clients of having an estate plan that we rarely consider the other side: after you have received your inheritance, how do you manage the new found wealth?
Ms. Griffith states: "unexpected money – and sometimes expected money – creates both financial and emotional challenges."Many of us who receive these windfalls often stress over the idea of what to do with the money and how will it be managed.
In her article, Ms. Griffith recommends that anyone who has received a windfall should follow the following four steps, which will likely assist them in making more informed decisions:
- Take a deep breath and acknowledge the reality of the situation. If you received an inheritance the chances are there is a death of someone important in your life.
- Don’t rush. Ms. Griffith tells a story of an old friend who inherited over $200,000, following the death of her mother. She advised that she intended on "playing around" in the stock market. Six month later – she didn’t want to talk about how "play time" ended. Ms. Griffith states: "As the calendar advances you almost certainly will change your mind about what you want to do with your windfall. Meanwhile, park it in short-term GICs or high interest savings account."
- Seek advice. "Contact a fee-only or fee-for-service financial planner who doesn’t sell anything other than their services."
- Reduce your expectations. "Don’t expect your windfall magically to turn you into a blissful resident of Shangri-La."
Receiving an inheritance can cause the beneficiary to experience mixed emotions. It is important to consider the above steps to avoid making an impulsive decision, which is likely to lead only to regret.
Rick Bickhram – Click here for more information on Rick Bickhram.