If there were no Will, Tessa's estate could have contributed to the British government's coffers.  In that circumstance, a probate research firm could have played a role. 

Title Research is one of the firms highlighted in yesterdays blog about "heir hunters".  Its services include: searches for missing beneficiaries, heirs, and legal documents (such as marriage, birth and death certificates back to the 1800s); asset research to value, verify and find missing or unknown assets; missing beneficiary indemnity insurance; probate valuations; and will searches to determine that the Will is the deceased's last will. 

If Tessa had died intestate, Title Research, and other firms, could have located her heirs around the world.  Alternatively, if the estate trustee had questions about the value of the estate assets, or had the trustee not known the whereabouts of the beneficiaries, it could have enlisted a search firm's services as some anecdotes suggest.

Potentially trustees can protect their personal liability by engaging a firm that has a best practices endorsement of Britain's Law Society.  It seems that an estate need not just have ties to the UK, but the extent of a firm's expertise in a specific jurisdiction would have to be assessed.

Interestingly, some of the detective work can be done by amateur sleuths: www.findmypast.com and www.ancestry.co.uk allow access to census data from the 1800s and a host of other historical information.  If genealogy is in your blood, it's a place to start.  And, as one UK law firm suggests, it might be advisable to do some of your own investigating.

Jonathan Morse

Fellow walkers from Britain were interested to learn that I work in estate litigation. After sorting out differences in our terminology, they asked if “heir hunters” exist in Canada. I was intrigued.

While I still do not know the extent of “heir hunting” here, I learned that Heir Hunters is a BBC series that follows probate detectives who look for distant relatives of people who have died without making a will. I have not heard of a similar program in North America.

Several UK firms track down missing relatives: Fraser and Fraser  and Title Research are two examples. About 545,000 people die in Britain every year and half of them do not have a will. As in Ontario, there are rules in Britain which dictate that when people die intestate, their estate passes to the deceased’s legal next of kin. In Britain, if there is no family, the estate falls to the Crown.  The Guardian claims that £10 million to £20 million falls to the government every year because there is no one to claim the estate. Heir hunters locate the next of kin and alert them to their inheritance; there is a finder’s fee of up to 25% of the amount.

Many people in Canada can trace their roots to the United Kingdom. Estate practitioners, if advising estate trustees, would be well served to keep “heir hunting” firms in mind. 

Thank you for reading.  Enjoy your day.

Jonathan Morse

This week on Hull on Estates, Paul Trudelle and Diane Vieira discuss compensation for work done by estate trustees and estate solicitors.

Case citation:

Rooney Estate v. Stewart Estate 2007 WL3019262 (Ont. S.C.J.), 2007 CarswellOnt 650

Comments? Send us an email at hull.lawyers@gmail.com, call us on the comment line at 206-350-6636, or leave us a comment on the Hull on Estates blog.

Posted on June 10, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #116 of our podcast on Tuesday, June 10^th, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada. From the offices of Hull Estate Mediation in Toronto, Ontario, Canada, here are Ian and Suzana.

Ian Hull:    Hi, Suzana.

Suzana Popovic-Montag:   Hi there, Ian. How are you today?

Ian Hull: Terrific, thanks.

Suzana Popovic-Montag: That’s good.

Ian Hull: So, remember, of course, to everyone that we can attend to and listen for your call-ins at 206-457-1985 and we welcome any call-ins to our podcast.

Suzana Popovic-Montag: And also if you’d like to send us an e-mail, our e-mail address, just to remind you, is hullandhull@gmail.com, or you can visit us, of course, at our blog at estatelaw.hullandhull.com.

Ian Hull: Well, Suzana, last week we were working on this, I think I called it “Setting up the Perfect Set of Accounts”.  And we ended the podcast with a discussion on capital encroachments which I’d like to, if we can, sort of close the loop on that issue a little bit today if we have time. But before we go into that, we are the recipients of, the proud recipients of, and grateful recipients of, various newsletters that come in.  And one of the newsletters that comes in from Fiduciary Trust Company of Canada.  And this is a really interesting group and I highly recommend that you look into them as a possibility to help assist you in your estate planning matters.  It’s fiduciarytrust.ca. There’s a great group of people there that we know of and we’ve worked with over the years.  And, of course, you know, from that perspective, they’re a great resource. And they send out a newsletter. And I just thought, Suzana, you and I thought we might talk about the spring 2008 newsletter. It was from Issue 2, Volume 5 which we are going to get scanned and put onto our webpage so that people have access to it. But, we wanted to talk for a few minutes about what I thought was a really interesting topic.  And that is dealing with estate planning and how to encourage everyone to draw your Wills.  Because we’ve talked about it in the past, the nightmares that arise out of a situation when someone dies without a Will.  And this is an interesting article which talks about six ways to stall estate planning.

Suzana Popovic-Montag: And I highly recommend it to people, Ian, because the whole, the way that it’s written is very, very easy to read and it just highlights the fact that people of all ilks in life are dealing with the same kind of issues, perhaps on different scales and perhaps with different complexities.  But these are all basic issues.  And I even like the title of this, in terms of turning into the negative, ‘Six Ways to Stall an Estate Planning’ as opposed to, you know, why we should go ahead with it. It’s just a neat, easy read and very, very informative.

Ian Hull: And they pick up on a statistic that I typically throw around when anybody will listen and that is at the outset, that over 50% of Canadians do not have a properly planned and executed Will, Power of Attorney and healthcare directive. The author of this article sort of answers the question as to why people are prepared to leave their estate planning so unplanned, so to speak, and the one word they use is procrastination. So, let’s start with number 1.  What is the first thing that the stalling of the estate planning is matched up with?

Suzana Popovic-Montag: It’s actually one that I often hear, Ian, and that is that “I’m just too busy right now to worry about estate planning. It’s just not the right time in my life to sit down and turn my mind to it”.

Ian Hull: And that’s a really troublesome one. Whatever age you are, young people, of course, you have to concern yourself that if something tragic happened and unexpected, the old analogy of getting hit by a bus is the one that most young people typically have to focus on, because the option of passing away does not necessarily sit top of mind in their world. But the other aspect is, and what we see most troubling in our course of litigation practice, is that last-minute estate planning by anyone, and certainly anyone who is, I would say, anything starting at 65 years of age and over…the last-minute estate planning creates so many troubles and so many possibilities of litigation that it doesn’t make any sense.  It’s never made any sense to me to allow yourself to procrastinate yourself right into the lawsuit.

Suzana Popovic-Montag: That’s a really good point because we know that when it comes to prioritizing our days and we hear people talk about time management issues and that.  And even the article here distinguishes between, you know, things that are of an urgent nature and those that are just important.  And they sort of remind us that estate planning is not only important but it can be urgent because, as you say, that five minutes to midnight planning is just not the best way to do it.  Or the other alternative that something could unpredictably happen the next day to preclude you from ever being able to do that estate planning.

Ian Hull: Okay, the six ways to stall, from this article, and I should have said at the start, Thomas Junkin is the author of the article.  And we’re going to try to get through a few of them now before we get into our capital encroachment discussion.  But that was Item No. 1.  And Thomas is a Senior Vice President of Personal Trust at the Fiduciary Trust Company of Canada.  So we’ve got to give him all the kudos because, after all, it was his good organization and good writing that we’re working from here. But let’s talk about the second item and one item that we see every day as a lurking problem.

Suzana Popovic-Montag: And that is that thinking about death and then planning for it, is basically just a very frightening thing for most people to do.

Ian Hull: And, in fact, some people feel superstitious about planning for death. I’ve had cases where clients will sit across the table from me organizing their Wills and Powers of Attorneys and they have feared this moment because they think that somehow that’s going to trigger death. And you know, the superstitious belief as well, I mean, it’s not easily overcome.  But again, I mean one of the points that the author notes in the article is that the way to approach this is deal with it as an intellectual exercise and not an emotional one. And I use the simple illustration of the tremendous costs that you’re going to allow to be undertaken if you do not do a proper estate plan, just from legal fees alone, even if you don’t have a fight. The Government of Ontario and the governments across the province will govern how your estate is to be distributed and that is typically not Position A for most clients, obviously.

Suzana Popovic-Montag: So moving then to Mr. Junkin’s third reason that most people will stall their estate planning, he points out that often times we hear that clients are confused and intimidated by the very complexity of what they view to be the estate planning process.

Ian Hull: And that one is a comment that generally is a fair one. You know, the difficulty is even for young people who are organizing their affairs, organizing their affairs in the context of the estate planning issues, the tax issues, all of the things that we talk about in our weekly podcasts, can be a bit overwhelming.  And I think the easiest answer is to get yourself into the hands of good advisors or advisor, who can simplify what they are going to do for you. Not to say that the documentation is going to be simple, but that they can simplify the process for you. And we talk about primary and secondary Wills here in Ontario as a basic estate planning technique.  Someone who sits down with you and goes through that issue carefully could spend hours describing the different nuances, but at the end of the day, it probably can be described in fairly short order as being a tax planning technique. You are avoiding the estate tax in Ontario if you do it. Having said that, there are other planning techniques that come out of primary and secondary Will planning.  So get into the hands of a good simplifier, so to speak.

Suzana Popovic-Montag: And the author of the article that we’re talking about, Ian, does a very good job in terms of bringing it down succinctly by saying that all estate plans really just deal with three basic concerns and those are: people, property and plans. And he says the people are your family relationships, your financial affairs are your property and then, of course, the plan is the one that you’re going to deal with your investment advisors, your legal advisors, your tax advisors, to put together depending on the nature and extent of your estate.

Ian Hull: Okay, well listen, I think we want to work through this article again and as I say, this was sort of a last-minute decision and we thought we’d get it on the internet for you, on our webpage so that you can have it and look at it for next week’s podcast. 

The one last comment we wanted to talk through briefly today and this is obviously a topic for those that deal with this, could take up many, many hours of discussion.  It’s a complex area of the law, and that is what we talked about last week is encroachments on capital or taking the capital out of the estate, out of the trust, before its time, so to speak, before you have the spouse or surviving spouse pass away and before it passes on to the next generation, because the spouse needs it, quite frankly. And we wanted to spend a couple of minutes on the nature of the considerations that you have to go through when you’re an executor to encroach or take out capital.

Suzana Popovic-Montag: And I always want to remember the fact that sure, the person who’s looking for the encroachment, of course, is going to want that encroachment to have no difficulties with it.  But what we’re really dealing with here is the gift-over beneficiaries at the end of the day, the residual beneficiaries of that life interest who are the ones who are sort of going to be watching over the executor’s shoulder during the course of the administration to see to what extent was an encroachment made, for what purpose and was it something that they would otherwise have something to complain about.

Ian Hull: And I think in summary, the whole question of encroachment, the Courts have said very clearly that if you are going to take capital out and give it to the surviving spouse, for example, or this life tenant before its time, you have to undertake it in a judicious and careful decision-making process. You can’t simply do it on a whim. And you have to show why it was a good idea, in your mind, at the time.

Suzana Popovic-Montag: And as part of being able to show that at the end of the day, of course, you want to document the stuff, the decisions that are made and the reasons for those decisions during the course of the administration.

Ian Hull: Okay, well I think that’s sort of a brief summary of this area of the law. We may touch on it again as we work through our audit checklist, but I thought it was an important one. And when we touched on it last week we thought it would helpful to sort of close the loop. So it’s been great doing this podcast with you today, Suzana.

Suzana Popovic-Montag: And thank you, Ian. Just a quick reminder to our listeners, if anyone would like to call in with any comments or any feedback, to feel free to contact us at 206-457-1985.

Ian Hull: And please feel free to go to our blog at estatelaw.hullandhull.com, e-mail us at hullandhull@gmail.com.  And obviously, feel free to go to hullandhull.com.  Our webpage, as I say, will have some more new product on it to help you guys guide through this process. So thanks very much, Suzana.

Suzana Popovic-Montag: Thanks to you, Ian.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other Hull On podcasts, or to leave a question or comment, please visit our website at www.hullestatemediation.com.

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

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Posted on June 3^rd, 2008 by Hull & Hull LLP

Paul Trudelle: Hi and welcome to Hull on Estates. You’re listening to Episode #113 on Tuesday, June 3, 2008.

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.  Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and wills. Now, here are today’s hosts.

Diane Vieira: Hi Paul, how are you?

Paul Trudelle: Oh hi, Diane, very good, how are you today?

Diane Vieira: I’m good.

Paul Trudelle: We are podcasting together again and today we thought we’d talk about the issue of accounting under Powers of Attorney and the duty to account after the grantor of the Power of Attorney passed away.

Diane Vieira: So we’re going to discuss a 2008 Ontario decision, De Zorzi Estate v. Read.

Paul Trudelle: And we’ll have a link to that on our website. This is an interesting case that just came to our attention. It was released just recently, in March of 2008. Megan Connolly blogged on it earlier last week and we thought we’d go into a little more detail in our podcast today.

Diane Vieira: So this is a case which discusses the duty of an attorney to disclose financial records for the grantor of a Power of Attorney.

Paul Trudelle: Right, and it’s an interesting case because there, there was a Power of Attorney that was granted. The grantor passed away and the beneficiaries sought to get an accounting from the attorney after the death of the grantor.

Diane Vieira: Why don’t I just give a bit of the background to the case and the different parties?

Paul Trudelle: Sure, that’d be great.

Diane Vieira: The respondents in this case were the residual beneficiaries of the estate. And the other side was a person who was both attorney and estate trustee.

Paul Trudelle: I think that’s pretty important and we’ll talk a bit about how important that is down the road.

Diane Vieira: And the beneficiaries had the question with respect to what happened to some bank accounts, prior to the death of the grantor.

Paul Trudelle: Right, and that would be relevant because the question was, what assets fell within the estate at the time of death? So the actions of the Power of Attorney prior to that would be very relevant to the size and nature of the estate.

Diane Vieira: And in this case, the grantor, there was no question that she was competent and that she never became incapable and actually there was evidence before the Court that she was the one making the financial decisions prior to her death.

Paul Trudelle: Right, and I think that’s an important factor as well. This was not the case where there was an incapable grantor who wasn’t able to look after her affairs.  I think that would be a much easier case for getting disclosure in accounting down the road. But here she was capable throughout and was able to consent and in fact, directed the transactions and that was something that the attorney appears to have relied upon in trying to avoid an accounting.

Diane Vieira: Yeah, the attorney had argued that she doesn’t have to disclose this financial information. The only person she had to account to would have been the grantor who was capable.

Paul Trudelle: Right.

Diane Vieira: So the beneficiaries had a few questions with respect to the administration of the estate but the sticking point was these bank accounts as we discussed, which would require the attorney to provide disclosure of financial information predating the death of the grantor.

Paul Trudelle: That’s right. So the application was before the Court. The question was whether the attorney had to account to these beneficiaries. The attorney took the position that they didn’t have to account and the Court then considered whether the beneficiaries would have a right to compel an accounting. 

I think the important sections of the legislation which is the Substitute Decisions Act in Ontario, is Section 42. Section 42 provides for an attorney to pass their accounts and sets out or enumerates who can apply to have accounts passed. Clearly, the grantor, if alive and capable, can request that the accounts be passed. There’s a number of other parties that are listed as being able to compel an accounting: the grantor, the attorney themselves, the Public Guardian and Trustee and the Children’s Lawyer have an automatic right to apply for an accounting, a judgment creditor of the grantor or the incapable person.  And at the end of Section 42(4) there is a catch-all: any other person with leave of the Court, and that’s the key there. If you’re falling into that ‘any other person’ category, you have to apply to the Court to get leave to get permission from the Court to compel the passing. And the question here was whether beneficiaries of an estate fell within the ‘any other person’ category who could then apply to the Court to compel a passing.

Diane Vieira: That’s right. Justice Herman looked at case law but with reference to this Section. She did find the beneficiaries within the Court were allowed to ask for an accounting.

Paul Trudelle: Right, and I think the cases, the Court identified the unusual or probably it’s usual, it happens a lot, the factor is that here, the attorney under the Power of Attorney was the same person as the estate trustee. So whereas normally an estate trustee would step into the shoes of the grantor and be entitled to compel an accounting from an attorney, here that estate trustee was one and the same as the attorney.  And the Court felt that it wasn’t likely that that person would compel an accounting from themselves and, therefore, opened the door to allow the beneficiaries of the estate to ask for this accounting. 

So, having qualified as a person or other person entitled to apply for leave to pass the accounts, the Court then turned their mind to whether the beneficiaries should be granted leave in this case.  And the Court considered a number of factors and looked at the issue of whether the fact that the grantor was capable throughout had an impact on whether leave should be granted.

Diane Vieira: Well in the Stickles Estate v. Fuller, the Justice based her decision on Section 42(1) of the Act which provides that the Court can order the accounts of the attorney to be passed and it doesn’t depend on whether the grantor became incapable or not.

Paul Trudelle: Right, and I think there’s a very broad and clear requirement that attorneys keep their accounts and pass them or produce them when asked for.  And the fact that the person was capable is not going to be seen as something that negates the requirement to pass accounts. The Stickles case was one where the grantor was capable and yet the Court still required the passing. 

Another factor is, another issue that the Court looked at in this decision is, how far back you have to go when passing your accounts. In this case, there was a Power of Attorney granted in September of ‘04 before death, and the person died in December ‘04. The beneficiaries sought an accounting that went back well before that, back to January ’04.  And the Court found that the duty or requirement to pass accounts will only go back as far as the Power of Attorney itself. And in fact, the Court looked at other cases and those cases dealt with attorneyships that predated the Substitute Decisions Act and in those other cases, the obligation to account only went back as far as the passing or the effective date of the Substitute Decisions Act. So in most cases then, the duty to account will start from when the Power of Attorney is actually granted.

So just to wrap up then on this topic, first of all I’d like to refer you to a very helpful article by Kim Whaley in the 2008 issue of Deadbeat that discusses this case and a number of the cases that are referred to in the De Zorzi Estate decision.  And it summarizes the applicable law and concludes by saying that the case is very helpful in clarifying the law with respect to the duty to account. Generally speaking, there is a heavy onus on an attorney to keep records and to pass those accounts when required and it clarifies who can request the passing of accounts after the death of the grantor. And you may be required to account to beneficiaries of the estate, even though the grantor was capable while you were acting as attorney and even though you are the estate trustee for that person’s estate as well.

Diane Vieira: Thanks, Paul.

Paul Trudelle: Well thanks, Diane. And before we leave, we’d just like to refer you to our contact information.

Diane Vieira: You can reach us by e-mail at hull.lawyers@gmail.com or you can call us on our telephone line which is 206-350-6636.

Paul Trudelle: We also invite you to visit our webpage where we have daily blogs and links to our podcasts on Hull and Estates and also our podcasts on Hull and Estate and Succession Planning. That can be found at estatelaw.hullandhull.com.

This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other podcasts, or to leave a question or comment, please visit our website at www.hullandhull.com.

Our theme music is Upper Structure by DJ AKid  and is courtesy of the Podsafe Music Network.

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Posted on May 13, 2008 by Hull & Hull LLP

Suzana Popovic-Montag:  Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #112 of our podcast on Tuesday, May 13^th, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada.  From the offices of Hull Estate Mediation in Toronto, Ontario, Canada, here are Ian and Suzana.

Ian Hull: Hi, Suzana.

Suzana Popovic-Montag:  Hi there, Ian.  How are you today?

Ian Hull:  I’m great thanks.  This week is a big week.  We had the pleasure earlier this week to record Hull On Estates as well, so we did both of the firm podcasts, so to speak.  Before we get into our topic today, I just want to remind everyone that we welcome comments and that’s our call-in number at 206-457-1985.

Suzana Popovic-Montag:  And, of course, that number, if you didn’t catch it, will be in our show notes as well as our e-mail address which is:  hullandhull@gmail.com, if you prefer to send us a comment by e-mail. 

Ian Hull:  So we had some really interesting blogs last week and I noticed yesterday’s blog was particularly interesting.  When I say yesterday, when it goes into the Internet we won’t know what yesterday is, but I encourage you looking at our blog as well, because it’s at hullandhull.com.  But we had some interesting comments by Chris Graham last week and Diane Vieira this week as well. 

Alright, now before…oh yeah, also our last podcast that we did on Hull On Estates, we spent more time than I intend to today, but we would like to again note with great enthusiasm that Terry Fallis, our great friend at Inside PR, has won the Stephen Leacock Medal of Humour Award, which was given to him last week.  And is an incredible result for him because he self-published his book, “The Best Laid Plans”, and as a result of winning the award, he also had the book reviewed in The Globe and Mail which was very exciting for him.  So, it’s a tremendous honour for him, no doubt, but well deserved.  It’s a terrific book called, “The Best Laid Plans”, and we congratulate you, Terry.

Suzana Popovic-Montag:  That’s for sure.  Congratulations, Terry.  Your book is outstanding and it’s great to see good things happen to good people.

Ian Hull:  Okay, so let’s talk about accounting.  And it seems like a good segway because no doubt Terry is counting his money as it comes in with his self-published book.  But we finished off our last podcast and the work that we’re doing really focusing…we touched briefly on the whole question of accounting.  But certainly, and it’s one of these things with podcasting, every week that we do this you live on the experiences of the week before, and unfortunately for the clients that I’ve seen in the last week, there has been a myriad of messy accounting situations come into our office.  And, you know, you do feel very badly for some clients who do not understand some of the basic expectations of an accounting that come from your role as an estate trustee.

Suzana Popovic-Montag:  And generally speaking, what you’ll do as an estate trustee, of course, is to try to keep as detailed an accounting as possible so that you can, at the end of the day, indicate everything that’s come into the estate and everything that’s been paid out of the estate and to whom.  And as part of that whole process, you want to prepare this accounting for review ultimately by the beneficiaries of the estate.

Ian Hull:  And one of the things I like to do before we get into some of the formal steps, is the informal step of making sure my beneficiaries know what’s going on, on a fairly regular basis.  And I compare it to a stockbroker or an investment advisor who would be expected to give quarterly updates as to the status of their account with their client, but certainly would expect it to do an annual update.  And many financial planners will sort of identify annually that they have to at least once a year sit down with their client.  They will be in contact with them throughout the year, but once a year they make an effort to go and see them or meet with their financial advisor.  And that’s sort of a good benchmark if I’m an executor.  And that’s just business thinking, not necessarily fiduciary law.  There is not, sort of, something written in stone, but it’s a good informal benchmark.

Suzana Popovic-Montag:  And we certainly know from our experience, Ian, that it just helps if people are kept informed.  As soon as there’s a cloud of some secrecy or not being fully apprised of what’s going on, that just leads to uncertainty with respect to the whole process.  So it just makes sense to provide this information, provide it regularly and provide it completely.

Ian Hull:  So carrying on with this theme that should we have done that or should we be in a situation where it is not contentious, there are no beneficiaries that are upset with our work as executor, at the end of the process, and the end of the administration, you can typically write to the beneficiaries sending out your accounts, maybe in an informal form, and look to them to provide you with a release.  And that release, before you finally distribute all the money, in most cases, and, you know, this is a complicated area, but generally speaking, if you can get a release, that, in most cases, will end your involvement and it will wrap up your disclosure obligations on the estate.

Suzana Popovic-Montag:  And just to keep in mind that you can get a release in situations where all the beneficiaries are adults and have consented to the accounts.  If, though, you’ve got an incapable beneficiary or a minor beneficiary of an estate, it’s not as easy.

Ian Hull:  That’s for sure.  So, let’s talk about the more formal passing of accounts because, like you say, there are situations where, if you have a minor or you have an incapable beneficiary, you simply have to formally pass your accounts.  But there are also cases where the beneficiaries will not agree to sign a release and close things off for you, so you still need to go into the Court system to pass your accounts.

Suzana Popovic-Montag:  And the ultimate goal, just for a passing of accounts, is to provide the executor with a release from the Court now because the beneficiaries themselves may not be able to or will not consent.  And so it’s basically a stamp of approval by the Court saying that what you’ve done during the course of this administration has been proper.  And that really is important to close the loop in terms of the fiduciary responsibilities of a trustee at the end of a day.

Ian Hull:  That’s such a good point.  Because really, at the end of a day, all we’re trying to do is allow for either an informal (when you just look for a release and a letter), or a formal audit of your work.  And when you’re an estate trustee, your work really is, although we’ve talked a lot about the kinds of things like worry about burial arrangements, worry about all of this.  When it comes right down to it, your work is fundamentally based on how you handle the money; paying the bills, paying the beneficiaries and so forth.  So there is this need at the end of the process for an audit.  And whether it’s formal or informal, you want to make sure you’ve done one or the other, finally wrapped up by a blessing from Canada Customs and Revenue, who will give you what we call a Clearance Certificate.  But that’s a little different in the sense that you do that right at the end.  And so, let’s talk a little bit about the process, so people can get a sense of what you’re going to get into should you be forced to pass your accounts in the formal courtroom setting.

Suzana Popovic-Montag:  And if you’re actually doing a formal passing, we would certainly recommend the assistance of an accountant or an account preparer who is familiar with the process of preparing accounts in Court format, because those are very different.  And I know my clients are always surprised by the fact that they’re very different from the normal financial statements that accountants prepare for companies.  And it’s a very different process.  So to the extent that you can have that done properly, right from the get-go, I think it saves time and aggravation at the outset.

Ian Hull:  And if you want to get an example, and we say this to clients and they sort of glaze their eyes over it, and say, “yeah, yeah, yeah, we’ll talk to the accountant”.  But if you want to get an example of what these accounts look like, go to our webpage and there’s a Breakfast Series that we produced, and in that we talk about various passing of accounts.  And we have precedents in there of accounts that Suzana and I worked up as a format account to show people what these things actually look like, because it’s hard to describe the form of estate accounts until you see them.  But it is essentially a bank book ledger, a start to finish line-by-line listing of all of the financial transactions which then isn’t in the courtroom but then has to be backed up by receipts; no different than the real world when you’re running your own chequebook and you’re balancing your own chequebook.

Suzana Popovic-Montag:  And in terms of the actual application itself, that’s really a very formalized set of requirements that are set out here in Ontario in our Rules of Civil Procedure.  So there is, for instance, a Notice of Application that has to be issued by the Court that will refer to the accounts, will refer to the period of time during which the accounts are being passed and also set out what the claim for compensation by the estate trustee is for that period of time.

Ian Hull:  And in the materials, and they’ll always include as well a copy of the Will, or the trust or whatever instrument that you’re passing your accounts under in that sense, so you can understand or the Court more particularly can understand what should have been done at law.  For example, if it was set up in a trust arrangement where all of the estate passed to the wife and then on her death, it passed to the kids; that’s a classic spousal trust arrangement.  Well, you need to look at the Will, make sure that that was the case.  Maybe there were some specific bequests as well that needed to be paid and the trustee missed that; maybe there were $100 gifts to all the grandkids and they were never paid or something like that.  When you check the Will, you make sure that those gifts were paid.  Those are the sorts of inquiries that, you know, this doesn’t take training as a lawyer to look for, but, you know, these are kinds of inquiries that you could make at this initial stage.  So, we’re going to start, I think at this point we want to talk in our next podcast in a little bit more detail about what the process is, so that you can get a feel for it.  But, again, the application itself sets the stage, so to speak.

Suzana Popovic-Montag:  Well I think that, Ian, will wrap up this podcast for this week.  I want to thank everyone for having listened and remind our listeners that if they have any comments, that if they’d like to phone and give us their comments by voicemail, feel free to call us at 206-457-1985.

Ian Hull:  And generally speaking, of course, getting a hold of us, chasing us down with an e-mail, giving us some comments is welcomed and encouraged.  We’ve got a hullandhull@gmail.com address and obviously feel free to go to our webpage at hullandhull.com, which will guide you through a myriad of options.

Suzana Popovic-Montag:  Well, thanks very much, Ian.

Ian Hull:  Thanks, Suzana.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other Hull On podcasts, or to leave a question or comment, please visit our website at www.hullestatemediation.com.

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

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Posted on April 8^th, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #107 of our podcast on Tuesday, April 8^th, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by

Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada, from the offices of Hull Estate Mediation in Toronto, Ontario, Canada.  Here are Ian and Suzana.

Ian Hull: Hi Suzana.

Suzana Popovic-Montag: Hi there Ian, how are you today?

Ian Hull: Just terrific, thanks.

Suzana Popovic-Montag: That’s good. We just want to take this opportunity before we get into the substance of our podcast to just remind our listeners that if they would like to leave us a comment, they can feel free to give us a call at 206-457-1985.

Ian Hull: And, of course, feel free to chase down our blog or send in a comment to hullandhull@gmail.com and the webpage hullandhull.com gets you a quick link to our blog which we’re posting almost every day on and had some interesting comments last week from our posts, so feel free to engage in the social media adventure.

Suzana Popovic-Montag: That’s great. Now I know, Ian, that you actually were podcasting solo last week because I couldn’t be here to join you and I thought you did a great discussion of your recent attendance at a seminar.  And so I thought what we might do is to, sort of, pick up from where we had left off at the end of our last podcast.

Ian Hull: Well, that sounds great. I do want to say one thing since that podcast was launched into the internet, I’ve had some interesting feedback that seminar was well received. Talked to a couple people that actually were at it and not particular, just what, of course, I said, which was hopefully helpful.  But some of the other speakers and the twists that were being put on the whole elder law scenarios that we’re going to be faced with more and more in society. So speaking of society, we have to refocus a little bit this week and talk about some issues relating to the administration of the assets of the estate and our ongoing slug through the burdens of being an executor.

Suzana Popovic-Montag: And we had at the last time spoken about the fact that we were looking at a situation where we suddenly had the Certificate of Appointment in hands, this probate document, and we were looking at some of the things that we take in terms of initial steps as an executor, once that document was obtained.

Ian Hull: So we’ve talked about this in the past and we’ve talked about personal effects, talked about the fact that we think it’s so important to make sure you document it, maybe take a video quickly of all of the personal effects or have some photos or whatever.  But once you’ve inventoried it, what do we do about getting the action steps to be taken to actually transfer or sell those personal effects?

Suzana Popovic-Montag: Well, Ian, in accordance with the terms of the Will the executor is going to want to deliver the individual personal effects directly to the beneficiaries who are named in there, and then obtain a receipt from those individuals, so as to have the protection of the fact that that gift or that bequest was made and that it was received by the recipient of it.

Ian Hull: And that receipt can’t go understated in the importance of that. We… I just had an estate that I recently administered and I personally made sure that the jewellery items that were delivered and they weren’t phenomenally expensive jewellery items, but they were very personal items and ones that, you know, the sort of chain of the ring from the deceased to you to the beneficiary is so very important.  And a lot of times, I’ll just say to clients, look if you’re the executor, don’t break the chain, so to speak. Once it’s in your hands, make sure that you’ve got full control of it and that you do not release it until you get a proper receipt.

Suzana Popovic-Montag: And then I guess, of course, there’s going to be personal effects that aren’t specifically spoken to and in those circumstances, an executor is going to want to arrange for the sale of those items.

Ian Hull: Absolutely. Now the sale of the items, too, can create its own spicy tension within the administration of an estate. One of the things that I tell my clients is that they want to quickly go on the internet, take a couple of minutes and search out what the sort of the star local sales avenues are. I mean, the classic one is Sotheby’s.  But not all of us have, you know, John Lennon pianos to put up for sale. But, you know, Sotheby’s has an operation in Ontario, Ritchies has an operation, Waddingtons is another one.  All of these houses are wonderful.  They do it so professionally and most of them will do sort of the gambit. If you give them – some of the stuff isn’t worth a lot but some of it is, they’ll often inventory it all for you and give you some help on how to deal with the stuff that is more modestly priced.  And then put in up for sale properly and by a third party, so you can’t get accused of messing up on the sale of selling that painting that sat over Grandma’s dining room table for 30 years, for a song. You’ll get the professional advisor telling you what its worth. They have some…like I know I just dealt with one from Waddington’s.  They have phenomenal internal resources like experts on Canadian art for certain periods that they’ll bring in and they won’t throw these things into the market, sort of, willy nilly.

Suzana Popovic-Montag: That’s great, Ian. And it’s something certainly to keep in mind because there’s always going to be these things that need to be dealt with. Another thing that I try to remind people of is the fact that once you’re in this stage where you’re actually liquidating or transferring assets, you want to consider also cancelling any insurance on those assets that you’ve maintained up until the time that that transfer is actually done.

Ian Hull: Geez, that’s a good point, you know.  I had an estate recently that had a bunch of art and the insurance on the art was almost an overwhelming cost to the estate and the beneficiaries were not happy that it took an extra month to cancel the insurance.  So that’s a really good point.

Suzana Popovic-Montag: And I think it sort of follows from the checklist that we’ve suggested that people maintain because it sort of brings you back to think about that and you can take care of it right at that time.

Ian Hull: Okay, so that deals with personal effects. What about cars and automobiles and that sort of thing?

Suzana Popovic-Montag: I think we’re looking at the same kind of situation there where there’s going to either be a transfer to someone who’s actually named in a Will or there’s going to be the arrangements made by the trustee to actually sell the vehicle.

Ian Hull: And again, I guess, your good advice on the insurances on that one as well.

Suzana Popovic-Montag: And so if we’ve looked at personal effects, we’ve dealt with automobiles, then those are usually the big items there.  Then we just are left with whatever’s ultimately left there and how we actually go about realizing those last things.

Ian Hull: And liquidating deposits and getting the, sort of, estate bank account established as quickly as possible is crucial.  And that, sort of, takes us into what we’ll start to call, I guess, the business side of the estate administration. The one side of many estates that we see the most problems in and that is, dealing with the accounting.

So first of all, setting up the bank account. You need your probate typically, to get a bank account opened. So you’ve got your probate certificate, you go to a bank.  You want, I tell my clients to go to a branch that’s convenient to you because you will be surprised how often you will have to actually deal directly with the bank. This isn’t always like us when people are alive, they can do internet banking, they can do, you know, cross-city branch banking, and so on.  You want to establish, I tell my clients anyway, to set up an account that is easy for you to get to.

Suzana Popovic-Montag: And once you’ve done that, you also want to think about setting up your bookkeeping mechanism because as an executor or a trustee, you’ve got to maintain very good records so that at the end of the day, if you’re called upon it, you can account to the beneficiaries of the estate or the trust.

Ian Hull: And it’s really at this time that I tell my clients to think about the end game now. You’ve been so careful so far, right from the moment of death or the moment you were told you had the job, you’ve been so careful.  This is really the turning point to maintain a level of almost perfection. You have to have receipts for everything, no money can go astray, obviously.  But your system is crucial.  And if you’ve got a situation where it is likely that you’re going to need to ultimately go to Court and pass the accounts, then now is the time to establish that system early, as opposed to remaking it at a later time when you don’t have all of the information at your fingertips.

Suzana Popovic-Montag: And so, Ian, in terms of advice, how do you usually tell your clients that they go about setting up this mechanism?

Ian Hull: Well, I think they’ve got to get good advice and accountants and lawyers know how to create estate format accounts. And it doesn’t hurt to (a) learn a bit about that and (b) set up a system that can be easily transferred into an estate format scenario.  Because the estate format accounting itself is – it can be something that is new to individuals who are not, you know, savvy on this form of accounts. It’s not rocket science, but it is a different form of accounts that you need to consider.

Suzana Popovic-Montag: And my clients are always surprised, Ian, by how different estate accounts are from normal financial statements. And I think that’s part of the education process that we provide to them about how these things are maintained.

Ian Hull: And I think, really, as I say, this is such an important turning point and starting point to the process, that I think it’s worth getting some initial advice on this and it may cost some money, but its all money well spent.

Alright, so now that we’re setting up the bookkeeping, we’re setting up the estate accounts. Let’s talk about, sort of, some of the long-term business aspects of administering this estate.

Suzana Popovic-Montag: In a situation where you’ve got a business that actually had been run by the deceased, in this instance, you’ve got to meet with the estate trustees and create, sort of, a plan going forward of how you’re going to either continue running that business or basically hiring individuals to do that for you as an estate trustee.

Ian Hull: Alright and that, of course, turns us at this point, we’ll wind up because it’s a good turning point in terms of how we will talk about the business side of things and let’s start focusing on some of the investment side that the – what people are going to expect you to be doing with the investments and what you’re expected to do on that front, depending on the estate itself. So I think that’s a good spot to wind up this podcast.

Suzana Popovic-Montag: Okay, and just another reminder to people who’d like to call in and provide us with their comments, to feel free to call us at 206-457-1985.

Ian Hull: And, of course, go to our webpage at hullandhull.com and work your way into it. Feel free to e-mail us at hullandhull@gmail.com and watch our blog. Thanks very much.

Suzana Popovic-Montag: Thanks to you, Ian.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other Hull On podcasts, or to leave a question or comment, please visit our website at www.hullestatemediation.com.

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

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Posted on January 30^th, 2008 by Hull & Hull LLP

Suzana Popovic-Montag:  Hi and welcome to Hull on Estates. You’re listening to Episode #95 of our podcast on Tuesday, January 29^th, 2008.

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.   Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills.  Now, here are today’s hosts.

Suzana Popovic-Montag:  Hi there.  I’m Suzana Popovic-Montag and welcome to another episode of Hull on Estates.

Ian Hull:  Hi, and I’m Ian Hull, and glad to be here on Hull on Estates.

Suzana Popovic-Montag:  If you’d like to be heard on Hull on Estates, we’ve now started a mechanism whereby we can have people call in and leave comments so that we can get some interaction on our podcast.  And you can do this by calling area code 206-350-6636.

Ian Hull:  So that number is shown in the show notes.  And along with that is our email address at: hull.lawyers@gmail.com.

Suzana Popovic-Montag:  And, of course, you can also visit us at our blog at: estatelaw.hullandhull.com.

Ian Hull:  Okay, Suzana.  Well, it’s good to be back on Hull on Estates.  We continue to enjoy doing our weekly podcast on Hull on Estates and Succession Planning.  And we thought today we might talk a little bit about some tips and traps from the drafting standpoint.

Suzana Popovic-Montag:  And just in terms of a little bit of a background there, Ian, of course, as solicitors, we’re drafting these Wills in situations where we’re trying to anticipate all kinds of possibilities.  And one of the things that we’ve certainly seen from our perspective is occasions where a Will is drafted with no residue clause.  Or actually the residue is given away more than once in a Will document.

Ian Hull:  And I, you know, when drafting Wills and Powers of Attorney, obviously all we can do is our best.  And one of the best ways to do our best is to have someone look at the document, a new set of eyes, #1.  And #2 is to have someone sort of look at the document, not from a typo standpoint, but from a core issue standpoint.  And I know it sounds sort of crazy, but we see enough of these problems with the gifting of the residue, if there’s a problem with the gifting of the residue from a drafting standpoint.  I’ve also created a little mini-checklist.  I always like to get someone in my office to read the Will before it goes out to make sure that I haven’t messed up.  But I also have a checklist.  And one of the things on the checklist is, as I say, re-read residue clause.  And, as I say, it sounds a little bit crazy but you have tremendous consequences if you don’t draw this part of it properly.  So that’s just one of my tricks.

Suzana Popovic-Montag:  It’s a great suggestion, Ian.  And with word processing the way it is these days, I mean we can see how it may be that by cutting and pasting, it may turn out that there is a second residue clause somehow that slipped up into a Will.  And so a second set of eyes is worth a whole bunch of prevention there.

Ian Hull:  In an interesting problem that we ran into just recently on a residue clause problem was that, because of word processing, the line for the residue, that one single line that said “rest and residue to my X” or whoever the person is, fell off the page.  And it didn’t land back on the next page.  So because of a glitch with the word processing, it was missed on the final version.  So, anyway, these are all sort of things to watch out for.

Suzana Popovic-Montag:  Another thing that I sort of watch out for, Ian, in drafting these Wills, and even as you say, Powers of Attorney, is dealing for all kinds of possible potentialities.  And so the possibilities that if you give a certain asset away, you want to consider how it’s going to be paid for, or what other things might be associated with that asset.  And just as an example, if you’re going to give away shares that have a certain adjusted cost basis, but then on the date of death there’s a huge deemed disposition capital gains tax associated with that, but you don’t provide for the payment of that tax, how will that be treated?

Ian Hull:  Well, that’s a great idea.  And these uncertainties can often be easily drafted around, and can properly be put into.  I also noticed one right now because we’re experiencing potentially and actual volatile market conditions.  And there’s always some need to be carefully drafting your investment clause.  And you have the choice, of course, of drafting it within the confines of the Trustee Act and the parameters of it.  Or expressly saying the Trustee Act doesn’t apply.  But recently I’ve met with a couple of consultants who have added another layer of service which I think is a fascinating idea, and that is, with trustees, to encourage them to maybe seek some consultation as to where to put the investment funds, whether its short-term or long-term, long-term obviously in a trust.  And these consultants will come in and look at the portfolio, analyze it and determine where best to place the portfolio.  And the interesting thing about these consultants is, is that they don’t actually take a fee.  They don’t want the ongoing work per se.  They just want the opportunity to consult and take a one-off fee of that sense.  And what I’ve found in some of my Wills is that where I’ve got clients who are concerned about how the investment portfolio is going to be managed, and say it’s obviously in a trust situation, or how it’s even going to be liquidated.  That’s one way to encourage your client in a preparatory way, to say to the beneficiaries, before you do anything to set up these trusts, I encourage you to do X,Y and Z.  And this is a layer of protection on the investment side that makes some sense in this volatile market, but also makes sense in a calmer market.

Suzana Popovic-Montag:  Just to follow-up, Ian, in terms of another example of a Will that deals with an asset without necessarily considering how it’s going to be paid for at the end of the day.  We often times see the provision of house trusts, where a spouse, a surviving spouse is given a life interest in a house and then on his or her death, the property is to be sold and the proceeds of sale distributed amongst other beneficiaries.  And we’ve seen occasions where the costs of maintaining that house in the meantime have not been accounted for and provided in the Will.  And so the question then is, you know, who is responsible for those kinds of expenses?  And particularly when they become capital expenses, or very large in quantum, then in those situations, it really becomes an issue as to who’s responsible to pay for that.  So just another thing that I certainly like to keep in mind and part of my own checklist in drawing Wills includes that particular question, you know, whose going to fund these expenses associated with these kinds of trust arrangements?

Ian Hull:  So I want to turn to one issue on the drafting side that can be…it’s a bit of a technical point, but one that you and I actually were looking at a trust this morning on, trying to determine whether or not the class closed.  And if it was drafted a little differently, it might have been easier to determine that.  What am I getting at in that kind of scenario?

Suzana Popovic-Montag:  Well, I think what you’re suggesting, Ian, there is a situation where you give a gift and it says that the gift is going to be distributable when the youngest child, for instance, attains the age of 25.  And so the question is, well, when do you determine child?  When does that class close?  Is it, you know, the children who are born as of the date of the death of that individual?  Or ones who are born afterwards?  And so until you can determine when the class closes, you can’t really determine who the gift over beneficiaries, or who the other beneficiaries are going to be.

Ian Hull:  So I think, just from a drafting standpoint, if there are classes that you need to close, so to speak, it’s fairly easy to do that by adding language such as, “who are alive at the date of my death” or some precision on the class closing issue, so that we can make sure that there is no question later on as to how many generations down the road we have to wait for, to determine the class closing.  And a classic class closing language is well and considers…oh this is good, I’m getting phone calls during the podcast…A good classic class closing as well is on life interests.  And does it close on the date of death of the life tenant?  Or does it close on the date of death of the last grandchild born or to die?  and all that sort of thing.  So you just…it seems to me you want to be very careful about that drafting aspect.

Suzana Popovic-Montag:  And sort of as an adjunct to that thought, I think also we try to keep in mind that beneficiaries may not necessarily die in the order that we might expect them to.  And so, to the extent that we can build in a little bit of flexibility for that, I think that’s something that I certainly try to keep in mind in my drafting.

Ian Hull:  Alright.  I also see from time to time problems with the gift over and the drafting with the gift over clause.  Suzana, what are your thoughts on that sort of scenario?

Suzana Popovic-Montag:  In these situations, Ian, and I think what you’re talking about is a case where you’ve got a distribution that’s made to, for instance, children when they turn, you know, 18, they’ll get a third of their entitlement; when they’re 21, they’ll get a second…

Ian Hull:  Right.

Suzana Popovic-Montag: …third of their entitlement and then at 30, or whatever the age might be, they’ll get the rest of it.  And in those situations, we try to keep in mind the fact that again, back to the order of death of beneficiaries, someone may die before they’re fully vested and fully entitled to their gift under the Will.  And so what happens in those situations?

Ian Hull:  So I think we have to be mindful, of course, of the classic rule of Saunders and Voce, which is an 1841 decision that would permit, if it’s not set up properly and not drafted properly, the beneficiaries to call on the gift if a gift over has not been drafted in accordance with proper drafting principles.  And the main thing, of course, is that you want to make sure that you’ve gifted over to the next series of generations leaving the contingent beneficiaries there as potential beneficiaries.  And if you haven’t, then when these beneficiaries turn 18, they can call on the gift if there is no gift over per se.

Suzana Popovic-Montag:  Talk about a frustration of testamentary intention in that case!

Ian Hull:  That’s right.  And so, it’s just something to keep in mind in terms of the overall drafting.  Now I think the last thing I just want to point out, and one of my pet peeves is that I think clients tend to get stuck on the whole question of appointing guardians of property for their children, and it becomes a bit of a distraction in the process of the Will drafting.  And often what I’m doing now with my clients is saying, especially when I have young clients coming in to see me, I just say to them look, get over it, let’s do a Will, let’s not do the guardianship appointment, that’s fine for now, but let’s do the Will.  Because 99% of the rest of it needs to be done, and a fixation over who should be the best person to look after your children is something that gets overrated and we don’t want to forget that under the Children’s Law Reform Act, it is only ultimately a 90 day appointment.

Suzana Popovic-Montag:  Well, thank you, Ian, for that tie-up to our podcast.  I think that basically brings us to the end of our discussion this week and I want to thank all of our listeners for having joined us today.  I’m Suzana Popovic-Montag.

Ian Hull:  And I’m Ian Hull.  And we look forward to hearing from our listeners.  Again, don’t forget, our call-in number, 206-350-6636.  And email at: hull.lawyers@gmail.com and then of course, our daily blog you can get to easily at: estatelaw.hullandhull.com as well.

Suzana Popovic-Montag:  Thanks very much, Ian.

This has been Hull on Estates with the lawyers of Hull & Hull.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other podcasts, or to leave a question or comment, please visit our website at www.hullandhull.com.

Our theme music is Upper Structure by DJ AKid  and is courtesy of the Podsafe Music Network.

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This week on Hull on Estate and Succession Planning, Ian and Suzana discuss trust planning options and anticipating issues that may arise in the future.

Posted on November 13^th, 2007 by Hull & Hull LLP

Suzana Popovic-Montag:  Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #86 of our podcast on Tuesday, November 13^th, 2007.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by

Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada, from the offices of Hull Estate Mediation in Toronto, Ontario, Canada.  Here are Ian and Suzana.

Ian Hull:  Hi Suzana.

Suzana Popovic-Montag:  Good morning Ian, how are you?

Ian Hull:  I’m great.

Suzana Popovic-Montag:  That’s good.

Ian Hull:  We’ve had some interesting discussions about, at the end of the last podcast, we talked about sort of an interesting dovetail between tax and family law claims, and just talked about the capital gain and Family Law Act issues.  And one thing that we wanted to finish off with on that discussion, because we’ve been really talking about, you know, how these core tax issues do make such a big difference in estate planning.  And, you know, I would say in the context of estates administration, there are two of the most fundamental issues:  one is the tax issue; and the other is, of course, what does the surviving spouse have, in terms of rights, that will screw up the deal, so to speak, screw up the plan that you’ve already done.  And one of the points that we don’t want to forget is that when we do draft our Wills, that we need to consider as well the possibility of the Family Law Act claims being made.  And that that will in turn accelerate the interest of the other beneficiaries under the Will, should an election occur.  So there may be a tax consequence when someone says the Will’s not good enough for me.  The surviving spouse says, the Will’s not good enough for me, I want to elect under the Family Law Act.  That may have a ripple effect on all the other beneficiaries, so we can anticipate that and sometimes plan around that.

Suzana Popovic-Montag:  And anticipating it really is the key, I think, because we try to create these plans and we call them as bullet-proof as we possibly can.  But the reality is that things can get frustrated, those intentions can fall to the wayside, and the FLA election is the prime example of that.  And in those cases, there’s an unexpected result that arises.  And so you try, to the extent that you can, to anticipate what the diminished value of the estate is going to be in those kinds of circumstances.  And what you do in light of the fact that the tax liability that you’re trying to so desperately avoid, might actually be accelerated as a result of what’s been done.

Ian Hull:  It’s so true, because we have the situation, the classic scenario where someone does elect under the Family Law Act and the remaining beneficiaries, and a lot of cases it’s the children, either of the first and/or second or both marriages, sit around the table and they go, wow, I got a lot less to spread around here now.  There may be tax issues you want to consider and there may be diminished beneficiaries that have other approaches they may want to take.  For example, maybe there is going to be…you can anticipate that there’s a possibility of an election, and there’s going to be a lot less money for the remaining beneficiaries, and you may want to anticipate, you know, how that will affect them personally in their individual circumstances.  So it’s just something to consider as we round off our discussion on the interplay between the family law and the tax issues.

Now, when we first started this sort of section of our podcasting, we talked about the fact that one of the core issues relating to estate planning is, of course, that we would want to consider setting up a spousal trust.  And we’ve talked a lot about the spousal trust.  We’ve put a lot of emphasis in the past few podcasts on the rights of the spouse.  There is, of course, the secondary part of that.  And that is, a testamentary trust.  And we’ve already talked a little bit about what that is.  But I think we should spend some time talking more through some of those issues.  Because you either are going to…if you’re going to set up a trust arrangement, you’re either going to set it up in a spousal trust arrangement, or you’re going to set it up in a testamentary trust arrangement, or both.  So let’s not forget what those are, and how some of the core tax issues reflect on that issue.

Suzana Popovic-Montag:  And just as a quick refresher point on that, a testamentary trust, of course, is a trust that arises by virtue of the terms of the Will.  And so it comes about and is created in a Will and it provides…the tax laws provide that testamentary trusts are actually taxed in the same manner as an individual is taxed under the Income Tax Act here in Canada.

Ian Hull:  So that’s the same manner as, of course, the marginal rates and the graduated rates that you would have, as opposed to an inter vivos trust.  So there’s sort of these three types of trusts.  There’s the inter vivos trust, which his typically, and we can broad stroke it a little bit, but it’s typically taxed at the highest marginal rate.  So while they’re good for some reasons, they’re not good for tax reasons sometimes.  And we’ve got the spousal trust, which we…the tax rate is the same as the testamentary, and that is, at the individual rate.  But we’ve talked a lot about, you know, it’s a very restrictive trust.  It only can apply to the spouse and you have to be so, so careful as to who enjoys the benefit of that trust.  And now this third trust and how it’s taxed is this graduated rate and what we will do typically in these trusts is create a series of beneficiaries in most cases.  We have options: include the spouse; include the first children of the marriage; include the second children of the marriage; whatever you think makes sense in your own individual circumstances.

Suzana Popovic-Montag:  And so in that case, you’re going to, I guess, anticipate having several testamentary trusts arising in the same Will, like you’re setting up, as you say, one for the spouse, for the children individually, in order to be able to capitalize on the tax advantages of that.

Ian Hull:  That’s right.  And we mentioned in a previous podcast this idea that you’d set up, and you could have numerous trusts.  It depends on your circumstances.  But let’s talk about the basic scenario.  You’ll have a surviving spouse, male or female, and you will have children surviving.  And if you have wealth that you want to put into a trust, as opposed to giving it to them outright, you will try to set up these two trusts.  And you often will put in the Wills, lots of estate planning techniques will say that $1.00 into each one, and the rest…and its up to the executors to decide, how much goes in the spousal, and how much goes in the testamentary.  So it gives lots of flexibility and it gives tremendous lifetime, ongoing protection for the good reasons that if you’re going to do a trust, exit.

Suzana Popovic-Montag:  And adding to that flexibility is the fact that the testamentary trust, the fiscal period for that trust, can actually be chosen by the executor and they can take into account what would be most beneficial for the beneficiaries of each trust in setting that fiscal period.

Ian Hull:  That’s right.  And there’s a technical twist that adds to that too, is that the trust beneficiary is deemed not to have received trust income until the very last day of that fiscal period of the trust.  So again, that’s another twist.  I mean, what…I guess that pushing out the time that the income is received, Suzana, where does that help the beneficiaries?

Suzana Popovic-Montag:  Well, what it