ESTATE PLANNING - MAKE SURE YOU DEAL WITH YOUR LOYALTY REWARD POINTS, OR POTENTIALLY LOSE THEM

You likely have loyalty-based reward points of some kind, such as Air Miles or Aeroplan.

You might be surprised that the reward points you accumulate may not be transferable by you to your beneficiaries. It depends on the contractual terms and conditions of your program, which you likely have never read or considered. You should check on that. Alternatively, the contractual terms and conditions of your loyalty plan may require that your points be utilized within a certain period of time, or they expire. This may present an issue if you pass away, of course.

According to the CBC, your loyalty program may have sole discretion about whether your points could be transferred to another if you pass away. If they are, there could be a significant fee involved.

You should:

1) contact your loyalty program and check into the terms and conditions, including your ability to gift or bequest your accumulated points on your death or disability;

2) request your loyalty program to inform you what information or documentation would be required to successfully transfer or bequest your points on your death; 

3)  keep a document or memo about your loyalty points to inform your trustee or heirs about your points/program(s) and any information they may need to transfer those on your death; and

4) speak to your estate planning lawyer about incorporating into your Will a gift or bequest of your loyalty reward points, with the above information in hand. 

For more information, Umair Adbul Qadir of Hull & Hull LLP provides helpful insight into dealing with your loyalty rewards programs in this recent blog.

CBC's recent article - click here.

________________________________

Jason Ward – WARDS PC LAWYERS

This WARDSPC BLAWG is for general information only. It is not legal advice, or intended to be. Specific or more information may be necessary before advice could be provided for your circumstances.

More information? We're here to help - jason@wardlegal.ca  www.wardlegal.ca

read more

MY ESTATE PLAN AND WILL - WHAT HAPPENS IF I MARRY (OR DIVORCE)? HERE ARE THE BASICS YOU NEED TO KNOW

Everybody should have an estate plan – namely, a Will and powers of attorney, at least.

What happens to your existing plan if you marry or separate/divorce?

If you marry, you will (perhaps unwittingly) revoke your Will automatically in Ontario, unless your existing Will specifically says that you made it “in contemplation of marriage”. Therefore, if you marry (and, ideally, before you marry), you should review your estate plan and make any changes that are necessary because of your marriage, especially if you plan to have children, for example.

If you separate from your married spouse, it does not automatically revoke your Will. Spouses are considered “separated” under the Ontario Family Law Act when they live separate and apart with no reasonable prospect that they will resume cohabitation. Separated spouses may share common accommodation as long as they live independent lives.

A separation will not impact your Will. If you are separated when you die, your spouse may still benefit from your Will, unless it is changed after you separate. Your surviving spouse will maintain his or her entitlement under your Will and other estate planning
after a separation, unless you make changes to your estate plan.

Therefore, if you separate (and if your separated spouse is your named beneficiary in your Will), you will need to promptly review your estate plan on or before you separate, or you may experience something you did not plan if you unexpectedly die. 

                   
If you have no Will when you separate, your separated spouse will likely fall within the definition of “spouse” legally and be entitled to share in your estate based on Ontario’s laws for intestacy (the Succession Law Reform Act) – another reason you should review your estate plan as of your separation. In Ontario, your surviving, married spouse will be entitled to your entire estate absolutely if you have no children. If you and your separated spouse do have children, your surviving spouse is entitled to a preferential share ($200,000) of your estate (off the top) and an equal portion of
the balance of your estate.

Not only should you review your estate plan on separation, but you should also enter a separation agreement as soon as possible, including addressing what, if any, rights each spouse is to have on the death of the other.

A  “divorce” legally ends the marriage and permits former married spouses to remarry (unlike a “separation”). Many married spouses resolved their relationship breakdown issues by negotiating a separation agreement, rather than a Family Court proceeding. However, you must ask the Court to grant a divorce order – only the Court can do so.

A divorce does not automatically revoke your Will. Rather, a divorce will only automatically revoke the parts of your Will that address your former spouse. All other provisions in your Will or other estate planning that do not relate to your former spouse will remain the same and in effect after your divorce. Your Will will be treated legally as though your former spouse died before you.

Effectively, this law is meant to invalidate any gifts made by you to your former (divorced) spouse, just in case you did not properly update your estate plan after you separated and divorced. Any specific gifts you made to your spouse will instead be directed to the residue of your estate. If your former spouse is entitled to the residue of your estate (the assets left over after the debts are paid and other specific gifts distributed), that benefit will alternatively be directed to the alternate beneficiary. If no alternate is named, then intestacy will result and your estate assets will be distributed according to the Succession Law Reform Act of Ontario.

In addition, if you named your (divorced) spouse as your estate trustee in your Will, a divorce will automatically revoke the appointment – more protection for you. Instead, the alternate will be appointed and, if no alternate is named, intestacy will occur for your estate. However, if no alternate is named in your Will, the rules of intestacy will govern. Your estate will be treated as though there was no will. Generally, a next-of-kin will need to apply to the Court to be appointed estate trustee.

Therefore, it is very important that you review your estate plan, particularly your Will and powers of attorney, if:

a)         you plan to marry;

b)         you separate; and/or

c)         you divorce.

 
There are other matters you should be considering, too, as part of your overall plan on separation or divorce. These relate to your other assets that may not be addressed by your Will (or not addressed properly), such as RRSP and pension designations, life insurance beneficiary designations and other assets for which you can designate a beneficiary, for example.

Therefore, when you marry, separate or divorce, you should review:

1)  your beneficiary designations, such as RRSPs, pensions, RRIFs, TFSAs and insurance policies;

2)  your jointly-held property, unless you own it as “tenants-in-common”, to ensure that your separated or divorced spouse does not take that property automatically by operation of law on your death; and

3)   your guardianship provisions in your estate plan, so you address your intention for the care of your child(ren) if you die, particularly if both you and your separated/divorced spouse are no longer living.

 
This WARDSPC BLAWG is for general information only. It is not legal advice, or intended to be. Specific or more information may be necessary before advice could be provided for your circumstances.

More information? We're here to help - jason@wardlegal.ca  www.wardlegal.ca

 

 

read more

PARENTS MAKING ADULT CHILDREN JOINT ACCOUNT HOLDERS - KNOW THE LAW - MORE ABOUT LEAVING A LEGACY OF LITIGATION

Recently I blogged about parents placing their adult children as joint holders of a bank account or other asset and the risks of doing so: http://www.wardlegal.ca/blog/24124

Lori M. Duffy and Hayley Peglar, lawyers at Weir Foulds LLP, recently blogged about this issue, too. Their blog is a great summary of the perils that can materialize with joint accounts established by a parent (often elderly or suffering from a disability) and an adult child - it is certainly worthwhile readings: 

"Common Misconceptions about Joint Accounts and Joint Ownership

Elderly parents will often put their money into bank accounts held jointly with their adult children, or transfer real property into a joint tenancy with one or more of their adult children. Sometimes, this is done for expediency so that an adult child can help manage the asset. In other cases, this is a planning technique used to avoid estate administration tax when the parent dies.

Whatever the motivation behind the transfer, there is a persistent misconception that the asset passes to the surviving child when the parent dies and does not form part of the parent's estate. In fact, there is a legal presumption that such assets belong to the deceased parent's estate. The adult child bears the burden to rebut the presumption and to prove the parent intended to gift the asset to the adult child.

The Pecore Framework

In Pecore v. Pecore[1], the Supreme Court of Canada set out a framework of analysis for gratuitous transfers to adult children. First, a presumption of resulting trust applies to gratuitous transfers of property from a parent to an adult child. Second, a trial judge must start his or her inquiry with this presumption and then weigh all evidence to determine, on a balance of probabilities, the testator's actual intention at the time of the transfer.

Justice Rothstein, writing for the majority in Pecore, set out factors the court may consider when determining the testator's intention. In Mroz v. Mroz[2], discussed below, the Court of Appeal added to this list of factors. The factors include, but are not limited to:

  • evidence of the transferor's intention subsequent to the transfer;
  • the wording of banking or financial institution documents;
  • control and use of the funds in the accounts;
  • the terms of any power of attorney granted to the transferee;
  • the tax treatment of the accounts; and
  • evidence of the transferor's conduct after the transfer, to the extent it is relevant to the transferor's intention at the time of the transfer.

The Recent Court of Appeal Trio

In a trio of recent decisions[3], the Court of Appeal for Ontario reaffirmed the principles established in Pecore. These cases illustrate some of the factors the court will consider.

Sawdon Estate v. Sawdon dealt with an aging father who put bank accounts into joint names with two of his five children. He told the two children that when he died, the funds in the account should be distributed equally among all of his children. A residuary beneficiary argued the accounts formed part of the estate. The trial judge held that the presumption had been rebutted. This was upheld on appeal, although on slightly different grounds. The Court of Appeal found there was compelling evidence before the trial judge that when the two children became the legal owners of the bank accounts, they did so on the understanding they were to distribute the remaining funds equally among all five children after their father died. As a result, the Court held that the deceased made an immediate inter vivos gift of the beneficial right of survivorship to his children, and that the accounts did not form part of the estate. In that case, there was compelling evidence about the testator's intention.

In Mroz v. Mroz, an elderly mother transferred title of the family home (her only significant asset) to herself and her daughter as joint tenants. At the same time, she executed a will which included bequests to her two grandchildren that were to be paid from the proceeds of sale of the house. The daughter failed to pay the bequests and the grandchildren challenged the transfer. The trial judge held that the presumption was rebutted, but that the deceased intended the grandchildren's bequests be paid from the proceeds of sale of the house. The Court of Appeal reversed the decision on the basis that these two conclusions were inconsistent. It was clear from the deceased's will that she did not intend her daughter to be the sole beneficial owner of the house. The Court held that the presumption was not rebutted and the house formed part of the estate.

Finally, in Foley v. McIntyre, the Court of first instance dismissed an action to set aside three inter vivos monetary transfers and a testamentary bequest of Canada Savings Bonds made by the deceased to his daughter. The Court of Appeal upheld the decision and agreed with the trial judge's conclusions that:

  1. the deceased had capacity at the time of the transfers;
  2. the daughter rebutted the presumption of resulting trust with clear evidence that the deceased intended the funds to be a gift; and
  3. the deceased was not unduly influenced.

With respect to the Canada Savings Bonds, the Court of Appeal held that the presumption of resulting trust was not rebutted, and the bonds formed part of the deceased's estate by way of resulting trust. As a result, the bonds passed to the daughter pursuant to a specific bequest in the deceased's will.

Take Away Considerations

These cases remind us that the Pecore framework is alive and well. Adult children should not assume, or treat, assets held jointly as their own in the absence of clear evidence that the deceased intended to gift the asset to the adult child. Similarly, parents who wish to gift assets to adult children through joint ownership should carefully document their intention and should review their testamentary documents to make sure they do not contain anything that could call their intention into question and lead to litigation."

To view all formatting for this article (eg, tables, footnotes), please access the original here.

WeirFoulds LLP - Lori M. Duffy and Hayley Peglar

 

 

read more

PARENTS - PUTTING YOUR ADULT CHILD ON YOUR JOINT BANK ACCOUNT - DON'T LEAVE A LEGACY OF LITIGATION

Over the past six months, I receive more and more calls about cases involving joint bank accounts between a parent and an adult child (when the parent passed away), most of which involving disputes raised by other adult children of the parent who passes.

Joint bank accounts is an increasingly popular tool used by elderly parents (on the advice of financial planners, typically) for estate planning. The goal: the money in the joint account will not fall into the parent’s estate and, therefore, will not be subject to estate administration tax and not be available to the other beneficiaries under the last will and testament. The intention is for the surviving adult child to receive the proceeds remaining at death as a “gift”.  The intention, however, may not be achieved, but rather litigation can ensue.

Parents – be smart when using joint bank accounts (by adding an adult child, or someone else, to your joint account, which has a right of survivorship to the other person).

The law: there is a presumption of resulting trust when a parent makes a gratuitous transfer of property into a joint account with an adult child. This effectively means: the adult child may be found to be holding the bank account proceeds in trust for the parent’s estate, unless the child can rebut the presumption by proving that the parent intended to gift the proceeds. This can be a challenging onus for the child to prove, in Court, and often leads to acrimonious and very costly litigation for the adult child (typically with other children of the deceased parent, or beneficiaries under the parent’s last will and testament). The important case is Pecore v. Pecore (2007, Supreme Court of Canada), if you are so inclined.  

Recent cases where litigation has been caused, illustrating the very challenging on the adult child to try to rebut the presumption and prove there was an intention of gift by the parent:

Johnson v. Johnson Estate (2015, Ontario)

Foley (Re) (2015, Ontario – Court of Appeal)

Tip: if you, as a parent, intend to use a joint bank account with an adult child (by placing the child on your account), for estate planning or otherwise, ensure that your intention is very clearly ascertainable, such as in your last will and testament, by a written declaration of gift and other means, which your qualified lawyer can help you achieve.

If you do not do so, your joint account may unintentionally fall into your estate, defeating your intention and estate plan, create confusion for those you leave behind and,  as often happens, leave a legacy of costly and protracted litigation for your family members. This would likely be a far worse outcome and potential savings to you than you intended to achieve by doing this in the first place. This can be done, but must be done correctly.

This WARDS PC BLAWG is for general information only. It is not legal advice, or intended to be. Specific or more information may be necessary before advice could be provided for your circumstances.

More information? We're here to help - jason@wardlegal.ca  www.wardlegal.ca

 

read more

FAMILY MEMBER CAREGIVERS - UNDERSTAND YOU ARE HELD TO A HIGHER STANDARD AND DUTY

Caregivers are increasingly being held to a higher legal standard. They are now generally regarded as a “fiduciary” to the person to whom they provide care. A fiduciary has higher obligations legally – caregivers are now in that category. 

Historically there are general categories of fiduciary relationships that have evolved in Ontario. They include: agent to principal; lawyer to client; trustee to beneficiary; business partner to partner; and, director to corporation.

Generally, a fiduciary obligation on a person will be imposed when:

  1. The fiduciary has scope for the exercise of some discretion or power;
  2. The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests; and
  3. The beneficiary is peculiarly vulnerable to, or at the mercy of, the fiduciary holding the discretion or power.

Vulnerability of the other person is often a key consideration.

This is important if a caregiver, for example (which may include a family member) is added to a bank account of a person in need of care, handles finances for a parent or generally provide financial assistance to, for example, an elderly parent or disabled person.

A recent case in British Columbia illustrates this trend in the law: Reeves v. Dean.

In this case, the caregiver was found to have misappropriated money from a bank account to which the caregiver was added by the person in need of the caregiver services. 

There are special remedies available from the Court when it is found that a fiduciary has acted unlawfully. They include: a constructive trust, accounting for profits, compensation to to the aggreived person (to restore them to their former position) and others. Generally, the remedies are identified by the Supreme Court of Canada in Frame v. Smith (1987).

Therefore, if you act as a caregiver, be very mindful of your higher duty.

On the other hand, if you receive, or you know someone who receives, caregiver services (particularly if they related to handling personal finances), be sure to speak to a qualified lawyer if you suspect there has potentially been wrongdoing by the caregiver. 

This WARDS PC BLAWG is for general information only. It is not legal advice, or intended to be. Specific or more information may be necessary before advice could be provided for your circumstances.

More information? We're here to help - jason@wardlegal.ca  www.wardlegal.ca

read more