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.
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.
Privacy and the protection of personal data are a major concern in modern society. Complicated privacy legislation exists in many jurisdictions with the objective of protecting personal information by imposing multiple safeguards, some of which can be frustrating to deal with. With the increasing stores of digital information, we also frequently see reports of security breaches of government and major corporations' databases, not to mention instances of identity fraud, theft and other cyber-attacks.
The Ontario Family Law Act (FLA) determines the division of property between spouses on marriage breakdown. But what happens when a spouse is a beneficiary of a discretionary trust?
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).
It's common knowledge that we are at the leading edge of an avalanche of wealth transfer. Baby boomers in increasing numbers are heading into their retirement years and beyond. The succession of capital that will occur is unprecedented. In the recent past, we've also seen higher average annual divorce rates and lower rates of marriage than say 50 or even 25 years ago. Added to the mix of wealth transfer and blended, non-traditional and sometimes dysfunctional families is another topic we've written on periodically in the past--greater proportions of the population living in diminished states of capacity for extended periods of time, dependant on family and friends to act as their substitute decision makers. In certain families, any combination of these ingredients can be a recipe for a nasty and prolonged estate dispute and general fractiousness.
Discretionary trusts are common estate planning tools used for a variety of reasons such as tax minimization and general wealth protection, including protection on matrimonial breakdown and from creditors. These trusts are often used in an estate freeze where shares in privately-held corporations are "frozen" to defer capital gains liability which might otherwise arise on a shareholder's death in favour of the next generation where the "growth" shares are held by a trust. Margaret O'Sullivan's recent paper "When Trust Law Meets Family Law" provides a review of discretionary trusts and their recent treatment by matrimonial courts in several jurisdictions. My post highlights some of the observations and concerns raised in Margaret's paper.