All posts by Elyssa Lockhart

Elder Abuse

A common misconception about elder abuse is that it is intentional. Another misconception is that it is apparent to those in the lives of an abused senior. Often, elder abuse is neither intentional nor apparent. So then, what is elder abuse and how can it be identified?

Elder abuse may be physical, emotional or financial. It may be overt or neglectful. Financially, it may be through theft or conversion of assets, or through misguided frugalness.

We should all be observant of the physical condition of the seniors in our lives. Injuries seeming to have easy explanations should not occur too frequently. Repeated injuries may be evidence not only of abuse, but of an underlying medical condition or of a living arrangement that is no longer suitable. When living arrangements are no longer suitable or medical needs go unattended, a lengthy delay in moderating a senior’s circumstances could indicate neglect.

In my estate planning practice, I meet with clients at various stages in their lives. As clients age, I often notice an increased isolation in their lives. It is important to remember that isolation can leave our aging loved ones vulnerable. A loved one who becomes increasingly generous with family, friends and caregivers, may be responding to loneliness. Accepting valuable gifts under these circumstances may be inappropriate. The question to ask is whether the senior in question believes you would still spend time with them if they did not generously provide you with such gifts.

Most clients who ask me about elder abuse are specifically interested in financial abuse. This most often arises in the context of a person who holds a Power of Attorney or who has been added as a joint account holder. Although there are factors considered at court to determine whether a joint account is truly the property of both account holders or whether one of them is the agent of the other, naming another person jointly on accounts is not advisable if the goal is to permit that person to assist with bill payments and routine purchases, as it leaves room for doubt as to ownership of funds.

A Power of Attorney document appoints someone who very clearly has a fiduciary relationship with the person who appointed them. This means they must always act in that person’s best interest, without regard to their own interests. Obvious violations of this trust include direct theft from accounts or purchasing expensive gifts for themselves on behalf of the senior. However, an example of abuse not often identified by others in a senior’s life is where money is saved rather than being spent on improving a senior’s final years.

Certainly, an attorney must not be spendthrift with a senior’s money. But where a savings account, RIF or other assets exist, utilizing those assets to provide a higher standard of living to a senior should be considered. Saving money to ensure a sizeable estate is a form of abuse that often goes undetected; it is also a form of abuse that is often unintentional.

This article serves as only a brief overview of an important issue. Additional resources are available at www.seniors.gc.ca.

Drafting for Success

“You can’t take it with you.” This statement often leads clients to chuckle – if it can’t come along for the ride, it doesn’t actually matter who gets it or what happens to it.

But, upon closer reflection, it does matter. Not only can you not take your possessions with you when you die, you won’t be able to guide your loved ones through the difficult task of dividing mementos and assets fairly.

As a parent of young children I often feel as though I should don a striped shirt and wear a whistle around my neck. As a lawyer, clients regularly warn me that the role of referee won’t end when my children reach adulthood. In both my personal and professional lives, I believe it is our obligation to our children to provide them with an environment designed to help them thrive and succeed.

You can’t take it with you, but you shouldn’t leave a mess behind you when you go either!

Legally, you cannot abdicate your testamentary decisions to another person. This means you cannot appoint an executor or beneficiary to decide for him/herself how your assets will be distributed to others following your death. For example, I have had clients say:

“I want my son to decide for himself how much of my estate to share with his sister.”

Statements such as this generally stem from a unique family history rather than from a lack of interest or concern. It is my role as a lawyer to learn that history and work to devise a legally enforceable solution that also meets my client’s practical and moral objectives. For instance:

“I want my son to have a life interest in my farm, so long as he continues to derive his primary source of income from farming.”

If this is the true motivation behind the client’s original instruction, it can be accomplished in an enforceable way that will likely have a far less negative effect on the long-term relationship between his children!

Wills and other testamentary documents should reflect both your instructions and my professional advice. It is my goal to focus on achieving your objectives, seeing beyond the potentially transactional nature of simply drafting a will.

Choosing a Trustee / Executor

Its been decided – you need to establish a Trust. Perhaps you have a blended family and want to reduce the risks of your Will being challenged following your death. Perhaps you have a disabled or spendthrift beneficiary who needs assistance to maintain financial stability. Perhaps you have minor children who could not manage funds personally in the event of your untimely death. There are countless reasons a Trust may be advised.

Now, though, the difficult question of choosing a Trustee must be addressed.

There are traditionally three categories of people chosen to act as trustees:

  1. Family Members and Friends.
  2. Professionals (Lawyers, Accountants, Financial Planners).
  3. Trust Companies.

Family and Friends

People who know you offer the advantage of understanding your values and the personal goals behind your decision to establish the trust. Of course anyone chosen should be financially responsible, trustworthy, organized and capable of working with legal and tax matters. But what other considerations should be taken into account?

Age – Our most trusted personal advisors are often our age, meaning they are more likely to be incapable of acting or even deceased at the time of our own death; young appointees may lack the requisite skills and experience necessary to administer your trust.

Nature of Assets – if your trust or estate contains only liquid assets to be managed and distributed in a specified manner, your selection of potential trustees may be much broader than if your assets include a going concern business that must be operated within a trust for a period of time. Land, foreign holdings, corporate shares, animals and other assets each raise different considerations.

Residency – the Estate Administration Act permits individuals residing outside British Columbia to act as your executor and trustee, but it does not assist in resolving practical challenges created by a distance from the physical assets to be managed. There is also provision in the Act for the Court to grant a special administration to another party, if absence is delaying administration of your estate. Tax legislation in other countries can impact the feasibility of your choice as well – US citizens and Green Card holders are often advised by tax professionals not to act as trustees outside the United States.

Professionals

Professionals offer expertise in the specific tasks trustees must take on and, depending upon their profession, may also be bound by professional licensing standards that increase their clients’ peace of mind when entrusting assets to their care. Professionals often agree to take on the role of trustee or executor for clients they have had prior dealings and built significant rapport with, increasing their understanding of the personal objectives giving rise to the trust.

Trust Companies

Trust companies offer the knowledge and expertise of professionals in an even more heavily regulated environment. While the employees of the trust company may never have met you personally, there is a heightened degree of continuity and objectivity in selecting a company rather than an individual, as complex family relationships will not have any impact upon the company’s method of administration.

Co-Trustees

Due to the benefits and limitations of each of these three categories, you may consider opting for a personal advisor and a professional or corporate advisor to act jointly. In this case, it is common for the professional or trust company to be allocated tasks associated with legal and tax matters, records keeping and providing/obtaining necessary opinions, while your personal advisor will guide specific allocations and distributions to your beneficiaries.

General

Establishing a trust, either during our lifetimes or in our estates, is quite common and the need for them or their benefits are not restricted to the wealthy. Successful implementation of a trust is often a reflection of the care taken in selecting trustees. If you have questions about whether a trust is suitable for you, or about selecting an appropriate trustee, please contact our offices to obtain advice on these matters.

 

Intestacy and Predatory Marriages

Predatory Marriages – what are they, how can we protect elderly loved ones from them and how can they can impact estate inheritances?

As our population ages in the coming years, it is anticipated that personal wealth in the astonishing range of several trillion dollars, will be transferred from one generation to the next. Much of this wealth will transfer simply from husbands to wives or from parents to children.  Other wealth, however, will transfer from a widowed parent to a new life partner against the testator’s previously stated wishes, either due to legal requirements or due to the influence of the new spouse.

The case of Banton v Banton in Ontario is a perfect example of how a predatory marriage can impact an otherwise standard family distribution.  The testator in this case married a member of the food services staff in his long-term care facility, then revised his will to provide for his new wife; notably, his estate was large enough to have provided for both his wife and his children, but his new will distributed his assets to his second wife.

Following Mr. Banton’s death, his children challenged the validity of the will and the following facts were considered:

  • The marriage occurred very close to the end of Mr. Banton’s life, following a period of reliance upon the new wife as a paid caregiver;
  • Mr. Banton was deemed to have been mentally incompetent at the time he wrote his new will (and likely also at the time he entered into the marriage);

In Ontario, much like in British Columbia under current statutory law, marriage nullifies previously existing wills.  The will Mr. Banton executed before his second marriage was no longer valid under the terms of the statutory law.

Mr. Banton was deemed to be mentally unsound at the time of drafting his new will after the questionable marriage.  This will is therefore not viable for probate purposes, rendering Mr. Banton intestate (having no valid will), and his estate became subject to distribution in accordance with the government’s statutory provisions for individuals without wills.

Currently, in British Columbia, if this situation were to arise, Mr. Banton’s second wife would receive the first $65,000 of his estate assets, as well as 1/3 of the remainder of his assets. His children would split the other 2/3 of the remainder of his assets equally between him. These distributions would, of course, occur after his debts and those of his estate had been repaid in full.

As our population ages, we need to turn our minds to the ongoing right of our elders to direct their lives, engage in rewarding interpersonal relationships and explore new experiences.  We will also begin to see increased cases providing guidance on how to ensure mental competence at the time of a late-stage marriage.

At McQuarrie Hunter LLP, we work with clients to ensure protection of family assets, responsible support of loved ones who are engaged in legitimate relationships and the eventual distribution of our clients’ assets in accordance with their stated wishes.

Joint Ownership – The Ugly Truths

When I meet with clients on corporate, conveyancing or other legal matters, they almost invariably ask me about wills and estates. Clients often hope that they have no estate planning needs – because they have already arranged for joint ownership with their parents / children / spouses.

Joint ownership is a self-help estate planning mechanism I see regularly in the Fraser Valley, as residents are often heavily invested in real estate. The basics of joint tenancy in real estate are widely understood and it is relatively cost-effective to arrange, making it an attractive DIY estate planning approach. Regrettably, it is also often recommended by seemingly knowledgeable and trusted sources, who do not understand the negative implications of joint registration in certain circumstances.

In many cases, SEVERAL of the following drawbacks will apply to the use of joint ownership as an estate planning mechanism:

  • Taxes – Distribution as a Triggering EventWhen you transfer or sell certain assets, the proceeds of sale may be deemed to be income under the Income Tax Act (Canada) and therefore taxable.  The Act does not permit transfers at less than fair market value, unless you qualify for a specific exemption – transfering a portion of an asset to a child may therefore trigger the payment of taxes;
  • Taxes – Death as a Triggering EventWhen your asset is sold following your death, the proceeds of sale may be deemed to be income to your joint owner under the Income Tax Act (Canada).  This is common if the asset was your principal residence but not your joint owner’s principal residence;
  • Taxes – Income Attributed to Original OwnerWhen you transfer an asset to a spouse, income will often still be attributed to you under the Income Tax Act (Canada);
  • Exposure to CreditorsWhen another person is on title to your asset, their creditors may be entitled to register judgements against the asset and may even become entitled to force a sale of the asset;
  • Loss of ControlWhen someone else holds an ownership interest in your assets, you will no longer be able to sell them or refinance them without that other person’s express consent;
  • Potential for LitigationWhen multiple other parties share title of an asset, it becomes less likely that they will all agree to sell at the same time or on the same terms (both before your death and afterward). When one beneficiary is on title in order to facilitate for others, there is also a risk that they will NOT share as you wished. Even when a beneficiary does share, there is a risk that other beneficiaries will take exception to how the asset was handled, the price it was sold for or the management of the funds following a sale.

Despite these drawbacks, joint ownership can be effective in the context of a broader, well-planned approach to your will and estate distribution.

Can I Contest that Will?

In British Columbia, very few people are entitled to contest the terms of your Will. Under section 2 of the Wills Variation Act, the Court may order a modification of the terms of your Will if it determines you have not made “adequate provision for the proper maintenance and support” of your spouse or children. In some cases, the Courts will vary the distribution of assets that you set out in your Will; alternatively, the Courts may add or remove beneficiaries.

ONLY your spouse and children may file a lawsuit under the Wills Variation Act. This legislation defines a spouse as either a legal husband/wife, or as someone you have been cohabitating with for a minimum of two years, in a marriage-like relationship. A child under the Act means your biological child or your adopted child, but not your step-child.

Check here to determine whether you have a claim related to a Predatory Marriage involving an elderly or incapacitated loved one.

Legislative Update!

What constitutes the legal end to a common-law relationship will be changing under the Wills, Estates and Succession Act, which is anticipated to be introduced in early 2013 (See Updates on WESA). If you are contemplating the end of a common-law relationship, or if you are revising your Will following the end of a common-law relationship, qualified legal advice is critical in today’s changing legal environment.

Other Claims Against Your Estate

Clients often express concerns that their siblings, business associates, former spouses and even friends, may attempt to disrupt the administration of their estate by claiming an entitlement to all or part of its assets.  These relatives and associates do not have the right to make a claim under the Wills Variation Act.

While these individuals are not entitled to make legal claims to modify the distribution of assets as set out in your Will, they may be entitled to advance contractual or other claims. This means that if you owe someone money or if you are holding something that does not belong to you at the time of your death, your estate could be sued just as though you could be if you were still living.

 

Inequity Between Beneficiaries

With respect to unequal treatment of siblings, two recent cases have further entrenched the notion that gifts made to a child by a parent prior to death are a legitimate consideration in both the parent leaving a smaller share to that child through the Will, and to the courts refusing to vary such a Will if the child advances a claim under the Wills Variation Act.  Both Doucette v. McInnes(2009 BCCA) and Gould v. Royal Trust Corporation of Canada (2009 BCSC) elevate the importance of gifts made during a deceased’s lifetime beyond previous cases.  In Gould, this is particularly significant due to the fact that the daughter who sought to vary her mother’s Will was physically disabled and had not been gainfully employed for a lengthy period of time prior to her mother’s death. Traditionally, these would be factors that could indicate financial need on the part of the daughter, sufficient to increase her mother’s moral obligation to provide for her.

The Court found though, that in part due to a gift of valuable property to the daughter during her mother’s lifetime, any modification of the Will resulting in an equal division of the mother’s remaining assets would in fact have resulted in an inequitable surplus inheritance by the daughter, to the detriment of her sibling.

Both of these cases also addressed issues relating to estrangement and difficult family relationships, which are unfortunately common in this field of law.  If you have questions about advance gifts you have given or received, or about providing for the additional needs of one child over another, qualified legal advice is imperative to ensuring your wishes are carried out after your death.

A pro forma Will is particularly insufficient to address distributional inequalities between beneficiaries.  For more information on the hazards of a so-called ‘simple’ Will, see DIY Risks.

 

Estate Planning Misconceptions

Wills avoid the need for probate.

No! Wills are designed for use in the probate process, to ensure your wishes are followed rather than a one-size-fits-all plan found in legislation and used when a person dies intestate (without a will).

Only wealthy people need professional wills.

Definitely not! This topic is too broad to cover adequately in this format, but if you have young children, disabled children, step-children, a common-law spouse, a disabled or elderly spouse, have been married more than one time, own assets outside of British Columbia or own shares in a company, among other factors, you should seek legal advice from an estate planning lawyer.

Joint assets negate the need for a will.

Sometimes, unless… If you and the joint owner spend time together, you could die or become incapacitated in a common accident. If you put one child on title to your assets in the belief they will share with other children after your death, you may be surprised to learn how often they do not.

Estate Administration Misconceptions

The Executor can implement the will right away.

No! The Executor is not the official legal representative of the Deceased until the Court has confirmed the will and issued Letters Probate to the Executor.

Probate takes about a month or two.

Well, sort of… Before an application for probate can even be submitted to the Court, the Executor must search for other wills, confirm all assets and liabilities, then notify all potential beneficiaries of your passing and provide them with a copy of your will. After submitting the application, processing times at the Court Registry often take about a month or two, or more.

But then… Following receipt of Letters Probate, your affairs must be settled (debts paid, assets sold, tax filings submitted to government) and a proposed distribution must be approved by your beneficiaries or confirmed by Court Order. Distribution of assets commonly takes place a year or more following death.

Probate is too much work, it is better to die without a will.

Just the opposite! Dying intestate (without a will) does not avoid probate, it merely adds a layer of administrative work to the process. Before an intestate’s estate may be probated, a legal representative (Administrator) must be selected and approved and the Administration may be required to deposit a sizeable financial bond with the courts. All other steps remain and must be completed after the appointment of this Administrator. The Administrator must then distribute assets in accordance with legislation rather than your personal wishes.

Executor’s Fees

“You want to charge what?!” In a perfect world, no executor would ever hear these words (and no beneficiary would feel the need to utter them). Unfortunately, issues involving executor’s fees often do arise.

Whether you are crafting your own will, agreeing to act as an executor, or approving accounts as a beneficiary, it is imperative to understand how executor’s fees are set. Fees can be set in a will itself, but if they are not specifically set out in a will, the Trustee Act limits fees to a maximum of 5% of the value of estate assets, plus a calculation for ongoing management if that becomes necessary.

It is a misconception that executors are entitled to 5%; this is the maximum fee under the statute.

Let’s assume your executor sells your assets for a total of $300,000, distributes some of the estate immediately but then must hold $200,000 in trust for three years before distributing to certain beneficiaries. Assume the executor invests that money and the estate earns $15,000 in interest each year. Maximum fees would be:

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In determining what to charge as an executor, and what to approve as a beneficiary, the size of the estate, complexity of the matters dealt with, time and skill required to finalize matters and level of success achieved are all to be taken into consideration. Every beneficiary whose inheritance is affected by the fee must approve the executor’s fees, or the executor will have to apply for the Court’s approval before taking the fee and finalizing the estate.