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Friday, August 7, 2020

This online will kit deliberately restricts your choices, and that's a good thing

Technology is changing the landscape for some clients who want to make wills. I've recently read an article about an automated online will-making tool that has been developed by a couple of lawyers in Ontario. They came up with this idea because, they say, people do not want to spend $1,500 to $2,500 to have a lawyer make one for them. I have to comment at this point that Ontario prices are obviously higher than prices elsewhere. For comparison, check out my posted prices for wills!

I am not generally in favour of people making their own wills, whether online or by hand, simply because people may not understand the way the law applies to them, or may not know what options are open to them. However, this particular tool has been developed differently, and I like their approach. They do not allow people using the tool to make many decisions. The tool creates a will that leaves everything to the spouse and if the spouse has predeceased, then among the children.

In other words, you could not use this will-making tool if you wanted to leave out one of your children, if you have a blended family, if you want to set up a trust for a disabled person, if you want to leave your cabin to one of your sons, or anything else that is even slightly out of the ordinary.  This is a good thing because when you are trying to deal with these situations, you should have legal advice, and you should have someone on your side who is experienced with the wording of trusts and wills.

In other words, this tool is useful for those in a certain situation. It's always good to have a variety of choices when it comes to buying any product or service, including having a will made. As long as the specific tool is not used by those who could be harmed by it, then it's valuable and beneficial, and it seems to me that the developers have made sure it cannot be used by the wrong customers.

I haven't seen or tested the will-making tool for myself. I've formed my opinion based on a detailed article from Law Times about the creators of this tool and their product. To read the article for yourself, click here. 

Sunday, August 2, 2020

Can an executor rent out an estate property when the sales market is slow?

Are you an executor trying to sell an estate property in a market that just isn't moving right now? You're not alone. This reader is in the same situation. Here is his question and my comments:
"I am the executor on my fathers estate and am trying to sell his home, but the current Covid market is challenging. Can I legally rent out the home for a year, putting all income into the estate account? And will this income be considered capital gains for me, or will it just be income for the estate? Another side question: how soon after probate must I close out and dispense the assets? Could one keep the house rented for 5 years and put all income into the estate? I want to avoid putting the house in my name to keep from paying capital gains on a second home. Our goal Is to sell the house soon."

You're right that the current market is challenging. I've heard from several executors that they are considering renting out an estate property after efforts to sell it have not worked out. 

The short answer is yes, as an executor you can decide to rent out the estate property. And yes, the income would go into an estate account for the upkeep of the home. From that account, you would pay property taxes, insurance, and repairs/maintenance. Keep an eye on costs because if it costs more to rent it than you are bringing in as income, renting is probably not the best option. Depending on amounts and circumstances, you could also make periodic payments to beneficiaries from the rental income.

I assume that at this point, the property is still in your father's name or in the name of the estate. It sounds as though you are going to be the only beneficiary of the house, but that's just an assumption based on your language and questions. Keep in  mind that if the property increases in value during the rental period, it will attract capital gains tax. If the property is in your name, the tax will also be in your name. If the property is in the name of the estate, then the tax will be against the estate. 

Beneficiaries often think that the house is "tax-free" because it was a parent's principal residence. And so it is when it leaves the parent's name. But after that, the property does not retain the parent's tax-free status; it takes on the status of whoever owns it. If the estate owns it, there is capital gains tax because an estate has real estate that increased in value, and the estate doesn't get a principal residence.

While the beneficiaries of the estate do not have the right to tell you what to sell or not to sell, I would suggest that you disclose your plans to them (if you are not the only beneficiary). Though there is no rule that on its own imposes a deadline that will compel you to sell or transfer the property, beneficiaries do have a right to have an estate wound up in a timely manner. If you're planning to delay the receipt of their inheritance, they should at least be given the courtesy of an explanation. A beneficiary can take you to court to try to compel you to distribute the estate if they object to the length of time it is taking you, so do your best to keep lines of communication open.

Wednesday, July 22, 2020

Will a threat of contesting the will delay an interim distribution?

Just when you think an estate is going to wind up without a major issue, you're proven wrong. This may be the case for this reader, who sent in an interesting question:

"I just received my release papers the other day and have since learned that my sibling may be contesting the will. Will the interim distribution now be put on hold until this matter is settled with my sibling?"

Probably. It's really not unusual that at the time the accounting and releases are sent out to beneficiaries, a new fuss begins. It's usually because a beneficiary receives the accounting and sees something he or she doesn't like. Something is missing or the numbers don't add up. They then say they are going to contest the will.

In reality, their issue is not with the validity of the will but with the contents of the accounting. If they don't like the executor's accounting, it has nothing to do with whether the will was valid or not. The appropriate response is not to begin a long, arduous, expensive lawsuit against the will but simply to ask the executor for more information. Perhaps some receipts to back up the numbers. Hopefully if they lawyer up, their lawyers will tell them this.

Obviously in this case I don't know what the specific issue might be that causes your sibling to question the will. But what sort of issue could it be that wasn't important all through the administration of the estate and only arises (perhaps several months after the testator died) when the accounting is produced?  The time for casting suspicion on the validity of the will or the competence of the testator would be long past. This just leads me further to believe it's actually a problem with the accounting and not the will.

To answer your question, the interim distribution most likely would be postponed. However, a postponement while an executor provides additional information to a beneficiary could take a week or two to resolve (assuming the executor acts responsibly and answers the beneficiary's concerns). A postponement for a lawsuit could be expected to take five years.

If it's a problem with the accounting that cannot be resolved by the exchange of information, the worst case scenario is that the beneficiary would compel the executor to pass accounts. While this doesn't take as long as a trial by any means, it could be a matter of months.

The interim distribution would have to be postponed during this time because the numbers would all change. Remember that if an executor passes his accounts, the legal fees and any costs for that are usually covered by the estate. This leaves less money for the beneficiaries, so each of you would get less on an interim distribution. You would have to be provided with new paperwork.

With any luck, your sibling's concerns can be addressed by the executor in a timely manner and the disruption will be minor.

Thursday, July 16, 2020

Secret trust is upheld by BC Court of Appeal

The British Columbia Court of Appeal has handed down an interesting case with respect to how verbal instructions from a testator can affect an estate.

Angelika Stuhff was dying of cancer. She planned to make a will, but didn't do so. In the final few days before her death, Ms. Stuhff discussed her estate with her common-law partner, Bernd Odenthal, and with her sisters. The estate was to go to Mr. Odenthal. She told Mr. Odenthal that if he began a relationship with a new partner, he must transfer her estate to her niece, Susanne Bergler. He agreed to do that.

Ms. Stuhff passed away. Her estate went to Mr, Odenthal. The estate consisted of some small amounts of cash and an interest in two real properties. Eventually he met someone else and married her. At this point, Ms. Stuhff's family expected to see the estate moved to Ms. Bergler, but it didn't happen. Mr. Odenthal denied that there was any obligation on him to carry out the verbal wishes made by Ms. Stuhff before her death.

Ms. Bergler asked the court to say whether or not she had a claim to the estate based on the facts. She claimed that Ms. Stuhff's instructions set up a "secret trust". At the trial court level, the judge said there was no trust and no obligation, but the court of appeal reversed that.

The appeal court examined whether the elements of a secret trust had been established. First, did the deceased communicate her wishes for her estate to Mr. Odenthal? Second, did he accept the instructions and agree to carry them out? The court stated that both of these elements existed and therefore there was a trust, even though Ms. Stuhff herself never used the word "trust" in her instructions. In other words, Odenthal agreed to give the estate to Ms. Bergler if he entered into a relationship and therefore he was a trustee for her.

In the end, the court ordered that Mr. Odenthal  had to pay Ms. Bergler $177,604 as her entitlement to the estate. This sum included $22,200 for breaching his trustee duties.

This is an interesting case partly because we don't see many secret trusts these days. This case does give a pretty precise discussion of what needs to be proved if someone is alleging that type of trust exists, which is important when there is no written trust document.

Anyone who'd like to read the case in its entirety can do so by clicking here.

Saturday, July 11, 2020

"I now have the smoking hot body I have always wanted… having been cremated"

As many of you readers know, I simply can't pass up an obituary written by someone with a sense of humour. I've recently come across one from here in my own province, written by Kathleen Hearn, who passed away just a few days ago. She certainly sounds like a fun person who lived her life to the fullest! For example, she says "I now have the smoking hot body I have always wanted… having been cremated". To read her obituary, click here. To read an interview about Kathleen Hearn, click here.

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