This week on Hull on Estates, Ian and Suzana discuss last week's Ontario Bar Association Conference (featuring Clare Burns and Jordin Atin as speakers).

They then wrap up their ongoing discussion about some useful steps to remember when administering an estate.

If you'd like to leave a comment, call us on our comment line at 206-457-1985 or leave us an email at hullandhull@gmail.com or you can visit our blog at estatelaw.hullandhull.com/.

Posted on February 12^th, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #99 of our podcast on Tuesday, February 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 and welcome to another episode of Hull on Estate and Succession Planning. I’m Suzana Popovic-Montag.

Ian Hull: And I’m Ian Hull. If you want to be heard on our podcast, you can participate with our discussion by calling and leaving a comment on our call-in line. This is number 206-457-1985.

Suzana Popovic-Montag: The number is in the show notes along with our e-mail address if you’d like to send us a message by e-mail at hullandhull@gmail.com. Or, of course, you can visit us at our blog at estatelaw.hullandhull.com.

Ian Hull: Alright Suzana. Well, you know, before we get into our topic today, I wanted to just start with a couple of quick comments. We had an interesting week this week. We were at…there was one of the big conferences, the Estates Conference of the Ontario Bar Association, the Institute. A couple of great speakers, Clare Burns spoke though, and Jordan Atin, our colleague, spoke in the morning on two, what I thought were fantastic topics and just great speeches. Clare talked about an interesting comment that she had on cases that are coming out and I thought it was interesting because we’ll talk a little bit about this in the context of estate administration. And that is, what happens in this new reproductive world that we live in and when you have babies born through artificial insemination and so forth, you create an interesting estate question.  And that is, if someone doesn’t have a Will and a baby has been born through circumstances of artificial insemination, you may have parents that aren’t at the table, so to speak, but you may have issues of distribution that get affected by virtue of the fact that you have a father and a child and the father isn’t around to follow through the chain of command, so to speak.  And, for example, in a situation where there’s an intestacy and a child dies and has no siblings, you go to brothers and sisters first.  But then you go to parents.  And the father may still be alive. For example, say the child is 35 years of age. He was born as a result of artificial insemination through a Sperm Bank and the mother never knew the father, never had anything to do with the father. Well, interesting question was lifted onto the table by Clare Burns, is that are there estate administration issues that come from this?

And I think, really, the point she was making that I thought was so telling was, is that we really are moving into a new age of who are parents and who are not parents and who could take in an estate and who may not take in an estate. And I just thought it was a fascinating discussion.

That was followed by a great discussion by Jordan Atin, who talked about family war in his book The Family War. You and I have talked about it many times and he had a really wonderful speech, great dialogue about what to watch out for and what to do to help avoid the family war. So that was good fun.  And then Jordan, that week as well, went on a show called Strictly Legal, a show with Michael Cochrane, a great friend of ours and a colleague. It’s on Business News Network. I had been on it two weeks earlier talking about estate planning and estate administration issues. So it’s been a good week, and a lot of fun. Lots of stuff going on.

Suzana Popovic-Montag: That sounds like a really interesting discussion, certainly with the Children’s Lawyer - that’s Clare Burns for those who may not be aware that she actually represents the Office here in Ontario, the government office responsible for minor and unborn children. So it’s interesting to hear how these issues arise in practice and I’m sure Clare’s got lots of stories that she could share with us.

Ian Hull: So let’s turn back to our discussion about administering an estate and talk about some more of the practical things that we want to consider and we want to do in this stage where we haven’t got probate, but we’ve got lots of work to do. And we roll up the sleeves a little bit. We talked about in our last podcast things like the safety deposit box step. And it’s interesting; I’m an executor in an estate just recently.  And I, too, went to the bank and I went and emptied the safety deposit box. Went through the whole process of that and it was sort of an interesting experience in the sense that, you know, you’ve got to roll your sleeves up and do these things to really believe it. But the fascinating thing I sort of took from going to the safety deposit box was that both banks I went to…we were clearing out the bank accounts and clearing out the safety deposit box…were so nice. And I go in there thinking, “geez, I’m taking all their business away from them, and I’m closing the accounts because the person’s died and we’re about to distribute to the beneficiaries”. And the staff and the system that they had set up to deal with me, to go through the box, close the account, they had a special representative to deal with me and so on… they were both - one was a credit union and the other was a bank.  But I thought it was interesting because I haven’t done one of those for a couple years now and just, you realize that the financial institutions are becoming aware of the importance of the transition. And what that process left for me was a good feeling about those two banks and I thought, “geez, you know, if I had someone to recommend or I had an estate or someone to deal with, the personal touch that they put into that process was a good way to leave some goodwill on the table to those who are living”. And I thought it was an interesting marketing point that I hadn’t realized that the banks were so attune to. And I just highly recommend it. And in this case, it was the Bank of Montreal. We have no ads from them in our podcast, but I will admit that was the case.

Suzana Popovic-Montag: Why do I have a feeling, Ian, that you didn’t necessarily tell them you were a lawyer?

Ian Hull: Oh, no, I did, they knew.

Suzana Popovic-Montag: Oh did you?

Ian Hull: Yeah. Yeah, oh yeah…they weren’t--

Suzana Popovic-Montag: That’s even better!

Ian Hull: Yeah, that’s so true, you know.  I thought that too because, but they…oh yeah, they knew I was a lawyer. I had wrote them before to set up things and stuff and so they knew I was coming.

Suzana Popovic-Montag: Way to go, Bank of Montreal.

Ian Hull: Yeah. So it’s funny to see… but it was a good point because the financial institutions are picking up on the fact that if you provide good service in this area you:

1. You’ll get some business back, no doubt; but
2. It’s not expensive service and it’s something that many, many people are going to need in the future.

Let’s talk on another area, about dealing with the banks and the transfer agents and so on in the estate administration and some of the first steps we want to take with them. And as you say, they knew I was a lawyer because I wrote them with some introductory letters and so on to sort of warn them I was coming.

Suzana Popovic-Montag: And I imagine that, as part of that introductory process, people will also write to the registered retirement plans that they’re aware of, to the insurance companies advising of the fact that the deceased has passed away and trying to get confirmation or details of the assets or the debts. Possibly to obtain any refunds that might be payable under any other of the assets owned by the deceased.

Ian Hull: That’s right.  And, you know, I make sure that you do follow a checklist pretty carefully on who you have to write and what you have to do. My own personal experience was where, in my own family circumstances, where I saw it too is that when someone transfers into a Power of Attorney status, the same sorts of things have to be undertaken. You have to…well you want to anyway…put together a pretty comprehensive checklist to follow through. You know, a letter to the bank with a copy of the Power of Attorney, or in the case of someone passing away, with a notary copy of the Will and so on. As I say, the transfer agents and you know, former employers, the OAS, CPP, that’s the Old Age Security people and the Canada Pension people as well. For sure, those are other people you want to write to in this transfer-over process.

Suzana Popovic-Montag: And if we have any information about annuities, mortgages and receivables, those kinds of things that were owned by the deceased, we’d want to write and advise them as well.

Ian Hull: I have an interesting case that I dealt with a couple years ago where we were administrating the estate.  And about two-thirds through the administration, one of the executor said, “you know, I’m pretty sure there was an estate down in California that the deceased was fighting about or dealing with”.  And sure enough, we made some inquiries for other interests in another estate and in that case, we were still waiting. The California lawyers were just waiting to wrap it up. And they said, “oh yeah, we’re glad to hear from you, we weren’t sure who the executor was, we were going to get back to you”. They were in no rush because they were still in the middle of cleaning it up. But it was a fruitful inquiry in that case and a fair amount of money came up from California. So you don’t want to miss an asset that might be out there in the form of an estate that has already fallen but hadn’t actually been paid out.

Suzana Popovic-Montag: That’s a really good point. I certainly have my own checklist, have a reference to the fact that, you know, you should be advising the Post Office so that mail can be re-directed, following up with the Passport Office and health cards, those kinds of things that have to be advised or cancelled. Driver’s license for the deceased, the Social Insurance number and, of course, any credit cards that he or she may have had in his or her own name.

Ian Hull: With the advent of points and Air Miles and so on as well, you want to deal with the transfer of that. My experience with that is, is that it can be fairly important.  I mean, if someone has lived a busy life and been on lots of airplanes or built up a lot of points, it can mean a fair amount of money. And I also find that the Air Miles companies and so on are typically pretty sensitive to the fact that they have some flexible rules. You have to do it reasonably quickly.  I mean, they won’t let you sit around forever. But often some of them will let you distribute the points in a fairly flexible way like, you know, split them amongst the family or that kind of thing, or roll them into the spouse’s name quickly and so on. So that’s worthwhile following up.  And I guess what makes it, you know, worthwhile and what this process and the letter writing, the importance of it is, is that if you work from a checklist, you don’t miss a major asset. And if you don’t…for example, a little thing like change the Post Office address and you lose the notice of an investment portfolio coming to your attention, then you’re exposed as an executor. So this administrative stuff, while on the face of it looks like stuff that, you know, oh my gosh, first of all who would bother or who really thinks about these things.  They actually can be really important because ultimately if you miss an Air Miles and the deceased died with 700,000 Air Miles on his card, it may mean a lot to a beneficiary. And in a case like that with those kind of points…one case I was involved with it was an emotional point because they were a little frustrated by the fat that their mother had spent so much time away from them. And so, in a sense, it was like a bit of the payback for all of her time. So, I mean, there are little anecdotal things that can happen. Club memberships, for sure, is another thing to think about because there might be some equity in the club membership and so forth.

So, I think what we wanted to try to talk about today was:

1. Our busy week that we’ve thought we’d share with everyone; and
2. Some of these sort of… tangible, sort of, roll-up-your-sleeves steps that you want to take a look at.

Because next week, we’re going to turn to the question of valuations. And that is in and of itself worth a week of podcasting straight without taking a break.  But we’re going to talk about the concept and talk about how it plays such an important role in an estate administration during our next podcast. Thanks very much.

Suzana Popovic-Montag: Thanks to you, Ian. And we do look forward to hearing from our listeners. You can send us an e-mail at hullandhull@gmail.com or just pick up the phone and call 206-457-1985. We hope you enjoyed the show.

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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This week on Hull on Estate and Succession Planning, Ian and Suzana talk about Inter Vivos and Principal Residence Trusts as effective tools to consider when tax planning a will.

Posted on October 23^rd, 2007 by Hull & Hull LLP

Suzana Popovic-Montag:  Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #83 of our podcast on Tuesday, October 23^rd, 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.  How are you today?

Ian Hull:  I’m fantastic.  Just coming off…I had a late night last night on a mediation and I tell you, it was a great experience as often they are.  I was advocating instead of mediating, which you and I do together most of our mediation time.  But we were…it was interesting.  It was in front of a sitting judge who chose to case conference.  It took a whole day but it was a great reminder to me as we turn to our topics today about tax planning Wills and looking at the sort of core planning issues.  It was a great reminder to me that as much as you want to try to plan and organize your estate, the human dynamic is a big, big part of life after death, so to speak, for your beneficiaries.  I learned a couple of really important lessons again and they were lessons that I’d heard before and experienced before, but they were great lessons.  One was that because it was a sitting judge, we were able to get the perspective of a sitting judge in terms of how this might unfold.  And you and I, of course, mediate a lot of cases with retired judges.  I haven’t done a lot with sitting judges for awhile and it was fascinating to get that perspective, so that was number 1 that I learned a lot from.  And then secondly was what really surprised me really at the end of the day was the whole dynamic of a mediation generally.  But anyway, it was a good experience.

Suzana Popovic-Montag:  I think those situations, especially when you have a sitting judge, resonates so much Ian, with both counsel and the clients.  It just seems that it adds a whole layer that, using a retired judge for instance, or some other person who isn’t…doesn’t have that kind of credibility associated with it.  It’s a very different kind of situation.

Ian Hull:  It really is and, you know, it’s a good reminder that, as I say, we sit down, we want to plan our estates, we want to keep our eye on the ball on the tax issues and the planning issues that we were sort of keeping focused on in our mini-series we’re doing now.  But I was really surprised at how the non-legal parts of it played out in this particular mediation, not different much than most mediations, but still surprised nonetheless that, you know, the non-legal issues really prevailed, the emotional issues between, this was a fight between two brothers over an estate.  But one of the things that struck me about the middle of the mediation was that we started to talk about a solution.  And one of the solutions was to create a new trust.  And in this case that I was mediating there was a situation where a testamentary trust was established.  But there was talk about trying to resolve it by creating a new trust, an inter vivos trust.  And I sort of took a deep breath and thought about it and as we were working through some of the scenarios and so on, I thought, you know, gee, it’s a good thing that, from our perspective, we, you know, have done a lot of the leg work on these inter vivos trusts and looking at how they can be an effective tool because when you’re under the hot lights of a mediation, you don’t have time to learn the product, so to speak.  So we turned to it pretty quickly.  And one of the first things we talked about was that inter vivos trusts can, of course, be an effective tool in avoiding the estate administration tax that is payable on death if the assets side in the estate itself.

Suzana Popovic-Montag:  Another thing that I would think, you know, when you deal with these kinds of inter vivos trust arrangements, you want to…I certainly try to remember the fact that, you know, as soon as you start transferring assets into a trust, that’s going to effectively lead to a deemed realization of the property that’s transferred into it at fair market value.  And that’s something that I just try to keep in mind because, you know, it’s easy to say I’m going to set up a trust but there still are tax consequences associated with that.

Ian Hull:  For sure, and just another sort of lesson that we came out of at the last mediation that I was involved with was, that was the first question that I asked as we were starting to consider this, is that in that case, the estate had fallen in.  The person had died and we were thinking about establishing with some of the money that was in this estate, this inter vivos trust.  And the first question I asked was, have the deemed disposition taxes been paid on the estate?  And fortunately in that case, they had.  But it is a very important starting point that you realize that whenever you create these trusts, the tax is payable on the transfer.

One of the twists that we can’t forget with our clients, which I try to make sure I tell my clients to consider in the inter vivos trust environment, is to create a principal residence trust.  And that is a trust really that helps us deal with an isolated asset being the home.  And in Canada, we are blessed with no tax payable on principal residence but if you want to put your principal residence in a trust, you can do it, if properly drafted, into a principal residence trust and the taxing authorities, Canada Revenue Agency, won’t treat it as a special asset and they’ll treat it as a principal residence in terms of the tax payable on it when you both put it in and take it out.  And that’s a very important option.  And it’s an estate planning option that I like to run by my clients because sometimes, for example, you have a younger child who…maybe not younger but maybe they’re in their twenties and you don’t want to pass on the asset directly or give someone the asset directly without letting them enjoy the benefit of a non-taxable growth in the principal residence.  But at the other end of the day, you also may want to add some protections to that home and where it goes and how it gets out of.  And one example I think of is that in another matter that I was involved with, what we did was we created in an inter vivos trust, the principal residence trust, we created a pool of money to be put into the principal residence trust and the trust provision said that the money in this trust may, not has to, may be used to buy a principal residence.  And what they did in that case was they used…they put $1,000,000 in that trust and they used $700,000 of it to buy the principal residence and they kept the rest to help with the expenses.  So this podcast isn’t about how to draft principal residence trusts but it is a planning tool in the inter vivos world, inter vivos trust world that can be very effective.

Suzana Popovic-Montag:  That also brings to mind the possibility of other kinds of trusts in addition to that.  Like, I know you’ve talked a lot about in the past joint partner trusts and alter ego trust arrangements as well.

Ian Hull:  Yeah, and they are a really important tool.  In Canada, they certainly changed the landscape fairly dramatically and I think both the alter ego trusts and the joint partner trusts justify a special podcast in a sense.  We have talked about them in the past but I’m going to make a note that we want to come back to that issue because it’s an important planning issue, but one that, for the purposes of this…today’s podcast, I think we need to sort of more or less gloss over in the sense that we don’t want to get too…we want to try to cover the general concept of an inter vivos trust.  But the alter ego trusts and the joint partner trusts are again inter vivos trust planning that are set up to essentially allow you to transfer assets into a trust and not get stung with the deemed disposition.  And we go back to first principles.  As we said, the inter vivos trust is a deemed disposition the minute you put an asset into the trust.  So if you have an asset that has been growing that you haven’t paid the tax on the capital gains yet and you decide to put that asset into a trust, that instant there’s deemed disposition tax payable.  Now, with an alter ego trust or a joint partner trust properly drafted, you can avoid that deemed disposition because of the special rules around it.  And one of the core special rules, without getting in too much detail, one of the core special rules for these two special trusts are that to enjoy the lack of being taxed, so to speak is, is that you have to be age 65 or over.  So they are only established for a very, you know, specific market, so to speak.

Okay, those two, as I say, I’ve made a note because I think there’s really a lot there to consider, but we’re going to come back to those trusts from a planning standpoint.  And in fact, you know, I’m going to make another note and say that we could probably have some more discussion on the principal residence trusts as well.  But let’s leave that for another day because that covers our sort of general comments on inter vivos trusts.

Just then to turn to one topic that we’re not going to have time today to cover entirely but the question of RRSPs is such a…it’s sort of the…it used to be the biggest planning issue that most Canadians deal with.  I mean, most Canadians who have pass on wealth, aren’t passing on massive amounts of wealth, they are passing on savings.  And one of the core savings that often lands in an estate is the RRSP.  And we’ll talk a little bit about what the general concept is, but we also know from a planning standpoint that that has to be one of the core areas to consider when we are sort of revisiting our Will plan from a tax perspective.  We used to…I mean, until the joint accounts issues flared up over the past 5 years, that now seems to be one of the core planning issues.  But until that happened, the RRSP was the dominant issue for most regular Canadians like you and I in terms of our savings, because that typically is the only pot that’s there.

Suzana Popovic-Montag:  And now recently with the RESPs, the Registered Education Savings Plans, those are things that are also coming into the mix, as well as, and we’ve talked about in previous podcasts, life insurance proceeds. All of those are other creative ways to sort of deal with the tax consequences of an estate plan.

Ian Hull:  So just…I’m just going to introduce the concept and then we’re going to work through it in some detail because of the importance of it in future…in the next podcasts.  But the concept again comes back to the whole idea that, you know, this whole idea that there’s a deemed disposition of the capital growth unless, and we talked about the inter vivos pure trust, it has to be…you have to pay the tax when you create the trust.  We talked about the idea that you can maybe avoid it with a principal residence trust.  You can probably avoid it…well certainly avoid it with the alter ego trust and the joint partner trust.  Well the same goes with deferring tax on RRSPs.  With RRSPs and RRIFs, what we’ve done from a planning standpoint and what we’re going to talk about in our next podcast is, is that what special treatments can we deal with with these investments to try to at least work around the impending doom…not death…the impending doom of a deemed disposition.  So I look forward to that topic and I appreciate your comments today too, Suzana.

Suzana Popovic-Montag:  Thanks very much Ian.  Speak to you soon.

Ian Hull:  Thanks a lot.

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.

/mem

Capital Gains Tax. For the purpose of calculating tax, the CRA deems a deceased to have disposed of all her capital property immediately before her death. This is referred to as a ``deemed disposition.`` Depending on the deemed proceeds of disposition, there may be a capital gain or loss. Certain types of capital property are exempt from this rule and an expert should be consulted for specific advice.

RRSPs and RRIFs. These tax sheltered investment vehicles lose their status as such at death. When you die, the tax holiday ends and your RRSPs and RRIFs are collapsed. There is a deemed sale of any securities held in the RRSP or RRIF and any income made in the year preceding your death must be included in the final return. There are a few notable exceptions to this rule, such as a spousal rollover and transfers of your plan to minor and/or mentally infirm children.

There are many creative ways of reducing the taxes that surface after your death. The benefits of doing so may be substantial and result in considerable savings for your estate. When you consider the fact that you spend a lifetime building your assets, speaking to a profession about your estate is advisable. Your beneficiaries will thank you.

Jason Allan

*For more information on how to file a final return, visit the Canada Revenue Agency's website 

The general rule is that, upon death, the holder is deemed to have withdrawn all the funds in the RRSP as at the date of death and will be taxed on the entire amount. This means that, generally speaking, the estate of the holder will pay the taxes, not the beneficiary of the RRSP.

The value of the RRSP is required to be reported on the deceased’s terminal tax return as part of his or her income in the year preceding death. Depending on the RRSP’s value and the total income of the deceased in that year, the proceeds of the RRSP might end up being taxed at the highest marginal value.

There are some circumstances where the estate will not be required to pay taxes on the RRSP:

• If the beneficiary of the RRSP is the spouse or common law partner of the deceased, then the RRSP funds can be transferred to his or her RRSP or RRIF, or they can be used to purchase an annuity.
• If the beneficiary of the RRSP is a financially dependant child or grandchild under the age of eighteen, the funds can be transferred to him or her to purchase an annuity. If the beneficiary is a financially dependant, mentally or physically infirm, child or grandchild of any age then the funds can be used to purchase an annuity or transferred to his or her RRSP or RRIF.

Another option is to designate a charity as the beneficiary. While the estate will still be liable to pay taxes on the value of the RRSP, it will be eligible for a tax credit, the effect of which is normally to offset the tax on the distribution.

For more information on these issues, check out the CRA Information sheet on the Death of an RRSP Annuitant.

Have a great day!

Megan Connolly

s. 52(1) A revocation in a will is effective to revoke a designation made by instrument only if the revocation relates expressly to the designation, either generally or specifically.

(2) Despite section 15*, a later designation revokes an earlier designation to the extent of any inconsistency.

(3) Revocation of a will revokes a designation in the will.

(4) A designation or revocation contained in an instrument purporting to be a will is not invalid by reason only of the fact that the instrument is invalid as a will.

(6) Revocation of a designation does not revive an earlier designation.

(7) Despite section 22, a designation or revocation in a will is effective from the time when the will is signed.

Section 22 of the SLRA states that a Will speaks and takes effect as if it had been made immediately before the death of the testator. As we can see, section 52 is a fairly exhaustive list of the possible scenarios that may unfold relating to the revocation of beneficiary designations. Tomorrow's blog will consider these provisions in further detail.

Have a great day, David. --------