Happy Heritage Day

Monday is a holiday here in Alberta as we celebrate Heritage Day. It's a day for celebrating and showcasing the dozens and dozens of countries and cultures represented by Albertans. Happy Heritage Day everyone!

Life insurance fertilizes next generation of farmers

Estate planning for farming families is complex. It's also very satisfying for a practitioner like me, because there are so many effective strategies that can be used to help transfer the family farm to the next generation. The attached article from http://www.capitalmagazine.ca/ describes how life insurance policies and mortgages can be used to meet the needs of all parties to the transaction. Click here to read it. The attached photo is also from that story.

Codicil or new will: which one do you need?

Lawyer Noreen Murphy has posted an informative article about deciding whether you need a whole new will or just a codicil (an amendment to a will). Unfortunately, the idea that a codicil is cheaper has become popular, and for many people the cheapest is always their choice, no matter what the downside. Click here to read the article and perhaps gain an understanding of why your lawyer thinks you need a whole new will. The attached photo is from Ms. Murphy's post as well.

Senior with dementia attacks wife with hammer

Last week I spent some time working with an older couple (90 and 87 years old) who have no family or close friends nearby. The wife had a stroke and was taken to hospital. Around the same time, the husband caught pneumonia and was taken to a different hospital. Each of them had named the other as their health-care decision-maker as well as their financial power of attorney. With each of them out of commission, both of them were left with nobody to help them.

This lack of contact with other people is dangerous to older people. Sometimes it leads to the situation I've described above, or other less than ideal situations. For example, seniors might live in their homes with advanced dementia without the proper safeguards, which could be dangerous in a hundred ways. I was very saddened to read this article from the Vancouver Sun which says that an elderly man attacked his wife with a hammer, injuring her severely. They were both suffering from advanced dementia, blindness and deafness according to the article. The wife was taken to the hospital and the husband was taken into police custody.

Who knows what led to the attack. We may never know. All I know is that this poor woman should not have had to suffer this injury, and that an old, blind, deaf man with dementia isn't going to get what he needs in jail. I find the whole story very sad, particularly as I'm sure there are many, many other stories like this just waiting to happen.

Two older people with both physical and mental problems should not be living alone. I don't yet know enough about this case to know whether they have family members who could have stepped in, or whether they had other in-home supports. It's possible they do have family but stubbornly refused to accept help. Most of us know someone who shouldn't live alone but who is too stubborn, fearful or confused to accept the needed assistance.

What if they were alone in the world, as are my clients that I mentioned?  My clients had understood years ago that one of them was going to outlive the other, and had named the trust company where I work as the executor of their estates. When they both landed in hospital, they really didn't know where else to turn so they called us. We were able to visit both of them in hospital, pay their bills, pass messages between them and help them get on a waiting list for an assisted living facility. Not everyone thinks to do this or can afford it. And many just simply refuse to think about what could go wrong.

Each of us needs to be protective about the seniors in our lives and proactive in offering help. This includes understanding that it's dangerous and frightening for people with dementia, especially when that condition is aggravated by physical ailments, to live alone. This idea begs the qustion of whether it is acceptable to force help on older people who refuse it. I believe that sometimes it is ok, when it removes a senior from a dangerous situation.

A future in wills and estates

I've received an interesting question from a reader that is more about the practice of law than about estate planning. Here is the question:

"I'm planning to take the LSAT this December with the express purpose of going to law school for estate and asset planning. Which schools should I consider for this speciality?"

I'm pleased to see your interest in wills and estates. Given the age of the baby boomers, this area of law is growing wildly and will continue to do so for some time.

You haven't said which country you live in, but I'll assume it's Canada. Look for a school that offers more than just "wills" as a course. You should ideally take succession, trusts and taxation, with advanced electives in those courses in your third year if possible. If I were you, I'd supplement the core wills courses with real estate and family law.

I attended UBC law school and in my third year participated in a student legal clinic. I was excited about this because it was full-time client work. Much as I value the experience, I don't recall drafting a single will during that time.

I feel very strongly that getting into an estate planning practice is going to have a lot more to do with the firm where you article than it does with the law school you attend. As you might know, law school gives us the theory but articles give us the hands-on practical knowledge. If you want to do wills and estates, you should article in a firm that is strong in that area.

Target the firms that have someone on board who is a leader in the wills area. If you're not sure who those people are, do some research. Websites help of course (tip: look for someone who lists "wills and estates" as either their sole area of practice or their main area of concentration, not someone who has it 5th or 6th on their list).

Join groups such as LinkedIn's "Canadian Wills and Estates Professionals" to see who is there and find out about their practice. If you can, join groups like local estate planning councils to get to know people. Definitely join your local bar association wills and estates sub-groups. Take note of who these groups bring in as speakers and who they elect to their executive. When you attend continuing education seminars, take note of who is delivering papers in your subject matter. This way, you'll soon find out who you want to practice with.

When you attend your interviews for articles, specifically ask if you will have the chance to work on actual client files that have to do with wills. You will likely get to draft a will or two, as most students do, but ideally you would also be involved in an estate freeze or farm probate application with your principal's supervision.

Attached photo from http://www.dreamstime.com/.

Amy Winehouse made a will excluding her "drug-addled" ex husband

There is no question that at age 27, singer Amy Winehouse died much too young. At least her parents and immediate family may be spared the further agony of an estate dispute being dragged through the courts and the media. This article from Mail Online reports that Ms. Winehouse had put all of her financial affairs in order after her recent divorce, including making a will that leaves out her former husband. For once, we can learn something positive from a celebrity estate. Click here to read the story. The attached photo is from Getty Images.

Five ways to pay capital gains tax

This article from http://www.capitalmagazine.ca/ is one of the most useful articles I've ever found for business owners who are exploring their options for passing on their business. As soon as you start looking at your options for selling, passing to your children or an employee buy-out, you start hearing about tax, specifically capital gains tax. Much of business succession planning is tax planning. Click here to read this article, which includes a printable side-by-side comparison of your options. The attached photo is also from that article.

Getting married later in life? Five things you need to think about

A marriage between two people who already have children from previous relationships and who have accumulated some assets is not simple. Some focused planning can ensure that financial matters run smoothly, including your estates after your death. Before tying the knot later in life, read this article from http://www.advisor.ca/ for a short but essential list of things to do first. Click here to read the article.

A growing trend: elderly parents marrying the caregiver

Several years ago I was involved in a strange file where the adult children of a wealthy man discovered after their father's death that he had recently married his housekeeper. As the law at the time stated that marriage revoked a will, the father's will leaving his estate among his children was overthrown. Each of the children hired a lawyer, as did the wife/housekeeper, and the fight was on.

The housekeeper had plainly preyed upon the man to get access to his assets. At the time, I'd never seen another case like it. Now, however, so many cases have come to light that they have their own title, that of "predatory marriages" or "predatory unions".

Could this happen to your widowed or divorced parent? What would that do to your family? What would it do your parent's financial security?

To learn more about this trend of elderly parents marrying the caregiver, click here to read an article by http://www.pollexestateplanning.com/ .

Attorney accused of stealing $300,000 from a friend's estate

Yet another estate has made the news because of alleged dishonesty. This one is in California. In this case it's a lawyer friend of the deceased who is accused of theft. The case was brought to light by a beneficiary who didn't receive the expected inheritance.

It's not clear to me from reading this article just who is the executor of the estate. Apparently it was not the accused lawyer. Click here to read the story. Note that in the US the word "attorney" in the title means a lawyer, unlike here in Canada where it means a person acting under a Power of Attorney.

Often beneficiaries approach me to ask about their rights when an estate is not being dealt with, or information is being withheld by the executor. Of course they are worried; this story is an example of what sometimes happens when a dishonest person is tempted by estate assets. I sometimes remind beneficiaries that they have both a right and an obligation to watch what is going on in an estate.

Some beneficiaries tell me they feel greedy if they ask outright for their inheritance or ask for explanations for missing funds. But if the beneficiaries aren't going to monitor the executor's actions, who is? Insisting that the estate be wound up in a reasonable time and that you receive your entitlement under the will doesn't make you greedy; it means you are ensuring that the executor carry out the duties as the deceased intended.

Fortunately, most estates that take too long or are conducted in unnecessary secretiveness do not end up with large sums of money missing. They are simply a dog's breakfast because a first-time executor doesn't know what he or she is doing. However, the beneficiaries won't know everything is ok unless they ask.

Attached graphic from http://www.dreamstime.com/.

Purchasing a vacation property in the US

Many Canadians are thinking about buying vacation homes in the USA. If you're one of them, would you be interested in knowing what a Canadian accountant with 25 years of experience might say about it? If so, click here to read this article by Mark Goodfield, an accountant who blogs at http://www.thebluntbeancounter.com/ . Photo from http://www.dreamstime.com/ .

Stealing from Mom and Dad

The July 18 issue of Maclean's Magazine has an excellent article by Risha Gotlieb called "Stealing From Mom and Dad", which talks about how aging parents are being financially abused by their own kids using powers of attorney. I was one of a handful of people Ms. Gotlieb interviewed for the story. Click here to read it. The attached photo is from the Maclean's story as well.

A Lesson on Contempt

Those beneficiaries out there who are struggling to deal with a rogue executor will be pleased to hear about the case of Re Penna Estate. In that recent Ontario case, the executor refused to comply with orders to pass his accounts and provide updated values on estate assets, among other things.

The court held the executor in contempt of court for ignoring what the court told him to do, and jailed him for 14 months. Personally, I'm glad of the severe sentence because I get calls and e-mails every day from beneficiaries who can't deal with executors who won't return calls, won't give any information, won't get on with the estate etc. There are too many executors out there doing whatever the heck they want with the estates.

Click on the link below to read a summary of the case from Hull & Hull LLP, lawyers in Ontario.

A Lesson on Contempt

The Devil is in the Details

When I read this blog post about an American case where a tax-planning lawyer acted as full-time care-giver for his aging parents, all I could think was "ouch..." The post from lawyer Kyle Krull will demonstrate loudly and clearly why you have to formalize caregiving arrangements between family members. Click here to read the story.

Who qualifies as a grandchild or great-grandchild under a will?

Check your will. Does it say that some part of your estate is to be left to your grandchildren or great-grandchildren? If so, is it your wish that the estate be shared with step-grandchildren, or just among those who are blood relations? It might be clear to you just who you intend to benefit, but perhaps it's not so clear to others who have to rely on your will for instructions.

Megan Connolly, a Toronto lawyer, has analyzed the recent Lang Estate case from BC, in which the court made a decision about who qualified as a grandchild under a will. Click here to read Ms. Connolly's post.

What happens to CPP and OAS benefits after death?

Thanks to our friends over at http://www.allaboutestates.ca/ for this practical guide to the two government benefits received most often by Canadian seniors. The more "how-to" information out there for executors, the better! Click here to read the article.

Talk to the kids before leaving them your cottage

I sometimes wonder whether my constant warnings to parents not to leave their cottage to ALL of their children are falling on deaf ears. I worry about the families who have taken that step. I was pleased to see a new article by Tim Cestnick of the Globe and Mail that gives some excellent, practical advice to parents who are considering dealing with their cottage this way. Click here to read the article.

Litigation involving the estate of the Godfather of Soul

To read a summary of the issue in the estate of James Brown, which is still going on since the singer's death in 2006, click here. It's yet another example of an estate ending up, sadly, in the courts. The story is from http://www.allaboutestates.ca/ .

Power of Attorney shouldn't be a leap of faith

Not long ago, as I picked up my lunch from a drive-thru, I paid for the food being bought by the people in the car behind mine. When I mentioned this to a friend, she said "but what's stopping the clerk from pocketing the money and still charging the next car for their meal?". I suppose nothing is stopping him from doing that, but I was (and still am) prepared to take the chance.

All I stood to lose in this transaction was less than $10. I would certainly have a different attitude if the potential loss was greater. Can you imagine taking this kind of unprotected leap of faith if the money you handed to the clerk was every cent you own?

And yet, this is done every day. People carelessly hand over access to everything they own and will ever own by signing Powers of Attorney. Not enough importance is placed on the fact that this extremely powerful document is often abused, causing losses that can be anywhere from inconvenient to catastrophic.

I know what you're thinking. You're thinking that the risk is greater when you put a stranger (such as the clerk) in charge of your money than it is when you put a family member in charge. Well, unfortunately you're wrong about that. The majority of financial abuse of seniors is perpetrated by family members.

It's not my intent here to dissuade anyone from having a Power of Attorney document prepared. In fact I am constantly involved in the process of helping my clients get these documents in place. What I have a problem with is the Power of Attorney document that puts no guidelines in place, allows for no accountability to anyone and gives too much power to someone who doesn't know how to handle it.

Part of the blame for the existence of these dangerously powerful documents belongs to the lawyers and planners who don't take the time to talk the customers through the potential pitfalls and then draft strong provisions in the document to head off problems. But I would say that a huge part of the problem lies squarely in the laps of those parents who refuse to acknowledge that anyone related to them could possibly do anything dishonest or negligent.

Last week I spoke with an older, widowed woman whose children are already starting to quarrel over her money even though she expects to live for many years yet. She said to me, very sadly, "I thought my family would be different. I thought we'd rise above this kind of thing." Why did she think this? Her children hadn't shown any signs of being any different from the rest of us humans on the planet. Her unsupported belief in the superiority of her children is shared by many mothers - and fathers - the world over.

If clients turn an intentionally blind eye to an issue and refuse to deal with it, there isn't much any lawyer can do for them.

Lawyers who specialize in estate planning can draft documents that, say, allow for annual accounting to other family members. They can provide that any person acting under a Power of Attorney who takes money or who can't account for missing money will lose that amount from his or her inheritance. However, when clients refuse to even entertain the idea that a child of theirs could give in to temptation or pressure or financial problems, the lawyer's hands are tied.

A client who is wilfully blind to the possibilities and won't protect himself is in the same position as I was going through that drive-thru lane - handing over the money and just hoping it will all be ok.

Don't make a law firm a beneficiary of your estate

This article from the Financial Post is an excellent discussion of how estate planning can accomplish what you want and prevent family disputes. Click here to read it. It contains several excellent tips.

Don't take a chance on unregulated will writing companies

There is a new article in a UK newspaper (http://www.guardian.uk.co/ ) that reports that thousands of people are being "ripped off" by companies or individuals offering will-writing services. The basic problem is that the companies are unregulated so that when it's found out that they didn't know what the heck they were doing or there is some other problem, there's nothing the consumer can do. Click here to read the article.

If anyone is thinking of hiring someone other than a lawyer to draw up a will for them, PLEASE read this article. You will find it educational.

As regular readers of this blog will know, I am in favour of people doing certain tasks on their own. In fact, I write books to help people do that. But I always stress to people that they need advice from lawyers and accountants, not unregulated people whose only attraction is that they are cheaper than a lawyer. Believe me, you are better off doing your own will than hiring anyone other than a lawyer.

The article above, as I said, is British, not Canadian. The problem is not nearly as widespread here as it is in the UK. But I have seen advertisements here for "paralegals" and other people offering to write a will for members of the public. Anyone with a computer and printer could have put up that ad, and the sad thing is, some people will fall for it. The advertisement recently put up in the lobby of my condo says "you don't need a lawyer for everything". That's true, you don't, but an unlicensed paralegal is not the answer for someone who needs a will.

Strategies for lawsuit-proofing your estate

While we don't always know for sure which issue or item is going to cause a problem in our estate once we've passed away, some are by their nature volatile, such as blended families. Others may not be obvious to you but are familiar to estate litigators as common causes of friction. This article by Rania Combs, who blogs at http://www.texaswillsandtrustslaw.com/ , will alert you to many of the causes and what you can do to avoid them. Click here to read the article.

The kids are insisting on seeing the will - and the parents haven't even passed away yet!

This reader's question deals with siblings wanting to know what's in the parents' will while the parents are still alive, and wanting to be added as executor. There certainly seems to be a heck of a lot of undue attention on the wills, considering the parents haven't passed away.

"I am Co-Executor of my parent’s estate. I come from a large family. One of my siblings (a residuary beneficiary) is insisting she see the Will, my Mother wanted to make multiple copies of the Will and give it to each child. I advised her it would not be a good idea to have several copies distributed all over the place. There is nothing to hide, but my concern is that if the Will is updated in the future, there could be conflicting copies complicating matters down the road. I suggested if my parents wish to share this information, it would be better to have a family meeting where everyone would have an opportunity to read the Will if they wish. Are there any concerns with this approach? Also another one of my siblings is pressuring my parents to be added on as Executor, she lives half way across the country. If she is added on as Executor, there could then be three, (or one may relinquish leaving two). Can the Will state that the Executor(s) not be entitled to any Executor fees or be reimbursement for expenses? Alternatively can a cap be identified in the Will to limit expenses of an Executor? Ultimately to protect the estate against the costs that could be incurred from managing the estate from a distance such as flights home when required to deal with matters not capable from such a distance?"

Family politics. They certainly make life interesting.

Your parents' wills are private documents, though yours is not the only family to behave as if there is a right for everyone to know what's in them. It's up to your parents to decide who sees it, but I think your comment about not showing it to everyone now in case of future changes is a good one.

When I read a question like this one, I wonder why someone would be so insistent about seeing the will. It's easy to assume that a child insisting on seeing the will is simply greedy and wants to make sure she gets her share, but that's not always the case. What is her concern? Sometimes it's simply the geographic distance from a parent that makes children wonder if the children closer to the parent are somehow influencing the parent. Is there something that can be done or said by your parents to resolve her concerns?

This goes for the sibling who wants to be added as executor too. Your parents had their reasons for choosing their executors, and on the face of it that should be good enough. Sometimes though, there are real concerns such as an executor facing bankruptcy, being sued, having a marriage on the rocks etc. And even if none of that is happening, your sibling might honestly feel that he or she is the best choice as executor for some reason. This is not to say that because a child thinks he or she is the best choice that the parent should change the will to accommodate the child - far from it. But the concern can sometimes be laid to rest by an open discussion.

The idea of a family meeting is workable, as long as your parents are prepared to be bombarded with questions and possibly be pressured to make changes. Believe me, a meeting to tell the children what's in the will is going to be interpreted as a meeting to ask the kids for input as to what's in the will. If your parents want to hear what everyone has to say, there's no problem, but if they don't want that feedback, they will have to be prepared to tightly control the meeting and the kids.

If your parents have given sums of money to some of the kids over the years, such as a down payment on a house, this should be mentioned at the family meeting. The parents need to be clear on whether those sums are to be repaid or not. If your parents don't mention them, the sums of money will be treated as an advance to the kids on their inheritance.

One of the things I like about family meetings is that everything is said publicly so it's clear where everyone stands.

Your question goes on to ask about changes that could be made to the will. Are these changes that your parents want to make? Are the concerns you've raised their concerns too, or only your own? Unless your parents have asked you to find out about these things, then you are doing exactly what your siblings are doing, i.e. pressuring your parents for changes.

Given the politics here, the will should directly address executor's compensation, even if the statement is simply that there is to be no wage paid. It is up to your parents whether their executors are paid and it would be a huge mistake in my view to leave this particular group of children to figure out what the parents wanted in terms of paying the executor(s).

Limiting expenses is a bit more tricky. The law is that an executor is to be reimbursed for all REASONABLE expenses incurred in the administration of the estate. Being an executor is not carte blanche to spend estate money, as you obviously know. If it came right down to the executors passing their accounts, an executor who has chosen to fly in to town repeatedly rather than using email or Skype or couriers could very well find himself or herself absorbing those costs after all because the judge won't allow them.

My final comment is that the difficulty in getting along that currently exists is a mere taste of what it's going to be like when your parents have passed away. Once that happens, it's all going to ramp up instantly. And we haven't even touched on the nightmare that awaits one of you acting under a Power of Attorney. Perhaps your parents should consider using a neutral third party executor, such as a trust company.

Marriage makes a will null and void

This recent article from the Financial Post talks about a case in which a man died after two weeks of marriage, and the court held that his will, which was made before his marriage, was void. Instead of his estate going to his only daughter of a previous marriage, almost everything went to the wife of two weeks. The article contains some excellent information about the effect of marriage on wills across Canada. Click here to read it.

How to pass on your frequent flyer miles

I don't see this question often on estates, but to those who have accumulated a lot of miles, it's important. Those miles are valuable! This article is American (from http://www.forbes.com/) but the concepts translate nicely to Canada. The article contains a link to specific information about 10 popular plans too. Click here to read the article.The attached photo is from Forbes Images.

A checklist of things to consider when making your estate plan (part 1 of 2)

This brief but informative article is from Dennis Duffy who blogs at http://www.duffylawoffice.com/ . In it he talks about the basic documents you should have in your estate plan. Note that the Americans use Living Wills. We don't. We use a document that is called a Personal Directive, Advance Directive, or Health Care Directive depending on where you live. Click here to read the article.

Dude, where's your stuff?

This article from lawyer Kyle Krull covers one of those completely practical questions that I love to see addressed, simply because most people don't think about them. If you die, how will your family know where your stuff (bank accounts, insurance policies, house title etc) is? Click here to read the article.

Note that in this article, the author says that "state treasuries" hold billions of dollars in unclaimed bank accounts. Our equivalent is the Bank of Canada.

Which assets does an executor deal with and which are outside of the estate?

This reader has questions about the powers and responsibilities of an executor and trustee, and which assets fall within their control. This information is essential to the estate administration process, so I thought I'd cover it here for all to read.

Here's the question:

"When an estate is probated do all assets fall under the probate or can some things be dealt with before hand such as banks, life insurance and investments and if something needs to be done through probate can we proceed at that time? If the executrix/trustee is not a joint tenant of the house, who is responsible for selling the house? Would it be the joint tenant or the trustee?"

Parts of this question are quite clear to me, though I'm not sure I understand the part about dealing with assets "before hand". I'll get to that, though.

All assets owned solely by the deceased fall into the estate. The two types of property that don't fall into an estate are both mentioned in the reader's question. One type is an asset that is jointly owned by the deceased with someone else. The other type is an asset with a designated beneficiary. These are usually life insurance policies, RRSPs, RRIFs and pensions.

Note that this does not include RESPs, which do not go to the child named in the plan, but stay in the deceased's estate.

If the house was owned by the deceased and a joint tenant, on the death of the deceased the ownership passes to the other joint owner. It would be up to the other owner to arrange for the title to be changed. Please note that where the joint ownership is between generations, such as between a parent and a child, this is THE OPPOSITE. Joint title doesn't automatically go to the child joint owner when the parent dies. The child is deemed in law to be holding the title on trust for the estate, and it's for the executor to deal with.

If the house was not held in joint tenancy but was held just by the deceased alone, it becomes part of the estate and it's the executor's job to sell it or transfer it in accordance with the will. This cannot be done before probate is issued by the court.

I'd like to get into the part about dealing with assets before hand. If the question is whether any of the assets can go out to the beneficiaries before the deceased actually dies, the answer is no. To me that seems starkly obvious but I'm asked the question frequently enough to know that not everyone sees it that way. If the person hasn't died, keep your hands off their assets even if they have named you specifically as beneficiary.

Once the deceased has passed away, the executor should advise any joint owners of the death of the deceased and tell the joint owner it's up to them to change the title. The executor should advise life insurance companies of the death of the deceased, and let the insurance company deal directly with the person named as beneficiary in the policy. The executor should also advise the bank that holds the RRSP or RRIF and let the bank deal directly with the beneficiary who will receive the funds. The executor should co-operate by giving copies of the death certificate etc to allow these other parties to get on with the business at hand. Probate is not required for these transactions.

The deceased certainly can - and should - deal with these assets before death by naming the beneficiaries on the life insurance, RRSP etc. During the estate planning process, joint assets and beneficiary designations are part of the same big picture that includes the will and power of attorney. It all has to fit together.

Anyone with this type of question who lives in Alberta can check out my "Alberta Probate Kit" book, as it covers these topics in much more detail.

The rising cost of caring for Mom and Dad

The following article from http://www.smartmoney.com/ is American but the principles and ideas discussed apply just as well to Canadians. If you or a family member are struggling with whether you should leave your job to care for your aging parent, or the cost of hiring someone to do that, click here to read this article for some good information.

Protect Your Elderly Parents to go into second printing

I'm very pleased and proud to announce that my first book, Protect Your Elderly Parents: Become Your Parents' Guardian or Trustee is going into its second printing next month. I'm hard at work on revisions to make sure that all of the information is absolutely up to the minute. The book contains information, instructions and forms for every province and territory so I have lots of checking to do! Thanks to everyone who helped make this book a success. I sincerely appreciate the fact that so many people read my words and find them helpful to their lives and families. Believe me, I don't take that lightly.

Lynne

Don't leave your "real" wishes separately from your will

Annie made a will leaving her estate to her five children in equal shares. When Annie died, the child who was named as executor began the process of probating the will.

The family fighting began almost immediately after Annie's death. Why? Because Annie had told her family that what she "really" wanted done with her estate was different from what was in her will. Verbally, she directed that specific assets be divided among certain people, some of whom were not her children.  She then made matters even more complicated by transferring her home into joint names with two of the children even though the will directed that the home be sold and the money divided among all five children.

This kind of thing happens more often than it should, to the detriment of the children left coping with the mess. I've seen two examples of it just this week alone. Parents leave their children verbal instructions that are different from the will, placing the executor in an impossible situation. The executor is legally bound to follow the will, but morally wants to follow what they believe to be the parent's "real" wishes. The will is legally valid; the verbal instructions are not, but carry moral weight.

The siblings then take sides. Accusations are made. Chaos ensues. The estate is delayed and often ends up in court.

If you change your mind about what's in your will, then change your will. This is a must. It is simply unfair and unreasonable (not to mention illogical) to leave a valid will and at the same time leave contradictory verbal instructions. You might as well toss your lighted cigarette into a barrel of gunpowder.

I believe people do this because they have faith that their children will figure it out and do what the parent "really" wants. But even children who want to follow the parent's "real" wishes can't usually do so because they are bound by the will. The children can't ignore the law, or a valid will.

I don't believe parents have any idea of the pain and inconvenience they put upon their children when they contradict their own wills with verbal instructions.

Don't delay when claiming for life insurance benefits

This post by Megan Connelly, who blogs at http://www.torontoestatemonitor.com/ , is a look at a recent court case in which the courts said the wife and executrix of a deceased man waited too long to claim his life insurance. She ended up without the insurance money. Click here to read the article.

2011 Succession Planning Conference - Toronto

Canadian Insurance Top Broker and Canadian Capital are joining forces to present a full-day succession planning conference for business owners. To learn more, click here.

National Financial Literacy Workshops for Women 55+

I've received the following notice from National Initiative for Care of the Eldlerly (NICE) for workshops in Toronto, Vancouver and Montreal.

Jul 08, 2011 
Reminder - Upcoming National Financial Literacy Workshops for Women 55+
Older Women and Financial Literacy: Groundbreaking National Project Targets Low Income Older Women and Immigrants:
Combined Research, Financial Tools and Workshops Designed to Empower Older Women
The National Initiative for the Care of the Elderly (NICE), at the Institute for Life Course and Aging, University of Toronto, has launched a new suite of national financial and legal tools along with workshops starting in June, designed to improve the financial literacy of older low income unattached and immigrant women in Vancouver, Montreal and Toronto.

Please click here for the press release for NICE's groundbreaking older women and financial literacy project.

Please click here for the Toronto workshop flyer for July; click here for the Vancouver workshop flyer for September; and click here for the Montreal workshop flyer for July.

Please circulate and post the attached workshop flyers to individuals and organizations suitable for this project.
For more information about the project's workshops, please see: http://www.nicenet.ca/detail.aspx?menu=52&app=236&cat1=676&tp=2&lk=no
The National Initiative for the Care of the Elderly's (NICE) Older Women and Financial Literacy Project is getting great media coverage. Please see Alison Griffiths, award winning financial journalist, article below:
http://www.metronews.ca/vancouver/comment/article/895735--empowering-a-special-group

National Initiative for the Care of the Elderly (NICE) Initiative nationale pour le soin des personnes âgées (INSPA)
222 College St., Suite 106
Toronto, Ontario M5T 3J1 Canada
Phone: 416-978-0545 Fax: 416-978-4771 http://www.nicenet.ca

Another cabin nightmare

The readers are keeping me busy with plenty of good questions these days! Here's another, which the reader referred to as "another cabin nightmare". I would certainly agree with that title.

"My mother in law owned a cabin and put the names of her 4 sons on the title. I am assuming that they are joint tenants. She passed away in 2010 and in her will it says she give, device and bequeath her property at the lake to her four sons in equal share. How can that be when they are already registered owners of the property? We are now working on her estate and the accountants say that there is $15K of capitals gains payable on the cabin. Is this right that the total capital gains has to be paid or should it only be on 1/5 of the value. She did not sell but gifted."

You're right that if the cabin was already in the names of the sons, the mother's will isn't able to transfer the cabin to them. Nobody can transfer something they don't own. The clause you mention doesn't actually transfer the title but does no harm. My guess is that the mother made the will before she transferred the title, just in case she passed away before making the change to the title. She probably just wanted to make sure that the cabin went equally to the sones. This is pretty common. It's also possible that she was told about the new rules regarding inter-generational joint property and wanted to confirm her intention to pass the title.

As for the capital gains, I am not in a position to gainsay an accountant's calculation of what is owing. In fact, I rely on accountants in my own practice to determine tax amounts owing. It's possible, in fact it's quite probable, that when the title transferred to the sons, there was no capital gains tax paid at the time, and therefore it's all still owing from back then. Your best bet is to ask the accountant for clarification of the period of time that the tax covers. Not having seen the will or any other information about the estate, the best I can do is let you know about the general rules, which you can then use to talk to the advisors working on the estate.

The fact that the property was gifted rather than sold doesn't make any difference to taxes. Both sales and gifts are considered "dispositions" for Canada Revenue Agency's purposes.

I think you will find that once you have a bit more information, the tax situation will become more clear. The executors did exactly the right thing in hiring an accountant to help with taxes. Unfortunately, once the estate is settled, the sons are just beginning the real cabin nightmare. From this point on, they will have to be unanimous in all decisions regarding usage, maintenance and sale of the property. That is impossible for most families to achieve.

Can a will be written on any surface?

We all know that a will must be written down, and most of us simply assume that means on regular sheets of paper. I personally have seen a will written on a series of small post-it notes, which was held by the court to be a valid will. On an earlier entry in this blog I told you about a woman who had written her will on a board. The attached article from http://www.allaboutestates.ca/ gives some pretty interesting examples of the surfaces used when a testator was in a pinch. Click here to read it.

Estate planning: taking it to the grave or leaving it all to your kids

Attached here is an article from Mark Goodfield who blogs at http://www.bluntbeancounter.com/ that discusses the two sides of the question of hanging on to your wealth versus leaving it to your children. Click here to read it.

Crooked executors can sabotage estate plans

Something that I consistently say to seminar audiences is that each person needs to put more thought into who should act as his or her executor. My experience over the years has been that people make an "automatic" choice, either because they think they have to by law, or because they simply don't realize the damage the wrong executor can wreak on an estate.

Then there are the parents who name a child as executor, despite the parents' misgivings about the child's spending habits, honesty or other issues, because they don't want to offend the child. This is definitely a tough one for the parents and I sympathize with their dilemma.

I recently came across this article in http://www.capitalmagazine.ca/ that gives a vivid description of one estate that was seriously derailed by a dishonest executor. Click here to read it. The attached photo is from that website as well.

Preventing affluenza in your heirs

Are you trying to leave an inheritance to someone without spoiling them or having them "blow" the inheritance you worked so hard to accumulate? This article from US lawyer Kyle Krull is a brief but excellent discussion of using trusts (specifically those known as incentive trusts) in your will to try to guide your children towards certain goals. I guarantee that if you are wondering if a trust is for you and you read this article, you will read things you hadn't thought of. Click here to read it.

A memorable senior moment - hilarious!

I really enjoyed reading this supposedly true account of a truly memorable senior moment. Click here to read the story if you feel like having a laugh.

Estate planning a must when marrying later in life

I agree with the premise of this article from http://www.about.com/ , that it's essential for those marrying later in life to have a strong, comprehensive estate plan in place. The article I'm attaching is American, but the concepts it mentions apply in Canada as well. Click here to read it.

The second concept mentioned in the article, that you can't disinherit a spouse without his or her consent, works a little differently in Canada. Generally speaking though, there is either a statutory obligation to leave some or all of the estate to your spouse, or an automatic right for a spouse to contest a will which disinherits him or her. Nobody should be trying to prepare a will that disinherits a spouse without consulting an estate planning lawyer first.

Can an executor be sued for secretiveness and delay?

I'd like to answer another excellent reader question today. The first thing I noticed about this question is that it starts with a complaint that the executor doesn't give any information. Executors reading this blog, take note at the number of problems that start when you hoard information! Just be transparent and a lot of these issues just don't ever arise.

Here is the reader's question:

"The executor does not give us any information about the estate of my mother, who died in 2004. He still does not want to settle the estate. He and his lawyer are saying there is an estate tax to be paid, which I believe is a capital gains tax as there are several piece of property involved. I was told that capital gains tax was paid in 2006. Now he is saying it is not. Can the beneficiaries sue the executor for lying for years?"

The fact that capital gains tax was paid in 2006 but must be paid again doesn't necessarily mean the executor is lying. Keep in mind that capital gains tax is payable each time a piece of capital property such as real estate changes hands. Back in 2006, tax was paid on transfers of the property from 2004 to 2006. If property is now changing hands - say it's being transferred to a beneficiary or being sold to an independent buyer - then there likely is additional tax because of this transaction. After all, the properties have been sitting in the name of the estate for seven years and have probably gained in value during that time.

Having said that, in my view seven years is much too long for the wind-up of an estate. Obviously I don't know all of the facts, so there could be complications that I don't know about, such as farms or businesses on the lands in question. But any executor who takes seven years (so far) with an estate without at least giving regular reports to the residuary beneficiaries is taking a huge risk.

I never understand why executors are so darn secretive. Perhaps they think that it's better to just keep their mouths shut and not invite trouble by telling others what they're doing. Unfortunately this is almost always the wrong way to go about it and they just shoot themselves in the foot.

When an executor mishandles an estate (and I don't know for sure that this one has - I'm making a general statement here) he or she can be taken to courts by the beneficiaries. It isn't really suing the executor, in the familiar sense of suing for monetary damages. The usual outcomes are that the court will force an executor to pass accounts, or will remove an executor from the job, or will force the executor to lose his or her executor's fees, or all of the above. Executors are sometimes ordered to pay the estate out of their own pockets if their behaviour has been really over the top in terms of dishonesty or mismanagement.

This executor is fortunate that he hasn't already been taken to court. There may be nothing wrong at all with the estate, but if so, he hasn't let anyone know.

Does your business succession plan include "going public"?

This down-to-earth article from http://www.forbes.com/ is a good discussion of what it's really like to take a private company public, how often that really happens, and who should consider it. Click here to read the article.

2011-12 Donor's Guide is now available

This blurb from http://www.donorsguide.ca/ says it all (paper copies are available, but note the link below to the online digital edition (free):

“The Canadian Donor’s Guide is like the Yellow Pages: an essential first-line resource for lawyers and donors. It’s an essential outlet for any charity that is serious about planned giving.” ~ Malcolm Burrows, Head, Philanthropic Advisory Services, Scotia Private Client Group

The Canadian Donor’s Guide to fundraising organizations in Canada (Guide des donateurs canadiens faisant état des organismes de souscription de fonds) is the only authoritative annual directory to charity in Canada, primarily used in planned giving. Donors, Philanthropists, Lawyers, Accountants, Trust Officers, Will and Estate Planning Officers, Taxation Professionals, Financial, Insurance and Investment Advisors, and other professionals use the Canadian Donor’s Guide to make decisions on philanthropy: bequests, major donations, and other charitable gifts.

The Canadian Donor’s Guide is the annual reference book for donors and their advisors containing data on charities collected by questionnaire as well as pertinent editorial content. No other publication contains this breadth of information on charities in Canada.

Available both in print and online in our Digital Edition. Sponsored by Scotia Private Client Group. Published with co-operation of the Canadian Bar Association, Imagine Canada, and Canadian Association of Gift Planners.

(Attached photo is also from http://www.donorsguide.ca/ ).

Where's the talent? Assessing possible business successors

Now here is a really handy tool I've just found on the http://www.capitalmagazine.ca/ site. It's a form you can upload or print - for free - to help you assess and compare candidates for taking over your business one day. I'm always in favour of tools that help someone get organized and get moving. Click here to access it. The attached photo of the worksheet is from the site mentioned in this post.

Small business estate planning: choosing estate trustees

Choosing an executor is always something that requires a great deal of thought. Is it even more complicated for the owner of a small business? Yes, says Laura West in a recent blog post at http://www.allaboutestates.ca/ . Click here to read Ms. West's article.

Fight over autographed baseballs leaves Pogofsky family battered

This story from the Chicago Tribune illustrates what can happen when an estate contains an unusual, valuable item such as a collection of autographed baseballs. In this case, the autographs were collected over 30 years and included those of Babe Ruth and Lou Gehrig. The owner of the collection passed away, and now his children are fighting - in court - over who should get the baseballs. My heart goes out to this family, who will likely never really recover from this fight. If only the father had given clear instructions in his will for his collection. Perhaps, like millions of other parents, he felt that the kids would "work it out" without a problem. Click here to read this story.

The attached photo is from Zbigniew Bzdak, Chicago Tribune, July 5, 2011.

The toughest job you may have never wanted

I'd say the title to this article is an accurate description of being an executor. Few people appreciate how hard it is to be an executor. This article from the Globe and Mail talks about a new product available - insurance for executors. It's a good article, so make sure you have a peek if you've been named as an executor. Click here to read it.

I'd like to add however, that instead of going the route of buying insurance in case you make a mistake, there is also the option of hiring a trust company to act as your agent. That way you don't actually have to do the work yourself, but still retain the control of the estate. Call any trust company to find out more if you're interested in this (or email me).

The attached photo is also from the July 5, 2011 story in the Globe and Mail.

Capital gains tax on homes passing to the next generation

Capital gains tax continues to be something that requires a lot of attention in estate planning. This is another excellent question from a reader that deals with capital gains tax. I'd like to share it with you.


Hi Lynne, You mention that houses passing to children are not taxable. What about houses which pass to a niece and nephew? Is there any difference. I am referring to adults when I say niece and nephew.Both have their own principal residences and would probably rent or sell the houses in question.There are 2 houses in question. One is the decedents principal residence and 1 is a rental property.Appreciate your help. Thanks


The statement "houses passing to children are not taxable" is an over-simplification of what I've said, and isn't accurate. Let me clarify that. There is no capital gains tax on a transfer of a deceased person's home to someone else if that home was the deceased's principal residence. It doesn't matter whether the person receiving the home is a child, niece or nephew, as the key element in the transaction is the fact that it's the deceased's principal residence.


If the house being transferred was not the principal residence but was a cottage or rental property, it is subject to capital gains tax, even if it's being given to the deceased's own children. So  you'll find that the two houses in this reader's question will be treated differently by Canada Revenue Agency no matter who they are given or sold to.


The reader mentions that the niece and nephew each already has a principal residence of his or her own and will probably rent or sell the house they receive, which seems likely. When the niece or nephew sells the house they receive from the estate - whether that is done within months or not until years later - that niece or nephew is going to have to deal with capital gains tax as the extra house is not his or her principal residence. The capital gains tax will apply to any increase or loss in the value of the house from the time the niece or nephew received it until the time it is sold.


These are the general rules of capital gains tax. The reader would probably benefit from a one-on-one discussion with an estate planning lawyer or tax accountant to learn more about how the capital gains tax will affect the situation.

How a trust can lighten the burden of raising a family

Have you ever wondered whether a family trust is right for you? Most people don't even get that far, as information seems hard to find. Tim Cestnick of the Globe and Mail has written an article you can't miss if you're interested in learning about family trusts. Click  here to read it.

Naming the estate as beneficiary

I'd like to talk about this reader question in today's post, as it's something that almost everyone will think about during their estate planning. Here's the question:

"It would seem to me that naming a person as a beneficiary instead of an estate would be the easiest and fastest route for distribution. Is there some benefit that I can't see to naming an "estate" as a beneficiary."


Assets that can be designated as going to a certain beneficiary are RRSPs, RRIFs, LIRAs, segregated funds, life insurance policies, pensions and a few less common assets. Designating a beneficiary means that at the time you buy or set up the asset, you state on the asset itself who is to receive that asset when you pass away. Assets with designated beneficiaries are not controlled by your will, unless they name the estate.


This brings us to the reader's question. Why would someone designate their estate to get the funds rather than leaving them directly to a beneficiary? Keep in mind that there is no right answer for everyone. For many people it's a good idea to name a beneficiary directly, while for others it's clearly advantageous to name the estate. Each person (hopefully with the help of an estate planner) will have to figure out his or her best course.


Let's look at an RRSP or RRIF. As most people know, money goes into these plans without being taxed first, and the tax is paid when the money comes out. When you pass away, the law says you are deemed to have cashed in your RRSP or RRIF, so the entire amount becomes taxable all at once. The only way you can save this tax is to designate your spouse (and in limited circumstances a dependent child) as your beneficiary and roll the plan over to him or her. This usually, though not always, means that designating the spouse is a better idea than naming the estate. If the estate were named as beneficiary, the tax would be payable.


Not every asset carries a tax liability, which gives more flexibility in naming a beneficiary. For example, life insurance policies are not taxable in the hands of the person who receives the funds. And the reader is correct that naming a beneficiary can be simpler. If the life insurance money goes directly to a person rather than the estate then there is no need to get probate just to deal with the life insurance.


However, life insurance is often left to a person's estate. This is not at all unusual because naming your estate as the beneficiary of your life insurance policy is a way of creating more cash in your estate. The estate doesn't have to pay tax on the life insurance money  it receives. Business owners like this because it allows them to leave something in the estate for their children who are not inheriting the family business. Individuals with cottages like to leave insurance money in their estates to pay the capital gains tax on the cottage so that the cottage can be kept in the family. A person with lots of debt or taxes might leave life insurance to cover those debts or taxes. These are just a couple of examples but there are several good reasons to leave life insurance to the estate. 


Estate planning is designed to ensure that all aspects of your financial life - will, business agreement, power of attorney, joint property and designated beneficiaries - all work together to achieve your goals.