Category Archives: Estate Planning

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.

 

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.

Intestacy and Young Families

We’ve all been there: young, vibrant, decorating our first house, having a first child, thinking about writing our last will and testament. Not so much? You aren’t alone!

The Fraser Valley is home to a growing number of young families. In my conveyancing practice I meet young parents excitedly planning for their futures with an investment in real estate. To say the least, they are not keen on thinking about their premature demise.

Knowing the focus of my practice, clients often bashfully admit they have yet to draft a will. So I immediately ask what they think would happen if they died unexpectedly. Married clients tell me, time and again, they believe their spouse would get everything. Not even close! Without a will, your assets must be distributed according to a legislative formula, which likely does not reflect your own preferences.

The law in this area is changing. For the past several decades, the law has provided for the following distribution:

First $65,000 of your assets to Spouse

1/3 remainder of your assets to Spouse

2/3 remainder of your assets divided equally among Children

It is expected that the Wills, Estates and Succession Act will become effective in the early months of 2013. After that, intestate distribution will depend upon whether or not your spouse is the natural parent of all of your children. If your spouse is the natural parent of all of your children the first $300,000 of your estate assets will go to your spouse. If your spouse is NOT the natural parent of all of your children, the first $150,000 of your estate assets will go to your spouse.

Of course it is true that many assets are held jointly with a right of survivorship to the surviving spouse, but this is not always the case. If you or your spouse chose to go on title to your major assets alone to achieve a first time home-buyer’s exemption or to avoid effects from a poor credit history, your spouse may not have access to the assets he/she needs to raise your children.

Under the current law, your spouse would enjoy the right to remain in your marital home (subject to financial considerations). Under the WESA, this right expires after 180 days.

By far the biggest risk intestate parents run though, is that their children will not be placed with the guardian they would have chosen.

 

Estate Planning FAQs

If I don’t have any assets why do I need a will?

Even in the event that you die with minimal assets, a will is necessary to legally identify a guardian for your minor children, or your beloved pets, and someone who will be authorized to distribute your personal mementos. A will also ensures that assets you do not currently own, or even anticipate owning, will be transmitted appropriately following your untimely death. Such assets can include inheritances or other windfalls, but often are the result of accident insurance claims. If you are involved in an accident that causes either a personal mental infirmity or your death, a will ensures that proceeds of litigation will be distributed in accordance with your wishes following your death.

Do I still need a will if I put one of my children’s names on all of my accounts and on title to my real estate?

This type of ‘self-help’ approach is very common. Unfortunately, there are significant legal pitfalls associated with this type of estate planning.

When a child jointly owns a residential property with a parent but does not live in the property, the tax consequences can be MUCH more onerous than the costs of probating the asset under a will. Further, if it is your intent to gift a property to only one child in this manner, you should be aware of several court decisions overturning this type of gifting in favour of a more equal distribution with your other children. A properly crafted will can overcome these and other estate planning pitfalls.

Why use a lawyer to draft my will?

There are many reasons to rely only upon a qualified wills and estates lawyer – the four most significant are listed here:

  • Execution and handling requirements for wills are very specific. Failure to adhere to these specific requirements can occasionally result in your will being deemed null, or more commonly in additional work being required during the probate process.
  • Kits that can be purchased at drugstores or online make estate planning seem so simple. Too simple! Clauses that are wonderful for one person can be tragically ineffective for others – what you don’t know about estate planning often results in a lawyer being retained to handle a complicated probate or estate litigation process. For a more detailed discussion of online and kit products see DIY Risks.
  • Not all assets you own or have entitlement to during your lifetime can be conveyed through a will. Lawyers are often retained to interpret or litigate imprecise attempts at conveying such assets.
  • No other professionals or para-professionals are trained in drafting complete trusts (for minors, disabled beneficiaries or children with rocky marriages) to protect your assets from misuse or waste.

What is the difference between a Power of Attorney (POA) and a Representation Agreement?

A POA is a document effective during your lifetime, allowing another person to deal with your assets in the event you are unavailable to do so. Powers of Attorney may be crafted to limit the type of assets a person may deal with, or the timeframe they are authorized to act, among other restrictions. A Representation Agreement is a document effective during your lifetime, allowing another person to make medical decisions on your behalf in the event you are incapable of doing so.

Why does a thorough estate plan include more than just a will?

A will only takes effect at the time of your death, not before, and then must be probated before assets can be transmitted into the hands of your Executor for management and distribution. A will cannot ensure that your business interests or personal holdings are managed effectively during mental or physical infirmity prior to your death. As well, a will cannot ensure that you are taken care of in accordance with your wishes during a period of mental infirmity prior to your death.

 

Blended Families

In cases involving blended families, the courts have addressed both the financial contributions made by a first spouse and the needs of a dependent second spouse. In one such case (Picketts v. Hall (Estate), 2009 BCCA 329), the British Columbia Court of Appeal moved away from the position expressed in previous decisions that common law spouses are entitled to maintenance payments but not to a share in the residue of an estate. The Court found that a long-term common law spouse who was financially dependent upon her wealthy husband was entitled to a significant share in the value of his Estate, despite the moral claims advanced by independent adult children of the deceased and his first wife.

The deceased’s first wife had participated in the accumulation of his wealth, which has in the past been a key consideration in awarding assets to the children of the first marriage. Therefore in 2009, Picketts marked an important milestone in estate planning for modern blended families, particularly where a legal marriage has not been entered into.

Another case covering this topic, also in 2009 was, Sikora v. Sikora, 2009 BCSC 195, in which the Court supported the claims of adult children of the deceased, whose will left the bulk of his assets to his second wife. In this case, the second wife was not financially dependent upon her husband. In fact, she and her husband had enjoyed a far greater standard of living than he and his first wife had. Significant to the Court’s decision to vary Mr. Sikora’s will was the fact that, at the time the will was drafted, the residue of the Estate would have included several properties that he subsequently sold. Given that the children were to inherit the residue of the Estate, it was clear to the Court that the deceased had intended to provide for his children in a substantial manner.

Unfortunately, upon the sale of his investment properties, the deceased did nothing to either modify his will or express a change in his intent. This case exemplifies the need to review our estate planning documents whenever there are significant changes in the nature of our assets or the way they are registered.

 

WESA – Legislative Update

The long-awaited Wills, Estates and Succession Act is now anticipated to come into force in the early months of 2013. The WESA will apply to everyone who dies after it comes into force, regardless of when they drafted their will. The WESA is significantly different from previous legislation, so it is imperative that wills being drafted today take this new legislation into account.

Survivorship

Today, if two people die together, the law presumes that the youngest outlived the other. This means that if they jointly own property, the property will pass to the youngest and then will be distributed under his/her will.

Under the WESA, the presumption of order of death is abolished and joint tenancies are deemed to be severed. People who die together are both presumed to have survived the other and they will each take their share of joint assets into their own estates.

Marriage

The Wills Act currently revokes your will when you get married, so that your spouse is not treated unfairly by a will you made before the relationship became serious. The WESA abolishes this and your earlier will is now going to remain in force until you make a new will. Without a new will, your spouse will have to sue your estate so that it can be varied to include him/her.

Separation

Today, if spouses obtain an order for judicial separation and then reconcile, wills drafted before the separation can still be effective in transferring assets to the surviving spouse if one dies. Under the WESA, a separation forever nullifies testamentary gifts to a spouse, whether the couple later reconciles or not. Even though you may be happily coupled at the time of your death, your spouse will be disinherited if you have not renewed your will after the reconciliation.

Also under the WESA, a judicial order is not required to evidence a separation of married spouses. Separation will be a question of fact, taking into account the length of separation (two years or more), intention of the parties and any triggering events under relevant family law statutes.

Common Law Relationships

The WESA recognizes common law partners as legal spouses after two years of cohabitation. After two years of cohabitation, common law partners have the same entitlement to apply to vary your will as a married spouse would. If either common law spouse terminates the relationship, entitlements under the WESA end on that date.

Has your estate planner discussed the WESA with you?

These issues are only a sampling of the important changes included in the WESA. Wills drafted without an awareness of the impacts the WESA will bring are unlikely to meet your estate planning goals.

 

Who Gets the Children?

We have all heard the story of the shoemaker’s children – they never have proper shoes! This adage holds true in many fields, but it does not plague the families of estate planners. Estate lawyers have wills, because the risks of dying intestate (without a will) are simply too high.

My husband and I have three girls, all under the age of 10. Like most children, our girls are full of personality! So much personality that our parents probably wouldn’t have the energy to keep up with them on a full-time basis. We each have one sibling; one is newly married and just starting out, while the other is well-established but has a large family of his own. Neither of our siblings lives locally in the Maple Ridge – Mission area.

If we didn’t have wills, which of course we do, how would our two grieving families determine what living arrangements we would want set up for our girls? Would an answer simply be obvious to them? Would they work together to obtain a custody order from the courts, or would they find themselves at cross purposes?

Without a will, conflict can arise even between the most well-meaning of family members. I have worked with families who feel they have to pursue custody in honour of their deceased child/sibling. I have worked with families who feel the other family wouldn’t continue to allow access over time, or who do not share religious and cultural backgrounds with other potential guardians.

They say it takes a village to raise a child, but all too often our ‘villagers’ don’t see eye to eye. Even if there were no other reasons (which there are), this should be enough to convince most parents of the need to draft a will.