Debra J Sweetman - Barrister, Solicitor, Notary

WILLS

There are several reasons that one should consider having a Will. In many cases, the house is the major asset and is owned as joint tenants. Under this circumstance, the house and any other assets that are jointly owned automatically go to the surviving owner(s) and any assets remaining are often low enough in value that if a Will exists, there is no need to apply for a Certificate of Appointment of Estate Trustee With A Will (formerly Letters Probate). Further, where a life insurance policy or RRSPs or mutual funds have a named beneficiary, those sums flow to the beneficiary(ies) regardless of the Will or the court process. Thus, the small sum paid for the Will prevents a large sum having to be paid later for legal fees and court fees. The court fees are $5.00 for every $1,000.00 of assets up to $50,000.00 and $15.00 for every $1,000.00 thereafter.

Although assets that are jointly owned with another person automatically go to the survivor, one should consider what would happen upon the death of the survivor. Where one dies in Ontario without a Will, the Succession Law Reform Act dictates where the deceased's assets go. It provides that the intestate estate is distributed, subject to the rights of the spouse, equally among the issue who are of the nearest degree in which there are issue surviving the deceased. Where any issue of the degree entitled has predeceased the intestate, the share of such issue shall be distributed among the issue in the manner set out and the share devolving upon that and subsequent degrees who predecase the intestate shall be similarly distributed. To put this more simply, ignoring issue that have predeceased:
if there is a spouse but no child, everything goes to the person's spouse;
if there is a spouse and one child, then $200,000.00 goes to the spouse and the remainder is divided equally between the spouse and the child;
if there is a spouse and more than one child, then $75,000.00 goes to the spouse and one third of the remainder goes to the spouse with the remaining two-thirds divided equally between the children;
if there is no spouse and no child, the estate is divided between the deceased's parents equally;
if there is no spouse, no child, and no parents, then the deceased's siblings take equally;
if there is no spouse, no child, no parents, and no siblings, then the deceased's nieces and nephews take equally;
if there is no spouse, no child, no parents, no siblings and no nieces or nephews, then the deceased's next of kin take equally; and finally, if there is no next of kin, then the estate goes to the Crown.

One should also consider the tax aspects of estate planning. There is a deemed disposition of depreciable assets upon one's death unless there is a rollover to a spouse or to a spousal trust. Further, there is no capital gain on one's principal residence and there are certain other provisions in the Income Tax Act exempting capital gains. One should consult one's tax advisor in this regard.

It is advisable to have a lawyer draft the Will, otherwise the legal interpretation may differ from the intended result.

THE FAMILY LAW ACT AND DEPENDENTS RELIEF ACT

A Will does not always govern where one's estate devolves. A spouse can claim an equalization payment under the Family Law Act rather than taking under the deceased's Will. This is the same principle that applies upon marriage breakdown. If one's spouse is named as one's Estate Trustee (formerly an Executor), this may create a conflict of interest if the spouse is not the sole beneficiary.

Further, if a person is not providing for a dependent in the Will, the dependent should be specifically excluded and the reason for the exclusion stated as the dependent has a potential claim under the Dependants Relief Act for support from the estate.

Many Wills drafted subsequent to 1986 contain a clause with respect to the Family Law Act. Basically, it prevents income and sometimes the capital from the inheritances from being transferred to spouses of beneficiaries in the event of marriage breakdown or contrary to the Will of a beneficiary.

MARRIAGE CONTRACT

One's spouse may change the terms of his or her will at any time therefore, one should consider signing a marriage contract or cohabitation agreement particularly where there are children from a previous marriage.

ESTATE TRUSTEE

An Estate Trustee is responsible for distributing the property of the deceased. When choosing an Estate Trustee one should choose someone who is at least eighteen years of age, who is trustworthy, who preferably lives in Ontario and who is available.

One should consider naming an alternate Estate Trustee in the event that the first named Estate Trustee predeceases the person making the Will or is unable to assume the responsibilities involved. If one's Estate Trustee has predeceased and no alternate is named, then the Estate Trustee of the Estate Trustee's Estate has the option of becoming the Estate Trustee of one's Estate, which may or may not be desirable. The consent of each Estate Trustee and each alternate Estate Trustee should be obtained before drafting the Will.

There are advantages and disadvantages if you appoint a financial institution as an Estate Trustee. If Estate assets remain in trust, there is continuity of administration, investment expertise, tax expertise and sophisticated accounting. There may be some disadvantages in the areas of sympathy and flexibility. Sometimes a financial institution is advisable where there is a question of family dissension.
The fees which any Estate Trustee may charge are approved by the Surrogate Court in Ontario and depend upon the complexity of the Estate and are usually between two and three percent of incoming and outgoing income and capital.

BENEFICIARIES

Where devising to someone who is under eighteen, it is wise to give the Estate Trustee power to hold the monies in trust until the person is eighteen or older to avoid the necessity of the monies being paid into Court until that time. This is also advisable where a beneficiary is seen as frivolous.

Trusts can be either intervivos (during lifetime) or testamentary (after death). A trust is taxed the same as an individual so you would be providing income splitting opportunities resulting in a lowering of your effective tax rate. Further advantages are creditor proofing, and having the growth of these assets taxed in the hands of the beneficiaries of the trust.

When drafting a Will one should make specific bequests or legacies of items or sums of money where one wants to be sure an item or sum of money goes to a certain person. Alternatively, many people merely make their wishes known to their Estate Trustees trusting that the Estate Trustees will fulfil their wishes and that the beneficiaries will not object.

GUARDIAN

Where a guardian is named in a Will, the person(s) named has ninety days from the date of death to apply to Court to be confirmed as guardian(s). The best interests of the children are always considered, but the wishes stated in the Will are persuasive. The consent of each person named as guardian should be obtained prior to the drafting of the Will.

FUNERAL ARRANGEMENTS

Similarly, any funeral or burial arrangements stated in the Will are not binding. Further, as a practical matter, the Will may not be read until after the burial takes place.

LIST OF ASSETS

It is advisable to keep an up-to-date list of assets especially RRSPs, bank accounts, etc. Each Estate Trustee should also be made aware of the location of the original will.

REVOCATION

A Will is automatically revoked on marriage unless the Will specifically states that it is made in contemplation of marriage to a named individual. Under the Succession Law Reform Act, where a Will is made prior to a divorce or prior to a marriage being declared a nullity, any provision in a Will wherein a spouse is named as beneficiary or as Estate Trustee is revoked and the Will is construed as if the former spouse had predeceased unless the Will specifies a contrary intention.

The comments contained in this article provide a brief overview only and should not be regarded or relied upon as legal advice or opinion. Debra J. Sweetman would be pleased to provide more information or specific advice on matters of interest to readers.

Debra J. Sweetman B.A.Sc., LL.B.
Barrister, Solicitor, Notary
340 Byron St. S., Whitby ON L1N 4P8 · (905) 666-8166 · Fax (905) 666-8163

POWERS OF ATTORNEY

The Substitute Decisions Act; the Health Care Consent Act; and the Advocacy Act are statutes affecting Powers of Attorney. The Substitute Decisions Act provides for two types of Powers of Attorney: one for decisions about property; and one for decisions about personal care.

POWERS OF ATTORNEY FOR PROPERTY

A Will does not have any effect until one's death. During one's lifetime a Power of Attorney for Property allows another person or persons (the attorney(s)) to sign anything for the person giving the Power of Attorney (the donor).

It can be restricted to certain types of documents and/or to a certain length of time. The Power of Attorney comes into force immediately, however, one may still handle one's affairs while one is capable of doing so.

It is not advisable to have the Power of Attorney effective only if the donor becomes incapacitated as it creates difficulties and delays in attempting to prove that the donor is, in fact, incapacitated. In any case, if the donor does not trust the attorney not to use the Power of Attorney unless there is incapacity, the donor should not trust that person at all. The Power of Attorney can be left with a third party, with instructions to release it only if the donor becomes incapacitated.

The Power of Attorney should include a clause that allows the Power of Attorney to be exercised "during any subsequent incapacity". This is referred to as an enduring or continuing Power of Attorney.

In the event one becomes incompetent, if there is no Power of Attorney, the Public Guardian and Trustee administers the estate. A Committee would have to be appointed under a costly and time consuming legal process. The person named as Committee would not necessarily be the person one would have named oneself had a Power of Attorney been signed.

In cases where a person is found to be mentally incompetent under the Mental Health Act, the Public Guardian and Trustee will initially become that person's statutory guardian of property. In this case an attorney will have to apply to the Public Guardian and Trustee to take over. The transition may take up to thirty days. If a person found to be incompetent has not signed a Power of Attorney, a spouse, parent, child, or sibling may apply to become guardian of his property.

There are different procedures under the Mental Health Act for appointing a statutory guardian of property for patients of psychiatric facilities.

POWERS OF ATTORNEY FOR PERSONAL CARE

A Power of Attorney for Personal Care (a "Living Will") allows a person or persons to be appointed to make decisions solely regarding care, such as consent to or refusal of medical treatment and admittance to a nursing home. It cannot be used unless a person is incapable of making personal care decisions.

The attorney must follow the instructions and wishes the donor made when the donor had capacity, whether the instructions are in writing or not. If there are no instructions, or it is impossible to follow the instructions, the attorney must make a decision in the donor's best interests. Consideration must be given to the values and beliefs the donor had while capable and any current wishes the donor may have, if they can be determined.

A Power of Attorney for Care may provide for different degrees of treatment in different circumstances. For example, if you are conscious or unconscious, mobile or bedridden, able or unable to recognize loved ones. However, it is generally best not to include such instructions as it is impossible to allow adequately for various scenarios. For example, a Power of Attorney may restrict the use of life support whereas breathing machines can be used temporarily in emergencies or during surgery.

Depending on the type of power of attorney you make, it is advisable to tell your family, lawyer, and financial institutions you deal with, health care providers, and anyone else who provides you with care who your attorney is and his or her address and telephone number. Remember to update them regarding any change in your attorney's address or telephone number.

ATTORNEY REQUIREMENTS

An attorney for property must be at least eighteen while an attorney for personal care need only be sixteen.

COMPENSATION

There is a set rate of compensation for attorneys, however, provision may be made in the Power of Attorney for a greater or lesser amount.

WITNESSES

Any witness must be at least eighteen years old. Those who cannot be witnesses include: the attorney, his spouse or partner; the donor's spouse or partner; the donor's child or someone who the donor treats as his child; a person whose property is under guardianship; and a person who has a guardian of the person.

REVOCATION

A Power of Attorney for Property may be revoked at any time as long as the donor is mentally capable. Anyone who has a copy of the Power of Attorney or who has been advised of the Power of Attorney should be notified of the revocation. The revocation should be in writing, in front of two witnesses. The rules regarding witnesses are the same as those for making a Power of Attorney.

Debra J. Sweetman B.A.Sc., LL.B.
Barrister, Solicitor, Notary