Completing and filing this form is a new bureaucratic step. All involved, including the Provincial Government administering it, are cutting their teeth on the process as it evolves. One of our clients contacted the information line and asked what value they should input for the real estate owned by the deceased at the date of death. The erroneous answer that they received was whatever the MPAC valuation was. This is wrong. The MPAC valuation is often below the market value. While this may save the estate 1.5% in the estate administration tax, it leaves the estate open to much more in capital gains. Remember that while the deceased up until the date of death was able to enjoy a principal residence capital gain exemption, no such exemption exists for an estate namely from the date of death up until the date of the sale of the home.

As an example, in todays over inflated real estate market, it is not impossible for a property to increase by $50,000.00 in value from the date of death to the date of sale. All of that appreciation would be a capital gains, taxed at the highest market rate, roughly speaking $12,500.00 in tax. For further details on this point, you need to consult with the estate’s accountant, but be alive to the conflict between what is in the estate’s best interest by saving a 1.5% tax rate versus an effective 25% marginal tax for capital gains.

Regularly, our firm is asked if we will make a hospital visit or go to a client’s home when they are not well enough to come to our offices.

While we are happy to do so, this incurs extra fees. Almost always the lawyer is accompanied by a law clerk as issues of capacity lurk in the background and the views of both a lawyer and an experienced law clerk are very important.

We have had the privilege to be entrusted with this responsibility repeatedly and we take it very seriously. Often time is of the essence and we take careful heed of the very short time lines that are often involved. It takes a delicate and sensitive hand to deal with clients who are often at the end of their lives, who have left drafting a Will or Powers of Attorney far too long, yet the necessity remains.

These are circumstances which are far from ideal and because the extra care and attention that is required and often the urgency that is involved, the legal fees are greater than the norm.

The end of life is rarely a kind or happy time in ones’ lifecycle, but it is a process that we approach with the gravity it deserves. We would be pleased to assist and for further information, contact either Fred Streiman 905-455-7300 ext. 231 or his law clerk Nelia Senra at ext. 226.

Justice Cory Gilmore of the Ontario Superior Court recently made a decision overturning a Will that she found had been motivated for racist reasons.  In the decision of Spence v. BMO Trust Company, Justice Gilmore found that the testator (person who made the Will) had left nothing to one of his daughters because she had had a child with a man who was of a different race.

Available for the Judge, which was not by way of Affidavit evidence and which was not contradicted  in any way, was the reason for the testator exclusion of his daughter of whom he had been long been estranged from.

The Will on its face contained no such racist language.  The established law which this decision runs contrary to, is that one is not supposed to look outside the four corners of the written Will itself, and not to look at the testator’s motives or state of mind (aside from competency) when drafting their Will.

In other words, no one would complain about Justice Gilmore’s decision had the Will stated the racist reasons within it.

The estate legal community is in a tizzy over this decision in which the Judge in essence found the Will to be void and simply divided up the estate amongst the testator’s two surviving children in accordance with the terms of the Secession Law Reform Act.

It will take some time to see whether or not the decision of Spence v. BMO Trust Company is the leading edge of judicial intervention in changing Wills that perhaps they should not.

There is a legal maximum that hard facts make bad law, but this very well be an example of that.

Stay tuned as we watch to see if this is an anomaly or a trend setter.

The administration of an estate by a trustee (also called an executor) can be very time consuming and involved. As a result, estate trustees have a statutory right to be paid for their services. The form and amount of compensation can vary widely based on the size of the estate, the time and skill required and the success achieved in administrating it. As a general rule of thumb, estate trustees typically take a percentage  of the gross value of the estate as compensation. The figure of 5% is widely acknowledged as a starting point. However, there are a number of ways to structure the compensation. There can be a specific amount set out in the will to be paid to the estate trustee. Likewise, the executor can take a gift or bequest as compensation. This occurs when they are left something in the will as a form of compensation.  The way the compensation is structured is very important.

Many estate trustees are surprised to learn that their compensation from the estate can attract income tax as an office or employment source. This brings with it many of the T4 and CPP requirements that, if left unreported, can attract a personal tax bill for the executor and payroll liabilities for the estate. Some people may prefer to structure the compensation as a specific gift to the estate trustee. These gifts will not be taxable but the testator (person making the will) should be careful that the gift cannot be construed as compensation for the executor’s work.The CRA generally upon close examination of an estate will deem a bequest in lieu of executor compensation as taxable income.  The practical point is the unlikelihood of a CRA audit of an estate.  If it is, the gift will become taxable. Another option that will not avoid tax, but may lower the tax payable, is to straddle compensation over different calendar years. This can lower the marginal tax rate of the estate trustee, which can result in less tax being paid.

In addition to direct compensation, estate trustees can bill travel expenses to the estate. These expenses must be related to the administration of the trust and they must be reasonable.  Reasonable travel expenses will not attract tax but there are a number of requirements that the Canada Revenue Agency (CRA) has. Estate trustees should be careful with their travel expenses and comply with the CRA requirements or else they could be subject to tax. The irony is that executors rarely claim the fees received as income.

The implications of tax on estate planning are very complex but can result in large savings. A blog post cannot fully do justice to the complexity of this field of law. If you are thinking about estate planning and want to provide the most efficient system for administrating your estate, you should seek legal advice. The lawyers at Dale Streiman Law LLP have experience with all facets of wills and estates. They are ideally suited to create the most effective succession plan based on your unique needs.

The following summary is for information purposes and very important to all Ontario residents, for Simple Wills and Powers of Attorney for Personal Care/Health and for Property are required in Ontario and if you fail to have such documents prepared, then it is a most costly exercise to have your property and/or estate left and administered by spouse or family members.

For example, a Last Will and Testament is prepared in the event of death of the person executing the will, i.e. the testator; in such a Will, the testator would name his or her spouse or family member, one or two persons to act as the Estate Trustee/Executor to manage the estate and distribute the assets of the Testator after his or her death. You may wish to name an alternative person if the first named Estate Trustee/Executor cannot act or predeceases you. Normally after payment of debts and funeral expenses, then a bequest is left of all the property of the Testator i.e. the residue of the estate after payment of debts, funeral expenses and no need to list the type of property either real estate or investments, furnishings etc. Such residue of the Testator is then left/bequeathed to his or her spouse, then if the spouse did not survive, or predeceased the Testator would normally leave the residue of the estate to the children referred to as issue per stirpes, meaning that the children if underage would be left the property, and an age of responsibility when such children should receive their share of the Testator’s estate is then inserted, such as l8, 2l, 23, 25 years or other age. The Estate Trustee is authorized to hold that child’s share and invest such proceeds and use it for the care, maintenance, education/tuition of the child, and then when the child reaches the age as selected by the parent, the child would get the monies remaining in trust. If such child predeceased the parent, the “per stirpes” expression would apply and if for example there were 3 children, one died and left 2 children, i.e. grandchildren, such grandchildren would get their father/mother’s share of the grandparent’s estate being l/3rd share and other 2 children would get their l/3rd share each. There are other clauses, such as appointment of guardian to get custody and raise children under the age of majority, common accident clause if no one survived, a Family Law Act clause so that if one of the children received share in their parent’s estate, this share or bequest would not be shared with their spouse or claimed as a Family Asset under the Family Law Act of Ontario.

If you fail to have a will, then it is a costly exercise to appoint an estate trustee, usually a member of the family with possible insurance bonds. The will with the powers of attorney documents can be amended at any time, but clients are warned that if one spouse died, the other survived, and the children are no longer dependents, i.e. they are no longer in school and working, then the surviving spouse can revoke the will and cut out the children as beneficiaries and leave the estate to a third party. This can be protected if the spouses have a marriage contract. There are other issues such as cohabitation with common law spouses and property and other issues need protect just as in a Marriage Contract and that would be contained in a Cohabitation Agreement under terms of the Family Law Act of Ontario. All clients should know that if they remarry, a pre-existing will is revoked and such domestic contract under such Act is recommended.

For Powers of Attorney under the l995 Substitute Decisions , the parties should name the spouse as their prime attorney and name alternates or substitutes for the spouse in the event that the spouse cannot act or predeceased the person giving the power of attorney, i.e. the donor.It is also important not to designate your estate but rather your spouse, and then even your children or other relation as a contingent beneficiary under any life insurance, pension, or RRSP’s or RRIF’s if such institutions permit so as to avoid the large cost of probating a will.

There are 2 separate forms of powers of attorney, one for personal care or health, whereby the appointed attorney or substitute is authorized to make personal care, health decisions, consents to operations, blood transfusions, decisions as to where the donor wishes to reside or is institutionalized, if the donor suffers from a mental disability e.g. Alzheimer’s disease. This personal care power of attorney form also includes the living will clause which can be broadened but generally states that the donor does not wish any medical procedures or extraordinary prolongation of life, or resuscitation in the event that there is no brain activity.

Property power of attorney is important in Ontario whereby the donor would name the spouse and as substitute for the spouse, 2 persons/children/relations acting jointly to handle and administer the donor’s property, since if the donor or person granting the power of attorney becomes disabled, then the Office of the Public Guardian and Trustee of the Ontario Government will in most cases assume control of the donor’s property, house, bank accounts, during such person’s disability.

The costs for such wills and powers of attorney are set out in our website and we would be pleased to meet with any parties wishing such documents prepared.

By: Elliott Dale

A Henson Trust is a methodology by which a person making a Will (the testator) makes provisions for a disabled beneficiary, usually a child, without jeopardizing the beneficiaries’ ongoing government assistance. The most common scenario is a disabled child who is receiving monies under the Ontario Disability Support Plan (ODSP). The ODSP program will reduce its benefits dollar for dollar, if the recipient receives a benefit over a prescribed limit under a Will. Namely the problem was how to leave money to a beneficiary receiving disability benefits without barring them from receiving those ongoing benefits or suffering a corresponding reduction. The Henson Trust, named after a 1987 Ontario Divisional Court case, created an approved arrangement now commonly referred to as a Henson Trust and found in many Wills.

A Henson Trust is the creation of a completely discretionary trust, in the hands of the executors of one’s Will. It gives those executors complete and utter discretion to distribute as much of the income and capital of the estate or an amount set aside for one particular beneficiary as they see fit. It is that absolute discretion during the lifetime of the beneficiary that allows the Henson Trust to be characterized as never actually being received by the disabled beneficiary.

More simply put, it never belongs to the disabled beneficiary because it is distributed only if and when the executor wants to. If it is not within the disabled beneficiary’s control, it is not theirs and therefore does not interfere with the beneficiary’s receipt of ODSP or any government plan.The challenge of course is very carefully choosing an executor who will act as the trustee/administrator of the Henson Trust.

Not only must one very carefully choose an executor that one has absolute faith in, but the testator must keep one eye very carefully on the age of the executor/trustee. Often the partial or complete solution is naming a sibling of the disabled beneficiary as the executor. The risk of course is naming one of the executor’s siblings as the trustee of the Henson Trust only to find that person becoming disabled or dying long before the end of life of the disabled beneficiary.

In large estates, the solution, in the absence of such family members or a trusted executor, can be the appointment of a corporate trustee.Discuss this issue with your lawyer who is experienced in the drafting of Wills and understanding the interrelationship between a Henson Trust and the receipt of ODSP benefits.

By: Fred Streiman