Fortunately, I’ve found a great solution.  A company called ‘neat’ has developed a portable scanner that suits my needs well.  The neat scanner is about the size of a rolling pin, weighs less than a pound, and is powered by a USB cable connected to my laptop.   The scanner also comes with decent software and a sturdy carrying case which holds the scanner and its USB cable.  Scanned documents can be created as pdf files straight out of the scanner by simply pressing the ‘pdf’ button on the scanner.

This great little scanner has also solved the problem of obtaining client identification for my records.  I was delighted to discover that it does a great job of scanning a plastic driver’s license.  To ensure a sharp, clear image, I set the resolution to 300 dpi when scanning identification documents.  For most other scanning, especially for documents that have printed text and no graphics, I find that a setting of 150 dpi or 200 dpi is sufficient.  The lower resolution results in smaller files. 

The software shipped with the scanner is helpful for organizing personal and business receipts, bills, and other papers.  During scanning, it can recognize the text on business cards making the scanned information fully searchable.  Imagine how quickly and easily you could organize all those business cards you collect at networking events, conferences, and trade shows.  I am looking forward to the upcoming ABA TechShow in Chicago, March 25-27, 2010, so that I can put the scanner to the test!

What is a Trust?

Simply put, a “trust” is an arrangement under which someone holds property (such as bank accounts, investments, a home, etc.) for the benefit of someone else.  There is a distinct separation between the legal owner of the property (the trustee) and the person who enjoys the benefits of the property (the beneficiary).  The trustee functions as a caretaker who makes decisions about how the trust property is managed.  The trustee owes a ‘fiduciary duty’ to the beneficiary which requires the trustee to manage the trust property prudently and in the best interests of the beneficiary even if detrimental to the interests of the trustee.

For some of us with few assets and if no one is expecting to have access to our assets, Ontario’s intestacy laws (how an estate is distributed upon death if there is no Will) may be enough.  For example, if a married person dies without kids and having most assets jointly-held with his or her spouse, the surviving married spouse gets it all.   If the deceased was single and never had kids, his or her parents share the estate.  However, having died without a Will means that it will take longer to access the assets and settling the estate will require more time and money.

The distribution dictated by Ontario’s intestacy laws is, in our experience, rarely what people expect and may come as a bit of a surprise.  For example, Chris’ marriage ended three years ago but no separation agreement was ever signed.  A year ago, Chris’ unemployed girlfriend moved into his house and she was never added to the title.  Chris never had children.  Chris was living in a common law relationship at the time of his unexpected death.  Chris never signed a Will.  Under Ontario’s intestacy laws, Chris’ estranged wife will likely get everything.  Although his common law girlfriend may have a right to support and possibly a right to claim against some portion of his estate under a constructive trust argument, a costly court battle may be necessary to establish such claims.  She has no automatic right to any of Chris’ assets other than to any assets they may have owned jointly or as a named beneficiary on life insurance policies or RRSPs or RRIFs. 

Anyone in a blended family (second marriages or a relationship with any combination of ‘yours, mine, and ours’ offspring) should be particularly concerned about the results of dying without a Will or without an up-to-date Will.  Many do not realize that marriage nearly always revokes a prior Will; however, the new spouse could opt to let the Will stand.  In our experience, this is unlikely if the new spouse is not mentioned in the Will.  Without a Will, the new spouse will inherit $200,000 plus either one-half or one-third of the deceased spouse’s estate.  If the deceased had just one child, the amount of the estate over $200,000 will be shared 50-50 between the deceased’s child and the surviving spouse.  If the deceased had two or more children, the amount of the estate over $200,000 is shared one-third for the surviving spouse and two-thirds shared equally among the deceased’s children.   

An important point:  a deceased’s estate does not include jointly-owned assets if there is a surviving joint owner nor does it include life insurance, RRSPs, RRIFs or similar assets for which there is a named living beneficiary.   When a marriage ends, both spouses should review and update beneficiary designations promptly and should consider whether jointly-owned assets should be divided or transferred to one spouse’s name or the other. 

Often the single most valuable asset that a couple own is the family home and/or cottage.  If located in Ontario, the title of such real estate can be changed from one form of joint ownership (joint tenants) to another form of joint ownership (tenants-in-common) which would ensure that half the value of the property would pass on death to the deceased spouse’s estate and not to the surviving estranged spouse.  This is a step, referred to as ‘severing the joint tenancy’,  that can be taken without the consent or knowledge of the other joint owner.

Thank you, CBA!  We are honoured to have our website recognized in this way.

When naming a charity as a beneficiary in a Will, most specify a cash gift (referred to as a ‘legacy’) of a certain dollar amount or the donation of an item of value such as artwork or securities (referred to as a ‘bequest’). From a tax standpoint, a gift in a Will is generally deemed to have been made immediately before the date of death.  As a result, a tax credit can be claimed on the final tax return.  A tax credit is a deduction in computing tax which would otherwise be payable.

Specifically, the lower of two amounts can be claimed:

(1)   100% of the deceased person’s net income, or,

(2)  under proposed legislation, the eligible amount of all gifts donated in the year of death (including gifts made when the person was alive plus gifts made under his or her Will), plus the unclaimed portion of all gifts made in the five years prior to the year of death. Any excess may be claimed on the deceased’s return for the previous year (up to 100% of the deceased’s net income). 

Given that a deceased is deemed to have disposed of all capital property immediately prior to death thus triggering capital gains, this tax credit can result in significant tax savings.

Clients often ask if it is necessary to specifically name a charity or whether they can let the executor choose the charity .  If too much discretion is left to the executor in choosing either the charity or the amount of the gift or both,  Canada Revenue Agency (‘CRA’) may deem the gift to have been made by the estate and not made in the year of death.   For this reason, we encourage clients to name the charities that they wish to benefit and to specify the dollar amount or the portion of the estate that the charities are to receive.

In future blogs, we will consider the advantages of benefiting charities by means of non-cash gifts, such as life insurance policies, securities, and RRSPs.

Hughes reviews a recent Ontario case, Evans v. Gondor, in which a most interesting situation arose.  At their request, the court removed the executors who had been named in the deceased’s Will.  The executors, the deceased’s sister and brother-in-law, no longer wished to act and there was no replacement named. This left the estate without an executor.

The estate was not a large one, consisting mainly of a small house.  The deceased’s elderly mother had the use of the house for her lifetime, called a ‘life interest’; however, she was not able to live in it.  The taxation authorities had placed a fairly substantial lien against the property. The estate was to be divided equally among three beneficiaries.  The beneficiaries and the Public Guardian and Trustee, an Ontario government body, declined to take on the job of executor. In arriving at the decision not to appoint a replacement executor, the court referred to an old case which concluded that “no person can be compelled to remain a trustee”. The concern was that no one would take on the job if stepping down was not a possibility.

As Hughes points out, this case shows how important it is to consider who you are appointing as executor and who might replace them.  We second this advice and suggest the following: 

1. Ask your lawyer for an explanation and some literature which outlines the duties and responsibilities of an executor. Thoroughly review this information and give careful consideration to who would be most suited to carry out those tasks.
2. Before signing your Will, ask the proposed executor and alternates if each is willing to take on the role.   Provide each of them with the information from your lawyer so that an informed decision can be made. 
3. If you do not know anyone who you think will be suitable, consider naming a lawyer or a trust company.  A lawyer or a trust company could be named as a first executor or as an alternative to a family member or friend who may not wish to take on the responsibilities when the time comes. This will increase the likelihood that there will be someone ready and willing to administer your estate. This is especially important if your Will contains trusts or a life interest which may continue for a number of years after your passing. 
4. Even after your Will is signed, it is important to  review your executor appointments from time to time and confirm that those named continue to be the best choices.  If a person you have named as an executor experiences a change in circumstances such as declining health, personal or financial upheaval, moving out of the country, update your Will and change the appointment of executor. 
5. If you are considering whether or not to grant a life interest in your house, cottage or other real estate, discuss the idea with your lawyer.  Is a life interest advisable given the nature of your assets, how long the life interest might last, and who will be around to administer your estate until the life interest ends?  Are there other alternatives that could accomplish your objectives?

An ‘insurance trust declaration’ provides a means to avoid probate fees on insurance proceeds while allowing the proceeds to be dealt with as part of a trust.   The declaration may be included in a Will or may be in a separate document.  A Saskatchewan case has raised the question as to whether an insurance trust declaration in a probated Will is effective in avoiding probate fees on insurance proceeds.  As a result of this case, some Ontario trust and estate practitioners recommend that the insurance trust declaration not be included in a Will that will be probated.  Either an insurance trust declaration is drafted as a separate document or multiple Wills (a Primary Will and a Secondary Will) are signed.  The Primary Will includes assets that require probate while the Secondary Will includes assets which do not require probate, such as insurance proceeds, household goods, and shares in a private corporation.

When a minor child is left an inheritance, the Office of the Children’s Lawyer (OCL) may become involved.  An office within the Ministry of the Attorney General for Ontario, the OCL’s mandate is to represent personal and property rights of minors and unborn children, including estate and trust matters. 

Parents may also be surprised to learn that when a child reaches the age of 18, he or she can demand that the inheritance be handed over to him or her if the inheritance is not being held in a trust.  The child can also demand a full accounting of all transactions affecting the inheritance unless previously approved by the Court.

A parent (or other person leaving a gift to a child) who wishes to defer payment of the child’s inheritance beyond the age of 18 can include a trust in his or her Will.  In a trust, the parent can specify that partial payments of the inheritance are to be made at various ages with income (what the trust assets earn) being paid out regularly.

Probate is the process of legally establishing the validity of a will.   As a result, the Court confirms the appointment of an Estate Trustee (or Executor).  The Estate Trustee administers and distributes the estate of the deceased person.  An Estate Trustee may be appointed with or without a Will.  If there is a Will, the Court issues a Certificate of Estate Trustee with a Will.  If there is no Will, the Court issues  a Certificate of Estate Trustee Without a Will and the estate is distributed according to Ontario’s intestacy laws.  When a person dies without a Will, they are said to have died “intestate”.

When Is Probate Needed?

If there is no Will, having a Certificate of Estate Trustee Without a Will issued will be required before any assets can be dealt with or distributed.  If there is a Will, whether or not probate will be required is determined by the types of assets the deceased owned and their value.  For example, if the deceased owned real property in Ontario, whether as the sole owner or as a tenant in common with another person(s), probate will be required to transfer the real property (or the deceased’s share of the real property) to a beneficiary.  If the deceased owned shares of a publicly-held corporation, probate will be required before the shares can be transferred. 

To transfer assets held at a financial institution to a beneficiary, the Estate Trustee must satisfy the requirements of that institution.  The maximum value of assets that may be transferred without probate varies with each financial institution.  If probate is not required, the financial institution generally requires certain documents be signed before releasing such assets.

Calculating Probate Fees

If probate must be obtained, probate fees are payable by the estate to the Court.  The amount is based on the value of the estate.  In Ontario, the fees are $5 per $1,000 on the first $50,000, plus $15 per $1,000 of estate value over $50,000.  There is no maximum.

In an upcoming blog, we will discuss how an insurance trust declaration can help avoid probate fees.

From all of us at Neff Law Office Professional Corporation, we wish you a joyful holiday with family and friends.  May your New Year be the best ever!

Lorelei, Carly, Mia, Lynn, Lisa, Natalie, Donna (and Daisy)