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

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Yesterday I talked about Section 13 of the Evidence Act (Ontario), which mandates that before someone can bring a claim by or on behalf of an Estate, he or she must have some corroborative evidence.  The standard of evidence required was dealt with by the Ontario Court of Appeal in Burns Estate v. Mellon.

The Estate Trustees, who were arguing that a transfer to a friend of the deceased during lifetime ought to be reversed because it was subject to a resulting trust, argued that the recipient’s defence that the transfer was a gift ought to be defeated because her corroborative evidence did not remove all reasonable doubt that she had received a gift.  The Court of Appeal agreed with the recipient, finding that the strength of evidence need only succeed on a balance of probabilities:

In principle, I see no justification for applying the criminal standard in a civil action.  A criminal prosecution differs fundamentally from a civil action, and the criminal standard serves different ends and operates on different assumptions from the civil standard.  (See R. v. Schwartz, [1988] 2 S.C.R. 443 (S.C.C.), at 462, per Dickson C.J.C. and Lamer J.)  Moreover, nothing in s. 13 itself suggests that the Legislature intended to displace proof on a balance of probabilities with proof beyond a reasonable doubt.

Thanks for reading.

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Listen to Valuations and Appraisals

Ian celebrates the 100th episode of Hull on Estate and Succession Planning.

He discusses the question of valuations and appraisals and how these affect estate mediation.

Comments? Drop us a line at 206-457-1985 or send us an email at hullandhull@gmail.com.

Valuations and Appraisals - Hull on Estate and Succession Planning Podcast #100

Posted on February 19^th, 2008 by Hull & Hull LLP

Ian Hull:  Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #100 on Tuesday, February 19^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 and welcome to another episode of Hull on Estate and Succession Planning. I’m Ian Hull and today unfortunately I am doing this alone because Suzana Popovic-Montag is away.  So I’m going to carry this solo and I want to remind you that if you want to be heard on our podcast, you can participate in our discussion by leaving a comment.  Please feel free to call 206-457-1985.  Now the number is also in the show notes and our webpage at: hullandhull.com. It’s an easy source to link to our blog and e-mail address for our podcast is hullandhull@gmail.com.

Today I wanted to talk about a couple of things. First and foremost with great pride, I can announce we’re at 100. Those of you who listen to the Canadian Podcast Buffet would know that this means that we’re in the Century Club which we intend to advise our good friends at the Canadian Podcast Buffet about our status at hitting 100. This has been quite a ride. Suzana and I began this challenge in March of 2005 and we’re here today having hit #100. As I say, I’m here alone but Suzana is here in spirit.

So today the issue I wanted to talk about is one that really, I think, underlies many, many of the problems that we face in an estate administration and that is, the question of valuations. Now this isn’t just going to be sort of a comment or discussion about valuations, about very big properties and very expensive properties. This is about valuations globally and how it affects an estate administration.

The first thing that somewhat comes to mind with valuations is real estate. And one of the things that an executor, once you’re appointed executor is put to task right away at, is to deal with real estate typically. And most estate administrations you’ve got the house or a cottage or something like that. And the valuation issue becomes a primary concern. Let me just pause at this moment on the real estate issue and let’s just save for the comment that I want to talk about right is… let’s say classic residential property. When you’re an executor, you really need to look around, check out the lay of the land and see who your beneficiaries are. Often you’ll have at the table people who may want to buy the property and there may be deals that you want to make directly with the beneficiaries to avoid commissions and so on. But in almost any event, there is the need to determine what the value of the residential property is. And there’s two central approaches. One is to get the valuation done by what I call a drive-by appraisal. And that’s getting a reputable agent or getting a few reputable agents, two or three, to give you a drive-by appraisal of the property. You need that at minimum for probate fee purposes in the sense that if you’re going to be paying the probate tax in Ontario. But just to get an understanding of the value of the assets you want to, I think, I tell my clients to consider first of all is the drive-by. Within the real estate agent gambit is also the possibility that they will go and just do a full inspection and give you a valuation on that basis. So it’s more than a drive-by. But it’s done by a real estate agent. And it’s essentially done on testing the market and so on, in that approach.

The other important delineation is if you want to really lock down the value of the property is to get a certified appraisal, I’ll call it. In Canada, there’s a certain association of certified appraisers. They have to be qualified and so forth. And you get what is essentially a more fulsome report on the appraisal value. That appraisal though, is typically obtained in situations where there is going to be some dispute as to the value. Maybe it’s the value from the taxing authority, they want to know what the value is for capital gains purposes. Or maybe it’s the value determination within the beneficiaries. More often than naught, the drive-by or walk-through appraisal through an agent is enough for an estate administration. But I always tell my clients to consider the possibility of doing a formal appraisal. And I think, I mean, two things come from this. One is, is of course the obvious is that when you get a drive-by or you get an agent to do the appraisal, it costs some money but it’s typically something in the modest range. I mean, my experience is that somewhere around… sometimes they’ll do it for free, sometimes they’ll do it anywhere up to fifteen hundred dollars. To do a proper, certified appraisal though, you’re looking at anywhere between two and five thousand dollars depending on the residential property. Now you get more of a seal of approval, so to speak, a more qualified opinion with the more expensive, but it’s a totally get-what-you-pay-for situation.

So that’s something, I think, that you’ll want to really consider is, is that whether or not, if you have real estate, you want to proceed to get the informal appraisal or proceed to get the more formal appraisal through the certified process, through a certified appraiser. I can think of a thousand reasons to do one and a thousand reasons to do the other and so to guess at it right now doesn’t make sense. I just think that what I will say though is, is that typically people stay within the ambit of working with agents to get it and don’t go to the full level of the appraisal.

I just want to talk a minute about commercial properties. Now in my example I think of, a nice woman dies, she dies with a cottage that needs to be appraised for CRA purposes because they want to know what the capital gain is, they want to appraise the house because the house is to be sold, the proceeds are to be split between the two children. And thirdly, they own a little retail property around the corner that they bought 50 years ago and it’s for a convenience store at this point, with a little tenant on the top of it. I mean that kind of scenario. And really, I mean, starting with that, when you get into a commercial property, then I tell my clients we’ve got to really seriously consider getting the certified appraisal.

Now like anything though, I make sure that we’re getting the appraisal from experts. People who know the area, the property, it’s the same as residential. You don’t want to get someone to give you an appraisal that works out of Whitby, when their specialty is Whitby and the property is in Saskatoon. But the same thing goes with commercial properties. There are specialties within their different framework of commercial properties that you want to look to, to get the right person to get involved with the appraisal process.

Now from a government taxing standpoint, CRA, the appraisal on a commercial property is very important and it also can be very important from the standpoint of a disposition ultimately to the beneficiaries. So we’ve got this appraisal process and I want to take it to another level in a sense, another tier of appraisal problems and that is, is that whether or not it’s just a Mac’s Milk and a tenant on top property or it is a series of buildings or it is something more substantial, different buildings and some vacant land and a whole mixture of residential and commercial properties. Obviously you need to have them carefully appraised just for the taxing authorities’ standpoint alone. But it seems to me anyway, you want to take a look at the properties and determine what you will ultimately want to do with these properties. If, for example, some are going to be split up amongst the families, each property given to one child or something like that, what we call a direct gift of the properties through the Will, then that may affect how you’re going to approach the appraisal. If they’re going to be sold, that may affect your approach to the appraisal.

I notice now in my practice many more times what’s happening is, is that you’ve got situations where you’ve got say, six or seven buildings, some bigger than others, a portfolio of a few million dollars in real estate and you may want to unload them all collectively to a group. And there are obviously people who are interested in investing in collections of properties. I know Suzana and I have dealt with over the years situations where there’s such a large collection of properties that you can even find that some of the pension funds and other very big investors are interested in getting the real estate properties into their portfolio. So what’s important, I think, is to look at the end game, determine what kind of property we’re dealing with. Are we dealing with residential only? Are we dealing with a mix? Are we dealing with small commercial property? Or are we dealing with larger or middle-sized commercial properties? Seek out the appropriate advisors and where I say that is, is that I typically say to my clients, “Look, go to…for a commercial property situation where you’ve got multiple commercial properties…go to two or three of the big brokers, get some analysis done by them (a) on the valuation side but (b) on what they think they’re going to do to market these properties to get them sold. And they’ll often put a bit of a pitch together, so to speak, and go to the executors with some sort of framework as to how they think they can put the properties out on the market and ultimately sell them.

So it comes down to a real question of due diligence and, I think, anyway from my perspective, you can never spend too much time getting the valuations organized because they can be a tremendous source of litigation at the end of the day if you’re not careful.

Alright, well that’s just some thoughts on valuations. There’s many more issues that we can talk about in Episode #101 when Suzana gets back, so I will save that for her. As I say, it has been a great thrill and an honor and a pleasure to be able to work with Suzana on these 100 podcasts. I’m looking forward to another 100 podcasts and I know that if we combine these plus all the Hull on Estates podcasts that we’ve done over the years, we’re well over 100, but today does mark an important and a bit of a monumental day in my podcasting career, only sad to be doing this alone.

Alright, so thanks again for joining us and this brings us to the end of this week’s discussion. Thanks for listening to me today. We look forward to hearing from you and again, our email is at hullandhull@gmail.com or our comment line 206-457-1985. I’m Ian Hull and until next week, so long.

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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I read an article in this week's Maclean’s magazine that more and more of Canada's "Super Rich" are drafting family value statements. According to the article, approximately $3 trillion (though the figure varies depending on the source) will be transferred in the coming decades to the next generation. The Super-Rich are particularly concerned that their children, as beneficiaries of this wealth transfer, will take the easy way out and decide not to work or give back to the community. Warren Buffet received a great deal of press when he stated publicly that he would not leave his fortune to his children. Instead, the Bill and Melinda Gates Foundation was the recipient of Mr. Buffet’s considerable largesse. 

According to the article, a value statement spells out those values that are important to the family and can include values that speak to community, work ethic, and religion. Apparently, the Super Rich are willing to pay various consultants significant amounts of money to get the statement just right. Every family member is asked to participate so that everyone buys into the process and the statement withstands the test of time.

Whether the average Canadian family actually sits down and crafts a family value statement is debatable. However, most families will discuss informally, whether over dinner or around the campfire, the values that motivate them and help them navigate life’s many choices. 

However it is done, it makes good sense for parents to sit down with their children to not only talk about the pending transfer of wealth, but their expectations (and aspirations) as to how their children will spend their inherited wealth. It is a truism that money has always been hard to handle.

Have a good weekend.

Justin

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Listen to "Estate Planning Tips"

In this week's episode of Hull on Estates, Natalia Angelini and Jordan Atin discuss how to deal with assets in the family and how to avoid future conflict.

Estate Planning Tips - Hull on Estates Podcast #80

Posted on October 9^th, 2007 by Hull & Hull LLP

Natalia Angelini:  Hello, and welcome to Hull on Estates Podcast #80 with Natalia Angelini and Jordan Atin.

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.

Natalia Angelini:  Hello.  Welcome to Hull on Estates podcast series.  Its number 80 in our series and you’re listening to Natalia Angelini and Jordan Atin.  Hi Jordan.  How are you?

Jordan Atin:  Oh, I’m doing great, how you doing?  Thanks for inviting me.

Natalia Angelini:  You’re welcome.  So our topic today is flashpoints, problem areas that you should be dealing with then planning your estate.

Jordan Atin:  Yeah Natalia, I mean, it’s a real problem for a lot of people.  But I guess as estates lawyers, we can pretty easily identify what assets, and it’s usually assets, that are going to lead to some problems.

Natalia Angelini:  Right.  And there’s an interesting scenario that you go through in your book, The Family War.

Jordan Atin:  Thanks for the plug Natalia, I appreciate that.

Natalia Angelini:  You’re welcome.  But there’s an interesting scenario that you go through and I’ll just summarize the facts briefly.  What essentially takes place is Dad has 3 children, his daughter Mary and two brothers.  He names Mary as his trustee in his Will and he divides his estate equally between his 3 children.  One thing he doesn’t tend to though is dealing with his pride and joy, his Mustang, I think it’s a Mustang convertible, some kind of car that is appealing to both of his sons.  And, of course, what eventually happens is a big dispute arises over this car.  And what transpires is Mary tries to settle this dispute by having a bidding war between the brothers and that just escalates because each is prepared to outbid the other to no end.  And then scrapping that idea, she tells them if they don’t come to an agreement within a week, she’s going to sell it to a third party.  And that is exactly what she ends up doing and the brothers, of course, are shocked and surprised. They never thought she would actually go through with it.

Jordan Atin:  That’s exactly right, Natalia.  And in fact what happened was, there was so much bad blood between the two brothers that they said to Mary, “Mary, if you speak to my brother, I’m never going to have anything to do with you again.”  And she heard that from both brothers and there she was, caught between her two brothers, with no right answer. And what, I guess is the question, what did the father do that was wrong?  What could he have done and what could estates lawyers have helped him with?

Natalia Angelini:  I mean the obvious answer to that is that he should have addressed that asset in his Will, at a minimum.  And he should have even, in my view, gone beyond that and talked about it with his sons and have arrived at some kind of solution as to how to deal with this car.

Jordan Atin:  This is a bit like King Solomon’s…the problem in dividing the baby.  The thing is, even if it’s in the Will, and it’s one reason why we often include a clause in the Will that deals with personal effects as opposed to residue of the estate, that is, we give some discretion to the personal representative or the executor to deal with personal effects, because we don’t want to be in a situation where we have to value each item and sell them.  But in this case, probably there was no right answer that could have been dealt with in the Will.  They could have said well, give it to the highest bidder or perhaps those would have helped in the sense that Mary wouldn’t have been left trying to come up with a solution.  But in the end, what was going to happen?  Probably one or both of the brothers was going to be upset about the situation.  And I think you’re exactly right Natalia, that the only thing that could have probably avoided this would be for Dad to have spoken with the two kids and said, what do you anticipate happening with this?

Natalia Angelini:  That’s a great point.

Jordan Atin:  The other thing, I think, it tells us is, who wants to be Mary in the situation?  Nobody.  And this is a good illustration of when it’s not a good idea to put one child in charge of other children’s assets.

Natalia Angelini:  That’s right.  I mean, another alternative is to have the estate trustee be someone other than your immediate family members.

Jordan Atin:  One piece of advice I always say is never put one child in charge of another child’s assets, either as a trustee or as an executor, if you can avoid it.  If you think, here’s one where only the Dad really knew what was going to happen.  So if you can anticipate that, and that’s a discussion that the lawyer should have with the father in drafting the Will.  If it’s something that you can anticipate happening, then get somebody else who can be blamed for all the bad things, right?  I mean, you don’t want to leave a legacy of hatred between your siblings just because of what you say in your Will.

Natalia Angelini:  That’s right.  And if you have all of your children be co-trustees, that doesn’t really resolve the problem either.  So I think your point is a good one.

Jordan Atin:  Yeah, if you can find somebody to blame, it’s a good, it’s always a good idea.  The other thing I think this illustrates is, Dad was not as brave as he could have been.  It’s very hard to talk to kids about what you’re planning to do and face the music as it were, as far as what kind of dispute is going to happen.  And here, if Dad had taken the brave path and said to the kids right up front, here’s what I’m planning to do, I think a lot of anguish could have been saved for Mary.

Natalia Angelini:  I agree.  So Jordan, what are some solutions for executors who have to deal with personal effects?

Jordan Atin:  Well, we see this so often, Natalia, as you know.  It’s really a terrible situation because often the real financial value isn’t in the personal effects, but the emotional value is, and the sentimental value. So just a couple of solutions that executors can use.  Let’s say you’ve got a whole list of personal effects.  One thing you could do is have the executor, where it’s supposed to be equal, you can have the executor deal with all of the personal effects and divide them into certain lots and then, you know, draw that randomly for example.  That’s one option.

Natalia Angelini:  So is there another option?

Jordan Atin:  Yeah, there are lots of options.  Another one is that you can…you set it up so that basically the beneficiaries who want a certain item have to purchase it from the estate.  And that keeps everybody honest in the sense that if they really want an item, then they’re going to buy it.  If they’re just getting it, if they just want it because it’s the highest value, then they’re obviously going to have to pay into the estate for that.  And so that’s why it’s crucial sort of at the beginning that you get an evaluation of all the property and then you can set up that option.  And that keeps everybody honest, because we all hear stories about, you know, so and so just wants that because it’s the highest value.  So this way, it keeps them honest.

Natalia Angelini:  Good point, Jordan.  Are there any other tips?

Jordan Atin:  Well I think it’s crucial that whenever you’re dealing with dividing up the personal effects, whether somebody is going to buy the items or you’re dividing it into lots or you’re doing it by auction, that the choice of  the order of the people, that is, if you’ve got 3 children, who’s going to get first dibs, should be done on a random basis.  Because nothing gets kids more upset than when you pick the eldest to go first, or you go alphabetically or something like that.  So what I always recommend is, pick a solution that’s as neutral as possible so that there aren’t those tugs back to the family, like their position in the family for example, the relationships.  Instead, you pick a purely random thing, everybody picks it out of a hat and that’s who goes first.  And you reverse the order, something like that, because you don’t want to be in a situation where you’re dragging back family history that, you know, oh John always got to go first, always got what he wanted on his pizza, sort of thing.

Natalia Angelini:  Right.  That’s even better than some things I’ve seen.  I’ve seen some Wills that say that the kids can select the items as between themselves and that the trustee has to simply ensure that they are divided up relatively equally.

Jordan Atin:  Right.  I mean that’s, you know, the more loosy goosy you make it in the Will, the more room there is for failure and destruction of the family.

Natalia Angelini:  Exactly.  Okay, well I think that wraps up our session for today.  Jordan, it was great chatting with you.  I hope you had a great Thanksgiving.

Jordan Atin:  Thank you Natalia.  It’s been a real pleasure to be here and I know that you had a lot of turkey over the weekend.

Natalia Angelini:  Thanks for noticing.

Jordan Atin:  It was my pleasure.

 Natalia Angelini:  Okay, bye-bye.

Jordan Atin:  Bye-bye.

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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Last week the Globe and Mail reported on a $1.5 billion lawsuit launched against Barry Sherman, the founder of Apotex, and a trust company. The case offers an opportunity to question the duties of disclosure to beneficiaries.

The claimants are the beneficiaries of their deceased father’s estate. Their father died in 1965 and his estate was administered by the trust company. In 1999, the claimants learned that the trust company had sold one of their father’s corporations to Mr. Sherman in the late 1960s. The claimants later learned that the sale included terms that they were to be given an opportunity to work at the company upon turning 21 and the option of purchasing 5% of the company after 2 years of employment. These terms were subject to some important conditions, including that the company remain under control by Mr. Sherman.

However, Mr. Sherman sold the company in 1972 for a sizable profit.

The claimants now allege that Mr. Sherman and the trust company are liable for not advising them of the terms of the agreement, among other things.

An interesting catch is that the trust company passed its accounts in 1993 and no objections were raised at that time.

At issue in this case will be the trust company’s obligations to disclose all details about its dealings with estate assets, even when the information has not been requested, either at the time or when the accounts are passed.

Thanks for reading.

Jason Allan

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When looking at the myriad of issues and problems that are created with succession planning for a family business, it is often forgotten that the family member who has been charged with (or readily accepted) the job of carrying on the family business is not him or herself particularly happy with the proposed division of the estate.

The question of "fair but not equal" is often a lifelong struggle for those who want to pass on a family business. In some cases, there is simply not enough money to fund a relatively equal division of the estate, as the core assets of the estate are tied up within the family business.

In certain situations, the non-participating family business members are treated in a "fair manner" by being given, for example, the proceeds of an insurance policy as opposed to the family business on death. The child who is charged with running the family business may not see that as being particularly fair. He or she may feel that for him or her to financially succeed, he will have to work in the business for the rest of his life, while the other siblings who are receiving fixed assets simply have to wait for the estate to fall in and they do not have the same lifelong work commitments to fulfill.

On the other hand, things can get particularly complex where one of the children does indeed want to and does receive the shares of the family business. The financial calculation of this gift is often based on complex valuation formulas which accommodate for discounts in the context of the family dynamics. Unfortunately, the valuation issue alone can be both expensive and time consuming. However, if this is the technique from which the division of the estate assets is going to be undertaken, then early intervention into this issue is essential.

For example, some communication within the family about an agreed upon valuation process should begin well in advance of one's death. If the process can be agreed upon, then arriving at a value of the family business is much simpler. If the process is addressed well in advance of death, then there are fewer surprises to the non-business participating family members.

In our experience, sometimes it is best to leave the distribution formula up to the next generation. Meaning, let the children who are ultimately going to share the asset decide on the formula to be employed upon your death.

We will continue to look at these non-tax estate planning issues in future blogs.

All the best,

Ian & Suzana.