bechailaw

5 Tips for Executors

nadia@bechailaw.ca (Nadia Bechai) — Wed, 10 Jan 2024 14:22:29 GMT

Key recommendations for executors

Acting as an executor carries a considerable amount of responsibility and can be more challenging than is often initially expected. To help executors navigate their obligations, this post provides 5 tips for executors.

1. Ask this one question. If you know that you are named as executor under a will, consider asking this one important question: where is the original signed will stored and how will I obtain access to it? The executor requires the original signed will to properly administer the estate. Without it, there will be hurdles to the administration process. The executor also requires quick access to the will following death: while the deceased’s family may be involved with making funeral arrangements, at law it is the executor who is responsible for the body of the deceased. Therefore, the funeral home may request to review the will when taking instructions for the burial/cremation of the deceased.

2. Don’t delay. It is the executor’s duty to take care of all the estate’s assets. Therefore, the executor must determine what these are and secure them in a timely manner. This may involve changing the locks on the deceased’s home, safely storing valuable assets, or freezing volatile investments. There will also likely be tax and other filing deadlines, so it is important to determine what these are to ensure that none are missed. Moreover, there is a general rule called the “executor’s year” that claims that an executor has one year to administer an estate of average complexity. Therefore, it is best not to delay the estate administration.

3. Get organized. Executors are required to account and provide information to the beneficiaries of the estate. Therefore, it is important to keep all receipts and statements from all transactions relating to the estate. Subject to the terms of the will, executors are also legally entitled to fair and reasonable compensation from the estate for the work performed in administering the estate. As such, it is a good idea for the executor to track the time spent on attending to the various tasks. This will substantiate the amount claimed by the executor in compensation.

4. Communicate regularly with beneficiaries. Beneficiaries are entitled to know what is happening with the administration of the estate. To help stave off disputes or claims against the executor, it is a good idea to periodically advise beneficiaries of the status of the estate.

5. Get professional advice. Executors have a fiduciary duty to the beneficiaries of the estate: they must follow the law and act with the highest ethical standards. Executors are expected to act as would a “reasonably prudent individual”, but that does not mean simply taking a common-sense approach. Many areas of the law can touch an estate and are complex – family, real estate, and tax law to name a few. Therefore, acting as a “reasonably prudent individual” often requires the executor to seek the professional advice of a lawyer or accountant. Failing to do so can be deemed a breach of fiduciary duty and expose the executor to personal liability. Therefore, it is best to seek the assistance of professionals early in the administration process.

* A version of this post also appeared on the website of Children Believe, a charitable organization, following a nationwide presentation given by Nadia Bechai to its donors.

Mortgage Financing Assistance

nadia@bechailaw.ca (Nadia Bechai) — Thu, 17 Nov 2022 21:44:13 GMT

Proper estate planning is critical when being added to title of someone else's property

This post is part 2 in our series on “inter vivos” gifts. While strictly speaking, there is no gift in the scenario examined here, the strategy employed is commonly seen as a manner by which family members (usually older generations) are financially assisting younger generations. It therefore forms part of the discussion on the intergenerational transfer of wealth.

Recall our family from part 1 in this series : Bruce and Moira have three adult children, Charles, Jennifer and Heather. Charles and Jennifer have steady jobs, and each owns a home in which they live with their families. Heather is single and wishes to purchase a condo.

Let’s assume this time that Bruce has passed away, leaving mom – Moira – and the three adult children. Heather now has sufficient funds to put towards the down payment for the purchase of her condo. However, Heather’s income falls short of being approved for mortgage financing.

Heather and mom, Moira, decide to do what many buyers in today’s market do to overcome this hurdle: Moira agrees to be added to Heather’s mortgage application and, as many lenders require, she is correspondingly added to title of Heather’s condo. Let’s assume that Moira takes only a nominal interest in the property, say 1%. Therefore, Heather legally owns 99% of the property while her mother legally owns 1%.

Moira and Heather decide to go one step further to clarify their intentions behind this ownership structure. They sign documents stating that Jennifer alone has made the down payment, that she will make all mortgage payments and that she alone will fully cover all expenses relating to the condo. The parties acknowledge that Moira was listed on title simply to facilitate the purchase of the condo and that really, the condo belongs to Heather.

This strategy is a common one – it helps family members enter the real estate market when they would otherwise be unable to. However, whenever implementing financing and legal strategies, it is important to appreciate that they bear some risk. In this scenario, consider the following:

1. The 1% owner becomes incapable. What happens if Moira is mentally incapable when Jennifer decides to sell the condo? If Moira is still on title, Heather will need someone with legal authority to consent to the sale on Moira’s behalf. Did Moira have a Power of Attorney for Property? Is the person she appointed someone who will work with Heather? If Moira does not have a Power of Attorney for Property, Heather will be unable to sell the condo until someone applies to the court and is appointed the legal guardian for Moira’s property. That process takes time and is costly, not to mention that it leaves room for disagreements among family members.

2. The 1% owner dies…without a Will. When someone dies without a Will, the Estates Act (Ontario) sets out who can apply to become Executor of the estate, and the Succession Law Reform Act (Ontario) determines who inherits from the deceased’s estate.

In our fictional family, Charles, Jennifer and Heather would all rank equally to apply for the role of Executor, and all three would be entitled to share equally in Moira’s estate. If everyone gets along, hopefully everyone agrees about who should become Executor. Otherwise, there could be significant delays in getting Heather full title to her condo.

Furthermore, let’s hope everyone accepts the documentation that Heather and Moira signed about the “true” ownership structure. Sadly, I have seen cases where the documents do not go far enough to indicate what is to occur to title on the death of a party. This leaves open the argument that the 1% interest is in fact shared by the beneficiaries of the estate, i.e. Charles, Jennifer and Heather. Note also that without proper estate planning, Moira’s 1% legal interest in Heather’s condo will likely increase probate fees payable by her estate.

If Moira had a Will, she could appoint an Executor which would help expedite matters and avoid the possibility for disagreements among the children. Furthermore, her Will could make a clear declaration of intention to bolster the documentation signed with Heather, explicitly stating that the 1% interest in Heather’s condo does not form part of her estate. Finally, there may also be opportunities to reduce probate fees payable by Moira’s estate on her 1% interest in the condo.

3. The 99% owner dies or becomes incapable…and the lenders need to be paid. No doubt, the lenders have required Heather and Moira to be jointly and severally liable for the mortgage payments. That means that if, for example, Heather dies before Moira, Moira is fully responsible for the mortgage payments until such time as the condo is sold. Is Moira in a financial position to make the payments in such a case? At what cost to her? Is it recorded anywhere whether Moira will be reimbursed for covering these payments: will she be reimbursed as to 100% or 99% of the expenses she paid, if at all? When the condo is sold, is it clear whether Moira will obtain 1% of the net sale proceeds, or nothing at all? No doubt the beneficiaries of Heather’s estate will be paying close attention as to what Heather and Moira explicitly agreed to, and what was not sufficiently stated. If Heather has a detailed Will, it would help answer these questions.

If you have someone else on title to your home or you have been added to title to someone else’s property, consider having conversations with your fellow titleholders about their estate plan. Planning for death and incapacity helps minimize the risk of family discord in future, not to mention the corresponding costs incurred to resolve such disputes.

Inter Vivos Gifts - Part 1

nadia@bechailaw.ca (Nadia Bechai) — Thu, 03 Nov 2022 18:06:34 GMT

How do cash gifts made during life affect estate plans?

This is part 1 of a series of posts on " inter vivos" gifting (i.e. gifting between living people). I encourage you to come back over the next few weeks to read about the various ways people are transferring their wealth prior to death, and how it impacts estate planning.

***

“We are on the cusp of the largest intergenerational transfer of wealth.”

You have probably heard this statement and thought that the transfer is looming because a large portion of the population is nearing death.

Until recently, that’s what I thought, too.

But I’m starting to see something different happen: clients are telling me that they want to make significant financial gifts to their children now, rather than wait for death to trigger the transfer.

With increasing interest rates, rapid inflation and slow growth in wages, parents are wondering what they can do, now, to help their children enter the real estate market (and finally move out!) or buy bigger homes to accommodate growing families.

To start this series of posts on inter vivos transfers, let’s look at the most straightforward gift: a one-time lump sum gift of money to a child who is single.

In our fictional family, Bruce and Moira are the married parents of three adult children: Charles, Jennifer and Heather. Charles and Jennifer have steady jobs, and each owns a home in which they live with their families.

Heather graduated from university. She has a secure job. For some time, she was renting a condo downtown near her office but with the increase in rental prices, she decided to move back home. If she continued to rent, she would never be able to save enough for a down-payment to purchase her own home. Bruce and Moira would like to see her settled into a place of her own, rather than reinhabiting her childhood bedroom – as would Heather!

Bruce and Moira are prepared to gift her $75,000 – no strings attached – which they hope will assist Heather in making a down-payment for a condo.

From a tax perspective: all good. In Ontario, inter vivos transfers of cash are not taxed to the gift giver nor the recipient.

Like many parents in Bruce and Moira’s situation, they want to help Heather enter the real estate market, just as Charles and Jennifer have already done. These older children are not currently in need of financial assistance, and in any case, Bruce and Moira could not comfortably make similar gifts to them at this time.

I ask Bruce and Moira: what does your Will say about how your assets are to be divided on death? In Bruce and Moira’s case, their existing Will – which still reflects their current intentions – states that everything is to be distributed equally among their 3 children. Therefore, without doing anything further, Heather will receive $75,000 from her parents now, while Charles and Jennifer will not – not now, nor in future. Therefore, while Bruce and Moira ultimately wish to treat their three children equally, that’s not what will happen.

To avoid possible disputes or hurt feelings, Bruce and Moira may want to consider including an equalization mechanism in their Wills – something estate planning lawyers refer to as a “hotchpot” provision. A hotchpot clause would provide that on the last to die, gifts given during Bruce and Moira’s lifetimes must be treated as an “advance” on the recipient child’s inheritance and therefore considered when equalizing the pot among the children.

What about Heather? If in future, Heather marries or invites a partner to live with her, she will want to consider how these people may acquire rights to the $75,000 gift. She may always want to keep this financial gift in mind and plan around it with a family lawyer and an estate planning lawyer.

In conclusion, inter vivos gifting play an integral role in the estate planning process. Whether you are the gift giver or the recipient of a generous amount of funds, it is important to review these with your estate planning lawyer.

Next time, I will review how another common way of assisting with the purchase of a home – adding parents to title - affects estate planning for parents and children alike. What if instead of gifting $75,000 to Heather, Bruce and Moira were added to title of Heather’s condo?

Succession Planning

nadia@bechailaw.ca (Nadia Bechai) — Fri, 21 Oct 2022 19:21:22 GMT

Five practical tips for small business owners

When small business owners inquire about succession planning, advisers understandably jump to tax planning strategies.

But what are some of the tangible, day-to-day things that small business owners can do to assist with succession planning?

Keep your minute books up to date. It may seem trite to say, but it’s important to keep resolutions signed, director and shareholder registers current, and share certificates issued or cancelled. If these tasks are not attended to, they create a lot of work (read: legal costs) to correct in future. In the worst case, litigation may ensue because the person in charge is no longer around to help “set the record straight.”

If your business will likely be sold on your death/incapacity, a purchaser will want to see a clear and clean transfer of shares throughout the life of the corporation; resolutions properly approved; and people appointed and removed from offices in the manners required by law. All agreements binding on the corporation should be kept in the minute book, such as Shareholders’ Agreements, stock options, etc. A purchaser will want to ensure that they are not inheriting liabilities and possible litigation. An up-to-date minute book is a critical part of that equation.

If your business is not one that will be sold, then your minute book still needs to be up to date to substantiate tax filings. Share ownership must be clear, so that CRA is satisfied that the right person is paying the right amount of tax.
Follow through on Death and Incapacity Clauses. If you’re incorporated or part of a partnership, be sure to follow through on the requirements of the death and incapacity clauses of your shareholders’/partnership agreement. If the agreement requires that each party maintain life insurance, has this been done - in the right amount and with the appropriate beneficiary designated? If life insurance is not called for, be sure to map out how your interest in the business will be liquidated. Be sure to answer the question: where will the cash come from to buy out your interest?
Who will do the work? In many cases, the “business” is you. For example, if you operate a regulated business – a legal/medical/dental/accounting/psychology, etc. practice, then you may be wondering what happens if you are no longer able to practice. First, be aware of the rules imposed on you by your regulatory body in the event of your incapacity or death. Of particular concern are your client/patient files: these will have to be handled in accordance with applicable law. Therefore, ensure that your Will and Power of Attorney for Property respect your professional rules, or at the very least, ensure that your Will and POA for Property flags the matter for your Executor/Attorney to investigate. As recommended by several professional regulators, it is also a good idea to get a limited Power of Attorney for Property for your practice, whereby you appoint a colleague to manage your practice in your place.
Develop systems. Whomever steps in for you will need access to certain information to carry on your business. Think of a way to make this important information available to them. Consider preparing a short manual to help guide your Executor/Attorney through your business processes and records.
Build your team. An accountant, financial adviser, lawyer and others who grow alongside your business will be invaluable as you build your business and contingency plan for it. They will also be great sources of information and support to your Executor/Attorney when they are called upon to step in. So start early with building the right team of professional advisers. Those closest to you will be glad that you did.

Digital Memories

nadia@bechailaw.ca (Nadia Bechai) — Wed, 06 Jul 2022 13:06:31 GMT

Will anyone be able to access your digital photos and videos?

"What happens to my digital assets on death?"

Some are referring to cryptocurrencies, online accounts, business or personal websites. But most are asking about the memories they’ve captured in photos and videos, then shared on Facebook and Instagram, and stored on their phones or in the cloud.

Planning for your sentimental digital assets is an integral part of estate planning and certainly something to discuss with your lawyer as you prepare your Will.

But in the meantime, you may like to check out this website produced by the Society of Trust and Estate Practitioners (STEP), a global body of professionals that help families with estate planning and administration. There you will find:

links to instructions on how to adjust your “legacy settings” on popular social media accounts (Facebook, Instagram, etc.) and cloud storage platforms such as Apple and Google; and
suggestions on what needs your consideration as you plan and how to discuss your wishes for your digital assets with loved ones.

Take a look at this video produced by STEP to help you think about the value of your digital memories.

The "Great Junk Transfer"

nadia@bechailaw.ca (Nadia Bechai) — Wed, 25 May 2022 20:50:13 GMT

When estate planning with clients, I am sometime asked, “What actually happens with all my stuff? How does that all work?”

That’s when I wish I could introduce them to my Executor clients who will undoubtedly sigh, maybe roll their eyes, shed a tear, or grit their teeth with frustration and resentment.

This past weekend, the Globe and Mail ran sister articles on this topic by Erin Anderssen - great reads if you have a chance to check them out:

“The great junk transfer is coming. A look at the burden (and big business) of decluttering as Canadians inherit piles of their parents’ stuff.”

“Are you inheriting your parents’ clutter? Eight tips for managing intergenerational junk”

Anderssen points out that in the next decade, Canadians will undergo the largest wealth transfer in history, estimated at about $1 trillion. But the bank accounts and portfolios make up only one piece of the inheritance. The other, consists of “piles and piles of stuff with nowhere to go.”

“The parents of baby boomers, the oldest generation alive today, were savers, having learned in lean times of war and the Great Depression to treasure what they owned. Their children were consumers. Together, they will leave behind houses jammed with mahogany dining sets, silver platters, crystal figurines and all manner of tchotchkes that their kids don’t want. And, even if they did want them, this Intergenerational Dump is happening just as millennials are facing a housing crisis, which will leave many of them either renting or living in much smaller homes. Grandma’s massive china cabinet is not going to fit.”

The truth is, dealing with “the stuff” is the inheritance no one ever wants: it takes countless hours to cull through, stagnates grief, and reminds those burdened with the task of their own mortality. Moreover, as Anderssen put it, “the whole process shakes awake buried sorrows, sibling rivalries, [and] family dysfunction. It is never just about the stuff.”

In my experience, it’s not necessarily the division of valuable pieces that forever strain relationships. Rather, family bonds break over who gets a treasured family board game, a grandmother’s old rickety rocking chair, or the holiday decorations. It is the division of items that hold memories and tell stories that unearth unhealthy dynamics and cause the heartache.

Here are a few points drawn from Anderssen’s articles – along with some points of my own – that may help you think about how to organize your home to help with the inevitable transfer of things. Getting organized can also help minimize friction over who gets what.

Separate the important from everything else. When you get important paperwork in the mail, make a habit of filing it straight away instead of having it end up in the kitchen junk drawer, a pile of Christmas cards or tucked away inside a book as a bookmark. Your Executors will need information about your life insurance policy, your bank accounts, and your property taxes. Make it easy for them to find.
Talk to your loved ones. Ask the children what they want and what they don’t want; and children, speak up! If you don’t think about it now, you will have to negotiate these things with your siblings while you’re all grieving (and everyone makes the time!) If you sense that there may be a dispute brewing, talk to your lawyer – there are ways to address the division of things in your estate plan.
Gift the things. People often speak to me about divesting their assets (i.e. money) to their children during their lifetime. The impetus behind this line of thinking is twofold: on the one hand, these clients are looking to minimize probate taxes on death, and on the other hand, they want to offer financial help to the next generation when it’s needed. I would encourage you to think about gifting your things, too, during your lifetime. If you know a child would love your cake stand, cuff links or corning ware, and you don’t have a need for all of it anymore, maybe gift it now and watch them enjoy it. No doubt you will be happy to see it all being used. Imagine taking a cake over to your grandchild’s first birthday using the cake stand, or gifting the cuff links to your son with a new shirt on a milestone birthday, or baking a lasagna for your daughter in the corning ware as she and her family recover from COVID. Passing on the "things" in a memorable way will be a lovely experience for all involved.
With the rest, de-clutter. And again. And again. It is an exercise we must repeatedly do throughout our lifetimes. As Anderssen suggests, one room at a time, start to pull out the superficial items. Things like appliances (or the boxes they came in), old makeup and perfume bottles, books you will never read again. If you don’t remember why you kept something, your loved ones won’t either. If you don’t use your china set, and no one wants it, Andersson recommends keeping one piece and giving away the rest.
Photograph the meaningful items you don’t save. It might help you part with them as you de-clutter, and avoids your surviving ones negotiating feelings of guilt as they decide to give them away.
Digitize family photo albums. That way, photos can easily be shared without sibling disputes - who keeps them or who will take on the task of digitizing them. Add the images of those meaningful items from no. 5 above with a little blurb about why they were important to you (your children may not know!)

Finally, don’t forget…cottages, storage lockers and safety deposit boxes: these need your attention, too.

On Giving

nadia@bechailaw.ca (Nadia Bechai) — Thu, 05 May 2022 18:41:36 GMT

Within minutes of their birth, my twin daughters were whisked off to the NICU at Michael Garron Hospital. It was a numbing experience, one that I look back on easily detached from the moment, like a fly on the wall watching it all unfold. Maybe the detachment was an act of self-preservation. Or maybe it was just all too surreal. Because it is WEIRD to birth children that you carried for many months, and then all of a sudden have them be taken away to an unknown location to become patients.

In the days that followed, I spent most of my time by their side in the NICU, watching them through the glass of their isolettes. The nurses taught me how to change their diapers while being mindful of all the cords that monitored and fed them. For a while, that was the most that I touched them.

One day, as they were beginning to thrive, I went to pick up a coffee from the hospital lobby. I returned to the NICU where a nurse was finishing up a diaper change on one of the girls. She then proceeded to dress them. Like, in real baby clothes. Until that point, they had only known diapers, cords and the warmth of their isolettes.

Watching her button the onesie, I felt stunned. For the first time I saw my girls as my babies , no longer patients . I felt hope. And joy. So much joy! I asked the nurse, where did the clothes come from? She answered that they were donated by other moms.

With my son, I was already part of a hand-me-down train. We had received used clothes from family and friends, and passed them on when he outgrew them. All very practical.

But those onesies, they meant something entirely different to me.

It struck me then, and sticks with me still. I am privileged. I am not in need. I am blessed beyond all measure. But in that moment, I was the recipient of someone’s “giving”. This was a gift from someone whose perspective was also changed through a onesie. Someone who knew the hope and joy that came from a onesie on a baby in the NICU.

The days that followed, I would return to the coffee shop in the lobby, but this time pausing for a moment in front of their donor recognition wall. I wondered if the mom who donated the onesies had her name up there. I wanted to know who she was. I wanted to thank her. But I also realized that maybe she didn't want or need to be known. Whether she was on the wall or not, she knew when she gave the onesies what it would mean to a mom like me. She already knew in her heart how grateful I was.

It had me think about “giving”, “donations”, “charity” and “philanthropy”. I was raised with the concepts of tithing and giving to those in need, but that onesie gave me a much broader lens on the purpose and meaning of giving. It is undoubtedly important to give, and I think that our sometime awkwardness around how to give, can get in the way.

It is therefore quite serendipitous that the Planned Giving Committee at MGH has asked me to speak at their professional advisors’ breakfast next week on how to talk about philanthropy within families.

As a wills and estates lawyer, I believe that preparing a Will isn’t just about getting this thing done and checked off the to-do list. There is no doubt that it can be a very practical exercise, much like a hand-me-down train. And absolutely: it’s about having peace of mind.

But it can also be something more: it can be something you do, that does good, and that you can feel really good about. If you think about it, you could take something that really touched you, and give that moment power to continue giving.

The end result?

The people who leave charitable donations in their Wills - no matter the form or amount - to people or causes close to their hearts, usually finish off the process with a sense of gladness and gratitude.

I am lucky to be able to help people through this process, and to witness the ripple effects it carries through their families – whether during the donor's lifetime or on death.

Something to think about…or better yet, talk about.

Blends and Lawyers

nadia@bechailaw.ca (Nadia Bechai) — Wed, 16 Feb 2022 14:52:38 GMT

How many lawyers do we need?

In recent weeks, the question has come up a few times: “We are a blended family. Do we each need a lawyer, or can we use the same lawyer to prepare our Wills?”

When advising a client – no matter the relationship status – it is important to determine who may have a claim against their estate and to plan accordingly.

Where a couple only has children from their current relationship, usually only one lawyer is retained to prepare their Wills. The partners – whether married or common law – present the same legal obligations on death, namely to each other, their children and any other dependents they may have. They also often share the same wishes as to the distribution of their estates. Therefore, “mirroring” Wills are typically prepared: these provide that when the first partner dies, everything is left to the surviving partner and then when they die, the assets are left to the children of their relationship. In essence, each partner’s Will provides the same instructions.

Blended families – whether legally married or not – present different dynamics. One or both partners have children from a prior relationship, and they may or may not have children together. The legal considerations are therefore more involved.

In a blended family, each partner’s obligations to their former partner must be considered. Are there Separation Agreements or Divorce Orders in place? If not, what is the legal status of the prior relationship? Has there been an informal arrangement or pattern of behaviour between the parties that gives the former partner rights to the estate? Are life insurance policies being used to secure payment of spousal support? What about child support? What has been decided (if anything) about guardianship of the children should both parents die?

Furthermore, the obligations to the new partner and children must be considered. How will legal obligations to the current family be met, while also satisfying the rights of the prior family? While just the legal claims can be challenging to balance, there is more at play.

Just as important as the legal obligations, it’s important to consider how you want to distribute your estate.

With blended families, some partners may want to treat all members of their families equally, but this may be unsatisfactory to the current partner. Other partners prefer to take a different approach and provide more for those who “need the money more”. Furthermore, there may be strained relationships among the various parties so avoiding conflict may be a top priority.

Therefore, to plan effectively, honest and open conversation with legal counsel is critical.

If one lawyer is retained to draft Wills for both partners, this would be what we call a “joint retainer”. The nature of this relationship is important to understand. It means that while information shared between the couple and the lawyer is kept confidential and protected by solicitor-client privilege, the lawyer cannot keep confidential information shared by one of partner from the other. Our rules of professional conduct require that a three-way conversation is always maintained.

Couples of a blended family are therefore encouraged to ask themselves: can I be fully open and honest about my wishes in front of my partner?

If yes, then perhaps retaining one lawyer makes sense. In fact, if it is the rare (but not impossible) situation where the couple of the blend will have mirroring Wills, then it may be important to have one lawyer. Otherwise, the Wills ultimately produced may not in fact mirror.

However, if you are hesitant about where the conversation with your lawyer may lead and whether you will feel comfortable enough to express yourself freely in front of your partner to provide your lawyer with instructions, then perhaps it is better for you and your partner to retain separate legal counsel.

This can be a tough question to answer, but a little soul searching up front can help simplify the estate planning process, and perhaps more importantly, lead to a smoother distribution of your estate.

Changing your relationship status?

nadia@bechailaw.ca (Nadia Bechai) — Wed, 02 Feb 2022 14:00:39 GMT

New rules may impact your estate

For the first time in a long time, some of the rules of succession have changed.

Effective January 1, 2022, amendments to the Succession Law Reform Act (the “Act”) came into force. The key changes alter who can inherit from our estates when our relationship status changes. While some of the amendments are long overdue, the true impacts of the new rules will not be apparent until the courts have had the opportunity to interpret them.

1. Marriage no longer revokes a will

You may have heard this long-standing rule: “marriage revokes a will”. The basis for this rule was to protect married spouses’ rights to each other’s estates.

Let’s say, for example, that Jane prepared a will in 2008 leaving her entire estate to her sister Sarah. Then in 2010, Jane married Chris. They enjoyed a happy marriage but Jane never got around to updating her will before she died in 2019. Under the old “marriage revokes a will” rule, marrying Chris nullified Jane’s old Will so that Chris’ matrimonial rights to Jane’s estate were preserved. Sarah would not have inherited anything.

However, in the face of the increasing prevalence of predatory marriages, this long-standing rule was repealed. The concern centered around younger people marrying older vulnerable persons for – quite bluntly – their money. Now, if a person makes a Will and later marries, the act of marriage will not revoke the will.

2. Separated spouses with a will

Previously, separated spouses could still benefit from a former spouse’s will.

Consider for example Steve and Ellen. During their marriage, Steve and Ellen prepared mirroring Wills where they named each other as Executors of their respective estates and gifted everything to the other. In 2017, Steve and Ellen separated, but being very busy with settling their affairs, they never updated their wills. Then Steve died in 2021. Because they were not then divorced but only separated, they were still married and hence, "spouses". Ellen was therefore still entitled to act as the Executor of Steve’s estate and inherit the entirety of his estate under the mirroring wills they had prepared during their marriage.

As you might imagine, that outcome may not have been Steve’s intention. Recognizing this and the fact that it takes time to settle a divorce, the Act now provides that, unless a will specifically states otherwise, separated spouses are no longer able to benefit under their ex-spouse’s will.

As of January 1, 2022, if a married couple separates and one of the spouses dies, then the will is interpreted as though the surviving spouse has pre-deceased their ex. This means that the alternate named Executor under the will, will administer the estate and the Executor must look to the alternate beneficiaries under the will.

While the amendments to the Act include a definition of what constitutes a separation, it has many lawyers scratching their heads. Clarity as to what constitutes being "separated" will likely require clarification from the courts.

3. Separated spouses but no will

When a married person dies without a will, the Act provides that the surviving spouse is entitled to a preferential share of the deceased’s estate before funds are distributed to anyone else. Currently, the preferential share is $350,000.

Until this year, separated people – because still married and not divorced – were considered “spouses” and therefore entitled to the preferential share.

With the recent amendments to the Act, separated spouses are now treated like divorced couples – the survivor of them is not entitled to the preferential share. However, again the definition of what constitutes a separation may be unclear in certain circumstances. It will be interesting to see how the courts interpret this term.

What should we make of all this? As always, it is important to have an estate plan, and to review it as life circumstances change. That way, things will unfold as hoped, expected and intended.

Death Shaping Life

nadia@bechailaw.ca (Nadia Bechai) — Wed, 01 Dec 2021 16:10:42 GMT

Thinking and talking about death can shape how you live

Rarely do we hear about people on their deathbeds thinking about their professional accomplishments, the material things they have amassed, or the amount sitting in their bank accounts. Rather, as Australian nurse Bonnie Ware noted in her book “Top Five Regrets of the Dying” , those nearing death tend to express the following regrets:

I wish I’d had the courage to live a life true to myself, not the life others expected of me.
I wish I hadn’t worked so hard.
I wish I’d had the courage to express my feelings.
I wish I had stayed in touch with my friends.
I wish that I had let myself be happier.

Inherent in these regrets, seems to be an acquired wisdom about the value of authentically connecting with loved ones. They express a deep realization that perhaps what’s most important in life, are the moments – big and mundane – that we experience with loved ones, openly sharing ourselves with them.

Yesterday, the Ontario Bar Association wrapped up “Make a Will Month”, an annual public education campaign about the importance of having a Will and having it done by a lawyer. You may have seen banners like this one on your social media platforms or local library over the last month:

Every year, I wonder how many people are called to action by “Make a Will Month”. Rarely when I run into friends, neighbours or other parents in the playground, do people ask me, “Why do I need a Will?” Instead, people often say, “we really need to get ours done” or “we’ve been meaning to do ours for years.” But they keep putting it off.

Don’t get me wrong, I think the campaign is critical in helping correct common misconceptions about the impact of death and the very real headaches that are left behind for your loved ones when there isn’t a properly drafted Will in place. However, in my experience, people usually know – at least on some level – that they need a Will.

So what is it that stops people from picking up the phone and calling a lawyer? Here are the typical reasons I encounter:

The perception that creating a Will is too costly.
Thinking that creating a Will is not urgent and that there is still time.
Fear of death and talking about mortality.
Avoiding family tensions they may have to face to create a Will.
That visceral feeling that our possessions and money won’t matter on our deathbeds, so why pretend they matter now?

Let’s address cost and urgency first. Consider for a moment how much you spend on your annual car or home insurance – protecting one asset, for one year. When viewed from this perspective, perhaps the cost of protecting all your assets and providing for your loved ones for as long as possible through a Will is quite reasonable after all. And, of course, death comes when it comes. We don’t know when it will happen.

But what about the general discomfort with discussing death, facing strained relationships, and that feeling that at the end of the day, none of this stuff matters? After working in Wills and Estates for several years, I can tell you that I hear things like this daily:

Where there was a Will:

“It was such a relief that my sister had planned her funeral, and even picked the hymns. I don’t know that I could have done all of that work while I was grieving.”
“Asking our friends to act as guardians for our children brought us so much closer. We are amazed at the effort they are putting into building a relationship with our kids. We just booked a family trip together!”

Where there wasn’t a Will:

“It was my fault. I was the one who resisted talking about death. I thought he would have more time. I don’t know how I will manage this mess while I get my son and I through the grief.”
“I can’t believe how bad this is. While he was in the hospital, he told me exactly what he wants done. But now I can’t carry out his wishes because it’s not what the law calls for…I made a promise…!”

This is what I know to be true: planning for your death matters. Not because you’ll spell out who gets what, but because you took care of the hard work to make things easier on those who survive you. Your planning and upfront work matters to those left behind. The way you plan to make things easier on them is part of how they will remember you.

Moreover, talking about these intimate things can bring you much closer to your loved ones. And thinking about it, really thinking about how you want to be remembered, will impact the decisions you make today. (It might even get you to start organizing your digital photos, or even printing some!)

If you don’t believe me – or you just don’t know how to go about it – I suggest you start by watching Michael Hebb’s TEDMED talk *. Hebb is the founder of “Death over Dinner” * , a fun (yes, fun!) program that aims to transform the difficult conversation about death into “one of deep engagement, insight and empowerment.” And yes, the idea is to invite your loved ones over for dinner with the intention of talking about your deaths – by breaking bread, having a laugh, and engaging on a focused topic, you’ll share a part of yourself with your loved ones, allowing you to build a deeper connection with them. What you take from this experience could be something that you carry through into other moments in your life.

And once you’ve overcome the discomfort of talking about death, call a lawyer. Because while you won’t care about all your stuff and money on death, you can make it easier for your loved ones to take care of it all, and maybe you'll decide to gift your things not just in necessary ways, but in meaningful ways.

Ultimately, you might agree with Michael Hebb’s apt conclusion: “Looking at death teaches you how to live.”

* Please note that Michael Hebb's work referenced in this blog post focuses on the economic implications of death in the United States, which are sometime different from what is observed in Canada. Furthermore, his "Death over Dinner" prompts are somewhat specific to American law. Please consult with a local lawyer to advise you about the applicable law in your jurisdiction.

Beneficiary Designations

nadia@bechailaw.ca (Nadia Bechai) — Fri, 19 Nov 2021 01:25:32 GMT

What do beneficiary designations have to do with estate planning?

A lot.

A beneficiary designation is a way of specifying who will receive the funds in your RRSPs, RRIFs, TFSAs, etc. (i.e. a registered plan) when you die. Similarly, a beneficiary designation on a life insurance policy names the person(s) who will receive the insurance proceeds payable on your death.

In Ontario, beneficiary designations can be made in one of three ways:

by completing a beneficiary designation form with the institution holding the plan (i.e. the bank, life insurance company, etc.);
including a beneficiary designation in your Will; or
having a standalone beneficiary declaration prepared by your lawyer.

To ensure that your testamentary wishes transpire, it is imperative that you review your beneficiary designations when preparing your Will. If, for example, you intend that a certain dollar amount is available for distribution, certain parties share equally in your estate, or that certain people receive their gifts only upon reaching a certain age, then it is necessary to review your beneficiary designations alongside your Will. Otherwise, the end result may be quite different from what you thought you had planned.

Here are a few common examples:

1. Unintended distributions to minors. People often complete the beneficiary designation forms provided by institutions as follows: “to my spouse, but if my spouse predeceases me, then to my sister Sarah as Trustee for my children, John and Jane.” This kind of designation has two, often unintended, consequences:

The fine print on the form typically provides that all funds will be paid to John and Jane on their 18 ^th birthdays. Therefore, if your life insurance policy provides $1 million in coverage, John and Jane will each receive $500,000 on turning 18 years old. This may not be what you had in mind.
As Trustee, Sarah may be unable to access the funds to further John & Jane’s wellbeing by, for example, assisting the guardians with funding a suitable home for their larger family. This is because the trust powers attached to beneficiary designation forms are often quite limited.

It is therefore important to review any trust terms applicable to designated funds, particularly where minor beneficiaries are concerned. It may be preferable to establish a separate trust in your Will to receive life insurance funds that can then be subject to a deferred distribution (e.g. at the age of 25) and that grants your Trustee broader powers to access the funds in the meantime to ensure your beneficiaries’ wellbeing.

2. Taxes must be paid – but consider who bears the cost. Under the Income Tax Act, you are deemed to dispose of all of your assets immediately prior to death, at the then fair market value. That deemed disposition can trigger a capital gain, which is taxable to your estate (subject to certain tax deferral strategies, like a rollover to a spouse). For example, RRSPs and RRIFs are assets that when deemed disposed on death, trigger a capital gain that is taxed to your estate.

Suppose you name your adult child Stuart as the beneficiary of your RRSP, and your adult children Sam and Simon as beneficiaries of your estate. You do this with the intention that each child receives roughly the same amount on your death. However, this type of plan often benefits the RRSP beneficiary to the disadvantage of the estate beneficiaries. This is because Stuart will receive the entirety of the funds in your RRSP, while Sam and Simon will share in the value of what remains in your estate after the payment of the capital gains tax due from the deemed disposition of the RRSPs at death. As such, your children are not treated equally.

3. Did you sufficiently provide for your spouse or dependents before designating someone else as a beneficiary? It’s important to know the legal characterization of your relationship to certain people, and what rights they may have to your estate. If you haven’t sufficiently provided for certain family members, then some of your beneficiary designations may not be honoured. This is because the courts may dip into your designated funds in order to satisfy the financial claims of your dependents.

Ensuring that your testamentary intentions are carried out requires a review of your beneficiary designations. Therefore, when preparing your Will, discuss your beneficiary designations with your lawyer to ensure that your wishes are not inadvertently defeated.

Help your Executor out

nadia@bechailaw.ca (Nadia Bechai) — Wed, 13 Oct 2021 23:27:12 GMT

3 ways you can help your Executor during your lifetime

In yesterday’s Globe and Mail, Rob Carrick wrote an article titled, “The worst job ever just might be serving as someone’s executor” .

In it, Carrick interviews David Edey, a Certified Executor Advisor, who endured 7 years, 10 court appearances and $50,000 in lawyer fees to settle his parents’ estate. According to Edey, acting as an Executor only brings: “Trouble.” He argues that “it is a thankless job” that can take about “100 hours or more and 12-18 months to get the estate settled.” Not to mention, Edey suggests, it can involve beneficiaries “who will not think twice to want to sue you.”

If you’ve ever acted as the Executor of an estate, you might agree. But, I also bet that you were quick to visit your lawyer to ensure that your affairs were in good order so that your Executor is spared the countless headaches.

Edey isn’t wrong. Too often, Executors are burdened by estates that are a real pain to settle. He therefore offers some tips for Executors to help alleviate the task. For example, he recommends that Executors hire professional advisers such as accountants, lawyers and financial advisers to assist with preparing and filing tax returns, applications for probate, or managing investments for the estate. He also recommends maintaining constant communication with the beneficiaries to minimize opportunities for tension, conflict or legal action.

These are all great tips. However, here are 3 additional tips that you can implement in your lifetime to greatly simplify the eventual administration of your estate.

1. Prepare a Will. Without a Will, your estate will incur legal costs (likely more than what it takes to draft a Will), your dependants won’t have access to your funds for a long time, and your estate may suffer losses from market fluctuations (whether real estate, stock, etc.) – all while time is spent trying to appoint someone to administer your estate. This happens because an Executor wasn't named ahead of time under a Will. To settle your estate, the court will look to appoint your next of kin to administer your estate, in the order of priority set out under the Estates Act (Ontario). Your spouse will be up first (although, not if they are your common law spouse – they don’t qualify). If your spouse has predeceased, is incapable or otherwise won’t do it, then your children will be up next (and yes, all of them must act together unless someone agrees not to act – you can imagine where this might end up in terms of possible conflicts…). And if your children can’t act, the court will look to your other descendants ranked by degree, then your parents, and then your siblings. Only if none of these can act will the Public Guardian and Trustee be appointed. This appointment is made by way of application to the court. Hence the legal fees, delays in distributing the estate, and possible financial losses while no one has the legal right to protect your assets. And then, the person appointed may not be the one you would have chosen. They may not have the necessary skills that Edey points out are helpful for an Executor to have, namely that they are honest, have a lot of patience, are well organized, pay attention to detail, can get along well with others, and have the time to attend to the task.

2. Organize your affairs. It is incredibly helpful to your Executors if you can prepare a list of your assets and liabilities, ready for them to use on your death. That way, your Executor doesn’t have to spend too much time digging around in your filing cabinet or kitchen junk drawer for important information. This is how a lawyer’s estate planning questionnaire can be incredibly useful. After you complete it, you can keep it together with your Will. It’s an excellent starting point for your Executor to be able to locate and collect your assets, have the contact information for key advisers and beneficiaries, and determine your outstanding debts that need to be attended to. It also helps them become aware of any registered plans, for example, that may be paid out directly to beneficiaries outside of your estate but for which your estate is responsible for paying taxes. In this way, you help your Executor avoid exposure to personal liability from the CRA for unpaid taxes.

3. Periodically update your Will. It’s a good rule of thumb to read over your Will every 3 to 5 years. Life changes – people marry, separate or have more children. Children grow older (and hopefully wiser), and some move out of province. Some loved ones may develop a disability for which they receive government support. You may acquire a cottage or a rental property, incorporate your business, or dispose of a large asset and roll the proceeds over to a new investment. All of these life events could require updates to your Will. While a good Will will take future contingencies into account, it’s impossible to know the future and plan for every eventuality. Not to mention that the laws change – not just estate-related laws, but also family, tax or corporate laws – all of which can affect your estate plan and yield unintended consequences on your death, including unhappy (and potentially litigious) beneficiaries.

With good careful planning, while it may never be a dream job, acting as an Executor won’t be the worst job.

Will Power

nadia@bechailaw.ca (Nadia Bechai) — Wed, 29 Sep 2021 18:34:21 GMT

Have you heard of this national campaign? If you haven't, it's not too late to check it out .

Will Power is a national public education effort designed to show Canadians the power they have to make a difference with their Wills. Currently, only 5% of Canadians leave a charitable gift in their Wills. The goal of Will Power is to increase that to 8.5% by 2030.

Here are some of the reasons that clients leave a charitable gift in their Will and that may resonate with you:

1. It's a way to s upport causes that are important to you. I'm guessing that you've probably supported a friend running or biking a race to raise funds for an organization. Or perhaps you already provide ongoing support to a charitable organization. Preparing a Will is a great time to give some thought to the causes and charities that are important to you, and consider leaving them a gift. It's an easy way to give, and to continue supporting these causes following your death. Charities report that e ven a 1% gift of an estate left to a charity can make an enormous impact to the charity, while still leaving 99% of your estate to your loved ones.

2. Save on taxes. On death, there is a deemed disposition of all of your assets at fair market value. This often triggers a large tax liability that is paid by your estate. When a charitable gift is left in your Will, the resulting tax credit can be applied against the taxes owed by your estate, thereby reducing the amount of taxes payable. Or, if in your Will you gift publicly traded stock on death, then any taxable capital gains on these shares are not attributed to you on your death, i.e. there's an automatic tax saving. And well, by saving on taxes...there's more money left to be distributed to your loved ones.

3. Model your values. Leaving a charitable gift in your Will is a way to make a final statement about your values. For the loved ones who survive you, they will likely cherish this reminder of how you lived your life.

Here's a quick look at what Will Power is all about.

Incapacity Planning

nadia@bechailaw.ca (Nadia Bechai) — Fri, 17 Sep 2021 03:16:49 GMT

Who will manage your finances if you can't?

When people are estate planning for the first time, they typically call asking for a Will. However, an important part of estate planning is to turn our minds to what happens in the event we become incapable of managing our personal affairs. This is sometime referred to as "incapacity planning".

A Will only comes into effect on your death. If you become physically or mentally ill, perhaps as result of an accident or due to a medical condition such as Alzheimer’s or dementia, then you may need someone else to manage your finances for you. This is where a Power of Attorney for Property is invaluable.

A Power of Attorney for Property is a document wherein you appoint someone, commonly called an “Attorney” or a Substitute Decision Maker, to make decisions on your behalf, say – if you are mentally incapable, as they relate to your finances. (Note that a Power of Attorney for Property is a different document from A Power of Attorney for Personal Care. In that document, you appoint someone to make decisions on your behalf in the event you become mentally incapable of making decisions that relate to your treatment, personal care or placement in a facility.)

It is a common misconception that if you are mentally incapable, your next of kin can automatically manage your financial affairs on your behalf. In fact, it is unlikely that they will be able to access, manage and control assets that are held in your name alone. While it is true that joint account holders may be able to manage certain accounts, they may not be able to make certain other decisions on your behalf.

Consider for example the situation where you are in an accident and suffer severe physical injuries and a cognitive decline. As a result, your spouse would like to sell your house to move you to a more accessible home. Pursuant to the Family Law Act (Ontario), even if you own your house jointly with your spouse, your spouse is not permitted to sell or encumber your matrimonial home without your consent or that of your Substitute Decision Maker. In this scenario, because you may not have capacity to consent to the sale of the house, your spouse would need for someone to sign off on your behalf under the authority of a Power of Attorney for Property (it may ultimately be your spouse who signs on your behalf, but they must do so as appointed Substitute Decision Maker).

It may be that you have signed a Power of Attorney with your bank. If this is the case, note that it may likely only apply to certain accounts covered by that particular document. When estate planning, we usually prepare a Power of Attorney for Property that can be applied more generally to all of your assets in Ontario.

So what happens if there is no Power of Attorney for Property? Who manages your financial affairs then?

Where there is no Power of Attorney for Property, someone must file an application with the court to be appointed as your “Guardian”. A Guardian for property has similar powers to an Attorney for Property, however they are appointed by the court instead of being chosen by you. The application process takes time and is costly – not only are legal fees often incurred, but during the time that it takes to have a guardianship application granted, investments may suffer losses, purchase and sale agreements may be terminated and other financial losses may be incurred. Until a Guardian is appointed, your assets may be managed by the Public Guardian and Trustee.

Therefore, remember to ask your lawyer about a Power of Attorney for Property the next time you call about your Will.

Executor or Trustee?

nadia@bechailaw.ca (Nadia Bechai) — Fri, 17 Sep 2021 03:03:06 GMT

Executor or Trustee? What's the Difference?

When preparing a Will or administering an estate, “Executor” and “Trustee” are terms used, often interchangeably, which can be confusing. So let’s unpack them.

EXECUTOR

Where someone dies with a Will, the person they have appointed in their Will to carry out its terms, is called the "Executor". It is the Executor's job to arrange the deceased’s funeral and distribute the deceased’s assets in accordance with the terms of the Will. The Executor is also responsible for doing such things as:

notifying the deceased’s bank and other financial institutions of the death and collecting all of the deceased's assets
notifying CRA of the deceased’s death and filing taxes
redirecting the deceased’s mail
cancelling all memberships, subscriptions and services
paying all outstanding bills from the deceased’s estate
cancelling the deceased’s health card, driver’s license, passport, etc.

In essence, the Executor is responsible for all of the paperwork and leg work involved with dealing with a deceased’s life.

Note that where the deceased dies intestate (meaning, without a Will), there is no Executor. Rather, an “Administrator” is appointed by the court to administer the deceased’s estate. The individual who will act as Administrator is typically appointed according to the order of priority set out in legislation. The roles and responsibilities of an Administrator are similar to those of an Executor, except that an Administrator may be subject to additional duties imposed by the court such as paying a security bond and reporting regularly to the court on the administration of the estate.

TRUSTEE

A Trustee is a person who acts as the legal owner of a trust’s assets. A Trustee holds these assets for a person or group of persons known as the beneficiary(ies). The Trustee is responsible for managing the trust’s assets, filing the trust’s tax returns and ultimately distributing the assets according to the terms of the trust. The terms of a trust are typically set out in a document known as a “Declaration of Trust” or “Trust Deed”, but they can also be included under a Will. Typically, trusts in a Will are designed to hold assets for minor beneficiaries, set up an education trust for grandchildren, or hold funds for the maintenance of a cottage, etc.

So why do we use these terms - "Executor" and "Trustee" - sometime interchangeably?

When no one is named to act as Trustee of a trust established under a Will, the Executor named under the Will, by default, acts as trustee for that trust. So, the Executor and the Trustee are the same person.
When filing income tax returns for the deceased’s estate, the Canada Revenue Agency (CRA) views the estate as a trust and therefore might refer to the Executor as “Trustee”.

But then who is an "Estate Trustee"? Under certain legislation in Ontario, the term “Estate Trustee” is used to refer to an Executor or Administrator. Kind of annoying to throw in a third term, but at least there is some logic to it. An Estate Trustee is entrusted with the assets of the deceased – i.e. the deceased’s “estate”, which is to be distributed according to the terms of the Will to the estate’s beneficiaries – much like a trust. See how that works?

What is probate?

nadia@bechailaw.ca (Nadia Bechai) — Fri, 17 Sep 2021 02:36:53 GMT

What is Probate?

At one point in my meetings with clients, the word “probate” will get used. That’s when I notice an ever-so-slight squinting of the eyes, an almost imperceptible tilting of heads, or a faint questioning intonation.

Most of us have heard the word used, but unless we’ve been involved in the administration of an estate, we may not have a real understanding of what it means.

Probate refers to a process. Probate is the process by which a Will is deemed to be a legally valid Will. A “probated Will” is one that has completed the probate process.

Why is probate necessary?

Following a person’s death, the Estate Trustee of the deceased’s estate will need to access the deceased’s assets to distribute them to the beneficiaries.

Let’s say the deceased held accounts at her local bank. To access these accounts, the Estate Trustee will present himself at the bank. However, the bank will correctly wonder – how can I be sure that this person is truly the Estate Trustee of the allegedly deceased accountholder’s estate? The bank will not want to be responsible for allowing someone to improperly access a client’s account.

The bank therefore wants reliable evidence that:

a) the accountholder is in fact, deceased;

b) the Will presented is a legitimate Will; and

c) the person presenting as Estate Trustee is in indeed the Estate Trustee of the deceased accountholder’s estate.

So that the bank is not required to conduct its own investigations, it will require that the Estate Trustee obtain and present a Certificate of Appointment of Estate Trustee With a Will/Without a Will from the Court (the "Certificate"). On application for a Certificate to the Court, the Estate Trustee will provide a copy of the Will (if there is one), and swear to certain facts regarding the deceased and the Estate. If the Court is satisfied with the evidence presented, it will issue a Certificate to the Estate Trustee, which the Estate Trustee can present to the bank to access the deceased’s account.

Therefore, the reliable evidence the bank seeks is the Certificate. The process of obtaining the Certificate, is called “probate”.

Note that the clerk of the court’s office charges a fee for issuing a Certificate. That fee, commonly called “probate tax” is technically called “estate administration tax”. It is a provincially levied tax. At the date of writing, Ontario’s rate of probate tax works is approximately 1.5% of the deceased’s assets that are probated under the Will above the value of $50,000 (i.e. the first $50,000 passes “tax-free”).