Tag: United States
A recent news article refers to the struggle of father of accused killer Bryer Schmegelsky to obtain video footage from the Royal Canadian Mounted Police.
The father’s lawyer has referred to the video as the accused’s “last will and testament.” It was apparently recorded very shortly before death and expresses funeral and burial preferences.
Oral wills (also known as nuncupative wills) are recognized in select jurisdictions, including some American states:
- New York law provides that an oral will, heard by at least two witnesses and made by a member of the active military or a mariner while at sea can be valid and will expire one year after discharge from the armed forces or three years after a sailor, if the testator survives the situation of peril;
- In North Carolina, an oral will made while the testator’s death is imminent and in circumstances where the testator does not survive in the presence of two or more witnesses may be valid;
- In Texas, oral wills made in the presence of three or more witnesses on the testator’s deathbed before September 2007 are valid in respect of personal property of limited value.
As most state legislation is silent on the issue of videotaped wills, if the testator’s oral wishes are videotaped, they must generally meet the criteria for a valid oral will to be effective.
However, in Canada, a will must be in writing, signed by the testator, and witnessed by two people. Alternatively, a will that is entirely in the testator’s handwriting and unwitnessed may be valid. Because Ontario is a strict compliance jurisdiction, any inconsistency with the formal requirements, as set out in the Succession Law Reform Act, renders a will invalid.
While a videotaped statement intended to be viewed posthumously may not be a valid will in Ontario and other Canadian provinces, it can nevertheless be used to express the deceased’s final wishes, for example with respect to the disposition of his or her remains (which are typically precatory rather than enforceable, even if appearing within a written document), and may assist a family in finding closure following an unexpected loss.
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Our readers will all be familiar of the issue of elder abuse, and the various forms that it can take. It is also well-known that elder abuse if underreported, giving rise to challenges in determining just how common it is and how incidence rates may be fluctuating within the context of our aging population.
A new study by Comparitech explores the issue of the underreporting of elder abuse and extrapolates reported incidents and studies regarding underreporting to gain an appreciation of how commonly it is actually occurring in the United States. Comparitech estimates that at least 5 million cases of financial elder abuse occur every year in the United States alone. While damages of $1.17 billion are reported, it is believed that the actual losses to seniors total $27.4 billion.
Technology also appears to be playing a role in increasing rates of elder abuse. Comparitech found that 1 in 10 seniors were victims of elder abuse and that the use of debit cards have become the most common tool in defrauding them of their funds. With phone and email scams on the rise in recent years, underreporting is anticipated to become a growing problem while incidence rates continue to increase without any way to determine exactly how many seniors are affected.
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The recently proposed tax changes by the federal government have left many Canadians on edge. In particular, tax planning for those owning small business corporations is currently under attack, and changes seem inevitable. (You can get a good overview of the proposed changes here.) As we grapple with the implications of these proposed changes in Canada, it is worth noting that our neighbours to the south are in the midst of a tax battle of their very own.
The United States is currently contemplating the new GOP tax bill, which President Trump aims to sign into law by the end of 2017. While discussing the entire breadth of the bill is beyond the scope of this blog (not to mention my caffeine supply), I think one aspect of the proposed bill is particularly worthy of discussion: the planned changes to estate taxation.
Currently, Americans can leave estates worth up to $5.49 million without passing any federal estate or gift tax. Estates worth more than that are subject to a 40% tax. Congress has already raised the estate assets threshold many times over the years; for example, in 2000, 52,000 estates had to pay the tax; it is now down to 5,000.
Congress is looking to raise the threshold once again, with the proposed GOP tax bill doubling that threshold to $11.2 million in 2018 and then doing away with the tax entirely by 2024. According to the Washington Post, the reduction and ultimate elimination of the estate tax would cost American tax payers $172 billion over a decade.
This provision to slash (and ultimately do away with) the federal estate tax has received a lot of buzz, which is perhaps disproportionate considering the proposal’s negligible impact on the American budget overall. According to Congress’ Joint Committee on Taxation, the vast majority of Americans – 99.8%- are no longer affected by a federal estate tax. Of the .2% of Americans who are affected, nearly all those who do pay are among the wealthiest 5% of Americans, with the richest 0.1% paying 27% of the total tax. Thus, the crux of the debate over this provision would seem to rest on principle.
The Republican party argues that the estate tax, sometimes called a “death tax”, should be repealed because it is unfair by its very nature. In an interview with Fox News last Sunday, Speaker Paul Ryan (R- WI) stated the party position as follows: “We just think it’s unfair. Death should be not a taxable event, and we should not be stopping people from being able to pass their life’s work on to their kids.”
Democrats, on the other hand, are widely rejecting this provision, arguing that the proposed estate tax elimination constitutes a giveaway to the mega-rich, and that the money could be used more appropriately elsewhere.
Whether or not the proposed estate tax deduction will pass as part of the GOP tax plan remains to be seen; however, reports suggest progress is being made towards the goal of having a final bill signed into law by the President before Christmas.
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Suzana Popovic-Montag and Lindsay Anderson (Law Student)
Beginning April 10, 2017, the United States Department of Labour will implement what is being referred to as the “Fiduciary Rule“. The Fiduciary Rule will require American investment advisors to satisfy a higher standard of care when providing investment recommendations, putting clients’ interests above their own and providing complete disclosure with respect to fees and potential conflicts of interest.
The standard of fiduciary, premised on a role of trust and the duty to act in utmost good faith, is applied to guardians of property and the person, attorneys of property and personal care for incapable grantors, estate trustees, and other types of trustees. While commentary regarding the Fiduciary Rule recognizes that investment advisors should be (and often are) already guided by the best interests of investor clients, some who earn commission on the sale of certain products may be in a position of conflict. The Fiduciary Rule will prevent advisors from making certain recommendations if they are not in the client’s best interests. The new standard of care required of American investment advisors may to some extent fall short of that applied in respect of other traditional fiduciaries, and is subject to a number of exceptions.
Absent the implementation of the Fiduciary Rule or equivalent requirements in other jurisdictions, investment advisors are not typically treated as fiduciaries. Contracts may specifically state that advisors are not acting in a fiduciary role and that they do not absorb risk on their clients’ behalf related to investment advice that is followed. Typically, if something goes wrong and an investor wishes to pursue a claim against his or her advisor, the onus is on the investor to prove the fiduciary nature of the relationship. If the investor is able to prove that a fiduciary obligation existed (factors include the length of the relationship, the sophistication of the client, and the demonstrated reliance on the advice of the advisor), the advisor must then show that he or she has discharged the duty in good faith and with full disclosure.
Although the Fiduciary Rule is scheduled to come into effect on April 10 of this year, it is anticipated that the new Trump administration may delay the applicability of the Fiduciary Rule for the time being. Although there have been discussions with respect to raising the standard of care of investment advisors in Canada, where extensive regulations already apply, an equivalent to the U.S. Fiduciary Rule has not yet been introduced.
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Ten years have now passed since the introduction of the Uniform Power of Attorney Act by the American Uniform Law Commission. Since 2006, the Uniform Power of Attorney Act has been approved and recommended for enactment in all US states.
Much like our own Uniform Law Conference of Canada, the American Uniform Law Commission is tasked with enacting legislation that individual states are thereafter encouraged to adopt.
To date, many states have not yet adopted the Uniform Power of Attorney Act or other comparable legislation to deal with attorneyship and guardianship issues. So far this year, however, five states, including Utah and Washington, have introduced and/or enacted the uniform legislation. A surprising number of states, which include our neighbours in New York State and vacation hotspots such as Florida and California, where a number of Canadians own property and spend the winter months, have not implemented the Uniform Power of Attorney Act.
The Uniform Power of Attorney Act is subdivided into four articles:
- Article 1 defines the term “incapacity” to reflect American common law, outlines the formal requirements for Powers of Attorney, and provides, among other terms, that a Power of Attorney will be treated as if durable or continuing (i.e. the authority of an attorney will continue during a period of the grantor’s mental incapacity, rather than being limited to use while the grantor remains capable) and will come into effect immediately, unless the document states otherwise;
- Article 2 outlines the authorities of attorneys for property and the circumstances in which an attorney may or may not exercise a Power of Attorney to transfer or deplete assets that are otherwise the subject of bequests under the grantor’s Last Will and Testament;
- Article 3 contains Power of Attorney forms and related instructions for use by lawyers and laypeople alike;
- Article 4 includes miscellaneous provisions that clarify the role of the Act within the context of other legislation and Powers of Attorney that predate it.
In Ontario, the Substitute Decisions Act governs most matters involving Powers of Attorney. If older Canadians and/or those experiencing cognitive decline spend time in the United States, it is advisable to look into the relevant state’s requirements to ensure that their Powers of Attorney provide the authority required to assist in managing affairs in these other jurisdictions.
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Most people set up their estate plans to minimize tax and keep their money out of the hands of the government. This is a story about a couple who did the opposite.
A recent article from ABC tells the story of Peter and Joan Petrasek. The couple had prepared wills that left everything they had to the United States government. Earlier this month, the US treasury received a cheque for $847,215.57 USD.
It is unclear exactly why the couple left their estates to the US government, although the article speculates that it may have been out of gratitude to the country that took them in. Peter Petrasek had fled from Czechoslovakia during World War II and escaped to Ottawa, where he met his wife, Joan. The couple moved to the United States in the 1950s.
It seems that they had no children and no living relatives, so they left their estates to the government. In similar circumstances, many would choose to leave their assets to friends or to charity. The Petraseks, it appears, wanted to thank the country that gave them a home.
This story gives us a different perspective on what it means to give money to a government. A tremendous amount of time and effort are spent on crafting and implementing legitimate estate planning mechanisms which are aimed at reducing the amount of tax that has to be paid on a person’s death. Often, testators have spouses, children, or other family that they intend to receive their property on death. Keeping money out of the hands of the tax collector means that their loved ones will receive more from their estate.
It may be that there is a lesson to be learned from the generosity of the late Mr. and Mrs. Petrasek. Governments perform a wide range of functions, many of which are aimed at the delivery of services to the public. A lot of these functions are similar to those performed by charities. Governments use our tax dollars for investments in medical research, public infrastructure, and social programs for those in need, among other things. Paying taxes out of an estate can be viewed a way of giving back to your community.
On a similar note, in 2011, Toronto City Council approved a measure to add a Voluntary Contribution option to property tax bills. Now, Toronto taxpayers are invited to make a voluntary donation to City services each time they pay their property taxes.
While many of us remain tax averse, it is refreshing to be reminded that there are generous souls out there who are grateful to the communities they live in, who recognize the important role that governments can play in that, and who are willing to contribute.
President Obama has recently revealed plans to increase inheritance taxes payable by Americans with high-value estates. His proposal increases the tax rate applied to estates of sizes greater than $5,430,000.00 from 40% to 68% of the amount over the threshold. If implemented, this increased tax rate will make American estates the highest taxed in the world, surpassing Japan, South Korea, and France, currently with the top three inheritance tax rates worldwide, at 55%, 50%, and 45%, respectively.
The proposal for inheritance tax increases in the United States is inspired in part by a study conducted earlier this month by the Tax Foundation, which suggests that our neighbours to the south are currently earning half of what they were from inheritance taxation in the early 2000s.
The decreased revenue is attributable to the exemption of estates valued at less than $5.43 million from inheritance taxes and estate planning with a view to avoiding the taxation. The exemption threshold for payment of American inheritance taxes has increased significantly since the year 2003, at which time estate assets beyond the first $1,000,000.00 were subject to inheritance taxes.
However, reduced earnings may be a scenario preferable to the American government to what has been seen in thirteen other jurisdictions since the year 2000 – the abolition of inheritance taxes altogether.
In other regions, such as the United Kingdom, where inheritance tax is also applied, the issue of the tax is divisive. It has the potential to raise funds which may be used to accomplish important social objectives, but can also frustrate estate plans of the wealthy whose beneficiaries may not be able to afford to keep what has been gifted to them.
Inheritance tax rates of greater than 50% certainly make the probate fees payable by residents of Ontario seem relatively insignificant. When so much planning revolves around avoiding the payment of low Estate Administration tax rates, it would seem that many Canadians would object to the establishment of an inheritance tax regime. Further, the recent study by the Tax Foundation suggests that there may be less benefit to government funding through the implementation of inheritance taxes than might be expected.
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