Blended families have become common, raising additional complexity for estate planning primarily due to differences in family dynamics and objectives. A failure to take these differences into account often leads to acrimony and disputes, which may irreparably damage family relations and thwart the estate plan. To minimize disputes and to ensure objectives are fulfilled, it is important to build safeguards into the estate plan.
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.
The case of Kilitzoglou v. Cure highlights the confusion and difficulty sometimes caused when an issuer of a life insurance policy or retirement plan requires a beneficiary designation to conform to its standard form and rules. In that case, the deceased filed a change of beneficiary designation form with Trans-America which was rejected on the basis that it did not precisely set out each beneficiary's entitlement on a percentage basis.
Transparency has become a powerful discussion point in recent years. A lack of corporate financial transparency has arguably been the cause of many modern major financial crises and corporate bankruptcies. Whether you agree with this view or not, transparency is a hot-button issue, both socially and politically. Lack of transparency can create an emotional, almost visceral reaction in those who view it as a deliberate attempt to hide the facts from those who are entitled to them. This reaction can, in turn, be upsetting and frustrating to those who are not attempting to hide anything, but for a variety of reasons legitimately believe that greater transparency is not necessary or appropriate in the circumstances.
One aspect of estate planning which is often not considered is how executors, trustees and attorneys should be compensated. Yet compensation claims are a frequent matter of contention and resentment, create disputes between executors, trustees, attorneys and beneficiaries, and can even result in litigation. Common scenarios include the executor, trustee or attorney claiming more than the beneficiaries believe they deserve, or the executor, trustee, attorney and beneficiaries not understanding what compensation is permissible and/or reasonable. Disputes can be minimized with advice and planning which address how the person who is going to do a very important job will be paid for their time and care.
When planning for the financial security of a family member with a disability, it is important to take into account his or her unique circumstances and needs. Available planning options sometimes place a large emphasis on ensuring that income support under the Ontario Disability Support Program (ODSP) is not jeopardized. Where there are more than adequate financial resources to support a disabled family member, reliance on ODSP with its attendant restrictions may be unnecessary or even undesirable. Common planning options for persons with disabilities include Henson trusts, inheritance trusts, and Registered Disability Savings Plans (RDSP).
Many of you have no doubt read a summary or highlights of the 2014 Federal Budget and noted the proposal to eliminate graduated income tax rates for testamentary trusts. Rather than thinking that testamentary trust planning is dead (no pun intended), in our view there are plenty of reasons to consider using trusts in your Will, including for income tax minimization.
In this blog, we highlight some special opportunities available where a non-Canadian resident passes assets on death to a Canadian resident. To illustrate, a couple of common examples: