Canadian Elder and Wills Law
Canadian Elder and Wills LawTopics on This Page:
Wills | Living Wills | Enduring Power of Attorney | Trusts | Estate Probate or Administration | Personal Representative | BC's Wills, Estates and Succession Act | Alter Ego Trusts
When a person dies without a will, all of that person's property is distributed according to a formula fixed by law. Without a will, legal costs are increased. It can also lead to hard feelings. Finally you will have no say as to who will look after your affairs after you have gone.
Preparing a will is relatively inexpensive and not time consuming.
A personal directive is a legal document which gives instructions on major non-financial personal decisions if you cannot make your own decisions:
- A personal directive lets you choose another person, an agent, to act on your behalf and make decisions for you when you cannot make them yourself.
- Making a personal directive is optional and voluntary.
- It can't be used to request assisted suicide, euthanasia or anything else illegal.
- Some of the issues that can be addressed are:
- medical treatments you would or would not want,
- where you would like to live,
- who you would like to live with, and
- choices about other personal activities (recreation, employment or education)
This is only available in some provinces.
This type of power of attorney is sometimes called "durable power of attorney" or "springing power of attorney" which "springs" to life when a certain event, specified in the power of attorney, has taken place.
An Enduring Power of Attorney allows you to appoint a trusted individual who will have authority to run your affairs while you are mentally incapacitated. If you do not have an Enduring Power of Attorney, you will have no control over who becomes your trustee and your spouse and/or family may be forced to hire a lawyer to bring a Dependant Adult Application. There could also be a delay factor in appointing such a trustee which could be detrimental to your estate or business interest.
A simple definition of a trust is property given by a person called the donor or settlor, to a trustee, for the benefit of another person (the beneficiary or donee).
Trusts are either:
- "inter vivos", also called a "living trust", in which the settlor transfers the property to the trustee in his or her lifetime.
- "testamentary trusts" are created by will and transfers property of the deceased settlor to a trustee for the benefit of a beneficiary.
Type of trusts
- Express trusts are created by clear statement by the settlor to create a trust.
- Resulting trusts are trusts that are presumed by the court from certain situations. Similar to a constructive trust but for resulting trusts, the court presumes an intention to create a trust; the law assumes that the property is not held by the right person and that the possessor is only holding the property "in trust" for the rightful owner.
- Constructive trusts are trusts which a court declares or imposes onto participants of very specific circumstances such as those giving rise to an action for unjust enrichment, and notwithstanding the lack of any willing settlor to declare the trust.
- Statutory trust are trusts created by the effect of a statute. They tend to be temporary in nature and serve the purpose of bridging ownership of property to benefit a certain class of individuals which the statute is designed to protect.
When a person dies his estate must be administered and if a will is involved the will must go to probate.
Probate is the Court document which proves the will as the actual last will of the deceased, and confirms the executor.
If the estate is intestate (no will), then rather than probate (which is reserved for wills), the court will issue letters of administration to an administrator. If a will does not name an executor, or if the executor predeceases the testator, or if the named executor declines the position, someone will have to apply to the court as administrator to handle all probate issues.
The term "personal representative" includes executors (where a will names an executor) and administrators (where a person dies intestate, or an executor declines, and the court must name someone to administer the estate).
The office of personal representative is voluntary. Even if you are named in a will as executor, you can decline.
A personal representative has a number of duties:
- to take possession of the assets,
- pay the debts,
- look after insurance matters and
- keep proper accounts.
- the personal representative stands as way station between the deceased and the beneficiary. As such, and legally, title to property goes from the deceased to the personal representative (as trustee for the beneficiaries) and then to the beneficiaries.
Some assets do not have to go to probate, such as joint property and RRSPs or insurance policies with named beneficiaries. Property in these are transferred automatically on death.
The Wills, Estates and Succession Act of B.C.came into force on March 31, 2014. The new law brings together and updates various statutes with the twin aims of providing greater certainty for individuals who leave a will and simplifying the process for those responsible for distributing an estate.
This is the biggest overhaul in almost 100 years. Justice Minister Suzanne Anton said Tuesday. The aim is to make it easier, faster and clearer for people to draft wills and have their property and assets distributed as they wish after they die. Anton said it’s the largest overhaul of will and estate legislation since 1920, and even after that overhaul, many of the processes and procedures dated back to 1837. “Today’s world looks and operates a lot differently than it did in 1837,” she told at a press conference Tuesday.
All existing wills remain in force.
One of the most significant changes in the law is that it allows judges more latitude to correct errors and use other documents to figure out the true intentions of the person who had the will drafted.
Some lawyers have expressed concern that it could mean a person’s emails, letters or notes discussing what they’d like to see happen to their money and property could be used by a judge to alter their will after they die.
But judges in other provinces have been very conservative in how they’ve used similar provisions, Justice Ministry officials said.
Around 45 per cent of British Columbians don’t have a will, the government estimates. That could mean decisions are made about guardianship of their children and division of their money and property in a way they didn’t intend.
“It’s an update and modernization of our legislation, and although that has growing pains it’s probably good overall,” said Kirsten Jenkins, a lawyer specializing in estate planning, trusts and administration at the Bull Housser law firm. Jenkins said the courts will also have to interpret a new change to the definition of a common law spouse, which appears to allow one spouse to unilaterally terminate a relationship and impact a person’s right to challenge a will. “This whole business of I can terminate [a relationship] unilaterally and we’re done … it will be interesting to see what the court does with that,” said Jenkins.
The new rules slightly change the way a person’s money is split between spouses and children if a person die without a will. Also, if a person dies without a will, the office of the Public Guardian and Trustee will no longer look for distant relatives beyond four degrees of separation; it would be up to those distant relatives to pursue part of an estate. The legislation also fixes a rule that made a person’s will invalid after they got married. “That’s not the case anymore,” said Anton. And it lowers the minimum age of a person allowed to have a will from 19 to 16.
The Justice Ministry said the changes will generally allow for simpler standardized forms for wills, estates and the probate process, as well as speeding up the processing of documents in cases where fraud is not suspected.
You can find out more information at: this BC Ministry of Justice link
Alter ego trusts are trusts, created after 1999, where the settlor (the person who creates the trust) is the sole person who has a right to all the income of the trust each year. Further, no one but the settlor can have a right to the capital (assets) of the trust while he or she is alive. It’s possible to set up a “joint partner trust,” which is the same as an alter ego trust except that both partners (married or common law partners) have a right to the income of the trust annually, and no one but those two individuals has a right to the capital of the trust while either of them is still alive.
Alter ego trusts can transfer assets to the trust without triggering tax on accrued gains on the assets.
The trust is taxed like other inter-vivos trusts (trusts created during the settlor’s lifetime) at the highest marginal tax rate. Each year, the income of the trust will be taxed in the settlor’s hands, and upon the settlor’s death (or the death of the second spouse or partner in the case of a joint partner trust), there will be a deemed disposition of the assets of the trust, creating a tax liability at that time inside the trust.
- 1. Avoid probate fees. Assets that you place into an alter ego trust during your lifetime will fall outside of your estate at the time of your death, allowing you to avoid probate fees (both domestic and potentially foreign probate if you own assets, such as real estate, outside of Canada). Probate fees are charged by the courts in each province (except Quebec) to grant “letters probate,” which certify that your will is valid and your executor has the authority to administer your estate.
- 2. Reduce delays and professional fees. Since the assets in the alter ego trust won’t form part of your estate on death, there won’t be delays resulting from preparing a court application to probate the will, or waiting for the court order. Legal fees for this task can also be avoided. So, your assets can be managed and distributed without these delays and costs.
- 3. Ensure continuity and liquidity. If you set up an alter ego trust, your trustee simply continues to manage your assets upon your death. Nothing changes in this regard. This also means that your trustee can convert certain assets to cash at any time, if desired or necessary, to pay taxes or make distributions to heirs.
- 4. Preserve privacy. Once you’re gone, and your will goes through probate, it becomes a public document. The value of your estate may also become public. A trust agreement, however, is not public and will guard the privacy of this information.
- 5. Protect against litigation. It’s possible for the terms of your will to be challenged by a disgruntled family member or other person. A trust agreement is much more difficult to challenge.
- 6. Replaces a power of attorney. One advantage a trust has over a power of attorney over property is that a trust agreement continues after your death, while a power of attorney does not. Further, the trust is more comprehensive in detailing specific duties and powers to be exercised by your trustee. Finally, a trust agreement offers the settlor greater protection against being unduly influenced by family or friends. The settlor is no longer the owner of the assets because they are now controlled by the trustee.
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