Power of Attorney for Personal Care – Mental Capacity and Medical Assistance When Dying

While I still act as a corporate accountant, I am spending more and more of my time providing wealth advisory services to my current and new clients, which allows me to utilize my tax, estate planning and general accounting background. When I combine these technical aspects together with the experience I have gained in respect of understanding the nature of people in relation to their families and their wealth, I am able to provide a comprehensive plan for their current, retirement and estate planning.

In providing these services, I always ensure my clients have up to date wills and powers of attorney (“POA”) for their finances and personal care (health). In many cases, the POAs are either very old or not even in existence. When discussing POAs for personal care, I advise my client that there have been many changes in the law in respect to heroic measures and medical assistance in dying and depending upon their personal and religious views, they need to review these issues with a very qualified estate lawyer.

I thought today, I would do a bit of a Q&A on some of these issues and specifically the mental capacity required to make these decisions. I thus turned to my resident estate and wills expert, Katy Basi, for some direction.

Please note Katy's answers are specific to Ontario, if you live in another province, you will need to confirm that province’s legislative provisions.

If you are a reader of this blog, Katy needs no introduction. If you are a new reader of the Blunt Bean Counter, check out some of Katy’s guest blogs from estate planning for extended families to New Will Provisions for the 21st Century – Your Digital Life to Cottage Trusts among many other posts.

I thank Katy for her assistance with this blog post.

Power of Attorney for Personal Care and Medical Assistance When Dying

Below is a summary of the responses to my questions from Katy. I was personally very surprised at some of her answers to my questions, but given this complex, controversial and still evolving area of law, I guess in retrospect, I should not be surprised.

Questions and Answers:

Mark: Katy, a concern for all of us as we age is mental capacity. How does mental capacity affect POA‘s for health?

Katy: “First we need to appreciate that a POA for personal care is only relevant and effective when the person in question does not have the mental capacity to make their own health care decisions. I am asked fairly commonly by my clients to include provisions regarding medical assistance in dying in their powers of attorney for personal care. This request usually comes on the heels of a discussion about whether or not to include a “no heroic measures” clause in their document. I have to tell my clients that the legislation does not allow a mentally incapacitated person to have medical assistance in dying. This is the case even if the person requested this assistance, when they were capacitated, in writing via their power of attorney for personal care.”

Mark: So, are you saying that even where you have requested medical assistance in dying in your POA for personal care, if you do not have mental capacity when the medical assistance is desired, that request is essentially voided?

Katy: “There is a clear distinction in the medical assistance in dying legislation between a person who has the capacity to make their own personal care and health care decisions, and a person who does not have this capacity. The former can request medical assistance in dying if all of the other conditions of the legislation are met, and the latter cannot. As a person’s power of attorney for personal care is only effective upon the person losing their capacity to make personal care and health care decisions, by definition the document is only relevant upon incapacity. At that time medical assistance in dying is off the table as an option".

Katy clarifying note to Mark: "This exclusion only relates to medical assistance in dying – your most recent verbal or written instructions, made while capacitated, otherwise govern your personal care and health care".

Mark: This provision seems unfair?

Katy: “So under one view the legislation is discriminatory – people with capacity can obtain this assistance, and those without capacity cannot. So, I guess that if I have a grievous and irremediable medical condition, which is another requirement under the legislation, I hope that I at least have capacity, as otherwise I cannot receive medical assistance in dying. If I am mentally incapacitated, with a grievous and irremediable medical condition, my power of attorney for personal care can request that all heroic measures stop at this point, and that lots of morphine and other pain relief be administered. But that’s it – medical assistance in dying cannot be given, and I will have to die on my own, when my body finally gives up”.

Mark: So, is there anything that can be done in case of mental incapacity?

Katy: “For some clients we include a clause in their power of attorney for personal care that indicates their desire for medical assistance in dying if they are in a situation where the other conditions of the legislation are met, in the event that the current requirement to have capacity is amended by future legislative changes. A bit of a Hail Mary, but why not?”

I thank Katy for her insights on this complex topic.

Katy Basi is a barrister and solicitor with her own practice, focusing on wills, trusts, estates, and income tax law (including incorporation's and corporate restructurings). Katy practiced income tax law for many years with a large Toronto law firm, and therefore considers the income tax and probate tax implications of her clients' decisions. Please feel free to contact her directly at (905) 237-9299, or by email at katy@basilaw.com. More articles by Katy can be found at her website, basilaw.com.

The above blog post is for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Readers are advised to seek specific legal advice regarding any specific legal issues and for their specific province.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Ethical Wills

Wills are typically matter-of-fact documents, as they have to be drafted to withstand legal challenges. Wouldn’t it be nice to have a “softer” complementary document, letter or even a video, in which you can express the following?

1. Your values

2. Your hopes for your family

3. Explain the decisions made in your will

4. Provide for or ask for forgiveness

Today, I will discuss such a will, commonly known as an ethical will.

What is an Ethical Will?

According to Wikipedia, “the ethical will is an ancient document from the Judeo-Christian tradition. The original template for its use came from Genesis 49:1-33”. These wills were designed to pass ethical values from one generation to the next. Modern day ethical wills had been adapted and modified and they remain excellent conduits to ensure our ethics, morals and standards are passed down and on record.

While ethical wills have typically been used to pass personal values to your family, some people are now using ethical wills to include financial issues and/or provide business guidance and values to second generation business owners. I will discuss these “wealth” wills next week.

The website for Celebration of Life, a company that helps people with their legacies, suggests you may include some of the following in an ethical will:

• important personal values
• important spiritual beliefs
• hopes and blessings for future generations
• life lessons
• love
• forgiving others and asking for forgiveness

Shae Irving, J.D. suggests you may also want to include the following in an ethical will:

• family history
• cultural and personal beliefs
• reasons for charitable and personal financial decisions
• personal stories about items of property left to inheritors
• how you would like to be remembered after death

When Do You Present an Ethical Will?

Ethical wills can be written and presented literally anytime from cradle to grave. You can write such a document when your son or daughter gets married, has their first child, or as a statement at the end of your life; but in no way are you limited to such occasions.

Most ethical wills are written as end of life statements and can be shared while alive or after you pass away. I would suggest that most people would prefer to have their ethical will shared after they pass away as it avoids confrontation; although personally, I think there is something to be said for explaining decisions and setting forth your values and beliefs in person.

Ethical wills are very personal documents and no two, will be the same. Should you wish to write such a document, the discussion and considerations above, should give you a good start on writing your ethical will.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.

Estate Planning and the Black Sheep Child

In November, Adam Mayers of The Toronto Star reviewed my book, Let’s Get Blunt About Your Financial Affairs. In his article, he discussed some of the comments I made in my book on inheritances.

123 REF-Tomas Marek

My observations elicited some very interesting emails to my inbox. Some of the emails provided tragic and sad details of children being left out of their parents' lives and consequently their wills for various reasons. One reader, who is gay, asked me if he could be left out of a will solely for that reason.

This question is far outside my area of expertise. I thus enlisted my wills, trusts and estates expert Katy Basi, to answer his question and discuss in general, the consequences from both the parents and child's perspective, of leaving a black sheep child out of the will.

Please note: Katy and I use the term "black sheep" colloquially and the term is not meant to be demeaning in any manner.

Estate Planning and the Black Sheep Child

By Katy Basi

Many families have one (or more) black sheep children, and estates lawyers commonly deal with two categories of questions regarding these shunned family members. In this blog post I will refer to our sample unfortunate as Cain (though most black sheep are not guilty of fratricide!). The two situations are as follows:

1. If the client is not Cain - can I cut Cain out of my will? If I do, will he be able to challenge my will? 
2. If the client is Cain – can my family members cut me out of their wills?

The Parent is the Client

If you plan to cut Cain out of your estate plan, I typically have three pieces of advice for my clients:

(1) Explain in the will why Cain is being treated differently than other family members of the same degree of family connection. For example, if a child is being cut out of a will because they have chosen not to have contact with their parents for two decades, the will should state that very relevant fact. Otherwise, Cain could argue that the lawyer made a drafting error by leaving him out, or this omission could be used as evidence of the parents’ lack of capacity to make the will(s) in question (i.e. the argument then goes “Clearly the fact that they “forgot about me” indicates that they had lost their marbles!”).

(2) Consider leaving a set dollar value legacy to Cain, and then having a clause that takes the legacy away if Cain challenges the will for a reason other than a valid interpretation issue. This is known as an “in terrorem” clause and needs to be very carefully drafted by an estates lawyer in order to be legally effective.

(3) Arrange for a capacity assessor to interview the testator before the will is signed (though not too far in advance of signing). The capacity assessor should then write a letter or report of some kind confirming that the testator has the capacity to make the will in question (presuming that this is the case, of course). This is particularly helpful if the testator is elderly or ill, or if there are any other factors which could lend strength to a “lack of capacity” argument by a disappointed beneficiary. I have seen a capacity assessment stop estate litigation in its tracks.

Cain is the Client

When I am advising Cain, my first piece of advice is to consult an estates litigator (I am an estates solicitor, and therefore a major part of my job, in my view, is to help clients plan their estates in such a way as to discourage litigation). After that disclaimer, my counsel generally flows along these lines:

(a) We are lucky (in my view) to have testamentary freedom in Ontario, subject to certain limitations (other provinces such as British Columbia have enacted laws limiting testamentary freedom to some extent).

(b) One exception to testamentary freedom is the ability of certain family members (e.g. minor and adult children, parents and siblings) to make a support claim against the estate. For example, if Cain is an adult child who was financially supported by his parents, and was not left a sufficient inheritance by them (as determined by a court) Cain may make a support claim against the estate. Support can include providing accommodation at lower than fair market value rent.

(c) Where no financial support has been provided, Cain’s usual recourse is to try to have the will that cuts him/her out declared invalid, usually on the basis of a lack of testamentary capacity (as alluded to above) or undue influence (e.g. “my sister pressured my mom into cutting me out of her will”).

(d) Either of these claims will require solid evidence to be successful in court.

(e) A successful will challenge is not helpful if the prior will also cuts out the challenger, presuming that the prior will is valid.

(f) While in the old days most of the costs associated with estate litigation were borne by the estate in question, the courts have shifted their approach in recent years. These days, courts do not hesitate to order an unsuccessful will challenger to pay, not only their own costs, but also the costs of the estate relating to the challenge. Litigation is very, very expensive and time-consuming, so launching a will challenge due to feeling left out, without a good evidentiary case, is just not a good idea.

(g) However, if the will challenger has been cut out of the will for a reason that is against public policy, then litigation may be successful even if the testator had capacity and was not unduly influenced. If Cain can prove in court that he/she was cut out of an estate plan due to discrimination on a basis not permitted under the Charter of Rights and Freedoms, for example due to their sexuality, or because they married outside of his/her race/religion etc., then Cain may have a valid claim. The evidentiary mountain here can be steep to climb, but in a recent case the claimant was successful in overturning her father’s will on the basis that her father had cut her out as she had a mixed-race child. She was successful despite the fact that there was no reference to this discrimination under the terms of the will. There was, however, substantial external evidence as to the discriminatory reason behind her father’s estate plan.[Note: Just prior to the publication of this blog post, the decision of the lower court was overturned by the Ontario Court of Appeal, reinstating the father's original estate plan. It would be very helpful to have guidance from the Supreme Court of Canada regarding this issue if the daughter decides to ask for leave to appeal].

My discussions with clients about cutting out, or being, the black sheep tend to be fraught with sadness, anger and frustration. My experience is that clients do not cut out a black sheep lightly, and in many cases would usually be overjoyed to reconcile, knowing that there will need to be apologies and compromise on both sides. By the time I am counselling a black sheep about being cut out, it’s clear that no amount of litigation will heal the hurt feelings.

Bloggers Note: Katy has written numerous guest posts for this blog. Many of her articles have proven to be very popular with readers. If you want to read more from Katy, the best way to review her previous blog posts is: go to the search function on the top right hand side of the blog and type in her name.

Katy Basi is a barrister and solicitor with her own practice, focusing on wills, trusts, estates, and income tax law (including incorporation's and corporate restructurings). Katy practiced income tax law for many years with a large Toronto law firm, and therefore considers the income tax and probate tax implications of her clients' decisions. Please feel free to contact her directly at (905) 237-9299, or by email at katy@basilaw.com. More articles by Katy can be found at her website, basilaw.com.

The above blog post is for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Readers are advised to seek specific legal advice regarding any specific legal issues.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Canadians Don't Have the Will

Over the last few years, I have often referenced a 2012 survey by LawPRO reflecting that 56% of Canadians do not have a Will. I have used this startling statistic to urge you to have a Will drafted (or updated) and to suggest you also put in place powers of attorney for property (financial decisions) and personal care (health decisions). The fact that Prince did not leave a will (which I find incomprehensible, given the number of advisors he would have had) has brought further attention to this issue.

Shockingly, in a new Google Consumer Survey conducted by Legalwills.ca, the number of Canadians without Wills has increased to 62%. The survey also notes that 12% of Canadians have an outdated Will (most never updated their Wills once they married and/or had children), which means that 74% of Canadians do not have an up-to-date Last Will and Testament.

In general, I consider this behaviour selfish and I cannot understand how anyone that is part of a functional family unit would ever want to leave their family the chaotic mess that follows when there is no Will in place.

Here are some facts from the Legalwills.ca survey, which can be found here.

Some Startling Numbers

The survey showed a correlation between age group and the probability of having a Will:

Age 18-24: 87% do not have a Will, 5% have an out-of-date Will, and 8% have an up-to-date Will.
Age 25-34: 77% do not have a Will, 10.5% have an out-of-date Will, and 12.5% have an up-to-date Will.
Age 35-44: 68% do not have a Will, 8% have an out-of-date Will, and 24% have an up-to-date Will.
Age 45-54: 53% do not have a Will, 13% have an out-of-date Will, and 34% have an up-to-date Will.
Age 55-64: 32% do not have a Will, 19% have an out-of-date Will, and 49% have an up-to-date Will.
Age 65+: 28% do not have a Will, 21% have an out-of-date Will, and 51% have an up-to-date Will.

As the survey notes, even when discounting younger adults, 48.5% of Canadians aged 35 and older responded to not having a Will and 13.5% responded to having a Will that is out-of-date, leaving only 38% with a Will that reflects their current financial and personal situation.

Unexpected Income Correlation

The survey found a surprising inverse relationship between income levels and the probability of having an up-to-date will.

“The group least likely to have up-to-date Wills was in the $100,000+ annual income range; respondents in this group were also three times more likely to have an out-of-date Will than those with lower incomes. The group most likely to have up-to-date Wills was in the lowest annual income range of $0-$24,999. As annual income increased, the proportion of respondents with an up-to-date Will decreased”.

Legalwills.ca suggests “The cause of this is likely because those with higher incomes can more easily afford to use a lawyer to write their Will; making modifications to a Will with a lawyer requires setting a meeting, and costs hundreds of dollars. To the contrary, those with lower incomes are usually inclined to use more affordable alternatives, such as online services, where the testator can make modifications to his or her Will at any time without extra costs”. (It should be noted that Legalwills.ca provides online services to custom-make Wills, Power of Attorney and Living Wills for Canadians and thus, they have a bias to online services).

Observations from the Survey

Legalwills.ca make some interesting observations from the data, a few of these include:

1. The system for creating and updating Wills is broken – their opinion is the current system is not working for most people.

2. People wait for the perfect time to have their Wills prepared – I agree with this comment. The issue here is; our life circumstances are constantly changing. Consequently, our Will is really a living document that requires various updates throughout our life.

3. Legalwills.ca references a quote from Forbes Magazine by the rapper Snoop Dogg, saying essentially: who cares about his Will, he will be dead. This is not an unusual comment. Legalwills.ca says “unfortunately, what Mr. Dogg doesn’t realize is that writing a Will was never about you. It’s about taking care of your loved ones – the people that you care for through your life, I’m not sure that many people would deliberately inflict trauma on their own family at a time when they can least handle it, but not writing a Will is setting your family up for heartache and emotional turmoil. It all too often leads to acrimonious fallouts between family members who seemed to get along just fine until they

had to work together to administer an estate without a Will”.

4. Legalwills.ca suggests that not having a Will is a huge missed opportunity. They suggest you can do wonderful things in a Will, for example:

• Leave a few thousand dollars to a charity

• Give your favourite niece some funds to travel the World

• Set up an event in your memory

• Create a scholarship fund

• Organize and pay for some social events for your best friends

• Leave a cherished item to somebody who will really appreciate it

• Make sure your digital accounts are all taken care of appropriately

• Make sure that your pets are taken care of

Whether you have a complex estate and need a lawyer to draft or update your Will, or have a simple estate for which you can use an online service, as Nike says “Just Do It” and get your Will and powers of attorney in place. You will have peace of mind and your family will be appreciative that you made their financial lives simpler at a time of grieving.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.

Common Estate and Tax Planning Issues

Over the years, I have reviewed many individuals’ financial affairs. Most people have their affairs somewhat in order, but there are typically still some issues to be considered or holes to be filled. Today, I list some of the most common issues and gaps.

Estate Issues

The most common estate planning issues I have observed relate to wills, powers of attorney, estate documentation and insurance. I discuss these below.

 

Wills

Wills always seem to have multiple issues and errors of omission when I review them. These five are the most common:

1. No Secondary Will – Depending upon your province of residence, a secondary will can be used to reduce the probate taxes due upon your death. This would most typically apply to shares you own in private companies and other personal items. It is my understanding that Ontario and British Columbia are the two main provinces where secondary wills are used, so check-in with your advisor if you live in a province other than Ontario or B.C.

2. Old or Dead Executors - As many people do not update their wills on a regular basis, I have often found their executors have passed away or they are very old (if your children are not your executors). You may want to review your executor selection and ensure you have at least one “youngish” executor.

3. All the Children are Executors – Keeping with the executor theme, many people have all their children as executors. I suggest that if you can finesse this with your children, in some cases it is better to only have one or two of your financial savvy children as executors, to avoid the estate being bogged down. This is not always practical given family dynamics, but is more efficient and can often reduce sibling friction.

4. Individual Bequests are Missing – Estate lawyer Charles Ticker notes in his book “Bobby Gets Bubkes: Navigating the Sibling Estate Fight that one of the biggest issues children have post-mortem, is where a parent had promised a child a certain personal item, be it jewelry, art, purse etc. and it is not reflected in the will. Parents, make your will consistent with your promises.

5. Blended Family Issues – Blended family issues can be so complicated, there is sometimes “paralysis by analysis” and they are just ignored. In this blog post I wrote in June 2020, I note that estate planning is complicated enough in a first marriage; second or third marriages multiply the risks and complexity. You may want to read the wills and estate planning sections of this blog post on blended families.

Powers Of Attorney

The two most common issues I come across with Powers of Attorney "(POA) are:

1. They are often not done!

2. The personal healthcare POA is out of date and does not reflect the significant health care issues that should be considered from extraordinary health measures to mental capacity (see this blog post) to assisted death.

Estate not Documented

I have seen many estates with no documentation in respect to the assets that constitute the estate and where the assets are located. I wrote about this a couple weeks ago, so I will not re-iterate. Here is the link to the blog post.

Insurance

Most people dislike paying insurance. However, parents often have family legacy assets they wish to keep in the family such as cottages, rental properties, family businesses etc. I have seen several instances where these legacy assets must be sold by the estate or to keep these assets in the family, excess taxes are paid as a work around solution. Often, life insurance, typically permanent insurance, such as Universal or Whole life would have made financial and tax sense and emotional sense (where the parent wanted a legacy asset to remain in the family).

I discuss many other uses of insurance for estate planning purposes in this blog post including the most popular, being life insurance to cover an estate tax liability on death.

Income Tax Issues

Capital Dividend Account

The capital dividend account (“CDA”) is a cumulative tax account that tracks certain amounts (most commonly the non-taxable portion of capital gains) that are not taxable to a Canadian Private Corporation and may be distributed tax-free to the company’s shareholders. See this detailed blog post I wrote on the subject.

Over the years, I have often seen this account not tracked or overlooked. A brief discussion of your corporation’s CDA balance should be part of your annual discussion with your accountant to ensure that you are not leaving any tax-free money on the table.

Charitable Donation Tax Efficiency

I have written several times (the last time being this blog) that many people do not maximize the tax benefits of their donations. If you plan to make a charitable donation and you own marketable securities with unrealized capital gains, it is far more tax-efficient to donate the securities in lieu of cash. This is because the capital gain on the security is not subject to tax when donated. For example, if you own shares of Bell Canada with a cost of $1,000 and a fair market value of $5,000, you would have to pay capital gains tax on the $4,000 capital gain when sold. However, if you donate the shares, the capital gain is deemed to be nil and you still get the donation tax credit.

Where you have a corporation and own marketable securities, it is even more tax-efficient to make a corporate donation, as the capital gain is eliminated and the capital gain gets added to the CDA account discussed above.

Unfunded TFSA

I find it very surprising how many people still have unfunded or partially funded Tax-Free Savings Accounts (“TFSAs”). These accounts allow you to grow your money tax-free and provide substantial flexibility in using and replenishing the account.

In the early days of TFSAs, the contribution limits were not large and people did not want the hassle of opening the account. However, as of Jan 1, 2022, the contribution limit for a TFSA is now $81,500. So, if you have not contributed, get going. If you have contributed haphazardly, check your balance with the CRA and get caught-up.

Capital Loss Utilization

I often see people pay tax on capital gains that is unnecessary, as they could have sold securities that had unrealized losses to reduce the gain and the related tax.

As 2022 has been a tough year in the markets, you may want to undertake some tax-loss selling before the end of the year. I will have my annual tax-loss selling blog in a couple weeks which is very detailed to assist in your tax-loss selling planning.

Estate Freeze

As per my blog Estate Freeze -A Tax Solution for the Succession of a Small Business undertaking an estate freeze in the right circumstances is often a great way to defer a families tax liability to the next generation. However, not everyone agrees as per this blog Are Estate Freezes the Wrong Solution for Family Business Succession?

I am a proponent of using an estate freeze where it fits a families needs. Over the last two years I have seen three estates that caused tax havoc for families that could easily have been minimized with an estate freeze several years ago.

Hopefully you and your advisors have already considered most of the issues discussed above. If not, you may wish to “clean-up” any holes in your planning and ensure the efficiency of your estate and tax planning.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

No Will? You’re in Famous Company!

Readers of my blog are aware of my inclination to harp on the fact that you should have a will, and where you have a will in place, that it should be updated for significant life events. As discussed last week, in my post Power of Attorney for Personal Care – Mental Capacity and Medical Assistance When Dying. I also think it is important to have up-to-date powers of attorney for financial and personal care. But today, we are talking wills and the lack of such for some famous people and the lessons you may learn from their estate planning miscues.

In my blog post “Canadians Don’t Have the Will”, I highlighted a 2016 survey conducted by Legalwills.ca, that found 62% of Canadians do not have wills.

The 62% number is astronomical and in my not so humble opinion, just irresponsible. I thought of this survey, when I was recently told by a colleague that they were working on an estate where the first spouse passed away without a will, and then the surviving spouse died a couple years later without ever having a will drafted. I can maybe understand that some couples don’t have wills based on the premise “everything will just automatically flow to the surviving spouse”, although this thinking may be flawed depending upon your province of residence as noted in this link for the laws of Ontario when you die intestate (without a will). But for a surviving spouse to not have a will drafted is just beyond my comprehension.

Since the advice of accountants, lawyers, finance columnists and bloggers is obviously being ignored, I thought instead of lecturing that you should have a will, I would reflect on the folly of not having a will by looking at famous people who have died intestate and the messes they left behind.

Please note: I have no ability to confirm that these people did not have wills and I am relying on articles and other internet sources for this list, so I cannot guarantee its accuracy. Some of the stories in respect of these people’s deaths and estates are fascinating. You may wish to read in detail the links and source documents I provide below.

Famous People Who Supposedly Died Without a Will

The Musicians

There seems to be a correlation between being artistic and financially irresponsible as noted by the extremely famous musicians I note below. This does not surprise me, as I have suggested in prior posts on naming executors, that at the risk of generalizing you will want someone more anal than artistic to carry out this task.

Prince

In this article by People Magazine it was reported “A Minnesota judge has made it official – despite Prince’s estate being worth an approximated $250 million, the singer did not have a will in place to declare the distribution of his assets. A hearing was held Wednesday morning, according to court documents obtained by PEOPLE, and the judge has approved Bremer Bank, the institution Prince trusted with his finances over the years, to move forward with handling his estate – both personal and financial business”.

Prince's former manager, Owen Husney, in this USA today article said “he was too smart to have overlooked something that crucial and he had teams of lawyers, business managers and accountants over the years who would have advised him it was crucial”. Assuming that no will ever surfaces, it is mind numbing that with so many advisors, Prince did not have a will in place and it could have fallen through the cracks (unless he just refused to have one drafted).

"It's astonishing, absolutely astonishing that he did not have a will," says Jerry Reisman, an estate lawyer on Long Island who's been following the case. He predicted trouble ahead. You're going to have 'siblings' coming out of the woodwork alleging they are siblings. Everyone is going to be fighting over this estate.”

Will Lesson #1: Run Out and Write Your Will 

Hendrix, Marley and a Cast of Thousands

In this LegalZoom,com article the writer notes that both Jimi Hendrix and Bob Marley died without wills and that their estates were subject to legal battles for years. Musicians such as Prince, Jimi Hendrix and Bob Marley have complicated estates due to the publishing rights they hold on their music, the typically massive demand for their music once they pass away and the value in unreleased material that is often released posthumously.

Other musicians that have purportedly died without wills include Kurt Cobain, Barry White, Tupac Shakur, James Brown, Sonny Bono and Amy Winehouse.

Athletes

Many athletes are known for blowing fortunes, but you would again think that their advisors would have ensured they had wills in place, but that apparently is not the case, or the athletes ignore their advice.

Steve McNair

Mr. McNair who played in Super Bowl XXXIV as the starting quarterback for the Tennessee Titans and was the NFL’s Co-MVP in 2003, did not have a will. He also had, in addition to his wife and children, a girlfriend - who murdered him in a murder-suicide. The sad details of this case can be read in this Probate Lawyer blog. 

If this story is not tragic enough, this Family Archival Solutions Inc. article discusses how McNair’s mother subsequently lost her home because Mr. McNair had not put his mother’s name on the house or made provision in a will for her to inherit the property as he had intended for her.

Will Lesson #2: Unintended Consequences Transpire when a Will is Not Drafted

Lamar Odom

This is a story about almost dying without a will. In 2015, former NBA star and ex-husband of Khloé Kardashian was hospitalized after being discovered unconscious

at the Love Ranch, a brothel in Crystal, Nevada. Mr. Odom’s heart supposedly stopped several times and was touch and go to live. Luckily for him, he survived the ordeal. As Mr. Odom supposedly did not have a will, it was reported that if he died, his estate would have all gone 1/3 to Khloé and 2/3 to his children. It is my understanding that Odom and Khloe had a good relationship despite their divorce and she was there at his side while he recovered and she did not want his money. So this is not a story about an ex-spouse trying to get something that was not hers, but clearly reflects that an ex-spouse may be entitled to your estate or part of it, if you are not careful.

Will Lesson #3: When You Do Not Have a Will, Your Ex-Spouse May Inherit Part of Your Estate

Other Famous People Who Died Without a Will (or Updating Their Will)

Martin Luther King

Mr. King who was assassinated on April 4, 1968 was one of the best known civil rights activists in the World. His “I Have A Dream” speech made in 1963 during the march on Washington is known as one of the finest speeches ever given. Unfortunately, when assassinated Mr. King was only 37 years old and did not have a will per this Forbes article.

This LA Times article discusses how the children are threatening his legacy as the estate battles on 47 years after his death in respect of his tomb, sermons and memorabilia.

Will Lesson #4: When You Die Intestate You Create Possible Conflict amongst Your Family

Pablo Picasso

As detailed in this 2016 article by Vanity Fair on the estate of Pablo Picasso,  Picasso did not have a will and left over “45,000 works, all complicated by countless authentications, rights and licencing deals”. The legal fees on this estate have were supposedly over $30 million.

Will Lesson #5: When You Die Intestate, Your Estate Can Be Withered Away in Legal Fees

Heath Ledger

As I noted in the introduction, I not only stress the importance of a will, but that it must be updated to reflect significant life events. Heath Ledger died of an accidental drug overdose in 2008 during the editing of the Dark Knight Batman movie in which he played the Joker and posthumously won the Academy Award for best supporting actor.

Mr. Ledger had a will drafted a few years earlier in which his parents and sisters were beneficiaries. He however, had neglected to update his will upon his marriage to actress Michelle Williams and on the birth of their daughter Matilda. However, unlike many messy and nasty estate fights highlighted in this blog post, Heath’s family as detailed in this People article altruistically handed over the entire estate to Matilda. It is nice to see some kindness amongst the greed and fighting of the other estates.

Will Lesson #6: Update Your Will for Life Events, or You May Negate the Benefits of Having a Will

Howard Hughes

As per Wikipedia, Howard Hughes “was an American business magnate, investor, record-setting pilot, film director, and philanthropist, known during his lifetime as one of the most financially successful individuals in the world. He first made a name for himself as a film producer, and then became an influential figure in the aviation industry. Later in life, he became known for his eccentric behavior and reclusive lifestyle—oddities that were caused in part by a worsening obsessive–compulsive disorder (OCD), chronic pain from several plane crashes, and increasing deafness”.

As discussed in this New York Times article it took over 20 years to sort out the estate of the reclusive Howard Hughes. Mr. Hughes did not leave a will and his estate was subject to various forgeries.

Will Lesson #7: If You Have Not Decided to Draft or Update Your Will After Reading These Stories, I Give Up!

While most of these famous people had substantial estates, the lesson is still the same for the average person. Have a will drafted (and powers of attorney) so that you ensure your estate goes to whom you wish and it is not frittered away on legal battles that not only cost significant sums, but destroy the lives and relationships of your loved ones.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

The Top Five Areas of Estate Litigation

I have written several blogs on wills, estates and executors; some from a tax planning perspective and others  from a purely philosophical or observational perspective. I find this topic area fascinating. Thus, I am pleased today to have a guest blog by Charles Ticker, a lawyer who specializes in estates. Charles will discuss the ugly underbelly of estates, the litigation that can arise.

The Top Five Areas of Estate Litigation

The writer Ambrose Bierce once quipped: “Death is not the end, there remains the litigation over the estate”. As a lawyer who deals with estate disputes, I can certainly confirm Bierce’s observation. Today I will discuss the top five areas where litigation tends to occur.

Challenging the Will

Wills can be challenged if the testator ( person who made the will) lacked the requisite capacity. The legal test for capacity to make a will was set out in the 1870 English case of Banks v Goodfellow :

It is essential to the exercise of such a power that a testator shall understand the nature of the act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties — that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not been made.

Anytime an elderly person changes his or her will in a significant fashion or decides to leave a child out of the will, the likelihood of a will challenge greatly increases. To defend the will against any possible claim, it is well worth spending the money to obtain the written opinion of a capacity assessor prior to the making of the will as to whether the individual had capacity. As well, it is helpful if the will is prepared by a lawyer as opposed to a self –help will kit. Medical records and lawyer’s records can be reviewed and may shed some light on the testator’s mental condition.

Another ground for challenging the will is undue influence. If Mom was coerced by daughter Sally to cut brother Bob out of the will, then the will may be set aside. However, it is difficult to prove undue influence.

Family Law Act Applications

In Ontario, if a married spouse dies without making adequate provision for his or her spouse, the surviving spouse can within 6 months of the date of death make an election either to take the gifts under the will or apply to the Court for an equalization payment similar to a divorce situation. Sometimes the surviving married spouse needs more time to make a decision whether or not to seek an equalization payment because the spouse does not have sufficient information or documentation concerning the deceased’s assets. In those situations, the surviving spouse can apply to the Court for an extension of time within which to file the election. Legal advice should be sought as soon as possible after the spouse’s death.

Dependant’s Support Relief Applications

In Ontario and most jurisdictions, there is an expectation that the deceased make adequate provision for the support of dependants. The definition of dependant varies from jurisdiction to jurisdiction, but in Ontario dependants can include minor and adult children , grandchildren, parents, siblings, married spouses, common law spouses and same sex partners. The dependant in Ontario needs to prove not only financial need but also that the deceased was under a legal obligation to pay support or was paying support just prior to the time of death. Once gain, there are time limits within which to launch a claim ( six months from the grant of letters probate of the will or of letters of administration) and legal advice should be sought as soon as possible. The Court, if it considers proper, may allow a claim that is filed later if there are still assets in the estate that have not been distributed.

Claims based on constructive trust and unjust enrichment

If a person has contributed money or labour or has provided value to the deceased which benefited the deceased and contributed to the acquisition, maintenance or improvement of an asset, a claim based on the doctrine of constructive trust can be brought against the estate. The Court may award the claimant an interest in the asset if there is a connection between the asset and the contribution made or may make a monetary award of compensation. Constructive trust cases are not easy to prove. There is often no real agreement that the claimant will receive compensation. Therefore, the claimant must show that the deceased received a benefit and was unjustly enriched at the expense or detriment of the claimant and that there was no legal reason for the benefit and related deprivation, that is the person contributing the money or services was not making the contribution as a gift or did not receive some other benefit from the deceased. Constructive trust claims are often seen in the context of a common law spousal relationships because at present in Ontario common law spouses do not have the same property rights on death as do married spouses.

Claims against executors

Executors have a difficult job. They are trustees and fiduciaries owing the highest duty of care to the beneficiaries. They are responsible to manage the estate in accordance with the provisions of the will and keep detailed records. If trusts are involved, they must prudently invest the estate. Executors can be called upon to account for their actions and in particular any compensation they propose to take. Even if the will allows the executors to pre-take compensation they will still be required to account to the beneficiaries. If the beneficiaries do not approve of the accounting, the executor must have his accounts passed by the Court. Sometimes, the Court will remove an executor if the Court is satisfied that the executor is not carrying out his duties competently or honestly. Executors also face potential personal liability from creditors of the estate if the executor distributes the estate and neglects to pay the deceased’s creditors. To avoid this problem, executors should advertise for creditors.

Charles Ticker, is an estates lawyer based in Toronto, Canada who focuses on estate litigation and mediation of estate disputes. More information about him can be found at http://www.tickerlaw.com/. The information in this blog is not intended to be legal advice. Readers should consult their own lawyer, attorney or other professional for advice.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

Financial Ethical Wills - For Estate Planning and Managing Family Wealth

Last week, you read about the benefits of an ethical will. These wills are a way for you to share your personal beliefs, spiritual values and hopes for the future with your family. Today you will discover how some people are using ethical wills, to set forth their financial principles and values.

As a parent, a financial ethical will can help you accomplish one or all of the following:

1. Allow you to explain your estate planning
2. Assist your family in maintaining the wealth you created
3. Provide your family guiding principles of how to conduct business
4. Set forth how you hope your monetary legacy is to be used 
5. Discuss your philanthropy values and principals.

Estate Planning - Explaining Your Decisions

As you may have read in my blog titled One Big Happy Family - Until We Discuss the Will, I am a proponent of family meetings to discuss your estate planning (or at least parts of it). Given that many people are uneasy with having a family meeting to discuss money and inheritances, an ethical will provides you the opportunity (albeit after you have died) to clarify for your family your thinking and decision making process in respect of your estate planning.

However, be mindful; if the objective in writing your ethical will is to be positive and motivating, you may need to consider whether the clarity you wish to provide to your family relating to your estate planning decision making process, is in keeping with this objective.

Business - An Ethical Will Provides Guidance for a Family Business

Given the tremendous failure rate of second and third generation businesses (only 30 percent of all family-owned businesses survive into the second generation and only 12 percent will be survive into the third generation), an ethical will can be used to convey the guiding principles of your family business, and even set forth the challenges and opportunities you foresee for the company going forward.

In his article "Reintroducing the Ethical Will: Expanding the Lawyer’s Toolbox", written for the American Bar Association, author Scott E. Friedman provides the following insightful comment:

“In contemplating the scale and variety of intra-family conflict, we have come to the conclusion that many such conflicts are, in part, attributable to the death of a leader who had not thought to clearly transfer his or her intentions, wishes and wisdom to the surviving family members. Lacking direction and the benefits gleaned from a legacy of insight and wishes passed on by the patriarch or matriarch, surviving children often become absorbed in the negative emotions of selfishness, resentment and jealousy, which all inevitably leads to trouble for the business”.

Thus, any guidance and direction you can provide to your children may be invaluable as they try to navigate through the issues of succession of a family business.  

Philanthropy - Setting the Tone for Family Giving

You can use an ethical will to ensure your philanthropic values are carried forward by your children. Here is a quote taken from an article by Eric L. Weiner, Ph.D. written for the practice management section of the Financial Planning Association, in which a parent said the following:

“I would love to see you become responsible members of the community and philanthropists. To that end, I have set up a donor-advised fund as the main conduit for our philanthropic interest. This fund will give you and possibly your children the ability to make grants to worthy causes. I want portability so that you can direct grants to your own communities, as well as to national and international interests”.

Alternatively, instead of setting up a charitable fund, you could just encourage philanthropy by speaking to the importance of charity in your ethical will and hope you lead by example and your children follow in your charitable footsteps.

Ethical wills provide you with a tool to impart both your spiritual and financial values and beliefs and principles to your children. You may therefore, wish to consider using an ethical will in addition to the traditional Last Will and Testament.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.

Recent Changes in Legislation Make Reviewing Your Will A Must

Tax changes that will become effective January 1, 2016, may have a harsh and surprising effect on your will and estate planning. To explain these new changes, I have a guest poster, Howard Kazdan, a tax expert with BDO Canada LLP.

Below, Howard highlights some of the more significant changes in the legislation.

Recent Changes in Legislation Make Reviewing Your Will A Must

By Howard Kazdan

 

The interaction of life’s two certainties – death and taxes – is about to get more complicated effective January 1, 2016, due to legislative changes to the taxation of trusts and estates that have been enacted. You may wish to review your will after considering the information discussed in today's post.

Change in tax rates for estates and testamentary trusts, except for Graduated Rate Estates ("GRE")

 

Currently, estates and testamentary trusts (i.e. trusts that are created by will upon death) are subject to tax at graduated tax rates. Under these old rules, you could set-up multiple trusts (generally for each child to control their inheritances) to be taxed at the lower graduated income tax rates.

Effective January 1, 2016 only a GRE will be eligible for graduated tax rates. The lower tax rates may only be available during the first thirty-six months of the estate if that period is required to settle the estate. All of the income in other estates and testamentary trusts will be taxed at the highest personal tax rate. Under the new rules, if you had set-up say 3 separate trusts for each of your children, all of them will be subject to the highest tax rate, as they will not be considered GRE’s (however, there may be non-tax reason for still creating multiple trusts, such as to protect against spendthrift children, protect assets for family law purposes and asset protection).

The administration of these new rules may also become challenging where you have multiple wills (some provinces allow for two wills, one for personal assets and one for assets that are not required to be probated) and have different executors, since all of the wills may make up one estate. If one component of the estate no longer qualifies as a GRE, the entire estate may no longer qualify, and therefore all income will be taxed at the highest marginal tax rate.

Finally, the availability of tax elections for income to be taxed in a trust at graduated rates, even if such income was paid or payable to a beneficiary will now be extremely limited.

To qualify as a GRE certain conditions must be met, which include: 

 

• The estate must arise as a consequence of death

• The determination time is within the first thirty-six months of the estate

• The executor must designate the estate as a GRE

• No other estate can be designated as a GRE

Other benefits that will only be available to a GRE also include:

• ability to maintain an off-calendar year end

• ability to avoid capital gains on taxation of donated securities

• no requirement to make tax installments

• ability to carry losses back to terminal return

• more flexibility for claiming tax credits in respect of donations made by will/bequests

Due to the significant benefits of qualifying as a GRE, it will be necessary to plan accordingly.

Change in taxation of Life Interest Trusts

 

These trusts are often used to provide an income stream to a surviving spouse during their lifetime with the residual assets being distributed to other beneficiaries after that individual dies.

For example, spousal trusts are common in a blended family where husband and wife were previously married and each has children from a previous marriage. The husband may have established a spousal trust in his will whereby his wife was to receive income during her lifetime, but his children from previous marriage will receive the capital of the trust after she dies, and her children from a previous marriage are the beneficiaries of her estate after she dies.

Currently, when the wife dies, there will be a deemed disposition of the assets of the trust at fair market value and any income arising from the deemed disposition will be taxed in the trust.

The new rules will shift the reporting of income arising in the final year before death of the wife, including income on the deemed disposition of the assets, to her final income tax return. Since the beneficiaries of her estate and the spousal trust are different, this will lead to inequitable results (estate beneficiaries will owe tax, but the trust beneficiaries will own the assets). If the Canada Revenue Agency is unable to collect this tax from the estate, then it will have the ability to demand payment of the tax from the trust beneficiaries.

Planning for Disabled Persons

 

The new rules provide for a Qualified Disability Trust (“QDT”) which can be established for a beneficiary that qualifies for the disability tax credit. A QDT will allow for the taxation of income at marginal tax rates during that beneficiary’s lifetime, provided all of the required conditions are met.

As the conditions are very complicated and potentially require elections, it is imperative to review any wills that have provisions for a disabled person in context of the new rules with your lawyer and accountant.

Charitable Bequests On Death

Currently, on death, donations in the will are included in the final tax return of the individual or in the prior year, not in the estate return. Under the new rules, the donation will be deemed to be made from the estate which may result in additional flexibility in claiming the donation tax credit if the estate qualifies as a GRE.

The new rules are very complex and it would be prudent for your accountant and/or lawyer to review your will and any current estates, testamentary trusts or other life interest trusts that you may be connected with as a trustee, executor or beneficiary because planning strategies previously anticipated may no longer be effective. Where it is possible to amend such documents, it may be advisable to do so. Where it is no longer possible to amend such documents then additional planning may be required to determine next steps.

Here is a link to an excellent BDO tax memo which you may also wish to read if you want more detail.

Howard Kazdan is a Senior Tax Manager with BDO Canada LLP. He can be reached at 905-946-5459 or by email at hkazdan@bdo.ca

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.

Make Things Easier for Your Family and Executor(s) – Designate Personal Effects in Your Will

In March of 2011, I wrote a blog post titled Personal Use Property – Taxable even if the Picasso Walks out the Door. The blog discussed the taxation of personal use property and noted how many parents often neglect to deal with their art, jewelry, collectibles and sentimental personal effects in their wills. These omissions may be either inadvertent, or on purpose, to avoid paying income tax and/or probate tax on the personal use property. The ramifications of this neglect are potentially twofold:

1. Parents, who take a leap of faith believing that their children will sort out the ownership of these assets in a detached and non-emotional manner, may be creating unnecessary dissension amongst their children.
2. Parents put their executor(s), who are often one or more of their children, in a precarious position, with respect to their liability for probate and income tax of the estate.

Ensuring an Orderly Distribution of Personal Property

Lynne Butler, an Estate Lawyer and Senior Will Planner for Scotia Private Client Group, and the writer behind the excellent blog Estate Law Canada, had this to say about personal effects: “My experience over the years has been that more estate fights happen over personal items of the deceased than happen over money. Sure we all like money but it's the personal items that have the sentimental value".

So how can parents mitigate the potential for a family fight? In three words: inventory and document. Parents need to undertake a detailed review of all personal items from art and antiques to jewelry to great grandma's tea set and ensure these items are reflected in their wills. Where there are significant variations in value for items such as art, antiques and jewelry, parents can choose to ignore the valuation issue and just leave those personal items to the child they wish. The other option they have is to equalize these disparities in value in their will through cash or other means. For less valuable items with sentimental value, the will should be as detailed as possible. The key is to ensure you minimize the amount of unallocated personal effects not included in your will.

Don't Leave Your Executor(s) in a Precarious Position

In November, 2011, I wrote a blog post titled “Ontario Probate – You may want to plan to Die in 2012 in which I detailed how changes to the probate rules, known in Ontario as the Estate Administration Tax (“EAT”) will now allow Ontario estate auditors four years from the date the EAT is payable to assess or reassess the tax. The consequence of this change is that executors will now have to be extremely careful in distributing estate assets.

I have been informed that where executors are diligent in their duty, they will only be responsible for any EAT assessment or reassessment in their representative capacity. However, most lawyers are still confounded as to whom Ontario will go after if the assets have already been distributed. The general consensus appears to be the beneficiaries will be held liable, but some commentators have suggested that because the issue is far from clear, executors may want to hold back the final distribution for four years, a very impractical solution.

Where assets are undervalued for EAT purposes, or where a Picasso grows legs that allow it to mysteriously walk out the door, executors will potentially have liability and penalty concerns. Parents in all provinces should understand that by not fully documenting their personal effects in their wills, they may be putting their executor or co-executors in an untenable position.

Personal Effects not Listed in the Will

So what does an executor or co-executors do when the last surviving parent passes away and they have not addressed the distribution of all their personal effects in their will? How do executors ensure siblings or relatives of the deceased don't help themselves to these personal assets as has been known to occur on more than one occasion and how do they distribute these assets without creating a family war?

Here are some suggestions:

1. As soon as possible, change the locks on the deceased’s home and ensure all assets are secured in the home. Valuable assets should be put into the deceased’s safety deposit box, if the bank allows such, or put into a new estate safety deposit box
2. Call a meeting of the beneficiaries and make it clear to them that they are not to remove any assets from the home and set out your intended plan of distribution of the personal effects.
3. Inventory and catalog all assets.
4. Get rid of the “junk”. We all accumulate old clothes, furniture etc. Weed out the crap and inform the beneficiaries they should see if there is anything they want or these effects will be donated, or removed by a Junk Removal service.
5. After you have had time to ensure everything has been accounted for and the estate is starting to move forward, distribute the assets that were noted in the will in accordance with the deceased’s instructions.
6. Lastly, comes the hardest part. How do you distribute the deceased’s personal effects that have not been itemized in their will? I have read, heard or seen the following possibilities: 
   
   a) For large valuable assets, attach values and attempt to distribute proportionately, if the assets allow for proportional distribution. First pick could be determined by draw and the person choosing last would then pick first the second time around. If the assets are disproportional, you can auction off the assets for a proposed value. If the value received by one beneficiary exceeds that of another beneficiary, the excess value received can be equalized with cash they have received from the estate or their own funds.
   
   b) For less valuable assets and sentimental assets, see if you can work something out with the family and/or beneficiaries. The beneficiaries can rank the assets one to ten and the assets are then allocated to the beneficiary with the highest ranking of each asset. Alternatively, a lottery can be used or any other method the beneficiaries can agree upon. You just want to distribute assets as fairly as possible while trying to minimize any issues between the beneficiaries.
   
   Parents need to be cognizant of the precarious position they may leave their executor(s) in where they do not itemize and allocate as many of their personal effects as possible in their will. For personal items not listed in the will, executor(s) need to secure, inventory and organize these personal effects and create a plan for distribution of such assets.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

The Taboo Of Money - I Will Not Talk About It -Part 1

As discussed in my blog post last week, I am going to post small excerpts of a book I was writing on money taboos which I have abandoned. Today and next week, I write on the taboo of discussing your will with your children, either individually or in a family meeting, while you are alive.

The Taboo

One of the biggest money taboos people have is discussing their will openly with family members.

People hate talking about their own death. People hate talking about their own money. People hate conflict within their families. Combine all of these hang-ups and a perfect storm of neurosis results, creating a virtual tsunami of taboos involving openly discussing one's wealth, one's death and disclosing one's personal opinion about family members. Many people view the thought of this discussion with horror, but my advice is simply - "get over it and do it!"

Reasons for the Taboo

In a 2016 Google Consumer Survey conducted by Legalwills.ca, the survey found 62% of Canadians do not have wills. The survey also noted that 12% of Canadians have an outdated Will (most never updated their Wills once they married and/or had children), which means that 74% of Canadians do not have an up-to-date Last Will and Testament.

I suppose the most common, although rarely admitted, reason for this is, that people are in denial that their lives will eventually end and that their lives will probably end at a time that they cannot control. Understandable, but foolish. None of us get out of this world alive, so get a move on and arrange your affairs so that all of the money, jewelry, collectibles and personal items you have worked for will ultimately be distributed in the most beneficial and tax-efficient way possible.

Once someone has faced up to the necessity of drafting the will, why then the fear of discussing its contents with family members - those who are actually going to benefit from the will? I have heard both rational and irrational reasons for avoiding the discussion. Here's a sampling of some reasons/excuses I have heard over the years for people not discussing their wills/estate planning with their beneficiaries:

1. It is none of their business.
2. My parents did not discuss their will with me, so why should I discuss it with my children.
3. It is bad luck.
4. If my children know what is in my will, they will be hovering over me like the Angel of death waiting for me to kick the bucket.
5. Discussing our intentions will just cause tensions amongst my children.
6. My will does not split my wealth equally among my children.
7. My children are not equally responsible and I have a trust for one child; I don’t want them upset at me while I am alive that I don’t trust their judgement.
8. I am leaving a substantial sum to charity, my kids will “freak” when they find out.
9. I have no idea how long I will live, my assets may be depleted by the time I pass away and the kids will be expecting certain assets that may not be in existence.
10. I have not drafted a will (see above).

Consequences of adhering to the Taboo

If you do not discuss your will with your children while alive, the following are possible

consequences:

1. Perceived or actual inequalities in your will that can be explained rationally while you are alive will never be explained. 
2. You may create unintended conflict amongst your children.
3. You may not have an accurate understanding of which assets your children truly want.
4. Income taxes may not be minimized.
5. Estate litigation may result.

There is no doubt that money brings out the worst in some people and a full disclosure of your family assets and planned distribution may cause problems in your relationship with your children and in their relationships with each other. But it is my belief that it is better to know the problems, confront the problems and solve the problems before you die and this can only be done by a full and frank discussion with your beneficiaries.

Next week I will discuss the benefits of having a family meeting to discuss your will and estate planning.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.