Toronto Estate Law Blog : Toronto Estate Lawyer : Hull & Hull Law Firm : Trust Mediation and Succession Planning : Serving Ontario, Ottawa, Mississauga, Hamilton

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In a recent article in the Globe & Mail, Thane Stenner dissects some helpful and balanced advice on issues related to estate planning by American businessman, investor and philanthropist, Warren Buffett.

His advice is not of the sort one might expect from a successful business magnate.  It relates less to investment choices and tax avoidance than it does to family, charity and communication. 

One notable piece of advice is in regard to how much a testator should leave to children.  While (tragically) few of us will be faced with the problem of having too much to give away, the lesson can apply to individuals with more modest estates as well.  Buffett, responding to a concern about spoiling children with an overabundant inheritance, began his reply by saying, "I think that more of our kids are ruined by the behaviour of their parents than by the amount of the inheritance."  The message Buffett is communicating is that it is not how much money is left to children that will determine whether they are spoiled by it or not, but the values, knowledge and experiences that are transmitted from testator to beneficiary that will dictate how wisely they will manage their inheritance, regardless of its size.  This applies equally to estate plans great and small.

Another comment that Mr. Stenner has wisely plucked from Mr. Buffett's speech is that an estate plan should be updated every few years.  Many testators prepare a will and assume that their estate planning is done.  Meanwhile, years and decades pass without giving the will a second thought.  When it comes time for the will to take effect, it may no longer be relevant, and may not accurately or appropriately reflect what the testator may have wanted.  Assets described in a will can come and go, leading to ademption issues.  Named beneficiaries and estate trustees can come into and fade out of a testator's life.  Your will, and indeed your whole estate plan, should get a "checkup" at least every five years.  It should also be carefully reviewed on a significant change in life circumstances, such as a marriage, a divorce, the birth of a child or grandchild, the death of a family member, or a significant change in the form or value of the assets it governs.  Ensuring that an estate plan stays current is an important way to protect your testamentary autonomy and to prevent litigation and heartache for beneficiaries down the road.

Mr. Buffett also suggested that the would-be beneficiaries should, in many circumstances, be participants in the estate planning process.  Ideally, there should be no surprises when a testator passes away.  This will help to prevent shock, disappointment and litigation.  If a beneficiary is inheriting less than his or her siblings, he or she should know why ahead of time, so that decision will not be challenged later on.  Of course, this may lead to anger or resentment, but the likelihood of dispelling this anger is much greater when the testator is alive and present to explain the rationale.  An unequal distribution may be seen as unfair, but it may simply be the case that the testator intended to or did advance a gift to the slighted beneficiary during his or her lifetime, or had greater confidence in the ability of that beneficiary to provide for himself or herself. 

Finally, Warren Buffett reminds us of our responsibilities to society.  As a philanthropist, he has made considerable contributions to causes such as the Bill and Melinda Gates Foundation.  While most of us don’t have billions to give away, it is worth remembering that even a small contribution can make a big difference. 

Have a wonderful day,

Suzana Popovic-Montag

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Estate disputes can be as emotionally charged as litigation gets. Often, there are homes, bank accounts and other valuable assets at stake. In many circumstances, the things that trigger the fighting are not the assets themselves. There are sibling rivalries, parent-child animosity, and first and second family tensions present which play themselves out through protracted litigation about RRSPs or a life interest in a condominium. 

In many cases, it is the smallest assets of the estate that cause the most resentment amongst the parties - a cherished tea set, or an heirloom wedding ring. Disputes over the personal effects of the deceased can get very ugly, and can spiral out of control into a full-blown battle. 

Personal effects are difficult to deal with by way of will. There can be many small items that can be difficult to identify in words. The items change over time as new pieces of jewellery are purchased and old furniture is given away. Some people choose to keep an updated list with their wills. This list is usually considered to be merely an expression of a wish, rather than a binding testamentary disposition. Such a list may, under the right circumstances, be incorporated by reference into the will. However, in order for this to apply, it must be in existence already at the time of execution. 

Because of the animosity these issues can cause, a number of creative ways of resolving the personal effects problem have arisen.

It may be advisable to discuss these issues with the would-be beneficiaries. Sort out the personal effects while everyone is alive, in the room, and on good terms. If there are no surprises, there is less likely to be a dispute. 

I recently heard of someone who prepared a "Book of Things". This Book took the form of a scrapbook containing pictures of the personal items that the author cared about, a description of what the items were and why they were important to her, and an explanation of who she wished to leave them to and why. 

Some estates have been resolve through the use of a lottery, or other chance-based mechanisms. Others still rely on drawing lots and taking turns, often flipping the turn order between choices, so that no party unduly benefits by going first. 

Silent auctions can be employed effectively to divide personal effects. In some estates, the beneficiaries are given fake money, which they can use to "buy" items at prices set by mutual agreement or by the estate trustees.

Whatever mechanism is employed, careful thought should be given to dividing personal effects during estate planning. Not only can it streamline the process and ensure that the beneficiaries are given what they want, but it can prevent disagreements which can explode into litigation and lifelong resentment within a family. 

Thanks for reading!

Suzana Popovic-Montag

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An article by Ron Clarke provides an excellent overview of Joint, Last-To-Die Insurance. These types of policies are designed to pay a tax-freebenefit upon the death of the last surviving spouse. Once a couple chooses this type of policy, neither can change the beneficiary designation without the written consent of the other spouse.

These types of policies are typically used in order to avoid the tax consequences associated with other assets.  When someone dies, it is deemed for tax purposes that their assets are sold, which creates a taxable event. That value is included in the deceased’s income for the year of death. Some assets are excluded such as the value of a principal residence or a savings account. 

When a person is in a spousal relationship, assets can be transferred at death into the name of the surviving spouse on a tax-free basis, thereby delaying the payment of income tax until the death of the surviving spouse.

Mr. Clarke provides the following example of the costs of a Joint, Last-To-Die policy:

"Assuming a male of 60 and a female of 58 both in good health and non-smokers. 

They purchase $250,000 of insurance payable only at the death of the surviving spouse with children as beneficiaries.

$250,000 of Joint Last-To-Die life insurance with a level premium for lifetime protection and payable only at the death of the surviving spouse:

Annual Cost = $2,400

To illustrate the inexpensive nature of this product, if this same couple purchased a Joint First-To-Die policy where the proceeds are paid out to the joint holder at the first death, the annual cost is:

Annual Cost = $7,900

If one purchased the insurance in their name alone to be paid to the spouse or beneficiaries at their death, the annual cost is:

Annual Cost = $5,600"

It is strongly recommended that you obtain professional advice from your insurance broker and your accountant when shopping for life insurance, as life insurance policies are often among the most significant assets that a person will leave for his or her family.

Thanks for reading!

Moira Visoiu

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The story of the 1972 Olympic gold medal basketball game is one that is shrouded in controversy. It goes as follows:

After dismissing their semi-final opponents, the United States and the Soviet Union faced off for the gold medal. While most of the game remained relatively incident-free, the last few seconds saw their share of controversy. Behind by one point with three seconds remaining, American player Doug Collins stepped to the line to shoot two free throws. He calmly made the first but during his second attempt, the buzzer signalling the end of the game mistakenly sounded. Despite this, Collins made the second free throw as well, putting the US ahead by one. The Soviets inbounded the ball and advanced it to half-court while their coaching staff ran over to the scorer’s table claiming that they had called a time-out after Collins’s first made free throw. This confusion caused the game to stop. The referees decided to re-start the play and put three seconds back on the clock. This time, the Americans stole the inbounds pass and began celebrating at mid-court. The game, however, was not over. An International Basketball Federation official climbed out of the stands and ordered that the final three seconds of the game to be replayed again. This time, the Soviets scored a last second layup to go ahead by one point and seal a gold medal victory. The Americans, feeling that they were the true winners of the game, decided to boycott the medal ceremony and have left the silver medals unclaimed ever since. The game has been called the most controversial in Olympic basketball history and, given the opponents, has caused some to attribute the result to a Cold War conspiracy.

So, what does this story have to do with estates? Interestingly, according to this Sports Illustrated article, one of the American players, Kenny Davis, has included the following provision in his will:  

“I devise and bequeath at my death that my wife Rita and children Jill and Bryan and their descendants never accept a silver medal from the 1972 Olympic Games in Munich, West Germany.”

You can imagine the litigation that would ensue should one of Davis’s “descendants” accept the medal. While this would be interesting from a legal perspective, the parties would surely experience the stress and expense that comes with all estate litigation matters. A good way to avoid this would be for Davis to sit down with his family and executor(s) to have an open and honest conversation about the provisions of his will in order to make his wishes clearly known and understood. Although death is an uncomfortable conversation topic, good communication can go a long way to avoid future disputes.

Thanks for reading!

Ian M. Hull

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Listen to: Hull on Estates #326 – Oral Contracts

Today on Hull on Estates, Noah Weisberg and David Smith discuss the role of oral contracts in estate law.  A  link to the case can be found here.  

If you have any questions, please e-mail us at hull.lawyers@gmail.com or leave a comment on our blog page.

Click here for more information on David Smith.

Click here for more information on Noah Weisberg.

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Earlier this week, I blogged about the movie Gladiator and the hurdles that must be overcome to prove that a gift made prior to death was made voluntarily. Today, I wanted to discuss the TV series, Downton Abbey, and conditions that existed in early 19^th century England which prohibited the voluntary testamentary disposition of certain assets and titles.

The series centres around an aristocratic family, the Crawleys, and its patriarch, the Earl of Grantham, who, as a result of the sinking of a ship similar to the Titanic, is left without a male heir other than a distant 3^rd cousin who is barely familiar to him. The plot is driven by a legal concept called an entail, which encompasses an inheritance of real property which cannot be sold or devised by will and which can only pass by operation of law to the owner’s heirs upon his death. In the series premiere, it is explained that the Earl’s land as well as his wife’s familial wealth which she brought to the marriage are included in the entail. This system of estate succession appears to be a primitive form of forced intestacy which passes wealth to family members but fails to recognize female beneficiaries in the table of consanguinity. Without a male heir, surviving dependants of the deceased can be left destitute only as a result of their gender. We are told of the Earl’s daughter’s pending marriage which is motivated solely to produce a male heir.

While this show certainly highlights the dramatic evolution of estate planning and estate succession since the early 19^th century, to me, the biggest contrast is the development of the Family Law Act and the election available to the surviving spouse. We have come a long way since the antiquated concept of an entail. In stark contrast to Downton Abbey, any person with testamentary capacity can bequeath their assets to any person they choose. However, there are statutory limitations on testamentary freedom, including the Succession Law Reform Act and the Family Law Act. Today, even if a spouse is intentionally disinherited, they are entitled to elect to equalize their net family property and avoid many of the devastating concepts explored on the show.

While our system is hardly perfect and ever evolving, perspective and a sense of history are often the best learning tools.

While I am not an Earl and I have no Abbey to pass on to my heirs, I am certainly happy that my daughter has the benefit of these modern statutory regimes.

Jonathon Kappy

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In the world of estates, there has been a lot of recent discussion about the legal treatment of digital assets post-death (Hull & Hull LLP associate Saman Jaffrey blogged about it last March). Most of this discussion has been focused on the law surrounding the posthumous treatment of websites, social media and email accounts. A recent article, however, has caused me to consider another kind of digital asset: frequent flyer miles.

The article quotes an industry expert as saying 3 trillion frequent flyer miles are accrued by U.S. travellers every year. Translating that figure to the Canadian population…well that’s a lot of miles (or kilometres). With the proliferation of rewards programs, many family members of the deceased now feel that it’s worth the time and effort to engage in the process of obtaining what are often significant assets.

The article goes on to state that most travel and credit card rewards companies allow customers to leave points to beneficiaries in their wills in order to avoid family conflicts and aid executors in their distribution duties. Doing so, however, can create problems like increased legal costs, taxation issues, and unwelcome attention.

When bequeathing rewards points in a testamentary document, you should be aware that all companies that offer loyalty programs have their own restrictions and requirements. Most will require a death certificate, some proof that you are indeed a beneficiary, and confirmation from an executor. Some other companies will only allow certain family members to inherit points. The procedures will differ between each program and company pursuant to their governing contracts.

If you have been fortunate enough to have been left points in somebody’s will, you can do some things to make the transfer process easier. While there is no standard procedure to have points transferred from a deceased’s account, it is wise to have a copy of the death certificate, the deceased’s rewards program account information, and a letter or contact information from the executor of the estate. It also helps to have your own account into which the points can be transferred.

When thinking about your estate plan, make sure to consider these non-traditional/digital assets. Why let them go to waste when you can use them to send a loved one left behind on a much needed vacation or two?

Thanks for reading.

Ian M. Hull

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Van Gogh produced 1,100 paintings, but only sold 1 during his lifetime. 

Artists can take steps to increase the value of their art estate.  A piece of art is worth more when an artist organizes and documents their work, according to ArtBusiness.com.  A brief note or a video recording by the artist explaining how and why a particular piece or collection was made can increase the value of the work, because the more people understand it, the more value that potential buyers or galleries may place on it. 

When an artist dies and has failed to sign their work, the art must be authenticated, which decreases its value.  The artwork must be “signed” posthumously.  Often, an estate stamp is made with a copy of the artist’s signature and the unsigned work is stamped.  Other times, the art can only be authenticated if it is both estate-stamped and signed by a qualified third party.  This has an effect on the monetary value of the art.  Unsigned pieces of art are regarded as being less significant and desirable than signed pieces of art. 

An artist can also increase the value of their work by having a well thought out estate plan that sets out how the Executor will present the art to the public.  A disorganized art estate plan is damaging to an artist’s reputation.  An organized estate plan for artists can enhance the value of the artwork, and increase the significance of the artist’s profile and legacy. 

Holly LeValliant

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The recent case of Ray Fulk, a reclusive man from Broadwell, Illinois, who left a Will leaving his entire estate – estimated to be worth $1 million dollars – to two actors whom he had never met is a display of testamentary freedom at its finest.   

Mr. Fulk had never been married, had no children, no close family members, no close friends and no dependants, and virtually no obligations (contractual, moral, or otherwise) owing to any other person – rare circumstances which allowed him the freedom to leave his estate to strangers, without litigation ensuing after his death.

Testamentary freedom – the principle that if you are of sound mind, that you are free to leave your estate to whomever you like, for whatever reason, and without explanation – is a deeply entrenched and perhaps romanticized notion in our society.   However, as those of us in the estates and trust field know quite well, testamentary freedom is not as absolute as Mr. Fulk’s story may make it seem - many limits have been imposed by the courts and the legislature.  

Some common limits to testamentary freedom are:

• Restrictions imposed by dependants relief legislation (e.g. Ontario’s Succession Law Reform Act) and the common law (e.g. Cummings v. Cummings) which provide protection to dependants who are not adequately provided for in a testator’s will and allow for a consideration of "moral obligations" owing to family members in the sharing of family wealth. 

• The rights of a surviving married spouse to elect to receive entitlements under the family property regime.  E.g. Section 6 of Ontario’s Family Law Act allows a surviving spouse to a elect between the benefits provided by the testator’s will or rights to family property division that would be available had the marriage ended in separation or divorce.

• Various contractual obligations of the testator.  E.g. The common law doctrine of mutual wills, which recognizes the possibility that a surviving spouse may have a contractual obligation to refrain from modifying his or her will after the death of the spouse.  Similarly, marriage contracts and other domestic agreements may be binding upon a person’s estate and impose restrictions on estate planning.

• Proprietary estoppel claims against an estate.  E.g. Claims based on statements of the testator promising either payment or property to a claimant on death, which promises are then left out of a will or not followed due to intestacy.

• Various quantum meruit, resulting trust, or constructive trust claims. 

• Gifts that are illegal in nature or contrary to public policy.  E.g. Conditions intended to interfere with family relations, such as conditions restraining or interfering in marriage and in parental relations with children, are contrary to public policy and therefore can be found to be void.

Thankfully for the actors named in Mr. Fulk’s Will, the above-noted restrictions did not apply to him – leaving him free to, as he did, send the ultimate fan letter in the form of a last Will and Testament.

Thanks for reading.  Enjoy the weekend!

Saman Jaffery

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Death is among the most deeply personal, individual and intimate of human experiences.  Every person has his or her own attitudes towards the inevitable end and every person has his or her own thoughts about what its implications may be on emotional and spiritual, as well as practical and financial, levels.  Whatever choices a person may make about their end and what comes afterwards, it seems intuitive that we should accord them a certain sphere of privacy in which to make decisions about end-of-life choices, funerals and testamentary dispositions. 

This sphere of privacy, however, can often be quite fragile.  There are a number of ways that a will and its contents can fall into the public eye, and may come to the attention of individuals who were not intended to see it.

In a story that made news earlier this month, Justin Trudeau, son of the late former Prime Minister Pierre Trudeau, opened up about the inheritance he received from his father's passing.  The Liberal leadership candidate disclosed that he received assets worth approximately $1.2 million from his father's estate. 

While the way in which information about Pierre Trudeau's estate was made public is not typical of most estates, the possibility of information becoming public might be a concern for many individuals planning their estates.

There are a number of ways a will can become public.  A probated will becomes a matter of public record.  Anyone who knows where to look is entitled to have access to the court's file and to see the contents of the document.  Even if no Application for a Certificate of Appointment of Estate Trustee With a Will has been filed, the will may still end up as part of a court record if litigation occurs.  In any event, the beneficiaries have an entitlement to see the will.

If a testator wants to leave gifts to someone that might offend surviving members of the family, a will might not be the best way to do so.  Lawyers and advisors should be cognizant of this issue when giving estate planning advice.  No testator wants their loved ones' memories of him or her to be tarnished by a surprise in the will.  A gift to an old flame, an unpopular cousin, or a child born out of wedlock may be best handled in a different way.

Gifts of this sort can be given during the lifetime of the testator as inter vivos gifts.  Although transfers of this sort can still be challenged, they may be less likely to fall into the public domain.  Another means by which to leave assets to an individual on death without exposing it to the public is to do so by way of a life insurance policy designated to that individual.  Again, benefits under these policies may be drawn into litigation in some circumstances.

A lawyer's duty of confidentiality and lawyer-client privilege extend beyond the death of the client.  However, a court can order the release of a lawyer's file and waive privilege. 

The best way to ensure that there will be no surprises in a will is to be open and frank.  A family meeting and strong communication can ensure that there are no secrets kept between a testator and beneficiaries which may explode into litigation later.  In a world where not even death is private, it may be that honesty is the best policy.

Suzana Popovic-Montag

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The Law Society of Upper Canada (“LSUC”), which is responsible for the self-regulation of lawyers in Ontario, is considering amendments to its Rules of Professional Conduct. While some changes are minor, some of the changes are more substantive and, in certain cases, such as for estate planners, may introduce new standards or restrictions. 

The amendments being considered by LSUC are as a result of the implementation of the Federation of Law Societies of Canada’s Model Code of Professional Conduct (“Model Code”).  LSUC has been reviewing the Model Code for the purpose of implementing it in Ontario since October 2011, and the Ontario Bar Association is now consulting with a LSUC working group.

The Model Code includes the following new rules on testamentary instruments and gifts, which are proposed to be added to LSUC’s Rules of Professional Conduct: 

• A lawyer must not include in a client’s will a clause directing the executor to retain the lawyer’s services in the administration of the client’s estate.

• Unless the client is a family member of the lawyer or the lawyer’s partner or associate, a lawyer must not prepare or cause to be prepared an instrument giving the lawyer or an associate a gift or benefit from the client, including a testamentary gift.

• A lawyer must not accept a gift that is more than nominal from a client unless the client has received independent legal advice.

As reported in a recent article in the Law Times, the proposed changes to the Rules of Professional Conduct are causing concern in the estate bar, in particular because of the provision restricting a drafting lawyer from recommending to a client that a clause be included in a will that the drafting lawyer be ultimately retained by the trustee(s) to assist with the administration of the estate.  Senior estate lawyers argue that with this wholesale restriction in place, clients will no longer be able to expressly direct that their trustee(s) receive advice from the drafting lawyer, who often is already familiar with the family, the testator’s assets, and other relevant matters. 

The Canadian Bar Association’s (“CBA”) Code of Professional Conduct includes a provision which allows drafting lawyers to include a clause in a client’s will directing the trustee(s) to retain the drafting lawyer, but only upon express instructions from the client to include such a clause. The CBA’s code states: “Without express instructions from the client, it is improper for the lawyer to insert in the client’s will a clause directing the executor to retain the lawyer’s services in the administration of the estate.” The CBA’s provision has long been accepted by estate practitioners without issue, and is one option the LSUC working group will certainly consider.

For further information about the proposed amendments to the Rules of Professional Conduct, please consult the LSUC’s report on the matter and the blackline version of the current Rules of Professional Conduct showing the proposed changes.   

Thanks for reading,
Saman Jaffery

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A heart-warming story of some unorthodox estate planning has been circulating online the past few days.  The story comes from a 68-year-old woman in Houston, Texas named Sue Johnston.

She and her husband were married for 46 years.  Every Valentine’s Day, he’d send her a bouquet of flower with the note: “My love for you grows”. 

In a letter to a magazine, Ms. Johnston writes: “Four children, 46 bouquets and a lifetime of love were his legacy to me when he passed away two years ago.”

Ten months after his passing, Sue was understandably shocked when she received a beautiful bouquet addressed to her - from her late husband.  She contacted the florist to advise him of the mistake.  The florist replied, 'No, ma'am, it's not a mistake. Before he passed away, your husband prepaid for many years and asked us to guarantee that you’d continue getting bouquets every Valentine’s Day.'

Along with the flowers was a card that read:  'My love for you is eternal.'

I’m not much of a romantic, but I’ve got to admit that this one choked me up a little.

Happy Valentine’s Day!

Moira Visoiu

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Warren E. Burger was the 15^th Chief Justice of the United States. During his tenure from 1969 to 1986, the U.S. Supreme Court delivered many ground-breaking decisions, including Roe v. Wade. However, even the most esteemed jurists are not above testamentary blunders. When he died in 1995, Burger left the following self-drafted one-page will:

LAST WILL AND TESTAMENT
of
WARREN E. BURGER

I hereby make and declare the following to be my last will and testament.

1. My exeuctors will first pay all claims against my estate;

2. The remainder of my estate will be distributed as follows: one-third to my daughter, Margaret Elizabeth Burger Rose and two-thirds to my son, Wade A. Burger;

3. I designate and appoint as executors of this will, Wade A. Burger and J. Michael Luttig.

IN WITNESS WHEREOF, I have hereunto set my hand to this my Last Will and Testament this 9th day of June, 1994.

/s/ Warren E. Burger

We hereby certify that in our presence on the date written above WARREN E. BURGER signed the foregoing instrument and declared it to be his Last Will and Testament and that at this request in his presence and in the presence of each other we have signed our names below as witnesses.

/s/ Nathaniel E. Brady residing at 120 F St., NW, Washington, DC

/s/ Alice M. Khu residing at 3041 Meeting St., Falls Church, VA

[End of Document]

As you can see, the will does not include any administrative powers and lacks many other boilerplate provisions that are included in most wills. He even misspelled “executors” as “exeuctors.” In an article written shortly after the will became public, it is estimated that the poorly drafted will cost Burger’s children over $450,000 in taxes, which could have been easily avoided.

While this story is somewhat amusing given the testator’s one-time position as Chief Justice, it is an important reminder that trying to avoid legal costs by drafting your own testamentary documents will almost inevitably lead to problems and expenses for the very people that you are trying to benefit.

Ian M. Hull 

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One of the most difficult decisions in estate planning is determining who will have custody of minor children in the event of untimely death. It is often the source of conflict between couples and can sometimes be the reason that the making of wills is avoided.

Under section 61 of the Children’s Law Reform Act (the “CLRA”), a parent with custody of a minor child is permitted to appoint a custodian for the child in his or her will. In the case where two parents have custody of a minor child, the testamentary custodial appointment of the parent who dies second will be honoured. If the parents die at the same time, only the appointment that exists in both wills will be effective. For example, if the father appoints X and Y as custodians and the mother appoints Y and Z as custodians, only Y will be awarded custody.

It is important to note that a testamentary custodial appointment for minor children is only legally effective for 90 days. After that period has passed, you must apply to the court for a permanent custodial appointment if one is necessary. In considering an application for a permanent appointment of a custodian, the court’s goal is to do what is in the best interest of the child or children. The court will also give significant weight to the parent’s testamentary wishes regarding custodianship and are generally unwilling to disrupt a temporary custodial arrangement without good reason to do so. When a child is deemed to be adequately mature, the court will take the child’s views and wishes on custodial appointment into consideration.

While no one wants to think of dying and leaving children behind, having a comprehensive estate plan includes custodial appointment. It will also give the testator peace of mind knowing that their children will be taken care of by someone they trust and in whom they have faith.

Thanks for reading.

Ian M. Hull

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As we begin to emerge from the moratorium on hockey that is the NHL lockout, many fans are enraged that such an agreement could not be reached between the NHL and the Players Association earlier. Why wait so long to finally make the compromise necessary to put the players on the ice and fans in the seats? With the entire 2012-2013 season on the verge of cancellation, the parties experienced a renewed sense of urgency. That is when tough decisions are usually made.

Recently, the U.S. Congress also faced an expiring contract, relating to estate taxes and gift taxes, which had significant adverse consequences to Americans if permitted to do so. As recently reported on by the New York Times, in 2010, as a result of President Obama and Congress being unable to reach an agreement on the tax exemption limits for estates and inter vivos gifts, for the first time since 1916, Americans were not subject to a federal estate tax. By the end of 2010, the President and Speaker of the House reached a two year agreement to set the estate tax exemption, as well as the gift exemption, at $5 million, indexed to inflation. If left to expire, the gift tax would have reverted to $1 million. As a result, may estate planers spent this most recent holiday season restructuring estates and transferring significant wealth, in the form of gifts, to take advantage of the higher exemption level prior to its expiry.

On New Year’s Eve, as a gift to Americans, Congress passed the American Taxpayer Relief Act, permanently setting both estate and gift exemption limits at $5 million (with a 40% tax on amounts over the limit).

Many Americans woke up on New Year’s Day with regrets… regrets over having transferred significant wealth to their children (and out of their own control) when, in retrospect, such transfers could have been delayed. Now begins their search for ways to unwind such transfers, if possible. While estate planning may now become simpler (such exemption limits eliminating estate taxes for all but the wealthiest of Americans), contract lawyers should be pretty busy in early 2013.

 Jonathon Kappy   

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If you have ridden the subway recently in Toronto you may have noticed a number of ads for formalwill.ca, a website that advertises itself as “Canada’s leader in online Legal Wills”. Being involved in the estates field myself, the website naturally caught my attention.

The move online for “do-it-yourself” wills should come as a surprise to no one. From websites that allow you to do your own tax returns, to websites that allow you to sell your own home, many services that in the past may have involved the assistance of a licensed professional are now being advertised to people as do-it-yourself options from the comfort of your own home.

In principle there is no reason that an individual could not properly draft their own will using the assistance of a website. So long as the individual ensures that the will is properly executed, and properly considers who they would like to bequeath their property to, there is no reason that a person could not create a legally enforceable will that meets their estate planning needs. Like many things in life however, the devil is often in the details.

The case of Re Forest, (1981) 8 E.T.R. 232, is an excellent cautionary tale in the world of do-it-yourself wills. In Re Forest, the testator purchased a legal “will kit” in which they were required to fill in blanks on a pre-printed form. Unfortunately for the case of the testator, when it came time to execute the will, while the testator signed the will, he did not have it witnessed by two witnesses. As a result, the will did not meet the formal requirements to constitute a valid will.

Having ruled that the document in its totality was not a valid will, the court next looked to whether the handwritten portions of the will could in and of themselves constitute a holograph will. The court assembled the portions of the will that were in the testator’s own handwriting and looked to see if the language contained in them could form a will in and of themselves. Unfortunately again for the testator, the court found that the handwritten portions in this instance could not constitute a valid holographic will for, amongst other things, they did not appoint an executor or dispose of the residue of his estate.

Online legal will kits would offer an interesting twist to the holograph will scenario contemplated by Re Forest. While previous “will kits” had you fill in blanks on a form, with the possible effect that even if they were not executed correctly a holographic will could potentially still be found to exist, in the case of online legal will kits presumably the entire document would be printed from your computer. As a result, should an individual fail to properly execute the will as occurred in Re Forest, a holograph will could likely not be found to exist as there would presumably be no dispositions in the will in the testator’s own handwriting.

Thank you for reading.

Stuart Clark 

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As a general rule, a lawyer must keep all information obtained from a client during the course of a retainer confidential. But is this always the case? Are there circumstances where the nature of the retainer is such that it appears self-evident that certain disclosure was intended on the part of the client? Are there circumstances under which, even absent the direct authorization of the client, a lawyer may release certain information obtained during the course of the retainer to third parties?

The Rules of Professional Conduct are clear as it regards the duty of confidentiality that is owed from a lawyer to their client. Rule 2.03(1) of the Rules of Professional Conduct provides:

“A lawyer at all times shall hold in strict confidence all information concerning the business and affairs of the client acquired in the course of the professional relationship and shall not divulge any such information unless expressly or impliedly authorized by the client or required by law to do so.”

Under most circumstances this rule seems fairly straightforward. In the context of a lawyer retained to draft a will however, things can become a little more complicated. A will, by its design, does not take effect until after the client has died. As the client will no longer be around to consent to the release of confidential information, who may the drafting lawyer release this information to following the client’s death?

Strictly speaking, if one was to follow the rules regarding confidentiality to the letter of the law, a drafting lawyer would be unable to release the testator’s will following their death. The will, being a document drawn by the solicitor on the client’s instruction, could easily be classified as a document that was “acquired in the course of the professional relationship”. As a result, the drafting lawyer, if adhering to the rules regarding confidentiality, would be unable to divulge the contents of the will to a third party.

To follow the rules regarding confidentiality in such a way seems of little sense. If the drafting lawyer is not even allowed to divulge the very existence of the will to third parties, how will the testator’s intentions be carried out?

In order to overcome this potential problem, the common-law has developed what is known as the “wills exception”. Generally speaking, the “wills exception” enables the drafting solicitor to divulge the existence of a will, and the contents thereof, to those individuals with an interest in the estate. The “wills exception” has been codified by cases such as Re: Ott, [1972] 2 O.R. 5 and Hope v. Martin, in which the court sanctioned the drafting lawyer to release otherwise confidential information to certain interested parties of the estate.

Thank you for reading.

Stuart Clark 

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One of the biggest hot-button issues in the world of estates these days is the status of the US federal estate tax. The current legislative regime is set to expire at the end of 2012 and, now that the election is over, Congress is being called on to act and provide certainty so that Americans can adjust their estate plans accordingly.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”) was passed by Congress and signed into law by President Barack Obama in December 2010, as part of an economic recovery regime designed to combat the effects of the now ubiquitous recession. The Act sets the lifetime exemption at $5 million per person (currently $5.12 million due to inflation adjustment), with a 35% maximum tax on anything over that threshold.

The Act also introduced “portability” to the credit, thereby allowing a surviving spouse to use the portion of the predeceased spouse’s credit that was not previously used. For example, if one spouse dies having used $3 million of their credit, the surviving spouse is entitled to increase their own $5 million limit by their spouse’s “unused” $2 million.

The Act is set to expire at the end of this year. Barring congressional action, the lifetime exemption will drop from $5 million to $1 million and the top federal estate tax rate will jump from 35% to 55%. Portability between spouses will also disappear.

According to a recent article by Florida Elder Law and Estate Planning attorney Joseph Karp, the Republicans support a total elimination of the estate tax, while the Obama administration supports a middle ground: a $3.5 million lifetime exemption and 45% top rate with portability remaining in effect. A pre-election article from the Wall Street Journal suggests that portability will remain in effect as it “enjoys bipartisan support.” It is not known, however, how the numbers will shake out or when Congress will formally address the looming issue.

These uncertainties are causing American estate planners significant consternation. They are unable to advise their clients through a crystal ball. With the election now over, the Presidency and Senate remain in Democratic control, while the Republicans retain the House of Representatives. The two parties will need to bridge the gap between their positions to provide the American public with a clear picture of how their estates will be taxed after death. Here’s hoping it happens sooner rather than later.

Thanks for reading!

Suzana Popovic-Montag

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The first time I ever bought a lottery ticket I won. Not just a free ticket, but a real prize - $250. At the time, as a recent graduate, I felt like I was on top of the world. The money didn’t go far, and frankly, years later, I don’t even remember what I spent it on.   What I can distinctly recall was the feeling when I lost on the next ticket I bought. I gave up on the lottery shortly after that.   I’d rather spend my $5 on coffee at Starbucks.   Apparently, I’m the abnormality in our country. 

Canada has seemed to weather the recent global economic recession relatively well. Imagine my surprise when I recently came across an article that suggests that 1/3 of Canadians are ‘banking’ on a lottery win or an inheritance for financial security.   I don’t give financial advice, but with your best odds somewhere in the range of about one in 14 million of winning the lottery, it seems only logical that this isn’t the greatest plan. As an estate litigator, it is even more disheartening. 

In Ontario, we have what is known as testamentary freedom. Meaning, an individual can leave their estate to the beneficiary of their choice. I don’t mean to suggest that there isn’t case law or law to provide a bit more structure to that. Certainly we have legislation, that allows for claims against an estate for a variety of reasons, which some may argue limits testamentary freedom. However, we don’t have what is known as ‘forced heirship’, meaning strict regulations on how your estate is distributed on your death.   In summary, the one third of Canadians expecting an inheritance may also be in for a surprise, on a much greater scale than my second attempt at winning the lottery. I’m not willing to take the risk.    

Without getting into an argument about the work ethic of various generations, or the economy we face, both of which could go on for eons, and have been debated throughout history, it seems that the two options which a third of Canadians are counting on are a bit flimsy. Whether planning for retirement, or just life in general, it may be that we as a nation need to reconsider our financial and estate planning focus, by understanding the rules behind the numbers.

Until Tomorrow,

Nadia M. Harasymowycz

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The legislation in Ontario requires that (aside from a Holograph Will or a Will of a member of the Canadian Forces on active service) a Will must be signed at its end by the testator or by some other person in his/her presence and by his/her direction, the signature must be made in the presence of two attesting witnesses present at the same time, and two or more of the attesting witnesses must also subscribe the Will in the presence of the testator.

As in most cases these requirements are adhered to, this is not the most common ground upon which to support one’s challenge to the validity of a Will.   However, two English cases contain interesting commentary of the subject.

In Esterhuizen v. Allied Dunbar Assurance PLC [1998] 2 FLR 668, the lawyer attended at the testator’s house three times to attempt to get the Will signed, but was unsuccessful. The testator was extremely reclusive, and could not organize to have any witnesses to the Will on hand. The Court found that a solicitor owes a duty to take proper care in advising the testator as to the formalities of execution, and a lawyer needs to do more than leave written instructions for the client. Rather, the Court stated that a lawyer ought to invite the client to his office to sign the Will there or visit the client with a staff member at home to have it executed.

In Gray v. Richards Butler [2000] WTLR 143, the client was departing the next day for a holiday and the lawyer met her at a restaurant that night to attend to the execution of the Will. However, as the client was enjoying the evening out and did not wish to sign at that moment, he left the Will with a set of standard instructions for her to execute and return to him. The Will was returned with deficiencies, including signatures in the wrong place, and the witnesses were not both present at the same time for the signing. The testator was treated as having assumed responsibility for the errors given that the solicitor made what the court viewed to be reasonable efforts to ensure due execution was observed. 

While these cases have very different outcomes, in my view they serve as reminders that the best practice for drafting lawyers in order to make due execution a non-issue is to have the Will signing process entirely supervised and presided over by them. 

For more on this topic, David Smith's paper and presentation given at our recent Hull & Hull LLP breakfast series will be posted on our webiste.

Thanks for reading,

Natalia Angelini - Click here for more information on Natalia Angelini.