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.
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.
A "protector" is a person who is given special rights and powers under a will or a trust instrument to participate in the administration of an estate or a trust. Protectors generally provide an oversight function--they ensure the trustees are administering the trust in accordance with the testator's or settlor's intentions and they also safeguard the interests of the beneficiaries.
Estate planning documents (such as a will, power of attorney for property, power of attorney for personal care, Henson-type trust and/or inter vivos trust) are the legal framework of an estate plan--the "apparatus"--which can seem to be a tricky network of legal rules, directions, and often unavoidably, a lot of legalese to navigate. Estate plans are sometimes short on information or guidance regarding the "soft issues": the relationships, context, goals, aspirations, vision, preferences, history, etc. that inform the overall structure.
There is often a legal answer and a practical answer to whether a trustee should disclose information and documentation requested by a beneficiary. The practical answer favours disclosure - it is easier and less costly to disclose than to fight a request. Disclosure also increases transparency. Beneficiaries who are kept in the dark often assume the worst and that assumption can cause a lengthy dispute, costly litigation, a depletion of trust assets, and family disharmony.
In our August 2015 post entitled "Keeping Your Estate Plan Healthy with Periodic Check-Ups" we raised the potentially problematic reality that your estate plan may only be truly up-to-date the day you sign your estate planning documents. We put estate plans in place to ensure that our wishes, intentions and goals are achieved in the event of incapacity or death. For most of us though, our day-to-day lives are perpetually changing--whether it be our relationships, residency, health, assets or values.
On January 1st, several new income tax rules for trusts and estates came into effect. An overview of these significant changes are discussed in our Special Advisory. While we understand that there is an ongoing dialogue between the Federal Ministry of Finance and several professional organizations regarding possible changes to two of these new rules, most, if not all, of the changes are here to stay. These changes do not eliminate the many and diverse benefits of trust planning, nor should trusts, including in Wills or established during one's lifetime, be considered as unattractive options.
With the advent on January 1, 2016 of the new income tax rules eliminating graduated income tax rates and imposing tax at the top marginal tax rate for testamentary trusts (trusts set up in Wills), some people may be of the view that using trust-planned Wills is far less attractive or even no longer useful. However, this view is based on the narrow assumption that trust planning in Wills is only income tax-driven. Our view is that there are some excellent reasons to consider trust planning in your Will which have absolutely nothing to do with income tax, and that this change of legislation will in fact be the genesis for a renewed appreciation for using trusts in Wills.
One of the perceived disadvantages to using a trust in estate planning is that restrictions on trustees' investment decision-making under trust law will result in lower investment returns. In particular, this is a concern where a trust has an income beneficiary to whom income is paid, usually for his or her lifetime (frequently used where there is a surviving spouse), and on the income beneficiary's death, capital is paid to one or more capital beneficiaries.
From time to time in the news we read about wealthy celebrities and business magnates who have publicly stated that their offspring should not expect to receive any sizeable inheritance upon the parent's death. In recent years, these pronouncements have come from a variety of people including Sting, Warren Buffett, Bill Gates, Gloria Vanderbilt and the late Dame Anita Roddick (founder of The Body Shop).