Severing ties

I had a potential client call me this week about a property he owns with his wife, from whom he had recently separated. They are working through their separation agreement, but in the meantime, he felt uncomfortable leaving their house in joint names, as he wanted his share of it to go to their children if something happened to him, rather than going to his wife.

It’s not commonly known, but it is possible to sever a joint tenancy with no notice to the other owner. You sign a deed from yourself to yourself, and now you are tenants in common; if you die, your share now goes through your estate, rather than to the other owner.

 

It’s usually best to let your co-owners know what’s going on. But if you need to sever ties quickly, you can get it done on your own.

Without proper advice, mistakes are all too easy to make

I see it all the time – people look on Google, find something that seems to make sense, and follow it through without getting advice from a professional. And then, when the action they took turns out to not have the same result in the place where they live as it did in the place where the blogger or journalist lived, they end up paying way more than they would have to just leave things be. Here are some common ones:

  1. Not naming a backup beneficiary for life insurance or registered investments. It’s great if you’ve named your spouse, but what if you die at the same time? Naming an alternate (or contingent) beneficiary means that this money will pass outside of your estate, and not be taxed.
  2. Gifting property (including adding a child to your deed). Always, always, always get advice from a lawyer and accountant before doing this. There are more dangerous than can be stated in a blog post.
  3. Designating registered investments through your will. This can be set up properly, but there is a specific way to do it – if you’re not using a lawyer, you can run into a lot danger, and end up with taxes owing on them because they accidentally pass through your estate.
  4. Putting severe restrictions on inheritances in a will. More often than not, they’ll be found to be invalid.
  5. Leaving assets to minor or disabled beneficiaries without setting up trusts. They could squander the money, or they could lose valuable benefits. It’s always best to have a professional do your will; it’s vital if your beneficiaries need any assistance at all.

This is a complicated area of law. Be careful.

Can I get a witness?

When preparing your own will, it is easy to overlook some legal formalities that could cost you (or others) much more than you think. One of these is having proper witnesses for your will.

It is a requirement to have two witnesses to witness your signature on a will. If this requirement is not met, it would require a court application to determine if the will is valid. If the will is not valid, then a previous will or intestacy laws would determine who inherits.

There are also restrictions as to who can be a witness on a will. If you are a beneficiary under the will and you are also a witness on the will, the gift that was left to you as beneficiary is no longer valid. This offers protection for will drafter in case the beneficiary is forcing you to sign the will. While it might not be your intention, you could prevent someone from inheriting their gift, or they could have to take legal action to inherit under the will (costing them money).

Under a holograph (handwritten) will having witnesses is not a requirement. This type of will can come with its own set of problems though in relation to witnesses. A handwritten will must be entirely written in your own cursive handwriting (not typed, printed or handwritten by another person). Your handwriting must then be properly identified by someone, which could require previous writing samples or could even involve hiring a handwriting expert to identify your handwriting. All of this would be submitted under a court application to validate the will, costing more money.

All this said, using a lawyer to draft your will provides you with an expert who can avoid these legal pitfalls and help save you money in the end.

What’s in a Name?

If you are thinking about incorporating a business, one of the advantages is the ability to reserve your chosen business name. When you incorporate your business in Ontario, your business name is reserved for use in the province. When you incorporate your business federally, your business name is reserved for use throughout Canada. Sole proprietorships and partnerships do not have this protection, and anyone can start a business with the same or a similar name to your business if you are not incorporated.

Incorporating your business can also offer you additional name protection through a NUANS name search. This search lists similar corporate names and trademarks across Canada to ensure that the searched business name is not currently reserved by another corporation or is not confusingly similar to another corporation’s name. A NUANS report also reserves the proposed corporate name for 90 days, ensuring that no other corporation or trademark can register under a similar name in that time frame. More information on the NUANS report can be found here.

Electronic deals

In Ontario, except for a tiny (less than 1%) fraction of properties across the province that have major title issues, all real estate is done electronically. A lawyer who is licenced to do real estate law in Ontario can close a deal anywhere in the province. So, if you’re moving to or away from a city, and you want to use the same lawyer for both deals, you can.

Ontario is not Alberta (or California, or Oregon, or New York…)

If you’re planning your estate, be sure that you’re looking at the right laws. Each province, state, and country is a little (or a lot) different. If you’re looking at rules from somewhere else, you could be completely harming your heirs. Don’t assume. Ask someone who knows.

Are you common law? Then your spouse doesn’t need your consent

In Ontario, the law is very clear: common law and legally married are two separate things. In the context of real estate, that means that, if the house is only in your spouse’s name and you aren’t legally married, your spouse can mortgage or sell the property without you even knowing, let alone consenting. Get married, get on title, or be very aware of the limits of your rights.

Passing on your RESP

I have two young children, and my husband and I started a family RESP when our first child was only a few months old. Education is much more expensive these days than when we went to university, and will likely be even more so by the time my kids go, so saving and taking advantage of government grants is very important.

RESPs are a different kind of vehicle from a registered investment like a TFSA or RSP. While those can have beneficiaries, the RESP cannot. What you need to do is have a specific clause in your will that states that the RESP is to pass to the child’s guardian, provided they set up a new RESP for the child’s benefit. If you do not have this, the RESP is collapsed and all of the grants are returned to the government.

If you have been saving in an RESP, you should make sure you have a will set up. You’ve worked hard to get those grants; don’t lose them.

Are you a first-time buyer?

It seems like it should be a simple question: if you’ve never personally bought a house, you should qualify, right? Unfortunately, it’s not so simple.

If you live in a home that your legally married spouse owns, you no longer qualify. Same if you are common law (in Ontario, that’s after three years of living together or any time of living together if you have a biological child together). If your spouse owns property, even if you don’t live there and never did, you no longer qualify. Even if you or your spouse got put on title to a property for some other purpose but didn’t truly buy the property, you don’t qualify – this happened once to a client of mine who got put on title to his parents’ Florida condo, and therefore no longer qualified as a first-time buyer.

This can have a significant for a first-time buyer. There’s the land transfer tax rebate – up to $4,000, plus more if you’re buying in Toronto. There’s the RRSP Home Buyers Plan, which allows you to withdraw from your savings, tax-free, as long as you repay yourself within 15 years. And there’s the tax refund available on expenses related to buying your first home that you can claim through CRA when you file your taxes for the following year.

If you’re planning to buy, and you’re counting on using a program available to first-time buyers, be absolutely sure that you qualify before you get started.

Silence is not golden

If you have a power of attorney for personal care, you have the option of listing specific instructions in it. These can be things like whether to donate your organs, your preference for care in a facility vs. in your home, or even end of life care. The general rule that your attorney has to follow is first to look at any written instructions, then to follow your known wishes, and last to do what they think you would want done.

You don’t have to write everything down, but you should at least be discussing your wishes with the people you have named. If they don’t know, they can’t do what you would have wanted.