Strategies to Prevent Estate Litigation - Hull on Estates #119
Listen to Strategies to Prevent Estate Litigation
This week on Hull on Estates, Natalia Angelini and Rick Bickhram discuss tools and strategies to prevent estate litigation.
Comments? Send us an email at hull.lawyers@gmail.com, call us on the comment line at 206-350-6636, or leave us a comment on the Hull on Estates blog.
Strategies to Prevent Estate Litigation - Hull on Estates Podcast #119
Posted on July 15th , 2008 by Hull & Hull LLP
Rick Bickhram: Hello and welcome to Hull on Estates. You’re listening to Episode 119 on Tuesday, July 15th, 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.
Natalia Angelini: Hi and welcome to another episode of Hull on Estates. I’m Natalia Angelini.
Rick Bickhram: And I’m Rick Bickhram.
Natalia Angelini: If you want to be heard on Hull on Estates you can participate in our discussion by leaving a comment. Give us a call at 206-350-6636. The number is in the show notes along with our e-mail address, hull.lawyers@gmail.com or you can visit our blog at estatelaw.hullandhull.com.
Today we’re going to be talking about strategies to prevent estate litigation. This is the first time Rick and I are blogging together; this should be good fun.
Rick Bickhram: Whoo hoo!
Natalia Angelini: Glad to see you’re excited, and I’m excited about our topic. I think it’s definitely something that testators want to keep in mind. So, Rick, why don’t you get us started.
Rick Bickhram: Thank you, Natalia. There really is no substitute to good planning. Good planning can go a very long way to prevent a family fight down the road when, unfortunately, someone demises and it comes time to divvy up the assets of that person’s estate. So, Natalia, what do you think are some good tools that a testator can consider when, or just before, executing his Will to help manage the estate planning?
Natalia Angelini: Well, Rick, aside from as you said, having a properly drafted Will, you say you’ve got good planning in place, and you have your Powers of Attorney in place. Aside from those kinds of things, there are a bunch of strategies that a testator can think about, particularly if they know that in their unique circumstance, they have likely got a Will challenge brewing post-death.
So some of these strategies are gifting assets before you die. And it can be somewhat of a dangerous strategy, but you know, with the proper advice and the right circumstances, it can have its benefits. So one of the first things you want to think about when you do this, that might be a good idea to think about rather, is getting tax advice and accounting advice and seeing a lawyer who can properly paper any kind of gifts that you want to give away. But it definitely can be a way of ensuring that your estate is either as minimal as possible or at least cuts out some of the contentious items because you’ve already gifted them away.
Rick Bickhram: And I think this is a really good tool because let’s say, for instance, mom dies and she has two sons. She gifts all her assets to one of the sons. The son who received nothing is obviously upset about the situation, so what does he do? He goes and challenges the Will. Well, what would he get in a Will challenge if he was successful? Really not that much. If the gift aspect was done correctly and the reason being is that all of the assets in that regard would have probably transferred outside of the estate.
Natalia Angelini: Right, and I think you’re touching on a good point there. If by gifting assets before you die, you do it in a way where, let’s say, you’re transferring ownership into joint names with your favourite children, then that is something that can still be contested. But it’s likely a type of challenge that’s harder to win than a Will challenge.
Rick Bickhram: Well, with that said, with every benefit there is a burden, and with this estate planning tool, there are many risks as Natalia pointed out earlier on. Some of these risks include, let’s say, for instance we put the subject asset into joint with the son, going back to my first example. It’s my intention here to leave this asset to my son. Upon my demise, my son and his wife separate, eventually divorce. That asset could be the subject of matrimonial litigation over the asset because it would possibly be considered the matrimonial property.
Natalia Angelini: Yeah, that’s right. And also it could be subject to attack by any creditors of your son’s, so that’s definitely something to keep in mind. But you know, there is a certain strategy to doing this and I think before a testator decides to go this route, some of the things they should think about are: number one, that they have a loving and trusting and close relationship with their favourite relative; that they won’t require these assets back for their own support; and that I guess that she or he accepts that they also won’t get back these assets unless they get the consent of the child that they’re gifting it to.
Rick Bickhram: All very good points, Natalia.
Natalia Angelini: Thank you, Rick.
Rick Bickhram: Now moving along, another estate planning tool, which is a double-edged sword here again, is videotaping. The testator could videotape herself explaining her intentions after the Will, but I must point out that a videotaped Will, in the jurisdiction of Ontario, is not considered a Will. A Will must be in writing.
Natalia Angelini: That’s true, Rick, but it can be a tool that can really help because you have an opportunity in a videotape first of all, to be seen and to be heard, and to explain exactly why your wishes are as they are, and why the bequests are set out as they are. And having said that, though, because it is a videotape, it can be very carefully scrutinized and little things like mispronunciations or forgotten names or fidgeting, that kind of thing, unusual phrasing, or other kinds of mannerisms, those can potentially be used against you by someone challenging a Will and they can perhaps assert that well, that’s evidence that she didn’t have mental capacity or that he was unduly influenced. So I think if your eyes are open to that, when you are doing that kind of a videotape, it might help in actually how it gets recorded. And, you know, those risks are some reasons why sometimes lawyers don’t recommend videotaping. But I think that it is, for the right kind of testator, it can be helpful.
Rick Bickhram: Good point, Natalia. Moving along in terms of other estate tools that can be used when managing or planning a person’s estate. One tool that is strongly recommended is known as the family meeting or the family conference. And in the family meeting or family conference, what it is really is, it’s an informal meeting where the testator here sits with her family, her children, mother and father if they’re alive, nephews and nieces if they’re included in the estate, depending on how close the family is, and what their plan is. It’s pretty much sitting down with your family and explaining to them what you’re going to do and why you’re going to do it. And Natalia, maybe you can shed more light on this because you’ve seen more cases than I certainly have. Why is this such a good tool?
Natalia Angelini: It’s a good tool because it’s really your only chance or the main way that you’re going to really speak directly to your beneficiaries, and to those that maybe you’re not intending to have as beneficiaries and really explain why it is that you have structured your estate in the way that you have. But I don’t want to confuse a family meeting with a family conference. A family conference is a formal meeting where you’ve got a third party chair; we do them at our office, for instance, and you’ve got potentially the accountant of the testator in attendance and the financial planner in attendance, and so it’s a much more structured event and I podcasted on that previously. Unfortunately I don’t have that episode off the top of my head, but if you’re interested in that, we certainly do have quite a detailed podcast on it.
So, what Rick was talking about which is a more informal family meeting, just with you and your family, you know, it’s got its risks because, of course, you can create real hostilities there. But it can also potentially avoid litigation down the road because you’re all together and there are witnesses and people that can give favourable evidence to say well, mom wanted her estate this way. So that might avoid a Will challenge down the road.
So why don’t we go to another strategic tool that you can use to hopefully prevent litigation. And I think, I don’t think that this is used often enough, but I certainly do see it more and more. And that is inserting protective clauses in Wills.
Rick Bickhram: I’m going to guess but I think the protective clause pretty much protects the testator’s wishes and ensures that they’re pretty much flushed out or carried out.
Natalia Angelini: Well I think if it’s enforced, yes. And I think, you know, that leads me to my next point, which is that this type of clause isn’t valid in every jurisdiction and even if it is, it really ought to be drafted with precision so a Court will accept it. But essentially these types of clauses either say anyone challenging this Will will lose their interest in the estate or it will say that if anyone challenges the Will and that kind of clause can also read, if you challenge a Will and you’re unsuccessful in the challenge, then you lose your bequest. So there can be two different kinds of phrasing; I mean there can be several different kinds of phrasing but those are two that I’m aware of. So it really creates a disincentive to proceed with Will challenge litigation.
Rick Bickhram: So it’s pretty much like an all or nothing scenario, correct?
Natalia Angelini: Exactly. And another way to do this more indirectly perhaps than having an actual protective clause is to give a gift directly to your grandchild. so you can bypass your child that you’re not, that you don’t want to benefit from your will and you can give the gift to your grandchild, and that can really discourage your child from challenging the Will because they will essentially be at cross purposes with their own child. And really, by litigating and challenging the Will, they’re potentially diminishing their own child’s claim and who wants to do that?
Rick Bickhram: All really good points again. Good stuff, Natalia.
Natalia Angelini: Thank you, Rick.
Rick Bickhram: The final point we would like to touch on today, the final tool that we would like to explain today is basically mental assessment. How does the mental assessment tool work? Should it be used and if so, how could it be used? What are your thoughts on that, Natalia? Natalia has more litigation experience than I do, so she could…
Natalia Angelini: Oh, don’t be so modest.
Rick Bickhram: She could provide more background here in that regard. My guess is, if an assessment occurs, just around the same time as when the Will is signed, and it is a favourable report, it could be beneficial to someone who is defending a claim against the estate that mom or dad lacked the testamentary capacity to execute the Will. What do you think about that?
Natalia Angelini: I think that’s absolutely the case. I mean, it certainly can be just one of the tools in your arsenal. If you know or you suspect that a Will challenge is going to come down the pipeline, then it’s a great idea, especially if you know that testamentary capacity is going to be an issue. It’s a great idea to have yourself professionally assessed. There are other ways to do it; you can go to your family doctor that you’ve known for 40 years and have them write a supportive letter and/or you can get professionally assessed.
Rick Bickhram: What do you think, Natalia, about let’s say for instance, I’m going to execute my Will and I go see my family doctor. My family doctor has known me for a few years obviously, he’s my family doctor. I go to him, I explain to him I’m about to execute a Will and I would like for him to write me a letter, pretty much explaining his observation as to my mental capacity. Do you think that that letter would be given much weight presuming, after my demise, there is an estate battle between the beneficiaries of my estate?
Natalia Angelini: Well, I mean, I think that’s going to depend on the particular facts of the case and what all the other medical evidence is, but it certainly can’t hurt. And if your family doctor has known you for many years and had the time and opportunity to really observe you, and their evidence really brings that out in trial, then that letter, coupled with their evidence, could be quite helpful, particularly if it’s done close to the time of signing the Will and I think that’s important, especially when you go the other route and you get a mental capacity assessment done. And that is likely, and again depending on the specific facts, an even more useful tool because someone who is hopefully, a professionally recognized capacity assessor and they are looking specifically to determine whether you have the mental capacity to not only manage your finances but also to make a Will.
Rick Bickhram: Well, Natalia, I think that brings us to the end of this week’s discussion.
Natalia Angelini: That’s right and I wanted to say it was great podcasting with you, Rick. We got some of our ideas from a great book written by Jordan Atin, Barry Fish and Les Kotzer, called “The Family War - Winning the Inheritance Battle. It’s a great book and it does cover a bunch of areas and this was one of them, so definitely an interesting read. And we look forward to hearing from our listeners. You can send us an e-mail at hull.lawyers@gmail.com or just pick up the phone and leave us a message on our comment line at 206-350-6636. Be sure to visit our blog at estatelaw.hullandhull.com where you’ll find even more information and discussion on today’s practice of estate law. We hope you enjoyed the show. I’m Natalia Angelini.
Rick Bickhram: And I’m Rick Bickhram, until next week, so long.
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.
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