In late 2021, Justice Nicholson of the Ontario Superior Court released his decision in Greaves Estate vs. Ontario (Ministry of Finance). Mr. Greaves died far earlier than anyone had anticipated. At the time of his death, he controlled three corporations ( not listed on a stock exchange ) and they were the beneficiary of a number of life insurance policies. As a result of his death, the insurance policies death benefits were paid to the companies, the shares of which Mr. Greaves solely owned. The estate now had these insurance proceeds within its four corners and the question became what assets were to be declared when probate is sought. The larger the value of the estate the greater the estate administration tax that the Province of Ontario will levy. That tax roughly speaking is 1.5%. As we discussed earlier, that is a tax that is completely separate and apart from any federally levied income tax. There was much discussion and debate before the court and in the end, the court would not allow the executors of the estate the right to even seek an answer to the question as to whether or not the insurance policies and accordingly the value of the shares should be included for the purpose of calculating the estate administration tax.

The unspoken practical answer is that this never should have been a question. Properly drafted Primary and Secondary Wills would have lumped the shares in a privately held corporation in that portion of ones estate that does not require probate and as such is not subject to the estate administration tax. Just a little bit of estate planning would have gone a long way and would have saved both much money and aggravation in this situation.

Our office regularly prepares Primary and Secondary wills, often as part of a probate avoidance process we call the Full Monty. Details of the Full Monty can be found on our website.

To learn more check out the article – A Strategy To Reduce Or Eliminate Probate Fees – Fully Monty

To learn more check out the illustration – The Full Monty

Elsewhere in our blog articles, we have discussed the creation of a Henson Trust. What happens if the testator/willmaker never created one? This can happen for various reasons, including where the deceased left no Will or if the disability took place after the Will was prepared. Sometimes, the willmaker fails to reveal to the lawyer the existence of a beneficiary’s physical and mental state.

Generally speaking, there is a $10,000 limit for receipts from a Henson Trust before any negative impact upon ongoing entitlement to ODSP, the Ontario Disability Support Program.

It is not uncommon for this situation to arise.  What can estate trustees do to try and mitigate the negative effect upon a beneficiary’s ongoing receipt of ODSP. Remember that an inheritance is considered by the provincial government in determining the beneficiary’s ongoing entitlement and quantity of ODSP payments. There are several strategies that can be looked at and here are only some of them:

1. There is firstly a $40,000 basic exemption in which one can have assets of this amount with no negative impact upon one’s ongoing entitlement to ODSP.
2. One can use the funds to purchase a principal residence for the beneficiary, a vehicle or some product that is related to the recipient’s disability. While this sounds like an excellent idea, frequently if a person is so disabled as to be entitled to ODSP, the purchasing of a residence may not necessarily make sense.
3. Another method is the ODSP existing restrictions permit an additional $100,000 segregated fund or trust being created for the beneficiary’s maintenance and support. It is almost as if retroactively a Henson Trust is being created for an individual, however it is now restricted to having no more than $100,000 within it.
4. There are also various expenses that are not related to disability that one can seek pre-approval from the director of ODSP to allow those expenses to be paid without impacting ones’ ongoing entitlement to ODSP.
5. Improving the ODSP recipient’s living condition by getting pre-approval from the director of ODSP. This could be used to renovate of the residence of the ODSP recipient, including furniture and perhaps even vacations for the beneficiary and even their personal care workers.

This area is extremely complex as involves the intersection not only of law but as well a government agency which is permitted to change its rules at its discretion. There are many learned papers on this topic which are beyond the scope of this blog. I would recommend for those parties that wished to further explore this area to look at the excellent paper contained within the 2021 Estates and Trusts Summit.

It is not uncommon for the average person to have heard of a Henson Trust, but not to have understood its meaning. A Henson Trust is named after a 1989 case involving the will of Leonard Henson of Guelph.  The provisions of that will was challenged and eventually led to an important decision that held that a Henson Trust was a valid method of assisting a disabled beneficiary while not impinging upon their ongoing receipt of Government assistance.  The most common example of that is ODSP, the Ontario Disability Support Program.  Legally the validity of a Henson Trust was given the “Gold Seal of Approval” by the 2019 Supreme Court of Canada case of S.A. v. Metro Vancouver Housing Corp.

The general concept of a Henson Trust is for the testator/willmaker to set aside a fund for a disabled beneficiary, but do it in a fashion in which the fund never belongs to the aimed beneficiary and the dispersal of funds is completely at the discretion of the trustee in charge of the Henson Trust. Generally speaking, the executor of the Will will be that trustee. A prime example of a Henson Trust is for an adult child who suffers a disability and is unlikely to ever become financially self-sufficient and the willmaker does not wish to harm the ongoing entitlement of the adult child to ODSP. The amount of ODSP varies with time and is set out in the regulations to the Ontario Disability Support Program Act. At the time of writing, an individual living independently and having no dependents will receive a total payment of $1,169 per month. Hardly enough to support a lavish lifestyle.

What is a parent to do to in an effort to achieve the goal of making provisions for their child, but not harming their ongoing entitlement to ODSP?  A Henson Trust is the common method of doing this for the adult child is inheriting nothing and has no entitlement to any benefit in the Henson trust. Whatever they receive is completely at the discretion of the Trustee.  These are extremely common, and it is important that you discuss this issue with the drafting lawyer.

One of our standard opening questions is about the mental and physical health of all parties within the family to alert ourselves as to whether not any special provisions need to be made in one’s Will, including a Henson Trust. Clearly critical is having complete trust in the Trustee/Executor to do the right thing for the beneficiary child.

Strategies when a Henson Trust was not created, can be found in our blog titled ODSP – WHAT TO DO WHEN THE RECIPIENT RECEIVES A SHARE IN AN ESTATE

Is printing your name the equivalent of signing a Will for the purpose of creating a valid Will?   This blog article must be looked at taking into account the substantial compliance rules that will be in effect in Ontario as of January 1, 2022.  Substantial compliance means as long as the court believes that a document is an accurate reflection of the willmakers intention then it may very well be deemed to be valid by the court.  In simple language, minor errors can be fixed by the court. That has not been the law up until now.

In the 2021 decision in BMO Trust v. Cosgrove, a highly experienced Wills and Estates judge, Madame Justice Dietrich held that printing one’s name is not a signature. Section 4 of the Succession Law Reform Act specifically requires a signature and where it must be placed. It also requires the two witnesses to subscribe to their names. It is interesting that the Act used a different verb, to “subscribe” rather than “sign” for the witnesses as opposed to the willmaker. Subscribe has many different definitions and can be referred to as a simple synonym for signing. Why endure the uncertainty and the legal fees when one simply has to follow the basic rules set out in the Succession Law Reform Act. Again, your lawyer will know this. Trying to do a Will yourself is clearly an exercise in being penny-wise and pound-foolish.

We are neither tax lawyers nor accounts, however, it is important that we point out to our clients who are the estate trustees aka executors, that they retain the services of a qualified accountant as quickly as possible.

It is not uncommon to have an estate with foreign beneficiaries. Beneficiaries who live in another country and are deemed to be a non-resident for tax purposes, are an important factor in driving an estate trustee to retain the services of a qualified accountant at the earliest opportunity. The Income Tax Act has very strict rules dealing with the taxation of income within an estate where there are non-resident beneficiaries. This can apply even if the income is not being distributed to the non-residents.

Income paid to a non-resident beneficiary is subject to a domestic 25% withholding tax and it is the responsibility of the estate trustee aka executor to hold this money and remit the tax to the Receiver General in addition to all the other filing responsibilities of the estate trustee.

If the assets of the estate meet the definition of taxable Canadian property, there may also be an obligation to withhold 25% of the value of the capital interest of the non-Canadian resident beneficiary in the estate, unless a certificate of compliance is obtained under Section 116 of the Income Tax Act.   This cannot be understated.

If a non-resident beneficiary lives in a country that has an inheritance tax, the beneficiary might very well find themselves subject to tax on the inheritance that they get.  This is, in addition, the tax that is levied against the deceased in Canada.  In essence, this becomes a form of double taxation.

There is yet another treacherous detail that requires the services of a highly qualified estate accountant. A US citizen or long-term green card holder or an individual deemed to live in the United Kingdom as their domicile, are faced with additional inheritance taxes and obligations. We generally ask at the outset of an estate whether any of the beneficiaries are non-residents of Canada. This is extremely important.  This simply reemphasizes the theme of this blog article, an estate trustee needs to retain the services of a qualified accountant at the earliest opportunity and not to delay.

Not infrequently, we are asked what is wrong with simply downloading from the internet or using a form that someone has purchased at a stationery store. What is wrong with simply doing a Will yourself by writing out your wishes on a piece of paper? The problems are many and it usually boils down to an individual being penny-wise and pound-foolish. The cost of doing a basic Will in our office, including Powers of Attorney, barely covers our own costs in preparing the documents.

There is a provision whereby a person can create their own holographic Will. A holographic Will simply means it is a document that is entirely in the handwriting of the willmaker on a completely blank sheet of paper, with no other writing or printing upon it and simply signed by the author. There is no need for witnesses and indeed there is no formal obligation for a date even.  The question then becomes whether the document in question written by the willmaker does indeed meet the test of being a holographic Will. It would clearly help if the document began by saying this is my last Will, but more often than not even that formality is not reflected nor is it required.

In no way do we recommend holographic Wills, although sometimes in an end-of-life situation, we may guide our clients when there is absolutely no alternative.

The clear risk in using either Will kits or preparing your own holographic Will is that if you make a mistake, the few dollars that you saved in legal fees, will be wildly exceeded by lawyer’s bills incurred trying to interpret what you have done.

In another blog article, we talked about The Sweeping Changes coming effective January 1^st, 2022 in which strict compliance is removed from being the law in Ontario and placing it in line with basically the balance of Canada. Ontario will also have a substantial compliance regime.

The test will simply be whether or not the court believes that a document that does not meet all of the required formalities is indeed a reflection of the deceased’s fixed and final expression of his or her intention regarding the disposal of their property upon death.

What will be different as of January 1^st, 2022 is the substantial compliance rules intersecting with the long-standing test as to whether not the words of a willmaker and in this case a holographic Will meet the requirements that have now been loosened. Examples have been given of scribbled post-it notes, or crumpled pieces of paper with instructions noted on them.

The author has been involved in an estate in which a handwritten note signed by the willmaker and posted on her refrigerator, filled with spelling errors was determined to be a holographic Will. As a financial lesson, the assets of the willmaker were less than $20,000 and legal fees of $10,000 were necessary to formally prove the document as being a Will. I acknowledge and point to the excellent paper written by Clare Burns McNiven and Dana Chriszenfeld titled Strict Construction of Wills in the Testator’s Handwriting, which was part of the 2021 Estates and Trust Summit. Their paper is a learned and exhaustive summary of the laws across Canada that will likely be the foundation of the law evolving in the Province of Ontario on this new and thorny field.

I repeat. Substantial compliance laws are well intentioned but may simply create a mess for the benefit of lawyers