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Within the next twenty years, Canada's baby boomers are in line to inherit a substantial fortune, which will represent the largest transfer of wealth from one generation to the next.

In an article written by Jennifer Power Scott and published in Canadian Living, Ms. Scott discusses the  bittersweet bonanza that many heirs face and cautions the impulsive spender: "There are a lot of people in this world who might go out and blow the whole thing in a week, and that's not appropriate. Unless you're well-heeled to begin with, flushing the funds into trips to Las Vegas, sexy cars and plush home theatres probably isn't the smart way to go."

In her article, Ms. Scott stresses the importance of carefully planning what to do with your inheritance, so that your inheritance can turn into a gift that lasts. Ms. Scott urges those who have received a windfall inheritance to:

1. Take a breath. Put your inheritance somewhere safe that earns a good guaranteed rate of interest for a few months while you think things through
2. Once you are ready to make a decision, speak to a certified financial planner
3. Consider your option, such as satisfying outstanding debts, investing into an RESP for your children, or an RRSP or RRIF for yourself

Essentially Ms. Scott's article forces her readers to consider their long-term goals as opposed to their short-term goals. "It pays to step back a little bit. Some people will immediately say, I've got this money, I don't deserve it all, and maybe I should start helping out my kids right away. But they need to make sure that their financial future is properly secured before they do that."

Thank you for reading, and have a great day,

Rick Bickhram - Click here for more information on Rick Bickhram.

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As most of us return to our offices from a long weekend, I would like to share with you an interesting case, which I read over the weekend and deals with an Application to declare a family member unworthy to inherit. S.R. (Succession de), 2008 QCCS 4015, is a decision released by the Quebec Superior Court.

In, S.R. (Succession de), the Deceased was survived by his spouse and four children.    The Deceased was a savvy businessman who, during his lifetime, was quite successful. In 1995, the Deceased asked a notary to prepare a Will. A draft Will was sent to the Deceased for his review but it appears that he never executed the Will. In 2000, the Deceased was diagnosed with cancer and subsequently died in 2003.

After the Deceased died, the children looked for their father’s Will in the home and at the Deceased’s office with no success. We are given to understand that all of the children, searched, under the bed, every closet, every brief case belonging to the Deceased, but were unable to recover a Will.   

One of the daughters prepared a proposal requesting the siblings to acknowledge that the Deceased promised to transfer a certain property to her. This would have the effect of increasing her entitlement under the Deceased’s estate. Her siblings refused to sign the acknowledgement, which led to the ensuing dispute. The disgruntled daughter, subsequently informed everyone that she had in fact, located a Will of the Deceased in an old briefcase, which was allegedly in the bedroom closet of the Deceased’s residence.

The discovered Will was similar to the draft Will prepared earlier, except that it included two additional provisions which favoured the disgruntled daughter, in the amount of $2.4 million dollars and was apparently executed by two witnesses from New York. 

The disgruntled daughter tried to probate this Will, but it was contested by her siblings and it was ultimately ruled that the Will could not be probated by the Honourable Justice Gagnon. Justice Gagnon held that there were all the sorts of question marks surrounding the validity and execution of the Will. 

After the Application for probate was refused, the disgruntled daughter then produced a document which was a blank cheque allegedly signed by the Deceased and which purported to give the disgruntled daughter her share in a building that she coveted and various other monies for her home. The siblings refused to admit the authenticity of the blank cheque and commenced proceedings against the disgruntled daughter to have her declared unworthy to inherit under the Deceased’s estate. 

Under the section 621 of the Civil Code of Quebec, it states that a person “may be declared unworthy of inheriting where a person is guilty of cruelty towards the deceased, and where the person has concealed, altered or destroyed in bad faith the Will of the deceased, or a person who has hindered the testator in the writing, amending or revoking of their Will.” 

In relying on this provision, the children advocated that the disgruntled should be precluded from inheriting because she concealed and altered, in bad faith the alleged Will of the Deceased. 

The court held that the disgruntled daughter had likely altered the Deceased’s Will, had taken the draft prepared by the notary and added some typewritten additions that benefited her to the detriment of her siblings and mother. The court further held that the disgruntled daughter likely had taken the blank cheque from the Deceased’s home and also forged that after his death.

Accordingly, the disgruntled daughter was declared unworthy to inherit and her claims against the estate were dismissed.

An interesting point, in Ontario we do not have any similar case law or legislation that would actually allow someone to commence a proceeding, seeking to have someone else precluded from receiving their entitlement absent criminal activity such as murder.

Have a great day,

Rick Bickhram

Rick Bickhram - Click here for more information on Rick Bickhram.

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It's Friday in late April. The May long weekend and all that cottage fuss is just around the corner.  (I like the cottage, but understandably a lot of people choose the backyard.)

In Ontario, we do not have inheritance tax like they do elsewhere, including the United Kingdom. In some cases, the several-generation home has to be sold to cover a £14,000 tax bill or, in one instance, a painting donated in lieu of inheritance tax of £700,000.

To be certain, we have taxes here. At death, often there is a deemed disposition of property unless steps have been taken in advance. An article from last year provides some thoughts on how one might plan to avoid the situation where the capital gains tax cripples an estate or the next generation.

Apparently, and maybe not surprisingly, the cottage market may be down by about 20% this season. Good news for buyers. Maybe it is also good news for those who are looking at estate planning this year. 

If the goal is to keep a cottage in the family, relative to the previous few years it might be an opportunity to trigger a disposition by transferring the property this season and, presumably, incurring a lower capital gain. Each situation requires specific tax advice. 

The economy is lousy but it might be a chance to avoid financial strain and family tension for the next generation.

Have a safe weekend, wherever you spend it.

Jonathan

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Talking about Wealth and Personal Finance - Hull on Estates Podcast #110

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.