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Listen to Issues in Estate Administration: Tax Filing.

This week on Hull on Estate and Succession Planning, Ian and Suzana discuss tax issues surrounding the administration of an estate.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estates and Succession Planning blog.

Issues in Estate Administration: Tax Filing - Hull on Estate and Succession Planning Podcast #110

Posted on April 29^th, 2008 by Hull & Hull LLP

 

Suzana Popovic-Montag:  Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #110 of our podcast on Tuesday, April 29^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.

 

Suzana Popovic-Montag: Hi it’s Suzana Popovic-Montag.

 

Ian Hull: Ian Hull.

 

Suzana Popovic-Montag: And welcome to our podcast. We would just like to take this opportunity at the very beginning to remind you of the fact that we have a call in number for any of our listeners who have any comments on our podcast. Please feel free to call us at 206-457-1985.

 

Ian Hull: And also I encourage you to send us an e-mail at hullandhull@gmail.com or check out or daily blog which is easily found from our webpage at hullandhull.com.  Well let’s start working through some issues on the estate administration.

 

Suzana Popovic-Montag: That’s great Ian, we shall, but I just wanted to take a quick opportunity to let our listeners know that by the time this podcast is up, you will have done yet another appearance on a great show that’s called “Strictly Legal”, that is hosted by Michael Cochrane and for people who are interested in hearing Ian speak about issues of Estate and Trust matters in a more general all encompassing fashion, I highly recommend you to that show.

 

Ian Hull: Well thanks Suzana, its fun, it’s a great show. I’m looking forward to it. It’s thrown up on a video stream after on Business News Network, BNN Network so, it’s good fun.

 

Suzana Popovic-Montag: Good for you Ian.

 

Ian Hull: Alright, so where we left off in our last podcast was we were still struggling through some tax stuff because it is tax time here in Canada.  So we get a little focused on that and the easiest, I find, with files, the easiest criticism of any executor administering an estate is that they botched the tax filings or did any of the tax related stuff and so let’s talk a little bit about that.  But also let’s talk about the fact that, you know, again, if you’re not the expert in the tax side of things, get help.

 

Suzana Popovic-Montag: That’s for sure.

 

Ian Hull: So we mentioned the T1 terminal income tax return which is due and then we talked a little about how you dovetail in an interim distribution encouraging the party, the executors, I try to encourage my client, the executors. to get the money flowing as quickly as possible, knowing the restrictions that are out there, because there are some, we can’t just simply send it out.  But as soon as is safe, send it out with sufficient holdback. One of the reasons for the holdback is, of course, we have to pay taxes.

 

Suzana Popovic-Montag: And in addition to the T1 terminal return an estate trustee is going to prepare annually a T3 estate tax return.

 

Ian Hull: And that’s on estates that are not immediately distributable, so that if the assets are generating income, or there is a trust that is ongoing, or you just didn’t get it filed, the estate administered in the first year, Revenue Canada still wants their tax money on those, on the interest income or the growth and so forth.  So our annual T3 estate return needs to be filed, and that is approximately, again you can expect a Notice of Assessment  approximately six to nine months after that.

 

Suzana Popovic-Montag: One of the other things that we suggest to our clients to keep in mind after these tax returns have been taken care of, is to consider and to confirm that all CPP death benefits, that’s the Canada Pension Plan death benefits, have in fact been received on behalf of the estate.

 

Ian Hull: And also here in Ontario, we are forced to consider the issue of additional estate administration tax being paid.  And on this point, I was in Court the other day, not a case that I was involved with, but I was watching and I noticed that there was some argument between the government of Ontario and a big, it looked like a big estate, I didn’t follow all the details, but they were arguing over a refund.  The estate had, in fact, filed, and it turned out they had overpaid, they just basically overestimated the value of a big, big property, paid tax on it, the administration tax on it and then were now going back to the Court to work out a mechanism to get a repayment.  So, as is in life, possession is nine- tenths of the law. It reminded me of the adage that, you know, its always better to be conservative when you are making the filings, on the estate administration tax side because it can be more difficult  to get the money back than it can be to pay the money.  But obviously always being honest throughout the process.

 

Suzana Popovic-Montag: That’s good advice, Ian.

 

Ian Hull: I think really at this point, I just want to take a deep breath and look back at what we are doing because, and this is where some clients, we meet some resistance from clients because they sort of see us as trying to cover off too much sometimes. But I really, I often at this point will sit down and prepare a comprehensive reporting letter.  From our standpoint, for sure, we will report throughout.  But this is a good time also for the beneficiaries to receive something in writing directly from the executor.  There is nothing like personal contact, ongoing phone calls is a great idea as well.  Just keeping people up to date, keeping the process personal.  Because this is personal, this isn’t a business transaction, this is a life transaction.  So I always encourage my clients who are executors to pick up the phone or grab a coffee with some of the beneficiaries or even have an informal meeting with them at the local coffee shop.  But most importantly, I also suggest to them that they prepare a reporting letter.

 

Suzana Popovic-Montag: That is really good advice, Ian because it gives people then an opportunity to sort of see in writing all the hard work that you have done as an executor and the benefit of that, of course, being at the end of the day, when you want to seek compensation for your work as an estate trustee, you will have something to point the beneficiaries to in terms of the work and the hard effort that you have put forward in administering the estate.

 

Ian Hull: And it really is, it is not just self-serving, I think it is a natural reaction for people to, who feel that they are in the dark, no matter what you are dealing with, in business or, and in this case what is often a family situation.  Dialogue and communication is so crucial and so the more, the better.

 

Suzana Popovic-Montag: And then just sort of to wrap up the tax discussion that we had we want to turn our minds to the final income tax return and the preparation of that final T3, and then, of course, applying for the final Clearance Certificate in order to give the sort of seal of approval to all the tax filings that have been done to the estate trustee on behalf of the estate.

 

Ian Hull: Okay, so let’s talk this through a little bit because this is really the final bell for the tax filings, and this final T3 return and the final Clearance Certificate application is so important. Again, I typically will tell my clients unless they are the tax experts that I am not, make sure you send everything to the accountant.  This is the last chance to have sent all of the paper that you think might possibly relate to any of the assets of the estate to the accountant, let them decide what needs to be put to the taxing authority, not you.

 

Suzana Popovic-Montag: And then, of course, file the return, pay any taxes owing and just make note of the fact that you want to follow up the actual receipt of the Notice of Assessment for that final T3 return and typically that will come in about six to nine months.

 

Ian Hull: And then, of course, we have the second step and that is, of course, we will be looking for a Clearance Certificate.  But one of the things that people talk about, and without getting overly technical on the tax side, is what do you do when you want to wind up an estate because interest is always going to be accumulating?  And there is an easy answer, again not for my abilities to follow through on the mechanics, but the concept that: say there is a $100,000 left in the bank and you are holding that back to get your Clearance Certificate from CRA.  You filed your final T3 return, everything is really ready to go but there is this one remaining amount of money that is being held back because the accountant said look, you know what, this is a busy account and this individual did a lot of transactions over his lifetime and CRA could always come back and look, and that final look at the Clearance Certificate time, because we have to remember CRA, that’s the last kick they are going to get at it too.  So they typically take a pretty good, careful look at all of the tax activity of the deceased at that time.  But what you can do is, you can allocate the interest income that is being accumulated on the stop date.  So you, say you have some money left, you want to stop the estate, basically stop the clock running, so that you can indeed say it is over to Revenue Canada.  The go forward income accumulation just gets allocated to the beneficiaries.  And as I say, there are certain forms that get filed with the Revenue Canada and so forth to make that happen.  But it is an important step to allow you to bring close to the ongoing treadmill of interest income that is going to be coming in on the money you are holding.

 

Suzana Popovic-Montag: And that is a really good point to address in the letter that you write to the beneficiaries reporting on the administration of the estate and reminding them that at that point, that stop clock date or whatever you want to call it, at that point forward they have an annual obligation to themselves report that income and pay tax on it.

 

Ian Hull: And so now we are looking for that Clearance Certificate.  And even if that, as I say, the final distribution hasn’t been made, so you write a letter to CRA, you wait typically, it’s difficult to guess, it might be six to nine months, it might be more depending on the circumstances.  And once you receive that final Clearance Certificate you can send out your final distribution. 

 

Now one little twist, just as a final comment on the tax side is, is that you want also, I remind my clients to look at whether or not the deceased was a G.S.T. participant or registrant, because there can be special filings that need to be undertaken for that, and make sure that that’s been closed.  So your loop is closed fully on the tax side, you’ve diarized them and then in our next podcast, we are going to talk a little bit about the accounting obligations, not from the standpoint of the government, which we have gone through, it’s going to be hopefully no more tax time once we get in our next podcast, we are going to move into the accounting obligation as between the executor and the beneficiaries.

 

Suzana Popovic-Montag:  Well that is great, Ian.  Thanks very much.  I look forward to our next podcast.  And just a reminder again for anyone who has any comments about our podcast, please feel free to call us at 206-457-1985 or send us an e-mail at hullandhull@gmail.com or, of course, visit our blog and our webpage at estatelaw.hullandhull.com.

 

Ian Hull: Thanks Suzana.

 

Suzana Popovic-Montag: Thanks 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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Listen to The Business of Being an Estate Trustee.

This week on Hull on Estate and Succession Planning, Ian and Suzana discuss the business side of being an Estate Trustee and talk about what to do with assets.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.

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Listen to Delay in the Granting of Probate.

This week on Hull on Estates, David and Sarah discuss issues that cause delay in the granting of probate.

Comments?

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

Issues Causing Delay in the Granting of Probate - Hull on Estates Podcast #104

Posted on April 1^st, 2008 by Hull & Hull LLP

 

David Smith: Hello and welcome to Hull on Estates. You are listening to Episode #104 on Tuesday, April 1^st, 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.

 

David Smith: Good afternoon. I’m meeting today with Sarah of my office.  Hello Sarah.

 

Sarah Fitzpatrick: Hi, how are you today?

 

David Smith:  Good.  And again, this is David Smith and I’m with Sarah Fitzpatrick.  And today, Sarah, we thought we would talk about issues causing delay in the granting of probate.  And what exactly are we concerned about here?

 

Sarah Fitzpatrick:  Well, with respect to some of the recent podcasts done by Ian and Suzana considering the process in obtaining Certificates of Appointment for Estate Trustee, we thought it would be useful to consider ways in which to avoid the delay.  Delays are notorious in many estates Courts and it can often be very difficult to obtain probate without having your application sent back for rectification.  So we thought we’d just canvass some of the ways, just practical ways in which you can, when drafting your application, try and avoid some of those delays.

 

David Smith:  And Sarah, I mean, what’s the concern in terms of delaying the receipt of probate?  If you can’t get probate, what does that prevent you from doing?

 

Sarah Fitzpatrick:  Well often the estate trustee is anxious to obtain the probate so that they can go ahead and administer certain assets.  And in certain Courts, probate can be granted very quickly, within, for example, a week.  But in other Courts, it can take up to 6 to 8 weeks.  And if, for example, there may be a transfer of property pending, or other assets that need to be administered, delay can seriously jeopardize the ongoing administration of the estate.  So it is important to get your probate as quickly as possible.

 

David Smith:  Alright.  And you touched on this at the beginning, but probably just as an aside, we should point out that we are podcasting today on Hull on Estates.  Our sister podcast is Hull on Estate and Succession Planning.  And as you’ve pointed out, Sarah, there is a couple of recent podcasts which have been done by Ian Hull and Suzana Popovic-Montag, that touch on some other issues relating to the obtaining of probate.  Again, our focus today is on delay.  So what can cause delay in the obtaining of probate, and what should we consider in the 10 minutes we’ve got today?

 

Sarah Fitzpatrick:  Most likely the most common error that is sent back for rectification is the names.  The Court insists on total uniformity of names in the Application documents, which means that in your Application, in all of the documents that are required in the Application, there must be total uniformity of the names.  They must be referred to the same throughout the Application.

 

David Smith: Now Sarah, as a litigation lawyer, I obviously don’t run into this issue quite often that often, and part of the reason you’re obviously podcasting on this issue with me is that in your practice, you do do this sort of work.  To what extent can you comfortably delegate any of those reviews to support staff?  Is that something you can delegate or do you need to do that yourself?

 

Sarah Fitzpatrick:  Absolutely, certain of the…you know, the Application, can certainly be filled out by clerks that are knowledgeable in this area.  However, it is important to review everything.  Again, errors are very common and not only is it good just to have a second set of eyes reviewing the Application, but again it’s…the Court does insist on uniformity in all of the Application documents and it’s important to review them, the solicitor in charge of the file as well.

 

David Smith:  And ultimately you, as the solicitor, are accountable for that, right?

 

Sarah Fitzpatrick:  Exactly, that’s right.  But, for example, with respect to using the same names throughout, often what you’ll find is that the Will may refer to the deceased by a certain name, but that many of the assets are actually registered in a different name.  For example, the Will might be the estate of James Smith, but many of the assets are registered in the name of Jim Smith.  So the Application actually provides in two different lines where you can actually state “in the estate of James Smith” and then there’s a secondary line down below, where you would need to put “also known as Jim Smith”.  And the important issue here is that not only do you need to address that issue in the actual form of the Application, but this needs to be consistent throughout all of the Application documents: the Affidavit, the Certificates.  Everything does need to have that “in the estate of James Smith, also known as Jim Smith”.  And they will send it back if it’s not exactly correct everywhere.

 

David Smith:  And, of course, if it’s sent back and you’re acting for the executor, is there an obligation to advise the beneficiaries that there has been some delay caused through any kind of inadvertence?

 

Sarah Fitzpatrick:  David, no, there’s no obligation per se to advise the beneficiaries of the estate.  It may be just a matter of practice.  Certain solicitors can certainly advise, but I wouldn’t say that’s typical practice.  But the errors are so frequent that it would not be unexpected for this to happen quite frequently.

 

David Smith:  Right, and I guess the only reason that sort of occurred to me was just again wearing my litigator hat, if you’ve got a contentious relationship between the executor and the beneficiaries, obviously you want to perhaps communicate any deficiencies to the beneficiaries, if there’s any…if it’s particularly acrimonious.  Sometimes my practice is even if it’s over the top, you advise them of every single delay, just so that they know that things are being done.

 

Sarah Fitzpatrick:  Right, well certainly just on that, in terms of advising beneficiaries, one issue is the Notices.  And that’s another area which can cause delay.  The Court is insistent, you do need to serve the Notices of Application on all the beneficiaries.  Now the Notice doesn’t affect the legal rights of the beneficiaries in any way.  But the Court still does require that the Notices of Application be served on all the beneficiaries and as importantly, the names of the beneficiaries need to be identical to the names referred to in the Will, as well.  So that’s another key point to keep in mind when serving the Notices of Application on the beneficiaries and keeping them advised of that.

 

David Smith:  Okay, so good tip, Sarah.  Now, you know, shifting away from the actual form of the Application, why don’t we touch now on some specific situations.  I’m thinking particularly of holograph Wills, just because that’s near and dear to my heart.  I run into it in litigation context on occasion.  What specific challenges are presented by holograph Wills that may cause delay if not dealt with properly?

 

Sarah Fitzpatrick:  Well, first of all, we’re going to need an Affidavit in the holograph Will, attesting to the signature.  And what can often cause delay is that there can often be only one beneficiary or major beneficiary and ostensibly there could be a conflict of interest if the beneficiary is signing the Affidavit attesting to the testator’s signature.  So that’s one area that you do need to be concerned about.  However, I don’t think there’s any legal restriction on a major beneficiary signing the Affidavit attesting to the signature.  And often, of course, there’s no one else that’s available to do that.  In my experience, I’ve had cases where often there may be a cheque from a bank, for example, and you can often have the bank teller sign an Affidavit attesting to the signature.  But certainly, when there is only a single beneficiary able to swear that Affidavit, that can certainly cause delay.

 

David Smith:  Okay, and certainly the characteristic of a holograph Will is not only that it’s signed by the deceased, but is wholly made in the handwriting of the deceased.  And I presume, of course, that the Affidavit would reference that fact as well?

 

Sarah Fitzpatrick:  That’s right.  And I…and further to that point as well, I think that this is a case if there was a sole beneficiary of the estate, and they were the only ones that could sign the Affidavit, it would very well be a case that would be referred to a judge.

 

David Smith:  Okay, for our last topic we can touch on, and we’re not going to hit everything obviously, let’s just talk briefly about administration bonds.  I mean these, you know, just uttering that phrase causes me anxiety because every time I’ve encountered bonds in the litigation context, they’ve been very difficult to obtain.  Can you just tell me briefly what problems administration bonds can cause in the context of obtaining probate and how that can cause delay?

 

Sarah Fitzpatrick:  That’s right, David.  In a case where you have an Application without a Will, or if it’s an Application with a Will where the estate trustee is either…well the Applicant is either not named in the Will, or the estate trustee is resident outside of Ontario, the Court is going to require either a bond or an Order dispensing with the bond.  And, as David mentioned, the bonds are notoriously difficult to obtain these days.  And so typically you’re left with the option of getting an Order from the Court dispensing with the bond.  What you’re going to need to obtain here is consent of all the beneficiaries, and you’re going to need an Affidavit from the Applicant as well.

 

David Smith:  Right.  The bond just boils down to an issue of trust, doesn’t it?  I mean, I’ve always found it kind of…the surprising thing about bonds, to my mind, is the executor is chosen by the testator because he or she is someone they trust.  Yet here you’ve got a situation where the Court orders that they’ve got to post security and that there’s a concern that they may not be trustworthy.  I always find that a little bit odd.

 

Sarah Fitzpatrick:  Yeah, exactly.  The Court is obviously protecting the beneficiaries in the event of negligence by the estate trustee.

 

David Smith:  Right, but I suppose if it’s good estate planning and the executors…the beneficiaries like the executor, trust the executor, then the bond might well be waived.

 

Sarah Fitzpatrick:  That’s right. And certainly the bond is a requirement when you have an Application without a Will as well.  So there may not have been an estate trustee named, so that can be critical as well.

 

David Smith:  Okay, that’s great Sarah.  So thanks so much.  It was a lot of…it was very interesting rather, doing this topic, and I look forward to podcasting again.

 

Sarah Fitzpatrick:  Great, thanks.

 

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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