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Estate Planning Basics
The document outlines the essentials of personal and estate planning, including representation agreements, powers of attorney, and the importance of having a will. It details the responsibilities of representatives and attorneys, the processes for decision-making during incapacity, and key aspects of estate planning like avoiding intestacy, probate fees, and will variation claims. It emphasizes the need for proper planning to ensure one's wishes are respected and to ease the burden on loved ones.
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Estate Planning Basics
- 1. Personal and EstatePlanning Basics Plan to Make a Plan Nicole Garton, B.A., LL.B., TEP Heritage Law 220 – 545 Clyde Avenue West Vancouver, B.C. 778-786-0615 Ext.111 nicole@bcheritagelaw.com
- 2. Introduction Why youneed a plan Personal and estate planning: Representation Agreement Power of Attorney Wills and Trusts
- 3. Representation Agreement Someoneto make personal and health care decisions for you when you cannot Personal care: e.g. dress, diet, where to live, what activities to participate in Health care: Minor healthcare – exams, immunizations, medications Major healthcare – surgery, general anesthetic, chemotherapy, experimental treatment, drug trials Can include additional powers – move you physically, restraint Routine financial affairs – pay bills, file income taxes, deposit cheques, transfer funds Does not override your right to make decisions for yourself if you are capable of doing so Can specify your wishes regarding resuscitation, life support, pain control, end of life You must have capacity to sign and it needs to be witnessed Capacity level may determine whether Section 7 or Section 9 Agreement is appropriate
- 4. Who can bea Representative? Someone 19 years of age and older with no capacity issues Consider where they live Cannot be an individual who provides personal care or health care to the adult for compensation, unless that individual is a child, parent or spouse of the adult Cannot be an employee of a facility in which the adult resides, unless that employee is a child, parent or spouse of the adult
- 5. Duties of aRepresentative To act honestly and in good faith To support the adult in participating in decision-making and then make decisions if the adult cannot Keep records of decisions made on behalf of the adult (e.g. date, circumstances, others involved and decision) To keep the adult’s personal information confidential To respect the adult’s religious views, and wishes if reasonable Concerns about Representative reportable to Public Guardian and Trustee
- 6. Changing, Revoking orEnding a Representation Agreement You must have capacity You must give written notice to the representative, alternate representative (or any monitor in a Sec. 7 Agreement) Revocation is effective on the date notice is given or an alternate date if so stated in the notice Agreement ends: on your death or Representative’s death incapacity of Representative if Representative is spouse, on separation as defined in Act Representative resigns and no alternate Court order or Committee is appointed
- 7. Medical Assistance inDying You cannot give a Representative the authority to consent to actively end your life Legislation requires that you have capacity to make that decision yourself at the relevant time in accordance with specific requirements and waiting periods You can express your wishes about prolonging life or quality of life in the Representation Agreement to give your Representative some guidance
- 8. Other Healthcare DecisionMaking Living wills Advance Directives Allows you to state your decisions about accepting or refusing health care treatments directly to a healthcare provider Must address the health care treatment needed at the time Even if not applicable, still useful as an expression of wishes Temporary Substitute Decision Makers (TSDM) A person chosen by health care workers to make decisions for you if you have no Representation Agreement, applicable Advance Directive or committee – to supply informed consent Order of people to be asked is set by law
- 9. Other Healthcare DecisionMaking Temporary Substitute Decision Makers Must be 19 yrs+, capable, have no dispute with you, been in contact with you in the past year, comply with your wishes Order: Your spouse (married, common-law, same sex) A son or daughter (birth order does not matter) A parent A brother or sister (birth order does not matter) A grandparent A grandchild (birth order does not matter) Anyone else related to you by birth or adoption
- 10. Other Healthcare DecisionMaking A close friend A person immediately related to you by marriage (in-laws, step- parents, step children) If there is a dispute about who is to be chosen, health care provider will decide You may not change the order of the list. A person lower down on the list may only be chosen as your TSDM by the health care provider if all the people above them do not qualify or are not available The TSDM is legally required to make decisions that respect your wishes Prepare a list of contact information for TSDM’s
- 11. Power of Attorney Allows someone else to handle your financial affairs e.g. file tax returns, banking, real estate, transfer assets, deal with businesses Restrictions on certain people being named (same as Representation Agreement) Caution regarding non-resident attorneys Can name more than one attorney act together or separately can be a trust company Can be temporary, for specific purposes or enduring You must have capacity to sign Must be witnessed properly (certain people cannot be witnesses) If you want your attorney to be able to use some of your assets to benefit themselves or other family members, you have to specifically state that; otherwise can only benefit you
- 12. Power of Attorney(cont’d) Only effective while you are living – at death, terms of a Will become effective Provides more powers to manage financial affairs than Representation Agreement and keeps your health care wishes private but requires more capacity than Representation Agreement Once signed by both parties it is useable, subject to terms of document Alternates and Revocation (capacity) Duties – similar to Representative Concerns about Attorney reportable to Public Guardian and Trustee
- 13. Committeeship If youcannot make decisions about your health care and finances and you are mentally incapable of signing a Power of Attorney or Representation Agreement, some one may have to apply to handle your affairs Requires a court application and supporting documentation from two doctors regarding incapacity Expensive and takes time You lose control over who will look after your affairs Public Guardian and Trustee may get involved
- 14. Estate Planning Toleave your assets to those you wish – Will To avoid intestacy – dying without a valid Will To expedite transfer of assets To avoid/lessen probate fees To avoid Will variation claims To do some income tax planning Trusts Charitable Gifts Taxation
- 15. Wills Why youneed a Will Determine who you want to benefit from your estate Determine who deals with your estate (executor) Guardianship and financial arrangements for minor children Provide for disabled dependents A will-maker must have testamentary capacity which means understanding: The nature and effect of a Will The property/assets he or she has Who the will-maker has a moral or legal obligation to consider
- 16. Requirements for avalid Will Wills, Estates and Succession Act (WESA) Testamentary capacity 16+ years Reflect the free will and choice of the will-maker (no undue influence) Be signed by the will-maker at the end, or someone at his/her direction, in the presence of two witnesses and both witnesses must sign in the presence of the will-maker Witnesses (19+, no beneficiaries/spouses as can invalidate their gift) Specific provisions relating to Wills made by registered First Nations individuals
- 17. Invalidity of wills A Will must be signed properly to be effective but the court has powers to cure defects in certain cases to give effect to will- maker’s intention If a will-maker made a Will and then got married before March 31, 2014, the Will is revoked unless it was stated to be made in contemplation of the marriage. If a will-maker married after March 31, 2014 the marriage does not revoke a Will. Separation, divorce or ceasing to live common-law results in certain provisions regarding an ex-spouse being invalid unless a contrary intention is set out in the Will Challenges to Wills – undue influence or incapacity
- 18. Executors Responsible for: Safeguarding the estate Gathering in the assets Paying your debts, including income taxes Dividing what remains of your estate among the beneficiaries named in your Will Caution regarding non-resident executors Choose someone who will likely be alive when you die and an alternate Can be a family member or trusted friend Can be a professional or trust company – higher fees charged, so usually only justified for more complicated estates or challenging family dynamics
- 19. If there isa Will Generally, a Grant of Probate will be needed for executor to deal with assets Involves paperwork, fees, legal advice (if desired), time Sometimes banks will transfer accounts without a Grant of Probate to an executor named in a Will depending on the bank’s assessment of the risk in doing so; e.g. whether the deceased was a long time client, the amount of the account, who the beneficiary is
- 20. If there isno Will - intestacy If you do not have a Will, your estate will be distributed in a manner dictated by law and may not reflect what your wishes would have been or benefit the people or organizations you would have wanted to Re: property in deceased’s name only – spouse no longer entitled to live in home for his or her lifetime but can purchase from the estate within a certain time More cost to the estate as a Grant of Administration from the court will likely be necessary The law dictates who has priority to apply for the Grant Can be detrimental to a disabled beneficiary receiving government assistance payments because even a small distribution can make them ineligible for that assistance
- 21. Expedited transfer ofassets Some assets can transfer without going through the estate and therefore are not subject to probate fees Probate fees are $6 per $1,000 between $25,001 and $50,000; and $14 per $1,000 from $50,001 and up Real estate held in joint tenancy passes to the surviving joint tenant Joint accounts pass to the survivor Caution regarding assets held jointly with adult children gift or held in trust for the estate? unintended consequences RRSPs, RIFs, TFSA’s, some pension plan benefits pass directly to named beneficiaries Life insurance passes directly to named beneficiaries Property subject to contractual rights or Family Law Act
- 22. Will variation claims Allows a spouse or children to contest the terms of the Will, claiming inadequate provisions have been made for their proper maintenance and support Spouse can be married or common-law No longer strictly a needs test so claim is available to independent adult children Can try to document reasons for leaving certain people out of your Will or for very disproportionate bequests Claims can only be made against the assets that form part of the estate so some planning may be prudent
- 23. Trusts Separate entitiesfrom you personally Can be set up in a Will to benefit minor children, disabled dependents, children until they reach a certain age, or adult beneficiaries in need of some protection (testamentary) Other trusts: Individual and Family Trusts Alter Ego Trusts and Joint Partner trusts Can have specific directions to the trustee regarding payment of capital and/or income or be discretionary
- 24. Trusts (continued) Incometax considerations (income splitting) A separate tax return is filed and is more expensive to set up in the short term as assets have to be transferred into the trust, but savings in the long term Terms of the trust instrument dictate what happens to assets owned by the trust on death, rather than the Will and therefore pass outside the estate
- 25. Charitable Gifts Niceway to recognize causes that are important to you or organizations that you have benefited from during your life. A donation in a Will can offset income taxes owing as the allowable deduction for charitable gifts in the year of death is higher than ordinarily deductible.
- 26. Taxation At thedate of death, the Income Tax Act deems that you have disposed of all of your property at fair market value, which often creates capital gains on which your estate will have to pay taxes. Accountants are often involved in estate planning and estate administration to minimize tax owing RRSP-RRIFs – income taxes have not been paid on these funds during your lifetime and will be payable at death unless these funds are transferred to qualifying individuals at date of death i.e to a spouse’s plan (deferred)
- 27. Conclusion Tools areavailable for you to have a say in who and how your affairs will be handled when you cannot make those decisions Have to have capacity to use those tools so need to plan ahead Having these tools will make things much easier for your loved ones Lots of resources available to help you – not necessarily just lawyers Get your ducks in a row!