Pursuant to section 2 of Part I of the Succession Law Reform Act,
“A person may by will devise, bequeath or dispose of all property (whether acquired before or after making his or her will) to which at the time of his or her death he or she is entitled either at law or in equity…”
The interpretation of the term “will” is defined under section 1 of the Act to include,
“(a) a testament,
(b) a codicil,
(c) an appointment by will or by writing in the nature of a will in exercise of a power, and
(d) any other testamentary disposition.”
The question of what constitutes a will was a topic of the recent Law Society of Upper Canada Practice Gems: Probate Essentials 2016 program on September 20, 2016 (click here if you are interested in a copy of the program’s agenda).
As an example from the program materials, Canada Permanent Trust Co v Bowman,  SCR 711 was a case in which the Supreme Court of Canada found a handwritten document in a cardboard box of the deceased’s home to be valid where, “read as a whole”, the document showed the implicit intention of a testator who wished for certain dispositions of her property following her death. The document in question listed certain people with dollar amounts or items beside each name, such as, “Ena $1,000.00 in National Trust” and “Laura—fur coat”.
An even more famous example may be found in Ian Hull’s prior blog on the testamentary disposition that was carved on the bumper of a tractor by an unfortunate farmer while he was trapped under its weight. The farmer did not survive and following engraving can be discerned from the bumper, “In case I die in this mess, I leave all to the wife. Cecil Geo Harris.”
Thanks for reading!
A recent article regarding a study by the University of South Australia suggests that the majority of family farms that are being passed on from one generation to the next are being left to sons rather than daughters.
According to the article, only about 10% of Australian farms are currently being bequeathed to daughters. The preliminary results of the study have revealed that it is common for farm owners to leave farm property to male descendants, while other, non-farm assets are instead left to females.
The article also notes that, traditionally, sons would be required to carry on family farms (whether they wanted to or not), while daughters would rarely have the opportunity to continue living and working on a farm (even if they so desired). In Australia and elsewhere, it appears that tradition still plays a strong role in how families are structuring their estate planning.
In other parts of the world, it has been suggested that the inattention to farm succession planning is a serious problem for farming families. A survey conducted among farmers living in Ulster, Ireland suggests that nearly half (48%) of farmers do not have any plan regarding the inheritance of farm property. Only 20% of survey respondents indicated that he or she had chosen a successor and executed a last will and testament to implement the related wishes.
Within the context of an aging population, it will become increasingly important that farmers take the time to obtain assistance in creating an estate plan to ensure that family farm properties are left to their intended beneficiaries.
Have a great weekend.
For business owners, part of a comprehensive estate plan should include a succession plan for your business. It is important to start planning the succession of your business early and revisit it from time to time. This should not be a single, discrete task, but an ongoing process over time. The Canada Business Network, a government organization providing resources and information to businesses, suggests that the process of retiring or exiting from your business could take up to 5 years. Furthermore, in case of unexpected illness or death, you do not want to be left without a plan.
Your succession plan should include consideration of matters such as the vision for your business, the selection of a successor and a plan for their training, and the timeline for your transition out of the business. It could also include a plan with respect to how you might remain involved following your transition, and in what capacity.
You will need to consider whether you want to transfer the business to another person, or sell it, either to a partner, third party buyer, or even an employee. In a family business, you may wish to transfer the business to family members who have been involved in the business. This would ideally be implemented much earlier than your planned exit to allow family members to work in the business, learn it over time, and be prepared to take over when the time comes. If there are multiple family members involved, it may be difficult to decide who you wish to take over the responsibility, and may be even more difficult to communicate to those not selected. Regardless of how difficult this conversation may be, it should nonetheless be discussed sufficiently early to attempt as smooth a transition as possible.
It is also important to consider estate planning strategies specifically relating to the transition of your business. Some considerations could include how to transfer your shares to the successor in a way that minimizes tax, and whether you will be able to make use of the capital gains exemption from dispositions of Qualified Small Business Corporation shares. You may want to consider implementing an estate freeze by exchanging common shares for preferred shares, and issuing new common shares to your successors in order to freeze the value of your shares in the business. The value of future growth will then accrue to the common shares held by the successors. In this regard, and with respect to your entire succession plan, it would be wise to work with professional advisors to create and implement a tax-efficient method of transitioning your business that will work best for you.
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I regularly tutor students who are preparing to write the Estate and Trust section of the Solicitor’s exam for the Law Society. One of the more common questions that my students ask is for help in explaining two concepts: lapse and the “anti-lapse provision”.
The common definition of a lapsed gift, is a gift that has failed because it is incapable of taking effect. Two common reasons for a gift to be incapable of taking effect is where the beneficiary predeceases the testator or the gift is disclaimed by the beneficiary.
Pursuant to Section 23 of the Succession Law Reform Act, unless a contrary intention appears in the Deceased’s Will, if a gift is incapable of taking effect, the failed gift will fall into the residue of the testator’s estate and distributed accordingly.
Section 31 of the Succession Law Reform Act is commonly referred to as the anti-lapse provision. The anti-lapse provision saves a failed gift if the beneficiary falls into the class of beneficiaries set-out under this provision and that beneficiary leaves a spouse or issue who survived the testator. If these conditions are met, the gift will not fall into the residue, however it will take effect as if it had been made directly to the spouse or issue of predeceased beneficiary.
Thank you for reading, and have a great day.
Rick Bickhram – Click here for more information on Rick Bickhram.
The August 13, 2010 edition of Lawyers Weekly featured an article by Kimberly Whaley with the above-captioned title. The article dealt with the relationship between marriage, property, and estates and the resulting risk of predatory marriages.
I think it’s safe to presume that the majority of people believe that once they have executed a Will, their carefully considered estate plans are locked in. However, the provisions people make for their loved ones upon their death are not exactly locked in. According to Ontario law, marriage automatically revokes a Will.
While shocking for many people, there are ways to avoid this unwanted consequence of marriage. For instance, where a person executes a Will in contemplation of marriage, his or her testamentary plans will survive the marriage.
The automatic revocation of a Will can lead to unfortunate and unintended results, particularly when individuals have capacity to marry, but lack the capacity to manage property and/or execute a Will. In such circumstances, a person who lacks testamentary capacity may end up the target of a greedy opportunist looking to marry for money.
In Ontario, where a person’s Will is revoked upon her marriage and she dies, her estate is distributed under succession law as if she died without a Will. According to the Succession Law Reform Act (“SLRA”), when the deceased, who dies intestate, is survived by a spouse and there are no issue, the surviving spouse takes all property of the deceased’s absolutely. Where the deceased dies with a net value of more than the “preferential share” and with a surviving spouse and issue, the surviving spouse is entitled to the preferential share, being $200,000, absolutely. After the preferential share is distributed to the surviving spouse, the surviving spouse is entitled to a distributive share, which varies with the number of children or issue surviving. If, for example, there is a surviving spouse and one child, the excess above and beyond the $200,000 is allocated equally between the spouse and the child. Where there is a surviving spouse and more than one child, the spouse is entitled to a third of the excess and the remainder is divided equally between the children.
The scenario that immediately comes to mind is one where an elderly and frail individual is preyed upon by a younger person who sees the marriage as an opportunity to abscond with the property of the elderly spouse who lacks capacity to manage property during his/her life or execute a Will.
In my next blog, on September 6, 2010, I discuss this topic in more detail, focusing on why predatory marriages are, perhaps, too easily accomplished.
Sara Crosbie, a writer with the Globe and Mail, recently published an article on the succession planning crisis looming over Canadian family businesses. In her article, Ms. Crosbie refers to a study completed by Deloitte and Touche, which indicates that two-thirds of Canadian families have no written contingency plans to guide them through a disability or death.
To understand the importance of family businesses to the Canadian economy consider the following study which was completed by Deloitte and Touche and found that “family businesses have 4.7 million full-time employees, 1.3 million part-time workers and sales of around $1.3 trillion.”
Ms. Crosbie states that the lack of succession planning could be attributed to the idea that most parents think, “there’s nothing here to pass on”, but the children think, “actually, I’m quite interested in taking it on.”
Dr. Pramodita Sharma attributes the lack of succession planning to the fact that “money and mortality conversations don’t usually take place until the head of a business is gravely ill. By then, it’s too late to start talking.”
Regardless of the cause, the consensus on resolving this looming crisis is rather simple, communication. Dr. Sharma says “Succession planning is either passing to the next generation of your family, passing to employees … selling it, to be merged or acquired by someone or it could be closing the business down. That needs preparation, too. You want to get the maximum value out of the business so it has to be a pro-active succession plan. You don’t want death to be the succession plan.”
Thank you for reading and have a great day.
Rick Bickhram – Click here for more information on Rick Bickhram.
As we are in the beginning of a new year, a quote from one of my favourite poets, T.S. Eliot, comes to mind: “For last year’s words belong to last year’s language and next year’s words await another voice.”
I recently came across an article entitled "The 8 Life Stages of Estate Planning", authored by G.M. Filisko. In his article, Mr. Filisko points out the obvious – during our life we will go through different phases and our estate plans should reflect these changes. Mr. Filisko lists the following stages to consider regardless of the phase one may be currently in:
1. Young, single and carefree
2. Single, but committed
3. We’re Engaged
4. Just Married
5. The Joys of Parenting
6. Divorce (if unfortunately applicable)
7. The Middle Ages
8. The Golden Years
Regardless of where one may fall in this spectrum, it is never to late to get started.
Since making New Year’s resolutions seems to be the theme around this time of the year, let’s make a resolution to be more organized this year and spend some time considering our estate plans.
Thank you for reading.
Rick Bickhram – Click here for more information on Rick Bickhram.
The Ontario Lawyers Gazette recently published a helpful article titled “Succession Planning Protects You and Your Clients”, which reminds licensees of the importance of planning for the future.
According to a 2006 survey, 80% of sole practitioners do not have a plan detailing who would service their clients in the event of their death or incapacity. This is an alarming number of sole practitioners who are putting themselves at unnecessary risk.
Under the provisions of the Law Society Act, the Trustee Services department of the Law Society may intervene in a practitioner’s practice and obtain a variety of orders which would have the effect of winding up the practitioner’s practice in the event that the practitioner became incapacitated or deceased. Margaret Cowtan, manager of Trustee Services states that “it can be a very intrusive and often expensive undertaking if Trustee Services is required to resort to an order to enable a practice to be wound up.”
One alternative that we can consider in planning for our future is to “name a licensed lawyer as a limited trustee in their wills for the sole purpose of winding up the practice. By appointing another lawyer as a trustee for the purposes of the practice, on death, that lawyer can not only take professional responsibility for the trust account and make appropriate distributions to clients he or she can review client files, continue matters should clients elect to engage them, or return files to clients as appropriate.” We can also give signing authority on the trust account to another lawyer in the event of an emergency. Only licensed lawyers or paralegals are permitted to deal with trust accounts.
If you are interested in learning more about planning for your future, please click the following link which will take you to the Law Society’s Succession Planning Toolkit.
Thank you for reading,
Listen to Dependant Relief.
This week on Hull on Estates, Natalia Angelini and Craig Vander Zee discuss dependant relief and reference a variety of cases that utilized the Succession Law Reform Act.
Listen to Delay in the Granting of Probate.
This week on Hull on Estates, David and Sarah discuss issues that cause delay in the granting of probate.