Plan for conflict, and hope it doesn’t happen

A recent TD Wealth survey found that 44% of planning professionals believe that family conflict is the biggest threat to estate planning today. And I think that’s absolutely correct.

In my personal experience, the estates that have the most difficulty are the ones where the parties don’t get along. Even if everything is being managed perfectly and properly, personal conflict will lead one party to hire their own lawyer, and sometimes even to start a lawsuit against the estate. Sometimes this even happens between executors who can’t get along. It wastes a huge amount of time and money that should be going through the estate to the beneficiaries.

The best advice that I can give if you must choose more than executor one is to choose executors who will get along, and to tell your beneficiaries ahead of time what your plans are. Processing it all now means fewer problems down the road.

Don’t Forget Your Furry Family Members

Many of us consider our pets to be members of our family. Some have taken this idea even further, actually left their entire fortune to their pets on their death. An example of this is Karlotta Leibenstein. Ms. Leibenstein was a German countess and multi-millionaire who left $80 million to her dog, Gunther III. This fortune was inherited by Gunther III’s son, Gunther IV, who is now worth over $400 million. You can read more about Gunther IV and his luxurious lifestyle here (he owns a property in Miami that once belonged to Madonna). While you might not be able to leave your pet millions of dollars, you can set up a pet trust for them in your will.

Under Ontario law, pets are considered as property. As such, your executor will have the right to decide what happens to your pets. Your executor would have the power to choose where your pets go and can even decide to take them to a shelter or put them to sleep.

If you do not have a will, you will not be able to decide who will care for your pets after your death. The courts will appoint an executor for you. This person will be chosen from the members of your family who step forward to act as executor. The person that the court chooses might not be the person you would have chosen to act as your executor.

One way to protect your pets is to put a pet trust into your will. A pet trust will arrange for any pets to be cared for after their owner’s death. By planning ahead, you can ensure that your furry family members are cared for after your death.

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.

Anthony Bourdain: No reservations, and no updated planning

Anthony Bourdain tragically died by suicide recently. Also tragic: he did not update his estate plan after his separation, which means that his estranged wife will be managing his estate. Perhaps this is what he wanted, trusting that she would manage things appropriately; more likely, he got busy and forgot, or didn’t realize that he had left her in charge.

In Ontario, as in many places, neither divorce nor separation revokes a will. Unless you make an effort to do a new will, for the most part, everything will stay the same.

If you are going through a change in relationship – entering or exiting – you need to change your will, too.

An executor’s checklist

You’ve been chosen as an executor. Now what?

When you act as an executor of a will, there is a lot to do. From arranging for the burial and funeral, to applying for probate if necessary, to paying taxes, to managing assets, being an executor is a proper job. If you aren’t getting advice, you should be.

You can find our checklist on acting as an executor here.

A little preparation goes a long way

If you ask most people, they would prefer that none of their hard-earned assets end up wasted on taxes or professional fees, or simply squandered, when they are passing them on to the next generation. Unfortunately, however, these things often happen, especially as estates get bigger – and we’re often worth more dead than alive, so estates are always getting bigger. Here are some ways to help prepare your heirs to inherit:

  1. Share assets during your lifetime. Gifting money to your children now allows you to see it enjoyed. It also allows you to see whether they will spend it wisely.
  2. Set up a trust. While there can be some tax consequences to trusts, they can also have a lot of benefits if set up for the right reason and in the right way. Always speak to your accountant, financial planner and lawyer before making the final decision, but where they make sense, they can allow you to save significant time and money transferring assets on your death, and can protect those assets from your heirs’ ex-spouses and creditors.
  3. Teach them about money. It’s never too late – or too early – to start learning. My two-year-old plays with his cash register and is learning about how many “coins” it takes to buy “milk” but we will be teaching him with real money before too long. Even if your children are adults, if you’re concerned about their ability to handle money, you can always still teach them. This also applies to grandchildren.

Estate planning is not a set-it-and-forget-it situation. Ensuring your assets don’t disappear the moment you die can require a bit of work, but it’s worth it.





Foreign executors

bridge-1I have many clients with children who live abroad. This makes things complicated when they want to have their child who lives in England or the United States act as the executor of their estate, because the courts in Ontario have broad powers to require what is called a bond. Basically, the courts can say that the executor has to pay into court an amount equal to the value of the estate; executors can get around this by buying a bond, or a type of insurance policy, to cover the amount. The cost of the bond is not reimbursed when the money is released from the estate to the beneficiaries, so it is a loss to the estate.

Generally, the court will not require a bond if the executor is in Ontario, other parts of Canada, or even a commonwealth country such as England or Australia. Generally, the court will require a bond if the executor is anywhere else.

If you are thinking of naming a foreign executor, in addition to the difficulty of acting from afar, keep bonding in mind.

Inheriting a house

HouseSometimes, instead of a share of an estate, a person could be left a specific asset; sometimes, this is a house or cottage.

If you do inherit, keep in mind that the executors will likely have to wait to transfer it to you until they have gone through the probate process. This can take anywhere from two weeks to six months, depending on how busy the courts are, so be patient.

Second, you need to seriously consider whether you want to keep the house or not. Don’t make a quick decision; this warrants a visit with an accountant and financial planner to assess possible costs and benefits to keeping it or selling it.

Inheriting a property can be more of a headache than it’s worth, so don’t be afraid to not hold onto it if it’s not the right decision for you.


Choose the right executor

Choose 2The person you choose as executor of your estate can either make it go smoothly or make it incredibly difficult, and expensive. Choosing a person who is in serious debt, or has addictions, or doesn’t get along with any of the other beneficiaries, or wants to please everyone and so might bend the rules – these are all bad ideas. Choosing all four of your children or keeping in a child who lives outside of Canada because you don’t want to hurt anyone’s feelings is also a bad idea. It’s also important to think about how complex your estate could be. If it is going to be incredibly complicated, it might be worth paying for a corporate executor, such as a bank or trust company.

The best plan is to keep an open mind, and have a frank discussion with your lawyer before making a final choice. Having a bad executor can be a terrible thing.

Prince, and the lack of a will

Purple princeBy now, everyone knows that pop and rock superstar Prince died on April 21. He died suddenly, and it has now been confirmed that he died without a will.

Prince had been married, but was single at the time of his death. His only child died at one week old, and his parents were both deceased, so his heirs are his siblings. His sister, Tyka Nelson, asked the judge to appoint Bremer Bank as the trustee of the estate, which was ordered last week. The estate will be distributed based on Minnesota’s laws of intestacy.

In Ontario, as in most jurisdictions, intestacy laws are very strict. If you are married or have a child, they get priority over the estate. If you are not married and have no children, it goes first to your parents, then to siblings, then aunts and uncles, then nieces and nephews, then cousins. It appears that Minnesota law is similar and his siblings will inherit his entire estate.

Maybe this is what Prince would have wanted; he does seem to have been incredibly generous with his family over the years. However, he was also an active member of his church, which will get nothing, and he will pay significant estate taxes because of his lack of planning.

Prince’s estate will be just fine; even with high taxes, each beneficiary will receive quite a large sum of money. However, a bit of planning might have resulted in less tax and money distributed as he truly wanted. This is a lesson to us all: a lack of a will doesn’t lead anywhere good.