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Toronto Trust and Estate Law Blog

Multiple Taxation on Death: The Taxpayer's Nightmare

With increasing globalization of people and their assets, a growing and often hidden threat is multiple taxation on death. Different countries tax in different ways on death, and when those laws collide, the same assets can be exposed to double and even triple tax or more.

Some countries tax the deceased or the estate on death, and some tax the beneficiary. There are also different bases for charging tax, such as citizenship, domicile, residency or the location of the assets.

Most jurisdictions impose some type of death, succession or estate tax. Canada, and a few other jurisdictions (including Australia, New Zealand, and Denmark) are unique in taxing capital gains on death. And there is growing talk in the U.S. of replacing its estate tax with a capital gains regime on death similar to Canada's.

Fun in the Sun, Until the Probate Court Comes?

While this winter in Toronto has been blessedly mild, colder weather makes many of us wonder why we live in a cold climate, or at least envy those who have vacation homes in warmer climates. While a vacation home in Florida or Arizona or other southern destinations may be a wonderful thing, planning is usually necessary to prevent it from becoming a burden after death for your family and executors. As an example, directly owning a vacation home in Florida or Arizona may give rise to the onerous process to probate a will in those jurisdictions. This is in addition to any U.S. estate tax exposure your estate may face due to direct ownership of U.S. real estate.

For example, in Florida the probate process requires that your executors either be your spouse or another relative, or be a resident of Florida. Unrelated non-resident executors are not eligible to apply for a Florida probate grant. This can limit your choice of executors where a Florida probate grant is necessary. If your chosen executors are not qualified for Florida probate purposes, the Florida court can appoint another qualified person instead, including a local professional or trust company.

The Family Wealth Conversation - Too Little, Too Late?

One of the issues of increasing concern to parents is having that family wealth conversation.

With increasing affluence, the present post-war baby boom generation is confronting more so than their parents had to, the best way to approach talking with their children about financial matters, including their eventual inheritance.

While we have formal education in core subjects such as mathematics, history and English as part of the standard elementary and secondary school curriculum, financial literacy is only beginning to become part of the education system. 

No Estate Planner is an Island

A well drafted will is not worth the (stack of) paper it is written on if it fails to achieve the client's objectives. Those objectives are often defeated where an estate plan is not properly designed, implemented, or maintained.

Under the traditional approach to estate planning, the lawyer typically designs the estate plan and drafts the relevant documents. The lawyer also makes various recommendations to the client--for example, the lawyer may recommend the client obtain tax advice with respect to a potential tax liability on death and may also recommend the client obtain life insurance to fund that potential tax liability. Sometimes the lawyer follows up with the client with regard to the various recommendations, but not always. Too often the client is left to oversee various implementation and maintenance aspects of the estate plan, and often the client has difficulty dealing with those aspects. 

Special Needs Planning: Knowledge is Power

As parents, we worry about our children: a truism that becomes even more true, and often extends to siblings, grandparents, aunts and uncles, when a child has special needs. We worry about what will happen to the special-needs individual, how they will care for themself and be cared for, and how we should plan for their future and leave them funds for their support and care, or just for a rainy day, without jeopardizing their independence or sources of government support. And when we look for information, online or from professionals, sometimes we end up not only worried, but also confused. And this can lead to paralysis and lack of planning.

Often the confusion arises from not understanding how the various available sources of assistance and planning tools apply. Ontario Disability Support Program ("ODSP") benefits, Henson trusts, disability tax credits, qualified disability trusts--these things can be difficult to understand, and more difficult to fit together in an understandable whole. And it is important to understand how they fit together, so that a family can coordinate planning for a special-needs individual, since a lack of coordinated planning can have unintended and negative consequences for them. 

Best Interest - Conflict of Interest: The Provision of Financial Advisory and Financial Planning Services

As we look forward in our crystal ball to looming issues on the horizon for 2017, one that certainly comes to the fore is the regulation of those who provide financial advice and financial planning services, often offered under the nomenclature of "estate planning" or "retirement planning" advice.

There is a lot of movement afoot as Ontario and other Canadian provinces grapple with how best to regulate those who offer financial advice and financial planning services given the lack of a comprehensive legal framework to do so.

Start the New Year off on the Right Foot

As of today, according to the Gregorian calendar, we are just over one month away from ringing in the New Year. If you are already contemplating your New Year's resolution, we thought we would help out in this blog post by providing you with a shortlist of "thinking points" for your estate planning to help you start 2017 with your best foot forward. What follows are five recommendations gathered from our past year's blog posts to assist in getting your estate plan into even better shape. 

Owning a Home Jointly with a Child - More Trouble than it's Worth?

In Ontario, on an application for a Certificate of Appointment, the applicant must pay Ontario Estate Administration Tax (also known as "probate tax"). Probate tax is levied at an approximate rate of 1.5% on the gross value of the estate. Assets passing outside of an estate, such as jointly-owned assets, are not included in the gross value of the estate and are therefore not subject to probate tax. In an attempt to avoid probate tax, a parent sometimes might think that a transfer of his or her home into joint ownership with a child is an appropriate option. This approach, though, can lead to several undesirable consequences and should only be done after thoughtful consideration of the ramifications.

On a transfer of a home into joint ownership with an adult child, the law presumes the parent did not actually intend to gift the home to the child. As a result, on the death of the parent, the child would be considered to hold the home in trust for the parent's estate and consequently the value of the home would be subject to probate tax (unless the above presumption is rebutted, as discussed below). As well, the home would then be dealt with in accordance with the parent's will. 

Ethos for an Aging Society

It is quite remarkable to think that notwithstanding our increasingly aging demographic,1 the recognition of the rights of older persons as a distinct group has been largely absent in the field of human rights. Only recently the rights of older persons as a distinct group have begun to emerge and slowly become reflected in legal thinking and legislative change. There is increasing movement towards creating a United Nations international declaration or convention on the rights of older persons as older persons' rights have not generally been expressly recognized at the international level. One of the objectives for creating an international convention is to provide a concrete overarching legal framework for use by government around the world, including by guiding policy-making in order to address the distinctive human rights issues faced by older persons.

Such a framework is important in the trusts and estates context, including in the challenging area of legal decision-making. When cast under the glare of a human rights perspective, much of our existing legislation for legal decision-making seems archaic.

For Better or For Worse... Especially If You Move

There are many things that we think about and plan for when we move--furniture, movers, schools, utilities... I could go on and on. There are even more things that we plan for when we move to another jurisdiction-language, taxes, visas, driving laws... and so it goes. But one thing you might never think about if you move to another jurisdiction is the impact of the matrimonial regime of your new home on your estate plan. Matrimonial laws can have a major impact on your estate plan, and not knowing what those effects might be can make the difference between your estate plan working the way it was meant to and not.

One major concern that matrimonial regimes the world over cause when considered in the context of an estate plan is how they limit a person's ability to transfer property on death when they wish to benefit people other than their spouse. This concern often arises in second-marriage situations, but there are also many other situations where it comes up. 

We are a top-ranked and peer recognized firm, including Margaret O’Sullivan by Chambers Canada High Net Worth 2018 as one of the top six private client lawyers in Canada

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