This month’s blog post was written by Héléna Gagné, Partner at Osler, Hoskin & Harcourt LLP.
When the acclaimed TV show Succession aired on HBO, many would ask us trust and estate practitioners, “does the show accurately portray real life?” The answer is: it is great fiction, but it is also not that fictitious! At the same time, we might say that if you have seen the Roy Family, you’ve seen one family. While each family has its own realities, dynamics, values, goals, and cast of characters (pun intended!), there remain ubiquitous topics and universal considerations observed in practice, and we thought we would share with you our Top 7 Lessons and Insights!
1. Understanding what you own – or the entirety of what you own and under what terms!
First, one should regularly update their personal balance sheet, not only as this could one day serve as a helpful guide to an executor, but also in order to map out and list the entirety of one’s assets. It is too common that we have to assist executors in locating and gathering all of the Estate assets – what about that inactive bank account, or that loan made to your old friend? Or worse, what about these cryptocurrencies that your children convinced you to purchase? Without properly taking digital assets into account in your estate planning, you could be throwing away real “monetary” value. Make sure to identify all of your assets, and in the case of digital assets, to leave a password-protected list of digital assets and digital accounts along with the passwords to access this “digital monetary value”.
Second, one may be under the impression that they own shares of Waystar Royco, but it may not always be as simple as it seems. Is the property owned personally, co-owned or owned as tenant in common, or is it owned in joint tenancy? In the case of joint tenancy, when one joint tenant dies, he or she ceases to be an owner, and the remaining joint tenant continues as the owner. Not knowing how title is held could result in an unexpected result in one’s estate planning.
2. Don’t forget about taxes!
A fairly recent Quebec Superior Court decision serves as a good reminder of the risks of forgetting about taxes. The facts of the case are regrettable: Ms. Caron was diagnosed with an aggressive cancer and was instantly hospitalized. She immediately called an estate practitioner to give instructions for her Last Will and Testament pursuant to which she would leave her income-generating real estate properties to her siblings and the rest of her estate to her husband. Unfortunately, Ms. Caron died shortly after having signed her will in the hospital. Nothing in the will provided that these income properties were bequeathed net of tax to the estate. Therefore, the significant tax liabilities triggered upon her death in respect of the large unrealized capital gains on the income-generating properties fell upon the estate and not to her siblings to whom the income-generating properties were bequeathed. As a result, the estate was not solvent, and the remainder of the estate was devoted to payment of the tax liabilities. The intent of the testatrix was put at question in this case in order to interpret the will: but the text was given primacy and the residuary beneficiary of the estate, Ms. Caron’s husband, ultimately did not receive anything from the estate given the extent of the tax liabilities.
Once you have listed what you own, it is important to estimate the tax liability on death or disposition and consider how it may impact your estate planning.
3. Do not let “perfect” be the enemy of “good”
Too often I have seen clients asking to postpone the signature of their will for things that can be easily modified by codicil or by redoing their will if need be. A draft will is not a will, nor is an email containing instructions to prepare your will. Do not withhold signing your will once it is prepared. It may not be perfect yet, and you may want more time to rethink certain aspects of it, but you will have a will in place that is at least more reflective of your wishes than your old will or worse, no will at all!
4. Who should I appoint as my trustee and executor?
I once heard a practitioner tell his client to choose a person that she would trust with her life even after death. I often wondered whether this was an appropriate standard to set. There are many people I would trust with my life. I know that they would rise to the challenge if we were stranded on a deserted island, but I am not sure whether the same people would be the right choice to administer my estate diligently or if they would even be comfortable doing so. Other professionals may say to choose a person who knows you well enough that when faced with decisions, he or she would know what you would have wanted. There too, I often question whether this is an appropriate ask. If I appoint my brother as trustee of a trust for the benefit of my teenage child, he might know me well enough to know what I would have decided when asked to encroach on the capital of the trust, whatever the reason may be. However, this does not take into account that my brother may have a certain relationship he wishes to preserve with my child, which may prove to be difficult and complicated when he steps in as trustee. I suggest to clients that they consider appointing third parties and professionals, such as corporate trustees, as executors and trustees, and more and more they decide that such appointments may be the key to preserving family relationships.
5. Estate planning is also planning for incapacity
It is important to also plan for circumstances in which you are unable to make decisions for yourself with respect to your assets and personal care. As Hayley Peglar, a trust and estates lawyer, recently stated, “Turning your mind to potential future incapacity can give you agency in decisions made on your behalf and soften the impact of a further temporary or permanent incapacity for your loved ones.”
6. When have you done your last “Will check up”?
You go to the dentist twice a year and you run on a treadmill at your doctor’s office during your annual medical check up. But, what about your “Will check up”? Many will say that an estate plan should be reviewed every 3 to 5 years. In fact, it should be reviewed at least that often but, more importantly, any time there is a significant life event such as a marriage or divorce, the death of a family member, the birth of a child or a grandchild, or a change in your assets. These events mean it’s time to dust it off and review whether your will is still appropriate for your wishes and estate planning goals in the circumstances.
7. Seek professional advice
Despite the countless YouTube videos I could watch on “how to cut my own hair at home”, I still prefer entrusting my hairdresser when it comes to haircare. I would argue that, even though there are simple forms and questionnaires you may find online that may be helpful in getting your reflections started, entrusting an expert is even more important when it comes to something as important as your will and estate planning (not to say that your hair is not important!). Estate planning should involve all the different professionals necessary to advise you, including your financial advisor, accountant and lawyer who will collectively take an integrated approach to ensure that the tax, legal and financial aspects of your estate planning are all well taken care of.
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