Useful Clauses in a Will - Hull on Estates Episode #163
Listen to Useful Clauses in a Will
This week on Hull on Estates, Paul Trudelle and Sarah Hyndman Fitzpatrick discuss various clauses in a will that may be useful in certain circumstances, such as carrying on a business, exclusion of illegitimates, or RESP's.
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Paul Trudelle: Hello and welcome to
Welcome to
Sarah Hyndman Fitzpatrick: Hi and welcome to another episode of
Paul Trudelle: And I’m Paul Trudelle. Hi Sarah, how are you today?
Sarah Hyndman Fitzpatrick: I’m great Paul, how are you?
Paul Trudelle: Very good. Enjoyed the long weekend.
Sarah Hyndman Fitzpatrick: Absolutely. It was wonderful. How about you?
Paul Trudelle: I did, yes. Did a lot of…it was very productive.
Sarah Hyndman Fitzpatrick: Excellent.
Paul Trudelle: We were talking about what we were going to podcast on today and we thought we’d talk about Will clauses that you often see but aren’t discussed in much detail or other Will clauses that you don’t always see that you may want to consider when drafting a Will or instructing a lawyer with respect to drafting a Will. So perhaps we could spend some time talking about these clauses or just scratching the surface with respect to some of these clauses, what they may mean, why you may want to use them and what they can do.
Sarah Hyndman Fitzpatrick: Sure, and you know, as you mentioned Paul, these are clauses that they don’t garner much attention but certainly they’re commonly utilized in Wills as well, so they’re important clauses but you don’t often get a lot of commentary on them. So we’re going to discuss some of those today.
Paul Trudelle: Right. One of the clauses that we often see or sometimes see in Wills deals with illegitimate children and that’s sometimes just put in without much discussion. Perhaps we can talk a bit about that.
Sarah Hyndman Fitzpatrick: Sure. The law in
Paul Trudelle: So you can put in a clause in your Will saying that children born outside of wedlock won’t form part of the defined class of children or other beneficiary.
Sarah Hyndman Fitzpatrick: Exactly and normally the clauses will go to elaborate that in the event you treat a child who is an illegitimate child and born outside of marriage, in the event that you actually treat them, a settled intention is often the terminology used as a settled intention to treat them as a child of a union or a marriage, that they actually will take. So that’s, you know, a typical clause that is included.
Paul Trudelle: And that clause, I understand, can go down the line as well. So you may have illegitimate children and child, but that child may have illegitimate children and that clause will apply to those grandchildren and so forth.
Sarah Hyndman Fitzpatrick: Exactly. And the other benefit to having that type of a clause in your Will is that it’s going to, I guess, relieve the onus on your estate trustee of searching down that class of beneficiaries as well, whereas if that clause was not there it would be incumbent upon them to make sure that they had sort of closed off all the classes of their inquiry when they were looking for beneficiaries. But if the testator’s intention is specifically set out that they intend to exclude those then that’s going to make their job easier as well.
Paul Trudelle: Right. So otherwise I understand they have to do those extensive searches or make inquiries with respect to illegitimate children and we’re often surprised…
Sarah Hyndman Fitzpatrick: Exactly.
Paul Trudelle: but there’s a lot of them out there.
Sarah Hyndman Fitzpatrick: That’s right.
Paul Trudelle: Another clause that we mentioned when we were preparing for this that you put into Wills I understand from time to time, is a clause that deals with Air Miles, specifically deals with benefits, bonuses like that.
Sarah Hyndman Fitzpatrick: That’s right. And that’s really a new clause that’s being incorporated in a lot of Wills now just based on all the loyalty programs that are available now. And you can often have a situation where the testator’s amassed a very significant quantum of Air Miles and it’s really worth, you know, considering if you’ve got a few hundred thousand Air Miles who you would want to be the beneficiary of those. And it’s certainly an asset of the estate and it’s not something that you want to go unrecognized so it’s really a simple clause but something that you would want to be mindful of and consider including in your Will.
Paul Trudelle: And again, that would just make it easier for the estate trustee to administer the estate and it deals with what can be a substantial asset.
Sarah Hyndman Fitzpatrick: That’s right, yeah.
Paul Trudelle: Speaking of making it easier for the estate trustee to administer the estate or maybe more difficult, we talked about specific clauses dealing with carrying on business by the estate trustee.
Sarah Hyndman Fitzpatrick: That’s right. Often the testator will want the business carried on, a business or corporation carried on after they pass away. So it’s really an issue, you obviously want to include a clause perhaps giving some discretion as to the estate trustee’s ability to delegate some of that authority perhaps to managers and so forth. It also is somewhat of an issue of who your estate trustee is going to be. It really makes it a little bit more appropriate to obviously consider someone that might have that business acumen as well.
Paul Trudelle: Right, I think that’s always a concern when you’re naming an estate trustee, is to their abilities or his or her skill sets and if there is a business to be carried on, then again that may…
Sarah Hyndman Fitzpatrick: Right.
Paul Trudelle: inform who you want it to be…
Sarah Hyndman Fitzpatrick: Right but certainly something to consider with the testator, you know, if it’s something, if they do have business interests, whether or not they want to clearly set out for the estate trustee what their expectations are, if they intend for that to be continued on after their death.
Paul Trudelle: Great. Another clause that deals with the estate trustee and particularly where they live is a clause dealing with the requirement that the estate trustee post a bond if they’re outside of
Sarah Hyndman Fitzpatrick: That’s right and it’s not binding, we’re still going to need to make the Court application asking the Court to dispense with the necessity to post a bond. But it certainly is useful, perhaps in the situation where you think that your estate trustee who may presently be resident in Ontario may move to another province in Canada and you want to make it clear when your estate is administered to the Court that you had contemplated this situation and that you didn’t necessarily expect for them to have to post a bond. So that can be, again it’s not binding but it can be persuasive for the Court to look at and say that this situation was contemplated and you can dispense with that necessity, which can be very useful when you’re administering the estate.
Paul Trudelle: That’s great and it can save the estate significant funds as well.
Sarah Hyndman Fitzpatrick: Absolutely.
Paul Trudelle: And the headache of trying to get the administration bond, which can be difficult.
Sarah Hyndman Fitzpatrick: That’s right.
Paul Trudelle: Another clause we talked about that we wanted to mention was the Family Law Act clause that we see in most Wills now.
Sarah Hyndman Fitzpatrick: That’s right. You would want to make absolutely sure that that clause was included. As most people are aware, the inheritances are exempt from net family property but the income earned on that inheritance is not exempt. So unless you have a specific clause that excludes the income that’s earned on that inheritance, that can actually fall into the hands in terms of calculating the net family property. So it’s very important to have that in there.
Paul Trudelle: So just to explain that. So if I inherit money from a parent or a relative or someone else, that does not, the property that I inherit or the money does not form part of my property that would be subject to equalization if I was to divorce or separate or…
Sarah Hyndman Fitzpatrick: Well the inheritance would. The inheritance itself would fall into the net family property. But the income earned on that inheritance would not. So that would be available for them essentially. So what you’re trying to do by these Family Law Act clauses is exclude not only the inheritance, which is excluded at law, but also include any income generated on that inheritance. So it’s really casting the net wider in terms of the money that you’re able to exclude when you’re adding it or doing your net family property calculations.
Paul Trudelle: So that protects more of those assets in the event of a marriage breakdown.
Sarah Hyndman Fitzpatrick: It protects more of them; it protects the inheritance itself and the income.
Paul Trudelle: Wonderful. So that’s a clause to consider. We see that a lot…
Sarah Hyndman Fitzpatrick: That’s right.
Paul Trudelle: and it’s an important clause to put in.
Sarah Hyndman Fitzpatrick: Absolutely.
Paul Trudelle: RESPs are becoming more and more popular these days and we’re seeing more and more clients with RESPs, Registered Education Savings Plans.
Sarah Hyndman Fitzpatrick: That’s right, yeah.
Paul Trudelle: And what can we do in a Will to protect or deal with that asset?
Sarah Hyndman Fitzpatrick: Well certainly you want to give some guidance to your estate trustee. You’ve really got a couple of options. Do you intend for the payments to continue after your death? Or do you intend for your estate trustee to wind up the plan? Those are really your two options. Typically I find most clients are interested in continuing the plan for the benefit of their children. So you need to specify that in your Will and say that your intention is for the estate trustee to continue making payments. They would actually be…I think it’s called a successive subscriber to the plan. But they would be required to continue making payments to essentially continue the plan for the benefit of your children.
Paul Trudelle: Dealing with personal property. We see Wills that have clauses dealing with the specific bequests that are made. Often we see Wills that deal with personal property by way of attaching a memorandum.
Sarah Hyndman Fitzpatrick: Right.
Paul Trudelle: What other ways can we deal with personal property in the Will?
Sarah Hyndman Fitzpatrick: I find, you know as you mentioned, you’ve got the situation where somebody wants to attach a memorandum. And again, as we were discussing just before this podcast, we had a discussion about the use of whether what’s called a binding memorandum or a precatory memorandum. And if you include it in your Will, it’s actually a binding memorandum. There are other restrictions on what you need as well. The memorandum needs to be in existence before the Will is drafted. You need to specify it specifically in the Will and the date of it. So all those actually need to be in place. It actually needs to be described in enough clarity as well, so that it can be understood. Now if all of those factors are in place, that’s called a binding memorandum. I find that most clients typically are more interested in doing what’s called a precatory memorandum which you essentially just put a clause in your Will stating that any memorandum that I may leave I would like my estate trustee to have regard to. And the advantage of that is that as time goes on, you’ve got your Will drafted, you’ve got it in place but you can actually change your instructions in that memorandum. For example, if you acquire extra jewellery and you have a beneficiary in mind, perhaps you might give something away, it may no longer be in existence. So you can basically just draft a new memorandum and attach it with your Will. And again, that’s not binding on your estate trustee but it would be, you know, very strong evidence of your intention.
Paul Trudelle: So in that case, you would give the discretion to the estate trustee to distribute your personal property.
Sarah Hyndman Fitzpatrick: Exactly.
Paul Trudelle: Along with the non-binding or the precatory memorandum.
Sarah Hyndman Fitzpatrick: Right. Because people don’t always want to spell out everything in terms of personal property. It can get complicated and again we’ve got issues of ademption and issues where something may no longer be in existence. And it can lead to a lot of interpretation problems. So it’s fairly common to do, you know, some kind of a memorandum, be it a binding memorandum or a precatory memorandum.
Paul Trudelle: Okay. Well those are all useful clauses to consider. Even if you don’t use them, you should keep them in mind or think about putting them in, turning your mind to those points, I would think, when preparing a Will…
Sarah Hyndman Fitzpatrick: For sure.
Paul Trudelle: or instructing someone with respect to a Will.
Sarah Hyndman Fitzpatrick: That’s right.
Paul Trudelle: Well I hope that was helpful. It was a pleasure podcasting with you today.
Sarah Hyndman Fitzpatrick: You as well Paul.
Paul Trudelle: And if you want to contact us, please send us an e-mail at hull.lawyers@gmail.com. Be sure to visit our blog at estatelaw.hullandhull.com where you’ll find more information. And until next week, or the next blog, thank you for listening.
Sarah Hyndman Fitzpatrick: Thank you for listening. It was a pleasure podcasting with you Paul.
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