Suzana Popovic-Montag2013-05-22T03:01:05-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.ca/author/index.php?author=suzana-popovicmontagCopyright 2008, HuffingtonPost.com, Inc.HuffingtonPost Blogger Feed for Suzana Popovic-MontagGood old fashioned elbow grease.Transferring Wealth Efficientlytag:www.huffingtonpost.com,2013:/theblog//3.32681462013-05-13T16:55:36-04:002013-05-14T11:45:16-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
Ontario does not have inheritance tax in the traditional sense. However, in order to demonstrate authority to deal effectively and administer certain kinds of estate assets, the person named as estate trustee under a will must apply for a probate certificate (now called a "Certificate of Appointment of Estate Trustee with a Will"). As part of the process, estate administration tax will need to be paid on all of the assets governed by the will for which the estate trustee is seeking the Certificate of Appointment.
Some assets, including certain corporate assets, can be transferred to the beneficiaries of an estate without a Certificate of Appointment. Including these assets in a will for which probate is being sought will require estate administration tax to be paid on these assets.
To avoid this, testators with these kinds of assets often prepare multiple wills. The first will would deal with all of the assets for which a Certificate of Appointment is required. The second will would deal with the corporate assets. The estate trustee would only need to seek a Certificate of Appointment for the will that requires it, and the estate can avoid paying estate administration tax on the corporate assets governed by the second will.
When an application is made for a Certificate of Appointment of Estate Trustee, the will becomes a matter of public record. Having a secondary will for which no such application is made can provide a means for a testator to make testamentary gifts in a way that is private and that is not open for anyone and everyone to see.
As with anything, when you add more moving parts, there is more room for error. The added cost of preparing and administering multiple wills and the increased risk that something may go wrong with one or both wills dictate that this strategy should only be employed under appropriate circumstances.
One particularly common error is that each of the two wills may include a standard revocation clause, which revokes all prior wills executed by the testator. If both wills include such a clause, only the second one to be executed is valid because it revokes the first. Often, it will be impossible at a later date to determine which will was signed first.
Another potential pitfall with multiple wills is that they may become a matter of public record if the estate becomes contentious and litigation commences.
Multiple wills have historically been used where a testator has assets in different jurisdictions as well. One will may have been prepared for each jurisdiction to be governed according to the law of the land in each place.
Today, however, multiple wills are mainly used as a way to reduce estate administration tax. The practice was approved by the courts over a decade ago in the case of Granovsky Estate v. Ontario (1998), 21 E.T.R. (2d) 25 (Ont. Gen. Div.). Since then, multiple wills have become an increasingly popular estate planning tool. As testators continue to search for ways to streamline the transmission of wealth to the next generation, innovative estate planning tools like multiple wills can be expected to increase in popularity in the future.
Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page. ]]>The Trouble With Joint Bank Accountstag:www.huffingtonpost.com,2013:/theblog//3.32246862013-05-07T07:44:02-04:002013-05-07T07:44:03-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
The use of joint accounts, however, is an exercise in the balance of convenience and control. We are frequently advising our clients that, despite the added convenience and tax-saving advantages associated with joint accounts, adding another person to an account substantially reduces your control over that account.
In our practice, we are often faced with the issue of a bank account held jointly between a deceased parent and an adult child. Thankfully, the Supreme Court of Canada has provided guidance through its decision in Pecore v. Pecore. This decision stands for the principle that, when assets are held jointly between a parent and an adult child, there will be a presumption of "resulting trust" upon the death of the parent. What that means is that the asset will revert back to the estate of the parent instead of passing to the adult child. This often comes as a surprise to people who are familiar with jointly-held assets passing to the surviving party by right of survivorship.
It is not uncommon for a surviving adult child joint account holder to rebut the presumption of resulting trust and attempt to have the jointly-held assets pass to them by right of survivorship. In order to do so, however, sufficient evidence must be presented to support the argument that the deceased wished for the assets to pass to the other account holder upon death. Documents such as Deeds of Gift can provide strong evidence as to the intentions of the testator and can help avoid disputes down the road. Deeds of Gift are little-used but extremely effective tools for giving away assets during your lifetime. These are formal documents that confirm a gift and can have a profound effect on the enforceability of that gift after death.
Another useful document is a Declaration of Intention. This document can be used to gift the right of survivorship of a joint bank account or some other jointly-held asset. Alternatively, it can be used to create a trust arrangement in situations where assets are held jointly out of convenience, but they are intended to benefit other beneficiaries after death.
Jointly-held assets often become the subject of stressful and expensive estate litigation. In order to avoid this, there are two extremely important things that should be done. The first is to write it down. Having something in writing that clearly identifies intention is the easiest way to ensure that jointly-held assets pass in the way you intend them to. While it would be ideal to have an experienced lawyer draft formal Deeds of Gift and Declarations of Intention, even simple, less-formal documents can help in ascertaining intention post-mortem.
The second thing to do is to communicate your intention clearly and meaningfully. Letting your loved ones know what you want to happen after you die is the single most important way to avoid estate litigation. We have previously mentioned in this space the benefits of a family meeting where testamentary intentions can be conveyed to beneficiaries. Despite the uncomfortable subject matter of these meetings, your family members and loved ones will be thanking you long after you are gone.
Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page. ]]>Taking Over the Taxes of the Deceasedtag:www.huffingtonpost.com,2013:/theblog//3.31796962013-04-29T16:43:04-04:002013-04-29T17:13:16-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/It has been said that nothing is certain in this world except death and taxes. This episode of Hull & Hull TV deals with both.
When a person passes away, his or her obligations to pay tax live on. The estate trustee becomes responsible for making sure that the deceased's taxes are paid. This responsibility must be taken very seriously. The Income Tax Act imposes personal liability on estate trustees for any unpaid tax liabilities of the deceased. This ensures that it is the best interests of estate trustees to do whatever they can to ascertain that the deceased's debts to the Canada Revenue Agency (the "CRA") are settled.
On an individual's death, a new taxpayer is created. The estate trustee is responsible for tax on income earned by the individual up to the date of death. The estate trustee is also responsible for the tax owing on income earned by that individual's estate -- a separate entity for tax purposes. The deadline for the filing of the deceased individual's final (terminal) tax return depends on when he or she died. If the person died before November 1, then his or her taxes are due on April 30 of the following year. If the person died in November or December, then taxes are due six months after the date of death. The taxation year for an estate is not necessarily the same. Whatever the deadlines, estate trustees must be diligent in their efforts to meet them in order to avoid incurring interest and penalties.
All too often, an estate trustee will begin administering the deceased's assets, only to realize that the deceased had failed to properly file and pay taxes during the later years of his or her life. Fortunately, the CRA has a Voluntary Disclosures Program, which allows taxpayers, dead or alive, to disclose errors, inaccurate or incomplete disclosure, or unreported sources of income that may affect their taxes. If done properly, a taxpayer may avoid some of the penalties which may otherwise be imposed. This process can be somewhat delicate, and professional tax advice is recommended. The Voluntary Disclosures Program provides an ideal way for estate trustees to clean up a tax mess that they may unexpectedly walk into, and to avoid liability for penalties or interest that would otherwise be incurred.
Fear of an unexpected call or letter from the CRA may keep many an estate trustee awake at night. If the assets of an estate have already been distributed, and the tax collector comes knocking, the estate trustee may be personally liable for the shortfall. Fortunately, the CRA provides tax Clearance Certificates. The Clearance Certificate states that all of the deceased's taxes for the relevant period have been paid. For an estate trustee, this provides protection from personal liability. Although there is no obligation to obtain a Clearance Certificate, having one in hand before distributing the assets of the estate may prevent problems down the road and sleepless nights for estate trustees.
One way to reduce the tax burden on an estate is through charitable donation. There are a number of ways to leave assets to charitable organizations. Any plan to do so should be a carefully thought out component of a comprehensive estate plan. The vehicles through which donations can be made include outright gifts of money or other assets, the creation of a trust, or the creation of a charitable trust. The most effective strategy may depend on the nature of the donor's assets and personal circumstances. Careful planning and professional advice may be advisable to make sure that the charitable beneficiary receives as much as possible and to reduce taxes.
Income tax related to an estate can be a minefield for the unwary estate trustee. However, with good advice and careful action, an estate trustee can avoid being haunted by the ghost of the deceased, and by the CRA.
Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page.]]>How to Deal With Death and (Estate) Taxestag:www.huffingtonpost.com,2013:/theblog//3.31385772013-04-23T12:32:30-04:002013-04-23T12:13:25-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
An estate tax is conventionally understood to be the tax that is paid on your death. In Ontario, one such tax is commonly referred to as "probate tax," although it is now more correctly known as "estate administration tax."
In order to obtain "probate" (now known as a certificate of appointment of estate trustee), an estate trustee must pay an estate administration tax at the rate of $5 per $1,000 (or part thereof) for the first $50,000 of estate value and $15 per $1,000 for the estate value in excess of $50,000. The value of certain property, such as jointly-owned property, however, is excluded from the calculation of estate administration tax.
There are different types of estate taxes depending on where you live as there are different jurisdictions that impose tax on your assets. In most Canadian provinces, there is a provincial tax (such as Ontario's estate administration tax) and a federal tax that will apply.
The federal tax that applies in Canada is the income tax on the deemed disposition of assets on death. If one dies owning capital assets that have appreciated in value, the gain on those assets will be taxed on death. Similarly, tax-sheltered assets like RRSPs and RRIFs will lose their tax-sheltered status on death unless advanced estate planning has been done.
The key to limiting the amount of tax paid on your assets upon death is to consult estate planning professionals such as lawyers, accountants and financial planners who can help create tax deferral and/or tax reduction strategies. Some common strategies include the following:
• Disposing of property during one's lifetime (either directly to a beneficiary intended to receive it on death or to a trust);
• Transferring property into joint ownership with one or more persons; and
• Ensuring that life insurance, RRSPs and other plan benefits are made payable to a named beneficiary rather than to the estate.
In our practice, we are often asked about the "21-year rule." This rule generally stands for the principle that any tax deferral vehicle, whether it is created during someone's lifetime or on death, has to treat itself as having disposed of its property every 21 years. This is in order to prevent people from holding assets in something like a family trust for multiple generations without ever having to pay tax.
Fortunately, there are some solutions that are not overly complex and are readily available to prudent estate planners. For example, creating a "life interest" in property allows for the tax payable on that property to be deferred by attaching those assets to another person's life. This is commonly done between spouses so that neither is burdened with the payment of tax on the other's assets.
Estate planners are continuously looking for appropriate and well-advised opportunities to avoid an immediate payment of tax on death or at the expiry of the "21-year rule" for clients that have created significant gains in their assets. This is because the tax can be so substantial that it has a dramatic effect on their estate as a whole.
While some of the strategies used to defer and reduce tax may appear simple on their face, the interrelation of finances, real estate, estates, trusts and tax law can create significant problems for loved ones left behind. Although we often encounter litigation caused by a lack of an estate plan, stressful and expensive disputes often arise from plans that have too many moving parts or parts that don't move with each other. As mentioned in our previous articles, the best way to avoid this is to consult an experienced estate planning professional and to have good communication between family members.
Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page.
]]>Executor to Someone's Estate? You Might Qualify for Compensationtag:www.huffingtonpost.com,2013:/theblog//3.30922132013-04-16T12:26:36-04:002013-04-16T12:13:34-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
For an individual managing the property of an incapable individual under a power of attorney for property, some guidance on compensation is provided by the Substitute Decisions Act, 1992 and its associated regulations. A compensation scheme may be provided for in the power of attorney document itself. If not, the default is 3 per cent of capital and income receipts and 3 per cent of capital and income disbursements, in addition to a care and management fee amounting to 0.6 per cent of the annual average value of the assets.
For executors and trustees, there are no statutory percentages but the standard practice is that 2.5 per cent of capital and income receipts and 2.5 per cent of capital and income disbursements may be charged, in addition to a 0.4 per cent care and management fee.
The percentages approach does not always provide a fair and reasonable value. The courts may temper the result of the percentages approach with reference to five factors, being the size of the trust, the care and responsibility involved, the time occupied in performing the duties, the skill and ability shown by the executor or trustee, and the degree of success resulting from the administration. The courts may adjust compensation accordingly.
Compensation frequently becomes a contentious issue in the administration of an estate or trust or in the management of a person's property under a power of attorney. It is frequently questioned. When family members, beneficiaries, or others are unhappy with the administration, compensation is often the first item on the accounts that is attacked because reducing compensation takes money out of the hands of the trustee, executor or attorney directly.
One reason that compensation may be challenged, particularly in familial situations, is that administering the property can be viewed by the challengers as something that should be done for free. Another is that the interested parties may be dissatisfied with the manner of administration generally and challenging compensation provides an avenue to express this dissatisfaction. In some situations, for example where the assets are particularly valuable but are simple to administer, the amount of compensation requested may be disproportionate to the amount of time, effort and skill involved.
The best way to avoid disagreement over compensation is communication. A conversation with the interested parties early in the process can nip a compensation fight in the bud. They should be made aware of the difficult nature of the job, and the amount of work that will be involved. Potential challenges are much less likely to arise if a claim for compensation does not come as a surprise. Letting the interested parties know that an attorney, trustee or estate trustee is entitled to be paid something for his or her time and effort will assist them in understanding compensation as fair payment for a job well done, rather than as a cash grab from the assets of an estate or an incapable loved one.
*Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page. ]]>Try This Alternative to Estate Litigationtag:www.huffingtonpost.com,2013:/theblog//3.30447452013-04-10T08:51:52-04:002013-04-10T09:01:55-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
When faced with the prospect of a heated courtroom brawl, we often canvas with our clients, at various times during the litigation process, the importance of alternative dispute resolution mechanisms. The outcome to an estates matter dealt with in this fashion is often more rewarding and also less expensive than proceeding to trial.
Mediations and arbitrations afford the parties an extra element of privacy and confidentiality that is not available as part of the courtroom process. This aspect of alternative dispute resolution can be appealing to those who are dealing with the personal, sensitive issues that form the basis of estate litigation.
Alternative dispute resolution is becoming more common. In most of the major centres in Canada, it has become of the expected steps to take in almost all kinds of litigation. For estate litigation in particular, alternative dispute resolution has become and extremely important step to take because of the people, emotions and money involved. The rigid courtroom procedure is often not as well-suited to deal with such highly charged disagreements.
Alternative dispute resolution mechanisms such as mediation, allow for increased flexibility in procedure and settlement construction. For instance, a mediation settlement can include elements of tax planning that might not be considered in a judicial decision. Estates matters are also often diverse and complex, touching on many different areas of law, such as real estate, contracts, corporate and family law. The flexibility of mediation allows for each of these areas to be included as part of a global resolution.
There are several factors to be addressed when deciding on whether and what type of alternative dispute resolution mechanism is to be used, be it mediation, arbitration, a family meeting or a type of hybrid. It is important to consider the parties involved, their lawyers or advisors, and their personalities. When dealing with someone considered to be reasonable and who wants to be the author of their own solution, mediation might be a desirable avenue to explore. When dealing with intransigent parties who desire a decision to be imposed upon them, arbitration or the traditional courtroom setting are likely better options. Another important consideration is whether the litigation is near its beginning, middle or end. The effectiveness and desirability of alternative dispute resolution mechanisms is likely to fluctuate with the stage of litigation.
Alternative dispute resolution is not limited to mediation and arbitration. One of the most innovative alternative dispute resolution mechanisms that is increasingly being implemented is known as "med-arb" whereby the parties begin in mediation and then move to arbitration when no further progress can be made. Collaborative law is also an emerging concept where individual counsel is appointed for each party and there is no opportunity to proceed to court. If a matter cannot be resolved short of an actual court proceeding, the collaborative process ends and the parties are forced to retain new counsel in order to resume litigation.
Even though it allows us to earn a living, we acknowledge the reality that nobody likes to be engaged in litigation. Alternative dispute resolution can allow for settlements to be reached more expediently, more efficiently and more privately than through the traditional court process. When faced with the reality of litigation, methods of alternative dispute resolution can serve to ease the pain of what can be an extremely expensive and emotional process.
*Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page. ]]>The 411 on Power of Attorneytag:www.huffingtonpost.com,2013:/theblog//3.29482692013-03-26T16:26:36-04:002013-03-26T16:26:50-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
In Ontario, there are two different kinds of Powers of Attorney. The first is called a Power of Attorney for Property, which addresses decision-making over property such as bank accounts and real estate. The second is called a Power of Attorney for Personal Care, which governs decision-making for health and well-being.
When deciding who to appoint as your attorney(s), it is important to consider who it is you want doing which job for you. Different people are often appointed as Attorney for Personal Care and Attorney for Property for the same person. In most cases, married couples will choose each other, as they are likely familiar with both aspects of each other's lives. Sometimes, however, a person with business acumen and time to deal with finances is appointed as Attorney for Property and someone with more understanding about healthcare needs is appointed as Attorney for Personal Care.
Powers of Attorney are not required by law. In fact, according to the statistics, less than 50 per cent of Canadians have executed a Power of Attorney. If you become incapable and don't have a Power of Attorney, you do not have anyone with legal authority to make decisions on your behalf. What that means is that someone will have to go to court and apply to be appointed as your Attorney so that they may be able to make decisions with regards to your finances and/or healthcare.
In regard to property, an Attorney has the legal authority to do anything on your behalf except for the making of a will. A Power of Attorney for Property is an extremely powerful document that has an effect on every aspect of your life. An Attorney for Personal Care, on the other hand, only has authority to make decisions relating to your healthcare.
Both Power of Attorney documents typically begin with the appointment of an Attorney or multiple Attorneys, depending on the choice of the individual. What usually follows is a set of restrictions imposed on the appointed Attorney. For instance, it is common to restrict when the Power of Attorney can be invoked, be it on a finding of incapacity or during a specific timeframe or specific purpose. Powers of Attorney are required to be signed in the presence of witnesses and are only effective during your lifetime. If circumstances change during your lifetime and you wish to change your Power(s) of Attorney, you can do so as long as you are capable.
Given the rise in the number of Powers of Attorney for property and for personal care that have been executed in Ontario, the volume of complaints, problems and litigation arising from those Powers of Attorney has increased and will continue to do so. In order to help your family and friends avoid the stress and significant cost related to Power of Attorney litigation, it is important to have these documents drafted by an experienced lawyer. It is also extremely important to have open and honest communication with the person(s) whom you choose to appoint as your Attorney(s), so that they are aware of the powers and duties that will be afforded to them in the event you become incapable.
Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page. ]]>The Powers of the Power of Attorneytag:www.huffingtonpost.com,2013:/theblog//3.29482292013-03-25T17:48:32-04:002013-03-25T17:43:29-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
Powers of attorney may lead to fights that can divide families when they ought to pull together to help their ailing loved one. In Ontario, they are governed by the Substitute Decisions Act, 1992, which sets out the requirements, powers and procedures associated with the documents. Powers of attorney for property, subject to limitations imposed in the documents themselves, grant the attorney the ability to do anything with the person's property, except to make a new will. With such broad powers over another individual, it is easy to see how the attorney could mismanage the grantor's property or take advantage of the role.
If the individual's family does not agree with the actions of the attorney, there are a number of ways in which they might challenge the power of attorney. They can attack the validity of the document by arguing that the grantor did not have the requisite capacity at the time the document was prepared. The tests for capacity to grant powers of attorney for property and personal care are set out in the Substitute Decisions Act at sections 8 and 47, respectively. If the grantor has been manipulated, coerced, or unduly pressured into signing a power of attorney, the validity of the document may be attacked on grounds of undue influence.
The actions of an attorney may be challenged as well. An attorney for property may be forced to account for every penny of the grantor's assets from the time that he or she began to act. The accounts can be challenged and subjected to the supervision of the Ontario Superior Court of Justice. Additionally, the Court has the power to set aside a power of attorney and appoint a guardian for property or personal care.
Because of the importance of powers of attorney to the rights and quality of life of an individual who has become incapable, it is absolutely essential that they be kept up-to-date. A careful review of your powers of attorney should be undertaken every three to five years or after any material life events, such as a marriage or a change in health conditions. Updated powers of attorney should be part of any overhaul of your estate plan.
To avoid problems with powers of attorney, good communication is the most important factor. The named attorney should be consulted before preparing or updating the documents. It is important that he or she is willing to take on the responsibility and is able to act if it becomes necessary. The attorney should be aware of where to find the documents which prove his or her authority, and they should be readily accessible so that he or she will not have trouble getting to them quickly if needed. It may be advisable to have a set of instructions or a list of assets ready to avoid loose ends. An attorney could easily lose track of an account or miss bill payments if not prepared. Ensuring that your attorney stays in the loop and is kept up-to-date will help to ease the transition if he or she ever needs to step in.
Communication is also the key to avoiding conflict within the grantor's family. Letting loved ones know your plans and the reasons behind them will help to prevent disagreements and challenges down the road. No grantor wants their family to be conflicted during times of ill health.
Naming an attorney requires trusting another person with everything you own and your own wellbeing. By keeping your documents current and making sure that the people you depend on are informed, most problems with powers of attorney can be prevented.
Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page.
]]>Don't Delay, Make a Legal Will Todaytag:www.huffingtonpost.com,2013:/theblog//3.29240442013-03-21T17:47:55-04:002013-05-21T05:12:01-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
A will, generally, is a legally binding written document that provides a roadmap of sorts for your estate trustee. It dictates how, when, and to whom your assets will be distributed. It can direct gifts outright to your loved ones or to charities, or manage the timing of gifts through trust mechanisms. Within some limits, a will is generally the best way to ensure that your property goes where you want it to. It is the key document in any estate plan, and it should express your wishes in as clear and concise a manner as possible.
When deciding to make a will, the first step is to decide on what you want. It is well worth the time to sit down and prepare a wish list of what you have, what you would like your estate plan to accomplish, who you would like to receive what assets, and how and when you would like them to receive those assets. You may want to think about what might happen in the future as needs and circumstances change. Some special assets, like the family cottage for example, might need more complicated arrangements.
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A wish is just a wish unless it meets the formal legal requirements to be considered a will. There are generally two types of wills recognized by law in Ontario. The requirements for each are spelled out in Ontario's Succession Law Reform Act (the"SLRA").
A handwritten, or "holograph" will, under s. 6 of the SLRA, needs to be entirely in the handwriting of the testator. It also needs to be signed at the bottom. No lawyers or witnesses need to be involved in the process. Provided that the document is otherwise valid, the courts have accepted holograph wills scribbled on a napkin or even engraved on a tractor. The rules may be relaxed even further for a member of the Canadian Forces on active service.
The more traditional form of will is the formal or "attested" will. Governed by s. 4 of the SLRA, the attested will must be executed properly to be valid, and the rules are fairly strict. The will must be signed by the testator at its end, or by someone else in the presence of the testator and under his or her direction. Two witnesses must be present at the same time that the testator makes or acknowledges the signature. The witnesses must each sign in the presence of the testator.
Do-it-yourself will kits can be used, but they can easily go awry without the advice of a lawyer. For example, a fill-in-the-blanks kit may not be entirely in the handwriting of the testator, and may not be valid as a holograph will. Ideally, the advice of a lawyer should be sought out. The cost of a properly drawn will is generally much less than the cost of potential litigation.
If a person dies without a will, the SLRA provides for a default distribution scheme. If there is a legally married spouse, the spouse is entitled to a preferential share. The legislation provides for the remaining assets to be divided between the spouse and the issue of the deceased. If there is no spouse or children, then it will go in order to the deceased's parents, siblings, nieces and nephews, or other relatives according to their degree of relatedness. The estate will only escheat and become government property if there are no living relatives.
Intestate succession has many disadvantages over a will. There is no ability to control the timing of distribution or to set up a trust. There is no way to give to a charity or cause. Taking the time to prepare a valid will and regularly updating and maintaining it is the best way to ensure that your wishes are followed.
]]>Keeping Your Will Up to Date With Your Lifetag:www.huffingtonpost.com,2013:/theblog//3.28541762013-03-11T17:23:38-04:002013-05-11T05:12:01-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
We live in an era where families have become more complex. The modern family often incorporates second and third marriages, step-children, half-children and common law spouses. Issues and tensions tend to underlie these types of relationships and they can become exacerbated when estate planning concerns arise. Although easier said than done, good communication and family meeting-style discussions can go a long way to facilitate estate plans being upheld.
We often recommend to our clients that they create a 'global' estate plan, incorporating other agreements such as cohabitation agreements, marriage contracts and separation agreements. Having these documents well-synced to wills and powers of attorneys can go a long way in sorting things out when plans go awry.
Another frequent recommendation we make to clients is to ensure their estate plans are up-to-date. Family dynamics and finances often change and a good estate plan should adapt to those developments.
There are also some 'hot-button' issues that are almost always avoided in estate planning, such as extra-marital relationships and children born outside of marriage. A comprehensive estate plan will incorporate those types of relationships either directly or indirectly to avoid claims against estates.
Poorly drafted wills are another common cause of estate litigation. Having seen so many of these, it has become clear to us that you "get what you pay for." Drafting your own will based on information found on the Internet or in a do-it-yourself kit cannot replace the skill and experience of a well-seasoned estate planning lawyer.
Complicated finances are another reason estate plans can fall apart. We live in a world where assets are increasingly mixed between different investment vehicles, such as RRSPs, investment accounts, holding companies and inter vivos trusts. These complex set-ups tend to bring out the flaws in estate plans. We often tell clients to not shy away from contacting their investment advisors and money managers in order to make sure that all the "Ts are crossed and Is dotted." For example, make sure that RRSP designations are done and that advisors have all of the necessary documentation and information that they need in the event of your death.
Another important consideration that can influence the likelihood of estate litigation is the appointment of an executor you trust and in whom you have confidence. This role is obviously crucial in the administration of an estate as executors are afforded significant rights and responsibilities under the law. It is important to carefully consider whether or not it is a good idea to appoint multiple executors, as riffs can occur between them and between those who feel slighted by not being chosen. People often automatically appoint a family member as executor when this doesn't have to be the case. It is sometimes wise to have a family friend or professional act as executor when family dynamics call for it. These people are often well-suited for the job as they can look at the family from the outside without any pre-conceived notions about what should or shouldn't be done. The most important thing to consider when appointing an executor is that it should be someone you trust implicitly because you won't be around to keep tabs on them.
Taking steps to shield your family from the undesirable process of estate litigation is one of the greatest gifts you can leave behind. Even though they might not appreciate it after you are gone, you will have peace of mind knowing that you have done everything in your power to protect them.
*Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page.]]>The Importance of Leaving a Willtag:www.huffingtonpost.com,2013:/theblog//3.27754472013-03-05T08:48:05-05:002013-05-05T05:12:01-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/over 50 per cent of Canadians do not have their testamentary wishes written down in the form of a will.
The reasons for this vary depending on individuals but we often come across a similar set of excuses. For instance, young Canadians often feel that they have not amassed significant enough assets to warrant an estate plan. Some people also have will drafting very low on their priority list and the refrain of being too busy and not having enough time and/or resources is all too common.
Some individuals also make assumptions as to what happens when you die without a will (legally referred to as 'intestacy'). They assume that their assets will pass to their spouse, children or next-of-kin when this is not necessarily the case.
Aside from ensuring that your loved ones will not have to struggle to deal with what you leave behind, drafting a will is a good opportunity to examine your personal finances. It allows you to consider your assets and liabilities and to gain a more accurate idea of where you stand financially.
Gaining an understanding of your finances is one of the reasons why it is a good idea to keep your will up-to-date once you have gotten around to drafting one. We often recommend to our clients that they review their testamentary documents every five years. Over this period, a lot can change. As we have seen over the last few years, the economic climate can fluctuate dramatically, which can have a significant effect on investments, revenues and the value of property. It is important to avoid the untenable situation where your testamentary gifts don't match up with your assets.
We are also often asked about do-it-yourself will kits as a means of avoiding expensive lawyer fees. These kits, however, are not an adequate replacement for a trained legal professional who is familiar with the nuances of estate planning. As each individual's situation is unique, trying to draft a comprehensive estate plan with a one-size-fits-all solution is likely not a good idea. A well-trained estate planning lawyer will be able to ensure that the rules surrounding the formalities of execution at the time of signing and the language used in the document satisfy statutory and legal requirements. While some kits are better than others, they cannot replace a lawyer's knowledge and experience.
There currently exists an excellent regime whereby lawyers, estate planners, accountants, insurance agents and other allied professionals work together with the client to create a plan that makes sense both from a tax standpoint and from the family dynamics perspective. Utilizing these professionals to create a well thought out estate plan can act as a cheap form of insurance for your loved ones who could be otherwise drawn into expensive and stressful litigation. Inadequate, faulty wills inevitably increase the stress and cost, for those you leave behind.
It is important to remember that more than just good documentary planning is needed to avoid family disputes and litigation. Historically, the whole estate plan was structured without the input of those who are most affected by the result, namely, the family members. It is the additional component of the family dynamics that is a significant instigator of estate litigation. In order to avoid undesirable litigation, it is wise to sit down with your family members and discuss your testamentary wishes openly and honestly. Even though this process can be difficult and uncomfortable for those involved, the emotional and financial expense that can come down the line is almost always worse.
Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page.
]]>Don't Let the Cottage Tear the Family Aparttag:www.huffingtonpost.com,2013:/theblog//3.27586812013-02-26T00:15:01-05:002013-04-27T05:12:01-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
Tragically, all too often, they can also tear families apart. The question of what to do with the family cottage on the death of the owner can be one of the more contentious issues in estate planning and can lead to emotionally charged and divisive litigation.
One reason that the cottage often becomes the centre of an estate dispute is that it affects the estate and its beneficiaries in financial ways as well as emotional ones. The cottage is emotionally charged in a way that most estate assets are not. Personal feelings and family traditions are deeply ingrained and are strongly associated with it. In many cases, the cottage has been in the family for many generations. But at the same time, the cottage is an estate asset bearing a dollar value, maintenance costs and tax obligations. Difficulty in reconciling these two divergent views of the cottage can spark animosity within even the closest of families.
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The resolution to these problems need not be as simple as giving the cottage outright to one beneficiary. In many cases, the result is that the cottage is sold on the open market and the proceeds are distributed according to the estate plan. There are, however, a number of options available to families who are willing to be more creative. One possibility is to transfer the cottage during the owner's lifetime to the next generation who may make use of it. In this way, families can start to become familiar with the responsibilities and burdens of maintaining the cottage, and the challenges involved in allocating use of it amongst themselves. The use of a trust, either inter vivos or testamentary, can be employed to transfer an interest in the cottage while maintaining some control over how it is used by the family. A well drafted co-ownership agreement can help individuals work out amongst themselves how the benefits and obligations associated with the cottage can be divided between siblings and their parents.
The options must be carefully considered against the backdrop of family dynamics while factoring in the financial consequences of the cottage. There may be significant tax obligations associated with the transfer of a cottage in the form of capital gains. This may necessitate selling the asset to pay the taxes. One way to mitigate this is to purchase life insurance products which can fund the estate's tax obligations created by the gain in the value of the cottage.
As with most contentious issues in estates, the problem can best be dealt with by good communication while the owner of the cottage is still alive. Taking the time to meet as a family can be an invaluable exercise. Beneficiaries can be asked about their feelings regarding the cottage. It may turn out that some of them are not as interested in a share of the cottage as their brothers and sisters. Some may lack the resources to maintain the cottage and will find it to be a burden rather than a benefit.
Any approach to dealing with an emotionally charged asset such as the family cottage may lead to disagreements, and it may be impossible to prevent friction during transmission between generations. By taking appropriate steps, communicating with one another, finding creative solutions, and by working together as a family, the cottage can continue to be the source of cherished memories for future generations.
Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page. ]]>Common Law and Marriage: Know the Legal Differencestag:www.huffingtonpost.com,2013:/theblog//3.27169052013-02-20T07:18:46-05:002013-04-22T05:12:01-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
There is a common misconception that common law couples have the same rights as married couples. Unfortunately, this often means that individuals in common law relationships fail to plan properly for what will happen when one spouse passes away. In reality, there are important distinctions between the rights of married spouses in Ontario and the rights of common law spouses.
One key distinction is that under Ontario's Family Law Act, on the death of a married spouse, the survivor may elect for an equalization of net family property. Essentially, he or she can choose to divide property in a divorce-like fashion rather than to accept what he or she might be entitled to under the deceased's will or what he or she might receive under the laws of intestacy. This right is not available to surviving common law spouses.
Another distinction comes into play when there is no will in place, or when there are assets that are not covered under a will. These assets would normally be distributed under the intestacy rules in the Succession Law Reform Act. While married spouses are entitled to inherit on an intestacy, common law spouses do not have this right. If there is no will, they may be left with nothing.
There are, however, a number of claims available to common law spouses. A spouse, married or not, may claim support as a dependant of the deceased under Part V of the Succession Law Reform Act. A number of equitable claims are available to common law spouses as well, including constructive or resulting trust claims, claims for unjust enrichment, and claims on the basis of quantum meruit.
An ounce of prevention is worth a pound of cure, as they say. Careful planning can spare a grieving partner the difficulty, expense and emotional strain of litigation.
A domestic contract or cohabitation agreement in writing can be a useful tool for delineating the rights of each spouse towards the other's estate. These agreements can be entered into before cohabitation begins, or at any time during the relationship. The agreement can be updated as the circumstances of the parties evolve and the relationship grows and changes.
Other estate planning tools play a critical role in protecting common law partners. A will is one way to address the needs of an unmarried spouse. Trust arrangements can be another invaluable tool for setting aside assets for the benefit of a spouse. A common law spouse can be designated as a beneficiary of a life insurance policy as well. Whatever arrangements are made, an estate plan should be revisited every few years or upon a significant change in circumstances like the birth of a child.
The key to avoiding future litigation is good communication. People in common law relationships should be open and transparent with one another in discussing their estate plans. A lawyer should be consulted as well, to ensure that misconceptions of the law do not lead to unintended results. The parties should carefully document their intentions with respect to estate planning steps. This will be of some assistance to the survivor if disagreement or litigation arises after one spouse's death. Communication may also help other family members feel included in the process.
Despite the similarities between common law and married couples, it is not safe to assume that they are the same in the eyes of the law. The process of going through a legal marriage can have a substantial impact on the entitlement of the surviving spouse to the other's estate. Couples should take the time to think these issues through and to talk about them. A careful and current estate plan can prevent the unintended heartbreak of a surviving spouse who is inadequately protected.
*Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page. ]]>Does Your Will Leave Loved Ones With Enough?tag:www.huffingtonpost.com,2013:/theblog//3.26638392013-02-13T08:47:22-05:002013-04-15T05:12:01-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
In our practice, we often see instances where surviving spouses are not adequately provided for. With more wealth comes an enhanced lifestyle and testators often fail to take this into account when drafting their wills. What is thought to be enough at the time might not be enough in actuality.
In Ontario, Part V of the Succession Law Reform Act (the "SLRA") provides a comprehensive scheme for claims for support by dependants of the deceased. The relevant section is s. 58(1), which states:
"Where a deceased, whether testate or intestate, has not made adequate provision for the proper support of his dependants or any of them, the court, on application, may order that such provision as it considers adequate be made out of the estate of the deceased for the proper support of the dependants or any of them."
Section 57 of the SLRA sets out a two-part test as to who qualifies as a dependant. First, the dependant must be a spouse, parent, child or sibling of the deceased; and second, the dependant must also be a person to "whom the deceased was providing support or was under a legal obligation to provide support immediately before his or her death."
The terms "spouse," "parent" and "child" all have definitions under sections 57 and 1(1)-(2) of the SLRA. For example, "spouse" can include a former spouse, common-law spouse and a same-sex spouse. A "child" can include a grandchild or a person whom the deceased has demonstrated a settled intention to treat as a child of his or her family (other than a foster child).
Section 62 of the SLRA lists a wide range of criteria for assessing support. Each case is determined on its facts as they relate to this list, which is made up of largely financial/budgetary criteria. However, the 2004 Ontario Court of Appeal decision of Cummings v. Cummings is widely viewed as adding "moral obligation" as a criterion for determining support and, furthermore, as a ground for declaration of dependency.
Dependants' support claims can often be a long and drawn out process, full of bitter infighting and disputes between the alleged dependent and the beneficiaries over how much (if any) should be paid for support. The length of time often involved in a litigious proceeding can lead to an obvious dilemma: If a person is truly a dependent of the deceased it means just that, that they are dependent on the deceased for their well-being.
If a person is truly dependant in every sense of the word, how will they support themselves while the application is still before the courts? Thankfully for a dependent in this situation, the SLRA allows the court to make an order for interim support pending the resolution of the application. Section 64 of the SLRA provides:
"Where an application is made under this part (Part V) and the applicant is in need of and entitled to support but any or all of the matters referred to in section 62 or 63 have not been ascertained by the court, the court may make such interim order under section 63 as it considers appropriate."
The test to determine if an alleged dependant of the deceased is entitled to interim support is essentially the same test as to determine if a dependant is entitled to support at all, as detailed above.
In order to avoid the expensive and stressful process of estate litigation that can arise from a dependant support claim, it is important to have a well thought out and well-drafted estate plan. It is wise to sit down with your family and the beneficiaries of your estate and have an open discussion about your plans. It is important to "do the math" and realistically determine what will be necessary to leave to a dependant, so that they may maintain their current lifestyle for the rest of their life.
*Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page. ]]>The Delicate Art of Changing a Willtag:www.huffingtonpost.com,2013:/theblog//3.26174902013-02-09T15:24:51-05:002013-04-11T05:12:01-04:00Suzana Popovic-Montaghttp://www.huffingtonpost.com/suzana-popovicmontag/
When meeting with a client about a change to a will or an estate plan, lawyers must first determine whether or not the client is capable of giving instructions. In this episode of Hull & Hull TV, we discuss the importance of assessing your client's capacity, how to undertake this delicate step in a client meeting, and how to spot signs of incapacity or undue influence.
Capacity is always an uncomfortable subject to raise with a client. It can be difficult to really explore with a person whether they truly understand the instructions that they are giving well enough to meet the legal tests involved. Legal definitions of capacity differ from medical ones, and differ from activity to activity. In order to make a valid will, a client must meet the classic test for capacity in Banks v. Goodfellow, which essentially asks whether the person knows and understands the nature and effect of his or her dispositions, including what his or her assets and liabilities may be, where those assets will flow under the estate plan, and whether the client has considered the people one might expect them to consider when preparing a will.
Though medical conditions can certainly affect a person's capacity, the test is not strictly a medical one and a full and proper assessment of a client's capacity can be very challenging. Individuals suffering from mental illness may often have their social graces, and can superficially appear to be fully alert, attentive, and conversational.
A careful lawyer should ask open-ended questions. Have the individual explain the estate plan and the reasons behind it in his or her own words. Checklists and other tools may be very helpful in ensuring that nothing is left out, but must be supplemented with careful probative questioning about anything that seems out of order. Always take careful notes of all meetings or conversations with the client.
Tragically, the elderly may become vulnerable to undue influence or threats of coercion from individuals seeking to exploit them. A lawyer meeting with a client about a will or estate plan must be on guard for this as well.
One red flag is when an a friend or relative of the client arranges the meeting or brings the client to the lawyer's office. Always ensure that when meeting with a client, no third parties are in the room when taking instructions or assessing capacity. Take care to explore with the client who may be influencing their testamentary decisions, and ensure that the advice and influence of people in the client's life has not crossed the line from supportive advice to coercive undue influence.
As the population ages, the number of challenges to estate plans based on testamentary capacity or undue influence is increasing. Taking careful steps to assess capacity, asking the right questions, and properly recording them, are part of a lawyer's professional and ethical obligations to their client. But lawyers must go beyond this to ensure that the end result is that we competently achieve what the client is trying to accomplish with a well-prepared and well-documented will or estate plan.
*Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page. ]]>