Posted on May 13^th, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi and welcome to Hull on Estates. You’re listening to Episode #110 of our podcast on Tuesday, May 13^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:        Hello and welcome to Hull on Estates. It’s Suzana Popovic-Montag here with Ian Hull. Hi, Ian.

Ian Hull: Hi, Suzana, how are you doing?

Suzana Popovic-Montag: I’m good, thank you, how are you?

Ian Hull: Great, happy to be on Hull on Estates this week and want to just remind everyone that we have a, encourage of course, a call-in number, at 206-350-6636.

Suzana Popovic-Montag: And that number you’ll find also in our show notes as well as our e-mail address which is hull.lawyers@gmail.com if you’d like to send us your comments by e-mail.

Ian Hull: Well, Suzana, we’ve got a couple of things we want to cover this week on Hull on Estates and our companion podcast dealing with estate administration issues right now. We’ve been talking about how an estate should be administered and giving some thoughts and sort of a mini-series on that. And I thought it might be fun today to talk about a couple of things relating to the dialogue that we think we should encourage and we certainly encourage with our clients, both before death and after death, before death with their family and then after death with the beneficiaries. But before we get to that, why don’t we spend a minute or two here talking about the

wonderful news about our good friend, Terry Fallis.

Suzana Popovic-Montag: Terry has self-published a novel and that’s a really impressive accomplishment on his behalf which has now won him the Leacock Award.

Ian Hull: Now for those of you who don’t know anything about the Stephen Leacock Award, it’s called the Stephen Leacock Medal for Humour and Stephen Leacock, who, actually in his day, he was described as someone more famous than Wayne Gretzky is today to Canadians. He was known throughout the world. In the early 1900s when you spoke of Stephen Leacock, many people around the world would have heard of him before they would have heard of a prime minister in Canada. But, obviously a great novel writer and a humourist, and every year there is an award that is handed out in his honour. Terry Fallis was short-listed and then ultimately won the Leacock Award for his book, “The Best Laid Plans”.

Suzana Popovic-Montag: And Terry’s book is actually a story about a reluctant political candidate who consents to run in a federal election on the condition, of course, that he won’t campaign, give any kind of media interviews or canvass door-to-door.  And it’s an amazingly well-written book that really does deserve, in my humble view, this wonderful award.

Ian Hull: And one of the neat things about this is, one of the many neat things is obviously Terry’s a terrific writer and a great humourist.  But what he did was, the classic publisher route he did not follow. He went the social media route and Terry’s obviously on the cutting edge of social media work, generally, and a real mentor to us in the podcasting world here for us. But he self-published his book.  He also has his book on the Internet for free in audio form.  So he has all of the chapters which he read and published on the Internet.  And the remarkable thing, obviously, of winning the Leacock Award is tremendous, but to be coming out of a self-published environment is unheard of, and really a testament to what Terry has been able to do in the social media world. I know the president of Thornley Fallis, Joe Thornley, is another incredible social media expert and I understand that he is going to be speaking out in Calgary where Suzana is also a speaker in the fall, at what looks to be one of the leading social media conferences for professionals and for others who are interested in getting into the social media workforce with a business slant. But Terry turned the business model to perfection because he talked about his book, he blogged about his book, he self-published his book, he published the book in audio, he did all of the sort of core steps that the social media environment allows for. So, tremendous success for him and an exciting time for him, no doubt and him and his family.

Suzana Popovic-Montag: Congratulations, Terry. We’re very, very happy for you.

Ian Hull: Alright, so what we thought we might talk about today was something that we’re going to get actually put on to our webpage.  And it came out of The New York Times.  It was a special section on wealth and personal finance. It came out on Tuesday, March 18, and I was alerted to it before it came out and picked up a copy of The New York Times because it looked like it was going to be a fascinating special section.

Suzana Popovic-Montag: And it really is, Ian. Flipping through it, it really is a great synopsis of our whole area and it captures all the main headings in terms of the estates and trust planning, the inter-generational transfer of wealth, and finance management, and I just highly recommend it to anyone who is able to pick up a copy or to refer to it on our website.

Ian Hull: And we’ve been talking a lot in our other podcasts, but also in this one, that, you know, from our perspective anyway, communication is crucial and this pull-out section from The New York Times really is a great summary. As I say, we’ll get it up on our webpage in the next little while. It’s a great summary of the different approaches that are going on. We’ve also always said and it appears to be as true as we’ve said it, is that the U.S. are so far ahead of us on talking about wealth management, wealth and inheritance talking in that sense, and really talking about the values of money. The first article in the section is entitled, “Breaking the Silence”. And talking, really, from a standpoint of motivating the family.

Suzana Popovic-Montag: And what I thought was amazing is the statistic that is actually set out there that says that there is going to be the largest inter-generational transfer of wealth in American history now underway.  And the Boston College Centre on Wealth and Philanthropy has actually estimated, Ian, that $41 trillion is going to change hands by the year 2052.

Ian Hull: So, you know, given these numbers in the U.S., we continue to obviously pale in comparison in terms of the Canadian experience.  But, you know, we continue to encourage our clients to talk about, you know, getting into, entering into discussions because these discussions need to take place against the backdrop of changing estate and tax laws, innovative tax instruments that are now available and, you know, using what is out there, and that’s the sort of an army of newly trained and well trained wealth advisors.

Suzana Popovic-Montag: We also have to recognize the fact that the reality is that there is a lot of upheaval and family discord that’s out there, and this complicates the planning mechanisms that are actually implemented by these advisors.  And so the reality is there is going to be divorce, there is remarriage, there is adoption, there are different kinds of domestic partnerships that have become sort of the norm, and all of this is taken into effect and into consideration in the planning mechanisms.

Ian Hull: And you look at it, and in one of the articles in the pull-out section there’s a…Patricia Angus is quoted and she’s a principal of a wealthy advisory service in New York and this is a classic definition. She defines wealth as the following: The definition, she says, is broadening to include not just financial capital but human, social and intellectual capital.

Suzana Popovic-Montag: And then she says that the professionals used to think that it was just, how do I go about transferring my financial assets at the lowest tax cost? Now actually people are asking, well what’s the purpose and the meaning of what it is that I’m doing here and how do I want to pass this down to the next generation or further generations?

Ian Hull: And she makes a great point that it really…it’s not about death, it’s about an experience in life and an opportunity to talk to your family about purpose and values that might not otherwise come up.

Suzana Popovic-Montag: And for people who just write a document and put it in a drawer to be opened up then on their death, it doesn’t foresee or doesn’t take into account the opportunity that you can have that would arise by speaking during your lifetime about your plans.

Ian Hull: So as we work through this section, you know, obviously we’re struck by a couple of the other articles. There’s a great article talking about, it’s entitled, “Protecting Children From Their Money” and the sort of parental distress that comes with situations where parents have accumulated a fair amount of wealth and have indeed begun to pass it down. But there’s a wonderful article as well that sort of works through this whole breaking of the silence of inheritance, and the author goes through specifically and talks to wealthy individuals. There’s one point in the article, a Mr. Rothenberg who had received $10 million in the sale of his company, the company I think was called Syracuse Language Systems that they refer to. And he then set up a charitable foundation and a community foundation for his three children to run, and that was set up with just under $5 million.

Suzana Popovic-Montag: And then with some of the remainder of his funds he started a company that he actually called the Glottal Enterprises which makes speech aids for people who are hearing impaired.  Again, it’s a small company that loses money, he called it, at the time.

Ian Hull: But he wanted to do something different and he even notes in the article, he’s quoted, he jokes about the fact that he’s sure his children wanted more of the money themselves, but he has created two separate foundations. He’s created an important legacy from his perspective. 

So, anyway, as I say, we’re going to put this on the webpage so that you can have an opportunity to enjoy some of this, but feel free, obviously, The New York Times online, and as I say, it’s on the March 18, 2008 pull-out section called “Wealth and Personal Finance”. But I highly encourage it and good reading, (a) because I think the topic is really well worked through by the various writers, but (b) it’s always good to see what the U.S. experience is and in particular, how the U.S. experience is being, they even deal with this, impacted on a more fragile U.S. economy and how that’s affecting this inherited wealth scenario.

Suzana Popovic-Montag:  Well I think, Ian that brings us to the end of this week’s discussion. Thanks for listening to me and for joining me today.

Ian Hull: So thank you Suzana, it’s a real pleasure and I look forward to podcasting with you again soon, and remind people that our call-in number, 206-350-6636, is always available for phone calls.

Suzana Popovic-Montag: Or again, feel free to send us an e-mail at hull.lawyers@gmail.com or visit our daily blog at estatelaw.hullandhull.com. Thanks very much.

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.

This question was recently considered in the Ontario Superior Court of Justice decision of Iasenza v. Iasenza Estate 2007 CanLII 23351.

As background, Ontario’s Family Law Act (“FLA”) allows a surviving spouse to elect to either receive benefit under the deceased’s will (or on an intestacy if there is no will), or receive an equalization of net family property under the FLA. Normally, the surviving spouse seeks information regarding each of the options, and then elects for the greater benefit.

However, information regarding the values of each option is not always forthcoming in a timely fashion. The election must be filed within 6 months of the date of death, or the surviving spouse is deemed to elect to take under the will or on an intestacy.

The Court held that it did have discretion to set aside an election made in favour of an equalization. However, the Court noted that the discretion will be exercised sparingly and only in “restrictive circumstances where the interests of justice require it and where the balance of the interests of effected parties clearly warrants it.”

In considering whether to exercise its discretion, the Court will consider:

a.                  Was the election filed as a result of a material mistake of fact or law made in good faith?

b.                  Was there any responsibility or culpability on the part of the effected parties in relation to the election?

c.                  Was the notice of intent to seek revocation of the election given in a timely way, and in particular, how long after the 6 month filing period was notice given?

d.                  Has the estate been distributed or would interested parties otherwise be adversely effected?

e.                  Does the election result in an injustice to the surviving spouse in all of the circumstances?

On the particular facts of Iasenza, the Court decided to exercise its discretion and set aside the election filed by the surviving spouse. As a result, the spouse was entitled to receive 1/3 of the estate under the will, whereas she would have received nothing under the election.

Thanks for reading.

Paul Trudelle

The article quotes Hull and Hull's own Jordan Atin: "A will is usually the last thing that a parent says to his or her children...". As such, the document "creates a definitive, lasting record of the relationship between parent and child and among a child and his or her siblings. That reason alone explains why estate disputes are so hotly contested".

Jordan Atin states that in addition to addressing the mechanics of the estate plan, solicitors also need to address their client’s family dynamics. Lawyers should consider with their clients the emotional effects of the will may that arise after the testator passes away. 

In the article, Sender Tator, a solicitor with Schnurr Kirsh Stephens, notes that in the context of litigation, “emotion often gets in the way of legal or practical realities; your client is often looking for a certain result, which legally may not be feasible".

The interplay of family dynamics and human emotion is one factor that makes estate litigation so interesting. (It is also a factor that often makes the practice so frustrating!)

One of the functions of a solicitor in estate litigation is to consider the role of family dynamics, and to see that it is identified and addressed. In addition, the solicitor should strive to ensure that the legal or practical realities are not overlooked, and that passion alone does not drive the litigation.

Thanks for reading, and happy Halloween.

Paul Trudelle

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.

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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Posted on August 28^th, 2007 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You are listening to Episode #75 of our podcast on Tuesday, August 28^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: Hi there Ian.

Ian Hull: So, you know, having some fun with this whole cottage issue and talking a little bit about solutions instead of just about problems.  You know one thing that arose recently on a file that I thought was interesting and something that we’ve talked a little bit about this, but a real life example of what’s happened was we were in a situation where it was a relatively friendly transition of the family cottage. And lo and behold, what happened was, as we were going to deal with it, the actual title documents hadn’t been looked at for a long time. The father had died.  I’m sorry, the mother had died about thirty years ago and the father had lived in the cottage and shared it with his kids and grandkids and enjoyed it. And then the children and the grandkids came up with a solution as to how to deal with the cottage before the father died. And father was happy with the solution. And then they went to deal with it and this was a property that was north of North Bay and it was particularly problematic in terms of the title holding. And it hadn’t been dealt with for thirty years prior and had never been dealt with. So interesting enough, and that’s fine, the lawyers stepped in and they figured out, smart real estate lawyers figured out how to, you know, transfer the one property and part of it had be severed.  And there was a whole bunch of interesting legal issues. But what happened was, in the interim, when the kids, they had gelled with the solution, and then the delay which was partially the process in the system, in between the delay which took about eighteen months to clear up some of the title problems, two new kids were born into the loop.  And one of the kids had gone offside on the deal.  

So we had to go back and rework the deal, revisit almost all of the issues that we thought we’d resolved. And then ultimately, we came up with a solution.  But, I just thought it was an interesting point to make in the sense that when you go into these things, often people roll their eyes when the lawyers say, well let me see what’s involved, per se.  Do you own all of the property you’re owning?  Or who owns it and does your great-grandfather still have some estate that we have to deal with to transfer it in? Because when you go to move on these things, it’s like anything in a business deal or on any transactions. They, no matter what, life is transaction based.  And when you’ve got a deal, you wanna crystallize the deal, move forward. And then when you hit a stumbling block like this and you can’t give people the tangible result that they thought they had achieved, things loosen up. 

And in this case, things loosened up to the point where it wasn’t destructive, but it was harmful.  Because again, some of the hard feelings and things were raised again. We were just reinventing the wheel in some level. So I’ve, you know, I wasn’t involved in the early part but we learned a good lesson that it’s really important to get a handle on the true ownership interests of, in this example, the cottage property, what properties exist where, what slices of land are appropriately to go where and who owns them and what’s the history behind them. And you can do that by working concurrent with the plan.  When we get the family together and we want to work through the transition, we often will say, well let’s start from ground zero here, make sure we’re at the right spot, the starting spot, leave that to the lawyers and we’ll deal with that concurrent with our efforts to work with you in terms of the solution. 

Suzana Popovic-Montag: Ian, that’s a great story and it sort of brings to mind a story that I’ve encountered as well in the past where the ownership is not by the individuals but by corporations and private corporations owned by the individuals. And, you know, we know with family companies, people sometimes get lazy with the formalities that are required in these kinds of situations.  So directors, you know, they’re not always in place, the by-laws are not always up-to-date and the resolutions aren’t necessarily in place. So that, at the end of the day, when some form of transfer of ownership has to take place, it really can become a nightmare procedurally and at law, where by, you know, like you say, the possibility of actually losing an otherwise simple, deal can really become a reality.

Ian Hull: And one interesting thing on this, just to follow up on that too was, in the situation that I was involved with, was one of the brothers actually owned a sliver of the land and that brother had died without kids. So it added a whole twist on it and it was, everyone knew he was dead and everybody knew he had no kids.  But what we had, it added a whole twist in terms of regularizing things.  And again, it just comes back to doing your homework, if you’re gonna start the process, start early. And one of the things that I often will say to my clients, if they’re in the business of wanting to transfer, whatever it is, say it’s the cottage, the family business or whatever, start the succession plan the day you buy the business or the day you start the business or the day you buy the cottage. And start thinking through that, if that’s the goal, one of your goals, even if it’s a modest property, you never know.  I mean, people who bought cottages in Ontario and Northern Ontario in the early ‘60s and late ‘60s, early ‘70s, had no idea what these cottages would be worth today. And so you want to factor in that possibility of a transition.  Because if you buy the cottage now and you set it up in some elaborate trust arrangement for tax driven reasons, that may not be what you want to do ultimately in the sense that maybe you’ll save some tax, but you may not achieve your goal of succession. 

So talking about succession with family cottages, let’s talk a little bit about some of the basic ideas of just what we can do, transferring the cottage on your death and what steps can be taken.

Suzana Popovic-Montag: Well Ian, during our last podcast, we talked about, you know, those situations and what you would do in the situations where you were really concerned about the tax consequences of the transfer. But if the tax issues aren’t necessarily a concern for you or you’ve somehow already covered the tax liability through perhaps life insurance or some other arrangement, then you’ll likely choose to transfer your cottage or your vacation property on your death.

Ian Hull: Yeah, and that’s the likely scenario.  I mean, you know, the elaborate schemes of doing things during lifetime and things like that that we talked about before are useful and they’re worth considering. And even some of the creative schemes of passing on partial ownership and so on. But what 90% of estate planning is death-based in the sense that it’s triggered on the death. And so let’s start to flesh out some of what are the more conventional ways because there are so many ways that transfer options are available. Each with different potential benefits and really depending on your family’s current situation and future situation and prospects.  So let’s start with, let’s just talk through some of these options that are available upon death.

Suzana Popovic-Montag: Well, one of the ones that easiest comes to mind, Ian, and one that probably most people are familiar with is the concept of joint tenancy. And what joint tenancy means is that you can decide to hold your property jointly with someone else, for instance, your children or your grandchildren or some other family members who then are the joint beneficiaries of that property. And so then on your death, there’s an automatic transfer of that property to the surviving joint tenant or tenants.

Ian Hull: Now once that’s property transferred though, it passes directly to the other joint tenant on your death.  And, of course, there’s this benefit in Canada of the no capital gains are triggered necessarily depending if it goes to, for example, a spouse. If you have a joint tenancy with your cottage and it transfers to your spouse, then there’s a rollover on the tax payable. If it goes to a joint tenancy with a child, then there is no rollover available and you will crystallize part of that gain at that time. But another nice benefit is the fact that you’ll avoid probate fees likely when you pass through this joint tenancy process. 

Suzana Popovic-Montag: Now if we put on our litigators’ hat, though, Ian we certainly know that this option which is very frequently used, can however have some very complicated results or exceptions to it that often do lead to disputes.

Ian Hull: And we’ve certainly, on previous podcasts, talked about how the Supreme Court of Canada talked about joint accounts.  Well, in some ways, this is a similar scenario. And that is, what comes right down to it when you get into these disputes, is the court wants to know who really owns the asset.

Suzana Popovic-Montag: And that fundamentally is based upon what was intended at the time that the property was transferred.

Ian Hull:   And another, I guess, not to be naysayers, but another downside of joint tenancy arrangement is that if any of the joint tenants pre-decease you, their interest automatically, of course, passes to the other joint tenants. Which means that their children or other beneficiaries may not receive any of their interest in the vacation property.  And the classic illustration is if you have three children and you put your cottage in the name of yourself and the three children and your spouse having died, say a couple of years earlier. Three healthy adults and yourself.  they’ve got their own kids, you think this is gonna be a perfect estate plan. Well, if that person then tragically dies before you and you’re looking at a situation where a whole string of their children may not take the cottage.  And then you sit, you know, when you talk about these things, you say, oh gosh, nobody would do that to the grandchildren and to the nieces and nephews. But if it’s been a long period of time and certainly, in my experience, is, is that not that they’re estranged, but they’re distant typically. And so, you know what, the linkage to them and the importance of preserving their Mom or Dad’s, you know, inheritance that way on a gratuitous basis without being properly setup legally, it wanes.

Suzana Popovic-Montag: That’s for sure, Ian and we certainly can attest to that. You can also choose to give away your vacation property or your cottage property in your Will by either an outright gift or even a trust.

Ian Hull: And in most cases, the beneficiary of the property will have to wait until the Will is probated and you pay probate tax and capital gains tax on the receipt of that gift.

Ian Hull: But there’s exceptions to all of these taxes and you really need to sit down with a lawyer and determine if gifting by Will is the right answer. Alright, well, why don’t we, we’ve got some other suggestions to talk about and we’ll save them for our next podcast, that start to sort of flush out these options of transferring the cottage property on death.

Suzana Popovic-Montag: That’s great, 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.

Posted on July 24^th, 2007 by Hull & Hull LLP

David Smith: Hello and welcome to Hull on Estates. You’re listening to Episode #69 of our continuing podcast series.

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 Natalia.

Natalia Angelini: Good afternoon David, how are you?

David Smith: I’m doing well Natalia. Natalia, I understand that the topic that we’re going to talk on today is Partition and Sale Proceedings, particularly as they relate to estate matters. And in particular, there is a decision of a newly, a relatively newly appointed judge, His Honour Justice Newbold in the case of Suttick and Schwenger.

Natalia Angelini: That’s right.

David Smith: I wonder, perhaps in terms of going on with this matter and talking about it in some detail, can you give us a little summary of the fact situation?

Natalia Angelini: Sure.  Essentially what happened here is we have the unfortunately all too common situation where the family is fighting over the cottage. And in this case there was a husband and wife, husband pre-deceased the wife in 1985.  And the wife ended up dying in 2002.  And her three children were beneficiaries under the terms of her Will of the family cottage. And they were to be owners of the cottage as tenants in common. And what happened is the cottage had a west lot and an east lot.  It had been severed years prior and what the children had decided to do was to have a new cottage built on the east lot by the sister. So we have two brothers and a sister. The sister, let’s call us Debra.  Debra was to build this cottage on the east lot and she was to have exclusive use of that cottage with her husband. And there were a lot of facts in dispute in this case.  But what we do know is that a dispute arose between Debra and her brother Charles who was building the cottage for her.

David Smith: That’s right, Natalia.  I’ll just pop in at this point and just sort of make the observation that potentially, there’s potential here for really complicated litigation.  Because as I understood the fact situation Charles, who was an architect by training, had designed and built the cottage which had a lot of problems with it and was not something that Debbie particularly liked. Notwithstanding the fact that it was on the east half of the lot, whereas the west half of the lot was the family cottage in which Charles resided. And so you had this classic situation really where, because of the nature of the property, it was on a peninsula, and was bordered on each side be water.  It was really an ideal situation to divide the lot in two and give one half to one sibling and one half to the other sibling, wasn’t it?

Natalia Angelini: That’s right.  But unfortunately, when you’ve got strive between brothers and sisters, you know, in this case at least, it just didn’t work out that way and couldn’t work out that way.

David Smith: I think also probably it was complicated by the fact that the Will provided an equal three way split among the siblings, right?

Natalia Angelini: That’s right.  And Charles and the other brother argued at the hearing that the mother’s intention was that if they could not share the cottage, that one sibling or another could buy out the other. And he relied on a document signed by his mother that was made a couple of years after her Will. And the court found that it was not a testamentary document.  And her intention as stated in the Will was clear that it was to be owned equally by the three of them as tenants in common. 

David Smith: What did the Judge ultimately decide then, Natalia?

Natalia Angelini: The Judge ultimately decided that the property should be partitioned.  And the brothers had argued that that would not be possible because it had already been severed years before. But the Judge found that a severance with the approval under the Planning Act is still different from a partition and that the partition could take place. And so what he decided to do was to grant the west part of the land to Debra and the east part to the brothers to share together. And keep in mind, the brothers had always expressed an intention that they could own it jointly. 

It’s interesting what the Judge did here because he really took all the factors into consideration when making his decision. One of the things he considered was the brothers’ desire to have a right of first refusal and have the property simply sold.  And he rightly, in my view, took into account that Debra would have been the only person losing out from that scenario because one of the brothers was significantly more wealthy than her and would have been able to buy the property. And not only that, I think it was clear that no one wanted this property to go outside of the family members, so that was another consideration. In addition, the brothers had wanted a right-of-way over the east lot if Debra had received the east portion of the land.  And His Honour, I think quite astutely, recognized that any contact between these siblings by granting a right-of-way would just lead to further complications.

David Smith: That’s right.  I think underscoring the whole issue here was the conflict between Charles and Debra.  Certainly the third brother was a bit neutral in the whole proceeding. What the case I think is useful for, and especially in the estates context, and I’d like to sort of segway now into sort of a general observation about estates and the usefulness of partition and sale proceedings. Certainly in our practice, Natalia, you and I both see many fights between siblings surrounding the family cottage. It really is a flashpoint for dispute, isn’t it?

Natalia Angelini: That’s absolutely right David.

David Smith: And as you pointed out in the Judge’s decision, there’s often a really emotional attachment to the property.  It may have been held by the family for generations. And so given a choice between partition and sale, it’s not really surprising, is it, that this Judge chose partition rather than sale, is it?

Natalia Angelini: Right.  It was the right result.  And not only that, under the Act and in the authorities, it’s clear that a partition should be ordered unless an injustice would result.

David Smith: Right.  And I think the preference is going to always be for partition when you’re talking about a cottage. Probably the other complication, we touched on this early, is on the one hand you’ve got the fact that the property is held in a certain way on title.  And then the complication is always the manner in which the Will speaks to the division of the residue. And here you had a three way split which the difficulty proved to be, how do you reconcile a three way split under the Will with a division of a property?  I mean it didn’t make sense here to divide the property three ways, did it? Because only, if you divide it three ways, the only way that would work would be for the person receiving the middle of the three portions to be without waterfront access.  And clearly that was not going to be desirable.

Natalia Angelini: Right.  And I think in this case, they were fortunate that Debra was happy to have either lot.  And so the Judge had some flexibility there.

David Smith: I think, you know, the other point here to and just as a general observation again from the context of an estate litigation lawyer, is the threat here that the property would be sold.  To my mind, it was really surprising that this even went to a hearing, because it’s conceivable that the Judge could have ordered a sale.  And that is what surprised me most about this case.  And any case like this is that the parties don’t or are unable to settle a case like this at mediation because it’s potentially tragic.  I mean, there’s no certainty that the Judge would do what you and I both felt was the right thing. Then again, you have to think that a lot of Judges may well be cottage owners and can have some real life experience that will allow them to consider how to resolve this kind of dispute in the best interests of the parties.

Natalia Angelini: Right.  And I think His Honour definitely picked up on the nuances in this case and came to the right result. Although I’m sure the brothers would disagree since they didn’t really get everything they wanted.

David Smith: Well that’s right.  I mean, I think their pitch was look, let’s all just share the cottage properties.  But it was clear that the relationship between the sister and the brother was not going to be amicable, certainly from her point of view. And I guess in closing what we maybe should just touch on Natalia, is perhaps the answer is obvious.  But let’s just pose the question. How do we avoid or how does a testator avoid this kind of conflict arising after he or she has passed away?

Natalia Angelini: That’s is a really great question.  I think it would call for prudent estate planning which is beyond the ambit of this podcast.  But I will say that at a minimum, that having a family conference where the children are apprised of the terms of the Will and the wishes of the testator are expressed, might go some way to help.

David Smith: Right.  I’d like to point out also for the benefit of our listeners, on our website in the Blogs directory, my recollection is fairly recently in the last month or so, I think Justin and Megan of our office either podcasted or blogged on the issue of how to avoid cottage fights.  And so it’s something to look for on our website. 

And so, Natalia, it was fun podcasting with you.  I’ll look forward to doing it again at a future time.

Natalia Angelini: Ditto, have a good day.

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

Sean Graham

READ THE TRANSCRIBED PODCAST

During Hull on Estate and Succession Planning Episode 39, we continued our discussion on the Family Conference, focusing on the actions to be taken in regards to non-participating family members. We also discussed the importance of documentation and defined will challenges.

Family Law Act Claims

Subject to a contract to the contrary, section 6(1) of the Family Law Act provides for the right of the surviving spouse to make an equalization claim against the assets of the estate.

Since the 1970s, a general statutory proposition prevails that the value of "family property" should be split up equally when the marriage ends, regardless of which spouse holds to the property.

With the coming into force of the Family Law Reform Act, 1986 (R.S.O. 1980, c.152 (repealed and replaced by the Family Law Act 1986, S.O. 1986, c.4)), Ontario established a deferred community of property regime, which added a new dimension in relation to its impact upon surviving spouses and estates of deceased spouses and other persons who have an interest in their estates.

The impact affected the rights of the estate of a deceased spouse and a surviving spouse, and had a serious impact upon the entitlement of other persons interested under estates of a deceased spouse.

Support of Dependants under Part V of the Ontario Succession Law Reform Act - Restriction on Testamentary Power

Since the early 1900s, legislators in the common law jurisdictions began to give to the court a discretionary power to order proper maintenance and support out of the assets of an estate in circumstances where the testatrix had failed to make adequate provision for the support of dependants. In Ontario, the Dependants' Relief Act, R.S.O. 1970, c.126 and the successor provisions of the Succession Law Reform Act, R.S.O. 1990, c.S.26, set out the statutory provisions whereby a testator's power to do what he or she wishes with his or her assets is restricted.

 In a future blog, we will continue to explore these important claims against an estate.

All the best, Suzana and Ian. --------