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O'Sullivan Estate Lawyers | Toronto Trust and Estate Law Blog

Impact of U.S. Tax Reform on Estate Planning for Canadians with U.S. Connections

U.S. tax reform measures were signed into law by President Trump on December 22, 2017, culminating a whirlwind legislative process at the end of 2017 which resulted in the Tax Cuts and Jobs Act (the "Tax Act"), the most significant changes to U.S. tax law in over three decades. These changes, in particular those relating to personal taxation, will impact many individuals and families with U.S. connections.

The Tax Act reduces U.S. personal income tax rates. The top bracket is now 37%, in contrast to the prior 39.6% and applies to individuals with income of $500,001 or more. In comparison, the top marginal tax rate in 2018 for an Ontario taxpayer is 53.53% and applies to individuals with income of $220,000 or more. U.S and Canadian tax rates are on opposite trajectories - ours increasing and the U.S.'s decreasing. The question of the day: is the Canadian policy approach sustainable given our reliance on and interconnectivity with the U.S.?

Domestic Contracts to Protect Family Wealth: Unassailable or Not?

When family wealth is at stake, parents may wish to encourage their children to enter into a domestic contract with their partners. The purpose may include to protect significant gifts and inheritances, a home owned at date of marriage, or a family business. With divorce rates at an all time high and the largest anticipated wealth transfer in Canada's history of approximately $750 billion to millennials over the next several decades, these issues are a growing concern for many families.

In Ontario, domestic contracts, which include cohabitation and prenuptial agreements, are useful to protect parties upon a marital breakdown or death because they allow couples to agree on rights and obligations regarding property division and support. Although they are generally difficult to challenge because courts respect private agreements, domestic contracts can be invalid if they fail to follow the requirements under relevant legislation.

U.S. Tax Reform Moves Forward at Breakneck Speed

No doubt many U.S. legislators were chewing on tax reform over the U.S. Thanksgiving weekend, as well as enjoying their turkey, as unprecedented momentum is moving U.S reforms ahead at breakneck speed demonstrating Congress's desire to complete tax reform before year end.

The proposed changes will be the most significant to the U.S. tax system in over three decades, and will impact many individuals and families with U.S. connections. Several major areas are impacted, including U.S. estate and gift tax.

Acting as an Executor or Attorney: Starting Out on the Right Foot

One of the questions we often get asked by people who are planning their estates or for incapacity is who they should appoint to be the executors of their will or their substitute decision makers if they become incapable. (In Ontario, substitute decision makers during incapacity are known as attorneys for property or personal care if appointed by the individual in a power of attorney or guardians for property or personal care if appointed by the Court - see our Client Advisory Powers of Attorney for more information).

Putting the "Success" Back Into Succession Planning

One of the increasing challenges facing parents and other family members today is achieving success in their estate planning - passing on their wealth well. But how should we define "success". From a professional viewpoint, much of estate planning focuses on ensuring a tax and cost-efficient transition of wealth to future generations and primarily focuses on financial aspects. But in doing so, have we lost sight of the forest for the trees? What is the overarching purpose of passing on wealth? Is it just about the money?

Estate Planning and Marriage Breakdown - Protecting the Inheritance

In estate planning, a parent typically wishes to provide for their children and each child's family. However, this desire to benefit the child's family often has a caveat: the child's spouse should not receive any part of the inheritance in the event of separation or divorce.

Medically Assisted Dying in Canada - An Update

In April 2017, the CBC reported that over 1,300 people in Canada have died with medical assistance since the Criminal Code was amended in 2016 to legalize medical assistance in dying ("MAID"). While this statistic points to the importance of MAID for many Canadians, the new legislation has not settled the ongoing debate concerning the right to die. Recent litigation on various fronts has highlighted continuing controversies, including questions about the role of medical professionals in MAID, limitations on who will have access to medically assisted dying, and ambiguity in the criteria for access.

Reproductive Technology and Estate Law: The Road to Progress is Paved with Good Intentions

On January 1, 2017, most of the provisions of the All Families Are Equal Act (Parentage and Related Registrations Statute Law Amendments), 2016 (S.O. 2016, c. 23) came into effect in Ontario. The intention of the Act is to establish new rules of parentage in Ontario to deal with the modern reality of assisted reproduction and surrogacy when it comes to who is, and who is not, a parent of a child and allow for non-biological parentage structures without the necessity of Court intervention. This involved updating and revising a number of statutes to make related amendments, such as to the Vital Statistics Act (Ontario) to reflect the new rules as they affect birth registrations.

For estate planning and administration purposes, a "child" of an individual was previously defined to include a biological or adopted child or a child conceived before and born after a person's death. This definition has been expanded to include a child conceived after and born within three years of a person's death if certain conditions are met. Further, rules regarding pre-conception parentage agreements and surrogacy agreements can result in a biological parent not being considered the parent of a child or in a non-biological parent being considered a parent of a child if the requisite rules and conditions are met. The definition of "issue" as set forth in the Ontario legislation means a person's descendants and has been similarly expanded to include, for example, grandchildren or great-grandchildren who come within the new definition of "child".

The Winds of Change or the Winds of War? Government's Tax Proposals Target Business Owners

As we return from Labour Day weekend and reflect back on the summer that never quite was, a major issue that will grab attention over the next weeks, now that it's business as usual again, is the government's recent tax proposals.

The government chose on July 17, 2017 in the midst of the summer doldrums to launch its strategic ballistic missile of tax proposals and draft legislation on the taxation of private corporations and their shareholders. We were forewarned in the February 2017 Budget to take cover as the government pronounced that it intended to target private corporations and their shareholders who it says unfairly use tax planning to lower their tax bill.

Integrating Life Insurance in The Estate Plan: The Need for an Holistic Approach

One of the interesting changes in our modern age when it comes to succession on death is that for many people, most of what they pass to their family and others will not be through their will, but instead by a "will substitute" such as life insurance. Many persons have term policies with a death benefit far greater than the assets accumulated during their life.

But with the use of such will substitutes comes the need to ensure integration with the will and overall estate plan. Unfortunately, the forms available to name beneficiaries provided by many life insurance companies lead to a lack of harmony with the will plan because they are too simple. It is ironic that a lot of time and effort can be spent in designing a complicated and comprehensive will plan which deals with assets of far less value than insurance proceeds passing by way of a too simple beneficiary designation.

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