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Two Current Estate Planning Topics
Floyd Gradley, B.Comm., LL.B.
Estate and Trust Lawyer,
Mackenzie Tax and Estate Planning Team
Topics To Cover Today:
• Tools for Mental Incapacity Planning
• enduring power of attorney
• representation agreement
• advance directive for health care
• nomination of committee
• Registered Education Savings Plan at Death
2
Tools for
Mental Incapacity Planning
Enduring Power of Attorney (EPA)
• Gives attorney power over financial and legal decisions,
but not health care and personal care decisions
• Does not give attorney power to make (or change) the
adult’s will or, except in special circumstances, to impact
the adult’s estate plan
• Is not revoked by the occurrence of mental incapacity
• Is revoked by death
• Is significantly less expensive to prepare than having the
court appoint a committee
4
Enduring Power of Attorney (EPA)
• Effective September 1, 2011, changes were made to
the B.C. Power of Attorney Act, including
• “donor” is now “adult”
• the adult’s signature must be witnessed like a will unless
witnessed by a lawyer or notary public (but still must be
executed and witnessed in accordance with the Land Title
Act if it is to be used for real estate matters)
• the attorney must sign and have signature witnessed
• the attorney can make gifts, loans or charitable gifts from
the adult’s assets if the adult was in the habit of so doing,
to a prescribed maximum (lesser of 10% of prior year’s
taxable income or $5,000)
5
Enduring Power of Attorney (EPA)
• Who to appoint as attorney? A person who
• knows your goals and is familiar with your affairs
• is diligent and has ample time to administer your affairs
• is willing to and patient enough to involve you in decisions
and foster your independence
• has integrity, objectivity, and good judgement
• is financially inclined and can maintain administrative records
• does not have interests conflicting with yours
• is not a U.S. person
• A trust company is also an option
6
Enduring Power of Attorney (EPA)
• When will the attorney’s power become effective?
• upon signing the EPA
• upon the occurrence of mental incapacity (a “springing”
EPA) – this option presents challenges
• shows a lack of trust in chosen attorney
• capacity is generally lost gradually over time
• is often difficult to obtain evidence of incapacity
• must establish an unambiguous triggering event, as
well as how and by whom that event is to be confirmed
• upon satisfaction of escrow conditions for release
• the escrow holder will likely insist on an indemnity
7
Enduring Power of Attorney (EPA)
• When should the attorney sign to accept authority?
• the attorney may wish to postpone duty to act
• adult needs to ensure that attorney is willing to act
• Unless specifically authorized by the EPA, an attorney
has no right
• to compensation – any authorization must specify the
amount or rate of compensation
• to derive a benefit
• to make gifts or loans in excess of the legislated amounts,
including for financial support of the adult’s family
8
Enduring Power of Attorney (EPA)
• Consider co-attorneys or alternate attorney(s)
• possible conflict between co-attorneys – are they to act
unanimously, separately “in any and all circumstances”,
or separately only in specified circumstances?
• how will a third party know that a primary attorney has
died or is unable or unwilling to act?
• Avoid prescribed short form EPA
9
Enduring Power of Attorney (EPA)
• Other considerations
• use of secondary EPA(s), but must integrate with (and
must not revoke) primary EPA
• for assets in other jurisdiction
• for operation of a business
• the Canada Income Tax Act provides that a person who
has the power to vote shares is deemed to own the shares
for purposes of determining “related persons”, “associated
corporations”, and designation as a CCPC
• a pre-September 1, 2011 appointment of a law corporation
as attorney is likely not grandfathered and likely not valid
10
Representation Agreement (RA)
• Gives representative power over health care and
personal care decisions, including
• “end of life” and other serious matters
• emergency situations if representative is available to make
a decision within a reasonable time
• Section 7 allows a person of diminished mental
capacity to make a RA governing certain personal care
and health care decisions as well as decisions
respecting “the routine management of financial affairs”
11
Representation Agreement (RA)
• Signature of adult must be witnessed like a will unless
witnessed by a lawyer or notary public
• Is revoked by death
• Is significantly less expensive to prepare than having
the court appoint a committee
12
Representation Agreement (RA)
• Who to appoint as representative? A person who
• knows your beliefs and values
• is aware of your personal and health care needs
• is diligent and has ample time to assist you
• if you desire, is willing to and patient enough to involve you
in decisions and foster your independence
• has integrity, objectivity, and good judgement
• A trust company is not an option
13
Representation Agreement (RA)
• When will the representative’s power become effective?
• upon signing the document
• upon the occurrence of mental incapacity (a “springing” RA)
– this option presents challenges
• shows a lack of trust in chosen representative
• capacity is generally lost gradually over time
• is often difficult to obtain evidence of incapacity
• must establish an unambiguous triggering event, as well
as how and by whom that event is to be confirmed
• upon satisfaction of escrow conditions for release
• the escrow holder will likely insist on an indemnity
14
Representation Agreement (RA)
• Consider a monitor
• mandatory for a Section 7 RA
• must make “reasonable efforts to determine whether a
representative is complying with his or her duties”
• Should a representative or a monitor be compensated
and, if so, how?
• no right to compensation unless specifically authorized by
the RA, including the amount or rate, and authorized by a
judge
15
Representation Agreement (RA)
• Consider co-representatives (perhaps responsible for
different matters) or alternate representative(s)
• possible conflict between co-representatives – are they to
act unanimously, separately “in any and all
circumstances”, or separately only in specified
circumstances?
• how will a third party know that a primary representative
has died or is unable or unwilling to act?
16
Advance Directive (AD)
• Expresses legally-binding health care wishes without
appointing a decision maker
• Expressed wishes are binding on a representative, but AD
can in writing eliminate the need for representative consent
• Presumably used for unique situations where no one is
trusted for appointment as representative
• The adult’s signature must be witnessed like a will unless
witnessed by a lawyer or notary public
• Be aware of institutions that require their own AD signed
17
Nomination of Committee
• An order of incapacity pursuant to the British Columbia
Patients Property Act can revoke an EPA and a RA
• A nomination of committee can be prepared to
• nominate the desired attorney(s) for appointment as
Committee(s) of the Estate
• nominate the desired representative(s) for appointment as
Committee(s) of the Person
18
Registered Education Savings Plans
at Death
Who owns Contributions, CESGs & Earnings?
• Contributions belong to the subscriber
• Canada Education Savings Grants (CESGs) belong to
the federal government
• Ownership of earnings is unknown until certain
conditions are met and the subscriber requests an
Accumulated Income Payment (AIP)
• The RESP beneficiary has no automatic right to
contributions, CESGs, or earnings, and only receives
Educational Assistance Payments or a refund of
contributions when authorized by the subscriber
20
What happens when the Subscriber dies?
• The executor may have to terminate the RESP contract
• the estate receives the contributions
• unused CESGs are returned to the federal government
• the estate receives the AIP if all conditions are met -–
otherwise, a designated educational institution receives
the AIP
This result is generally undesirable, and can be
avoided if there is a successor subscriber . . .
21
Successor Subscriber
• A successor subscriber acquires the subscriber’s rights
by appointment in the subscriber’s will
• An estate beneficiary “trades” part of his/her estate
benefit for the RESP, and becomes successor
subscriber by making a contribution to the RESP
Or, in most situations, there is a better way to
avoid termination of the contract . . .
22
Testamentary Trust
• Establish a testamentary trust in the subscriber’s will to
hold the RESP contract, with terms directing the
trustee how to exercise subscribership rights
• the trustee would be directed to terminate the contract
when there is no longer a need for the RESP, and the
refund of contributions (and AIP, if available) would be
held or distributed according to the terms of the trust
• The subscriber’s will can direct the executor to
maximize contributions to the RESP from estate assets
before transferring the contract to the successor
subscriber or trust
23
Disclaimer
The tax and estate planning tools and strategies discussed today are
general in nature and will not be appropriate for everyone. Neither
Mackenzie Financial Corporation and its subsidiaries and affiliates
(collectively, “Mackenzie”) nor the presenter have been engaged for
the purpose of providing legal, taxation, accounting, investment,
insurance, or other professional advice. Your clients need to discuss
specific tax and estate planning tools and strategies with their own
professional advisors, and they need professional assistance with the
implementation of any strategy.
Mackenzie makes no representation or warranty as to the
effectiveness of the tax and estate planning tools and strategies
discussed today. In addition, Mackenzie has neither consulted with
nor sought approval from the Canada Revenue Agency or any
provincial tax authorities with respect to any strategy.
24
25

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Planning for Incapacity

  • 1. Two Current Estate Planning Topics Floyd Gradley, B.Comm., LL.B. Estate and Trust Lawyer, Mackenzie Tax and Estate Planning Team
  • 2. Topics To Cover Today: • Tools for Mental Incapacity Planning • enduring power of attorney • representation agreement • advance directive for health care • nomination of committee • Registered Education Savings Plan at Death 2
  • 4. Enduring Power of Attorney (EPA) • Gives attorney power over financial and legal decisions, but not health care and personal care decisions • Does not give attorney power to make (or change) the adult’s will or, except in special circumstances, to impact the adult’s estate plan • Is not revoked by the occurrence of mental incapacity • Is revoked by death • Is significantly less expensive to prepare than having the court appoint a committee 4
  • 5. Enduring Power of Attorney (EPA) • Effective September 1, 2011, changes were made to the B.C. Power of Attorney Act, including • “donor” is now “adult” • the adult’s signature must be witnessed like a will unless witnessed by a lawyer or notary public (but still must be executed and witnessed in accordance with the Land Title Act if it is to be used for real estate matters) • the attorney must sign and have signature witnessed • the attorney can make gifts, loans or charitable gifts from the adult’s assets if the adult was in the habit of so doing, to a prescribed maximum (lesser of 10% of prior year’s taxable income or $5,000) 5
  • 6. Enduring Power of Attorney (EPA) • Who to appoint as attorney? A person who • knows your goals and is familiar with your affairs • is diligent and has ample time to administer your affairs • is willing to and patient enough to involve you in decisions and foster your independence • has integrity, objectivity, and good judgement • is financially inclined and can maintain administrative records • does not have interests conflicting with yours • is not a U.S. person • A trust company is also an option 6
  • 7. Enduring Power of Attorney (EPA) • When will the attorney’s power become effective? • upon signing the EPA • upon the occurrence of mental incapacity (a “springing” EPA) – this option presents challenges • shows a lack of trust in chosen attorney • capacity is generally lost gradually over time • is often difficult to obtain evidence of incapacity • must establish an unambiguous triggering event, as well as how and by whom that event is to be confirmed • upon satisfaction of escrow conditions for release • the escrow holder will likely insist on an indemnity 7
  • 8. Enduring Power of Attorney (EPA) • When should the attorney sign to accept authority? • the attorney may wish to postpone duty to act • adult needs to ensure that attorney is willing to act • Unless specifically authorized by the EPA, an attorney has no right • to compensation – any authorization must specify the amount or rate of compensation • to derive a benefit • to make gifts or loans in excess of the legislated amounts, including for financial support of the adult’s family 8
  • 9. Enduring Power of Attorney (EPA) • Consider co-attorneys or alternate attorney(s) • possible conflict between co-attorneys – are they to act unanimously, separately “in any and all circumstances”, or separately only in specified circumstances? • how will a third party know that a primary attorney has died or is unable or unwilling to act? • Avoid prescribed short form EPA 9
  • 10. Enduring Power of Attorney (EPA) • Other considerations • use of secondary EPA(s), but must integrate with (and must not revoke) primary EPA • for assets in other jurisdiction • for operation of a business • the Canada Income Tax Act provides that a person who has the power to vote shares is deemed to own the shares for purposes of determining “related persons”, “associated corporations”, and designation as a CCPC • a pre-September 1, 2011 appointment of a law corporation as attorney is likely not grandfathered and likely not valid 10
  • 11. Representation Agreement (RA) • Gives representative power over health care and personal care decisions, including • “end of life” and other serious matters • emergency situations if representative is available to make a decision within a reasonable time • Section 7 allows a person of diminished mental capacity to make a RA governing certain personal care and health care decisions as well as decisions respecting “the routine management of financial affairs” 11
  • 12. Representation Agreement (RA) • Signature of adult must be witnessed like a will unless witnessed by a lawyer or notary public • Is revoked by death • Is significantly less expensive to prepare than having the court appoint a committee 12
  • 13. Representation Agreement (RA) • Who to appoint as representative? A person who • knows your beliefs and values • is aware of your personal and health care needs • is diligent and has ample time to assist you • if you desire, is willing to and patient enough to involve you in decisions and foster your independence • has integrity, objectivity, and good judgement • A trust company is not an option 13
  • 14. Representation Agreement (RA) • When will the representative’s power become effective? • upon signing the document • upon the occurrence of mental incapacity (a “springing” RA) – this option presents challenges • shows a lack of trust in chosen representative • capacity is generally lost gradually over time • is often difficult to obtain evidence of incapacity • must establish an unambiguous triggering event, as well as how and by whom that event is to be confirmed • upon satisfaction of escrow conditions for release • the escrow holder will likely insist on an indemnity 14
  • 15. Representation Agreement (RA) • Consider a monitor • mandatory for a Section 7 RA • must make “reasonable efforts to determine whether a representative is complying with his or her duties” • Should a representative or a monitor be compensated and, if so, how? • no right to compensation unless specifically authorized by the RA, including the amount or rate, and authorized by a judge 15
  • 16. Representation Agreement (RA) • Consider co-representatives (perhaps responsible for different matters) or alternate representative(s) • possible conflict between co-representatives – are they to act unanimously, separately “in any and all circumstances”, or separately only in specified circumstances? • how will a third party know that a primary representative has died or is unable or unwilling to act? 16
  • 17. Advance Directive (AD) • Expresses legally-binding health care wishes without appointing a decision maker • Expressed wishes are binding on a representative, but AD can in writing eliminate the need for representative consent • Presumably used for unique situations where no one is trusted for appointment as representative • The adult’s signature must be witnessed like a will unless witnessed by a lawyer or notary public • Be aware of institutions that require their own AD signed 17
  • 18. Nomination of Committee • An order of incapacity pursuant to the British Columbia Patients Property Act can revoke an EPA and a RA • A nomination of committee can be prepared to • nominate the desired attorney(s) for appointment as Committee(s) of the Estate • nominate the desired representative(s) for appointment as Committee(s) of the Person 18
  • 20. Who owns Contributions, CESGs & Earnings? • Contributions belong to the subscriber • Canada Education Savings Grants (CESGs) belong to the federal government • Ownership of earnings is unknown until certain conditions are met and the subscriber requests an Accumulated Income Payment (AIP) • The RESP beneficiary has no automatic right to contributions, CESGs, or earnings, and only receives Educational Assistance Payments or a refund of contributions when authorized by the subscriber 20
  • 21. What happens when the Subscriber dies? • The executor may have to terminate the RESP contract • the estate receives the contributions • unused CESGs are returned to the federal government • the estate receives the AIP if all conditions are met -– otherwise, a designated educational institution receives the AIP This result is generally undesirable, and can be avoided if there is a successor subscriber . . . 21
  • 22. Successor Subscriber • A successor subscriber acquires the subscriber’s rights by appointment in the subscriber’s will • An estate beneficiary “trades” part of his/her estate benefit for the RESP, and becomes successor subscriber by making a contribution to the RESP Or, in most situations, there is a better way to avoid termination of the contract . . . 22
  • 23. Testamentary Trust • Establish a testamentary trust in the subscriber’s will to hold the RESP contract, with terms directing the trustee how to exercise subscribership rights • the trustee would be directed to terminate the contract when there is no longer a need for the RESP, and the refund of contributions (and AIP, if available) would be held or distributed according to the terms of the trust • The subscriber’s will can direct the executor to maximize contributions to the RESP from estate assets before transferring the contract to the successor subscriber or trust 23
  • 24. Disclaimer The tax and estate planning tools and strategies discussed today are general in nature and will not be appropriate for everyone. Neither Mackenzie Financial Corporation and its subsidiaries and affiliates (collectively, “Mackenzie”) nor the presenter have been engaged for the purpose of providing legal, taxation, accounting, investment, insurance, or other professional advice. Your clients need to discuss specific tax and estate planning tools and strategies with their own professional advisors, and they need professional assistance with the implementation of any strategy. Mackenzie makes no representation or warranty as to the effectiveness of the tax and estate planning tools and strategies discussed today. In addition, Mackenzie has neither consulted with nor sought approval from the Canada Revenue Agency or any provincial tax authorities with respect to any strategy. 24
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