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Listen to Deductions from Compensation.

This week on Hull on Estates and Succession Planning, Ian and Suzana finish up the discussion on the question of accounting by reviewing deductions from compensation and briefly sum up the procedure of the passing of accounts.

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

Deductions from Compensation - Hull on Estate and Succession Planning Podcast #125

Posted on August 12, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #125 of our podcast on Tuesday, August 12^th, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada. From the offices of Hull Estate Mediation in Toronto, Ontario, Canada, here are Ian and Suzana.

 

Suzana Popovic-Montag: Hi there, Ian.

Ian Hull:  Hi, Suzana. How are you doing?

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

Ian Hull: Just great. We’re having some fun with this whole question of accounting, and I think I’ve done the numbers, and I think we’re almost done. But before we go through our podcast today, let’s remind everyone, please feel free to call in on our call-in number and our call-in number is of course, 206-457-1985.

Suzana Popovic-Montag: Or send us an e-mail at hullandhull@gmail.com or of course, you can visit our blog at estatelaw.hullandhull.com as well. 

Ian Hull: So before we launch into the substantive podcast today, I just wanted to do a couple of things. One, I want to deal with an e-mail that came in and another is I want to just welcome people to listen and look at the, last week we enjoyed Jordan Atin who is our associate counsel here, our Senior Associate Counsel, and he was on Canada AM for four days in a row talking about family feuds and the link to the webpage where CTV is still running the streaming is worth looking at, and we’ll make sure that’s in our show notes.  But Jordan had a great opportunity to talk about family feuds and sort of the issues that arise out of his book, “The Family War” which is co-written by Les Kotzer and of course, my good friend, Barry Fish.

Alright, so we were talking about some of the e-mails. And we had two e-mails last week come in. Both of them were semi-related and so I’m sort of going to merge the two of them together. And the question really comes down to this:  What are we talking about with The Shoebox Effect? And what we’ve been mentioning in the past and what we’re going to talk a little bit about today, because part of our wind-up is the importance of vouchers, is The Shoebox Effect is this. When you are a trustee, no matter what you think, no matter what you do, you will be someday possibly asked to show your receipts and that’s all I’m saying The Shoebox Effect is. Make sure you keep receipts, even if it’s in a shoebox. Your lawyer or your accountant can work on the presentation of it when you ultimately have to go to Court, but keep the receipts. So that was the two questions that came in, actually, both were from different parts of Canada but asking about the same question. So I’m not going to dwell on it other than that and say that when we’re winding up our comments on accounting, please, please, please keep your receipts if you’re a fiduciary.

Suzana Popovic-Montag: And just to add one thought to that, Ian, I would also suggest that it’s really helpful to make sure that you document as much as possible everything that you do as a trustee.  And when it comes to exercising your discretion, and if particularly the Will or the trust document allows you to have a broad discretion, to write down your thoughts or your reasoning or the underlying reasons that you decided to do something or not do something and include that in the shoebox that you end up bringing to a lawyer one day possibly.

Ian Hull: That’s a great suggestion and it comes down to, when we’re talking about getting paid for all of these efforts, the deductions from compensation that we briefly talked about in the last podcasts, what can you look to? So we talked about that you can get paid, say approximately 5% as a tariff, so to speak.  And we’ve talked about some of the things we’re going to knock you out from, but one of the easy deductions is the delineation between the executor’s work and lawyer’s work or accountant’s work. And that ties into your comment, Suzana, on docketing, keeping records beyond just the receipts that I talked about.

Suzana Popovic-Montag: And things for instance, like the preparation of tax returns, when fees are associated with that, depending on who’s preparing the tax returns and how much those fees are, that’s another thing that might possibly be a deduction from compensation if the trustee for instance is an accountant. And these are situations where a trustee is an accountant or a lawyer that you see most often, where these issues can arise.

Ian Hull: Alright, so another concern that we raise and probably the last deduction from compensation we’ll just mention now, is this whole idea of pre-taking compensation. Under Ontario legislation, if you’re a fiduciary or, as I say, a guardian under the Substitute Decisions Act, they actually allow you to pre-take your compensation, take before you’ve made your efforts. But we’ve talked about in the past the cases, and we’ve talked about them in the show notes as well, the case law that talks about Re: Knoch which we talked about in our previous podcast and others, and we want to be very, very careful about pre-taking, getting paid before you’ve done your work. So that’s an easy deduction.

Suzana Popovic-Montag: Ian, just a question that I find often gets asked is whether or not GST is actually payable on executor’s compensation. What are your thoughts about that?

Ian Hull: Well, that’s a great question and it’s a murky area of the law.  And what has happened in the past is you would typically have to look at it case by case. First and foremost, you have to look at the amount of the payment that the compensation is. If it is over $30,000 that you’re being paid in compensation, which could be the case because it’s typically a one-time payment, you may have to pay GST on that income as having rendered services. So it’s really case-by-case. Talk to your accountant, get good advice before you wrap up that issue, but that’s an excellent question and a really important heads-up for people who are accounting and doing compensation work.

Okay, I think we’ve pretty well covered off our accounting in the in-depth form and so we wanted to make sure that we stayed the course and came full circle to our sort of checklist that we’re trying to work through. And one of the things I will say is we’re hopefully going to be changing our format and trying to pick up a video feed for our podcasts which is in the process. Some technology glitches haven’t allowed for it to fall in just yet, but we’re going to be moving into some different topic areas. But one of the topic areas that we have to, I think, just sort of at least wrap up in a minimum way, is the process itself. We’ve talked about the passing of accounts process but let’s talk about the physical steps that are taken because many people don’t understand passing of accounts and what you can expect in the courtroom once we’ve got the Court format accounts.  And my introduction to this, by way of the fact that we’re going to be moving this into an audio, is that we’re going to have our own mini-series on this issue, where we’re really going to flush out these topics.  But I think its worthwhile talking about them briefly now, so that people understand what they’re going to get themselves into once they’ve got these beautifully created Court format accounts.

Suzana Popovic-Montag: And procedurally speaking, certainly here in Ontario, the Rules of Civil Procedure will govern what is included in an Application to pass the Court format accounts. And we started when, before we got into this discussion of how we would audit estate accounts or how to prepare a best kind of set of accounts in the circumstances, we talked about the fact that it’s all part of an application process.  And so there will be an actual Court date that’s assigned to the hearing for the return of the executor’s accounts, and you’ll serve a Notice of that application on all the beneficiaries together with, in many circumstances and many situations, a copy of the accounts as well. And the Rules themselves specifically provide what has to be in this Application record and I thought, Ian, it might be good to just sort of flush out some of those specific requirements.

Ian Hull: Alright. Well I think and it’s helpful because it’s not quite as daunting when you get the document itself thrown at you because, as I say, a lot of these accounts are passed in a non-contentious environment.  But it’s legal mumbo-jumbo to some people so you want to make sure you sort of know what you’re getting yourselves into when you get it. And the main document behind the accounts is the Affidavit verifying the accounts, they’re proving that you’re swearing to the truth of the accounts, and that’s the fiduciary sort of statement that says these accounts are true and accurate.

Suzana Popovic-Montag: And that Affidavit, as I say, is included in the record that is served upon everyone who has a financial interest in the estate. And financial interest in the estate I think we’ve talked about on previous podcasts, has a very broad meaning in the sense that even people with a contingent interest in an estate will be served with the accounts as well.

Ian Hull: And talking about service, we don’t want to forget that there may be government agencies that we have to serve, of course; the Office of the Children’s Lawyer should there be any minor child’s interests, or interests of those who are unborn and unascertained.  And without getting too technical about it, we just want to look at the trust document or the Will and see if there is a trust. And typically if there’s a trust, more often than not, almost certainly in fact, the Children’s Lawyer would be served, that’s the Office of the Children’s Lawyer.  And it’s different in each Ontario jurisdiction, but basically the lawyer in charge of minor interests. Another person to be concerned about serving is

Suzana Popovic-Montag: the Public Guardian and Trustee. That office would be served on behalf of any incapable beneficiaries of the estate. And so just like the Children’s Lawyer protects the minor, the unborn or the unascertained, the Public Guardian and Trustee here in Ontario will represent those incapable beneficiaries.

Ian Hull: So those are just things to keep a heads-up on so that you don’t get out of the box and miss a page of the application process by not putting important entities on notice. Obviously, we come back to our cardinal rule: Read the document, read the Will, read the trust and make sure you’ve served everyone named in that, but the Public Guardian and Trustee and the Office of the Children’s Lawyer, are two entities that aren’t necessarily named and quite often aren’t named, so just a heads-up. 

So I think that gives you sort of a sense of what the document itself, in a friendly environment will be, so I think we’ll wrap up today’s podcast and again reminding you, please feel free to e-mail at hullandhull, h u l l a n d h u l l @gmail.com.

Suzana Popovic-Montag: Or feel free to call and leave us an audio comment at 206-457-1985. Thanks very much, Ian.

Ian Hull: Thanks, Suzana.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

 

To listen to other Hull On podcasts, or to leave a question or comment, please visit our website at www.hullestatemediation.com.

 

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

 

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Listen to Cases for Increasing and Decreasing Compensation.

This week on Hull on Estates and Succession Planning, Ian and Suzana discuss cases for increasing and decreasing compensation.

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

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Listen to The Business of Being an Estate Trustee.

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

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

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Listen to Administration of the Assets of the Estate

This week on Hull on Estates and Succession Planning, Ian and Suzana discuss things to consider when administrating the assets of an estate and point out burdens of being and executor.

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

Administration of the Assets of the Estate - Hull on Estate and Succession Planning Podcast #107

Posted on April 8^th, 2008 by Hull & Hull LLP

 

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #107 of our podcast on Tuesday, April 8^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 Suzana.

 

Suzana Popovic-Montag: Hi there Ian, how are you today?

 

Ian Hull: Just terrific, thanks.

 

Suzana Popovic-Montag: That’s good. We just want to take this opportunity before we get into the substance of our podcast to just remind our listeners that if they would like to leave us a comment, they can feel free to give us a call at 206-457-1985.

 

Ian Hull: And, of course, feel free to chase down our blog or send in a comment to hullandhull@gmail.com and the webpage hullandhull.com gets you a quick link to our blog which we’re posting almost every day on and had some interesting comments last week from our posts, so feel free to engage in the social media adventure.

 

Suzana Popovic-Montag: That’s great. Now I know, Ian, that you actually were podcasting solo last week because I couldn’t be here to join you and I thought you did a great discussion of your recent attendance at a seminar.  And so I thought what we might do is to, sort of, pick up from where we had left off at the end of our last podcast.

 

Ian Hull: Well, that sounds great. I do want to say one thing since that podcast was launched into the internet, I’ve had some interesting feedback that seminar was well received. Talked to a couple people that actually were at it and not particular, just what, of course, I said, which was hopefully helpful.  But some of the other speakers and the twists that were being put on the whole elder law scenarios that we’re going to be faced with more and more in society. So speaking of society, we have to refocus a little bit this week and talk about some issues relating to the administration of the assets of the estate and our ongoing slug through the burdens of being an executor.

 

Suzana Popovic-Montag: And we had at the last time spoken about the fact that we were looking at a situation where we suddenly had the Certificate of Appointment in hands, this probate document, and we were looking at some of the things that we take in terms of initial steps as an executor, once that document was obtained.

 

Ian Hull: So we’ve talked about this in the past and we’ve talked about personal effects, talked about the fact that we think it’s so important to make sure you document it, maybe take a video quickly of all of the personal effects or have some photos or whatever.  But once you’ve inventoried it, what do we do about getting the action steps to be taken to actually transfer or sell those personal effects?

 

Suzana Popovic-Montag: Well, Ian, in accordance with the terms of the Will the executor is going to want to deliver the individual personal effects directly to the beneficiaries who are named in there, and then obtain a receipt from those individuals, so as to have the protection of the fact that that gift or that bequest was made and that it was received by the recipient of it.

 

Ian Hull: And that receipt can’t go understated in the importance of that. We… I just had an estate that I recently administered and I personally made sure that the jewellery items that were delivered and they weren’t phenomenally expensive jewellery items, but they were very personal items and ones that, you know, the sort of chain of the ring from the deceased to you to the beneficiary is so very important.  And a lot of times, I’ll just say to clients, look if you’re the executor, don’t break the chain, so to speak. Once it’s in your hands, make sure that you’ve got full control of it and that you do not release it until you get a proper receipt.

 

Suzana Popovic-Montag: And then I guess, of course, there’s going to be personal effects that aren’t specifically spoken to and in those circumstances, an executor is going to want to arrange for the sale of those items.

 

Ian Hull: Absolutely. Now the sale of the items, too, can create its own spicy tension within the administration of an estate. One of the things that I tell my clients is that they want to quickly go on the internet, take a couple of minutes and search out what the sort of the star local sales avenues are. I mean, the classic one is Sotheby’s.  But not all of us have, you know, John Lennon pianos to put up for sale. But, you know, Sotheby’s has an operation in Ontario, Ritchies has an operation, Waddingtons is another one.  All of these houses are wonderful.  They do it so professionally and most of them will do sort of the gambit. If you give them – some of the stuff isn’t worth a lot but some of it is, they’ll often inventory it all for you and give you some help on how to deal with the stuff that is more modestly priced.  And then put in up for sale properly and by a third party, so you can’t get accused of messing up on the sale of selling that painting that sat over Grandma’s dining room table for 30 years, for a song. You’ll get the professional advisor telling you what its worth. They have some…like I know I just dealt with one from Waddington’s.  They have phenomenal internal resources like experts on Canadian art for certain periods that they’ll bring in and they won’t throw these things into the market, sort of, willy nilly.

 

Suzana Popovic-Montag: That’s great, Ian. And it’s something certainly to keep in mind because there’s always going to be these things that need to be dealt with. Another thing that I try to remind people of is the fact that once you’re in this stage where you’re actually liquidating or transferring assets, you want to consider also cancelling any insurance on those assets that you’ve maintained up until the time that that transfer is actually done.

 

Ian Hull: Geez, that’s a good point, you know.  I had an estate recently that had a bunch of art and the insurance on the art was almost an overwhelming cost to the estate and the beneficiaries were not happy that it took an extra month to cancel the insurance.  So that’s a really good point.

 

Suzana Popovic-Montag: And I think it sort of follows from the checklist that we’ve suggested that people maintain because it sort of brings you back to think about that and you can take care of it right at that time.

 

Ian Hull: Okay, so that deals with personal effects. What about cars and automobiles and that sort of thing?

 

Suzana Popovic-Montag: I think we’re looking at the same kind of situation there where there’s going to either be a transfer to someone who’s actually named in a Will or there’s going to be the arrangements made by the trustee to actually sell the vehicle.

 

Ian Hull: And again, I guess, your good advice on the insurances on that one as well.

 

Suzana Popovic-Montag: And so if we’ve looked at personal effects, we’ve dealt with automobiles, then those are usually the big items there.  Then we just are left with whatever’s ultimately left there and how we actually go about realizing those last things.

 

Ian Hull: And liquidating deposits and getting the, sort of, estate bank account established as quickly as possible is crucial.  And that, sort of, takes us into what we’ll start to call, I guess, the business side of the estate administration. The one side of many estates that we see the most problems in and that is, dealing with the accounting.

 

So first of all, setting up the bank account. You need your probate typically, to get a bank account opened. So you’ve got your probate certificate, you go to a bank.  You want, I tell my clients to go to a branch that’s convenient to you because you will be surprised how often you will have to actually deal directly with the bank. This isn’t always like us when people are alive, they can do internet banking, they can do, you know, cross-city branch banking, and so on.  You want to establish, I tell my clients anyway, to set up an account that is easy for you to get to.

 

Suzana Popovic-Montag: And once you’ve done that, you also want to think about setting up your bookkeeping mechanism because as an executor or a trustee, you’ve got to maintain very good records so that at the end of the day, if you’re called upon it, you can account to the beneficiaries of the estate or the trust.

 

Ian Hull: And it’s really at this time that I tell my clients to think about the end game now. You’ve been so careful so far, right from the moment of death or the moment you were told you had the job, you’ve been so careful.  This is really the turning point to maintain a level of almost perfection. You have to have receipts for everything, no money can go astray, obviously.  But your system is crucial.  And if you’ve got a situation where it is likely that you’re going to need to ultimately go to Court and pass the accounts, then now is the time to establish that system early, as opposed to remaking it at a later time when you don’t have all of the information at your fingertips.

 

Suzana Popovic-Montag: And so, Ian, in terms of advice, how do you usually tell your clients that they go about setting up this mechanism?

 

Ian Hull: Well, I think they’ve got to get good advice and accountants and lawyers know how to create estate format accounts. And it doesn’t hurt to (a) learn a bit about that and (b) set up a system that can be easily transferred into an estate format scenario.  Because the estate format accounting itself is – it can be something that is new to individuals who are not, you know, savvy on this form of accounts. It’s not rocket science, but it is a different form of accounts that you need to consider.

 

Suzana Popovic-Montag: And my clients are always surprised, Ian, by how different estate accounts are from normal financial statements. And I think that’s part of the education process that we provide to them about how these things are maintained.

 

Ian Hull: And I think, really, as I say, this is such an important turning point and starting point to the process, that I think it’s worth getting some initial advice on this and it may cost some money, but its all money well spent.

 

Alright, so now that we’re setting up the bookkeeping, we’re setting up the estate accounts. Let’s talk about, sort of, some of the long-term business aspects of administering this estate.

 

Suzana Popovic-Montag: In a situation where you’ve got a business that actually had been run by the deceased, in this instance, you’ve got to meet with the estate trustees and create, sort of, a plan going forward of how you’re going to either continue running that business or basically hiring individuals to do that for you as an estate trustee.

 

Ian Hull: Alright and that, of course, turns us at this point, we’ll wind up because it’s a good turning point in terms of how we will talk about the business side of things and let’s start focusing on some of the investment side that the – what people are going to expect you to be doing with the investments and what you’re expected to do on that front, depending on the estate itself. So I think that’s a good spot to wind up this podcast.

 

Suzana Popovic-Montag: Okay, and just another reminder to people who’d like to call in and provide us with their comments, to feel free to call us at 206-457-1985.

 

Ian Hull: And, of course, go to our webpage at hullandhull.com and work your way into it. Feel free to e-mail us at hullandhull@gmail.com and watch our blog. Thanks very much.

 

Suzana Popovic-Montag: Thanks to you, Ian.

 

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

 

To listen to other Hull On podcasts, or to leave a question or comment, please visit our website at www.hullestatemediation.com.

 

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

 

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