Thursday, June 16, 2016

Can the executor hire himself to do renovations on estate property?

Is it okay if the executor of the estate hires himself to do renovations on the estate property? A reader recently asked me about this. Read on to see his question and my comments.

"I am the Executor of my Fathers estate. There are four beneficiaries including myself. I spent 8 months after my Father passed away to renovate the home. I have documented each and every day of who did work and time. These people include my wife, family, friends and contractors. I now have sold the home, and need to pay these people. Therefore, what kind of receipts do I require from whom? My major dilemma is myself, I am a contractor, I did extensive work inside and outside of the home, which I kept records of. How do I claim my time re: labour for that work, which is not justified as work to be done as an Executor?"

Executors regularly incur the wrath of beneficiaries when they appear to have benefited personally from something they've done on the estate. In your case, they may not like it that you will be paid for doing renovations. They may wonder if you have done unnecessary renovations just to get a bigger piece of the estate. However, it's really not that unusual for the executor of an estate to determine that an estate property would sell for a higher price if it were renovated or modernized. The key to it is whether there is a benefit to the estate.

Let's say the cost of the renovations is $25,000 but it increases the sale price of the house by $50,000. That is surely beneficial to the estate, as you have not just preserved it, but maximized it. Now, on the other hand, if you spent $25,000 on renovations but only managed to get $10,000 more on the selling price, you can expect the beneficiaries to be justifiably upset that you lost estate money.

Assuming that we have jumped the first hurdle - that of justifiably spending estate money - let's move on to the next. Let's talk about you doing the work yourself and paying yourself.

The general rule is that if an executor does work for the estate that he would have had to pay someone else for, the executor can be paid for that work at the rate such work is normally paid. In other words, if you were going to hire a contractor to renovate the house anyway and that happens to be your profession, you can hire yourself to do it and pay yourself your usual rate. You can pay your workers what you would pay them if the work had been done for a stranger. Set everything (work orders, employment records, invoices) the way you would for any customer. You-as-contractor will send the bill to you-as-executor, because the executor is your client. Then pay yourself out of the estate. Show the expenses on the executor's accounting when that time comes.

You'll find that all of those detailed records you kept will be important. The beneficiaries would have every right to look over expenses you paid to any contractor, and this is true even though you are the contractor yourself. You are going to have to be transparent and be prepared to show all invoices and receipts if the beneficiaries want them. Although there is no legal conflict of interest, you should realize that if you over charge, or do shoddy work, or don't actually increase the sale price of the property, you will have created a conflict of interest that didn't exist before.

As a general rule, if you do everything with integrity and transparency, and you always keep the best interests of the estate in mind, you shouldn't run into trouble.

Wednesday, June 15, 2016

New survey shows 74% of Canadians don't have an up-to-date will

Recently I was contacted by the folks over at to let me know about the results of a survey they had conducted. Their results are, in fact, really interesting. They report that 74% of Canadians don't have up-to-date wills. This is quite a bit higher than is generally thought, since most studies and surveys conclude that the number of will-less Canadians is around 50%. The difference in this survey is that they asked not just whether people have a will, but whether their wills are up to date.

If you'd like to check out their survey and their analysis of the results (they correlate the wills to the age and income of the respondents), click here.

This company is an online will-writing service that uses software to create an interactive experience that results in the customer having a new will. Here is one of the statements made in their report:
"The service at uses the exact same software used by estate planning lawyers across Canada. So the final product is usually word-for-word identical to a Will produced by a law office."

I would just like to point out that lawyers like me, lawyers who specialize in wills, DO NOT use software to create wills. We just don't. We don't need to, or want to. If you get a will from a lawyer that is word-for-word like a will produced by software, then sure, you might as well just go right to the software yourself. But if you want legal advice, ideas, suggestions, or clarification, then go to a lawyer who specializes in will planning and believe me, it will not be anything like a document you do yourself.

For example, yesterday I met with a client who had already made his will and wanted to check it over. He left his RRSP to his son. He left a small life insurance policy to his daughter.. He wanted the rest of his estate - vehicles, motorcycle, bank account - to be cashed and used to top up his daughter's share to equalize with her brother. I pointed out to him that his estate would have a $75,000 tax bill because of the RRSP so there'd be nothing left to top up the daughter's share. In other words, there was legal information he needed that he didn't know he needed, until he asked a lawyer.

He could have used software to create the will he wanted, and it would cost him less than talking to me, but by talking to me he was advised about his situation and had a chance to fix it.

And seriously, not every lawyer charges an "egregious" fee for services, as this article claims. I'm told daily by my clients that my bills are less than half of what they are quoted by others.

So shop around for expertise and for prices before deciding where to spend your will-planning money. If you want legal advice, you need a lawyer.

Friday, June 10, 2016

Beautiful objects from Joan Rivers' estate being auctioned

Would you like to see some of the beautiful objects collected by people richer than you or I will ever be? In this instance, some of the lovely trinkets and jewelry that were collected by the late comedienne, Joan Rivers, who died in 2014 are being auctioned off by her estate. Click here to see a story - with lots of photos - from The photo you see here is of a turquoise and pearl Faberge bracelet worth about $10,000. It accompanied the article on and is credited to Christie's.

Tuesday, June 7, 2016

Our son has an addiction & mental health issues. Can we leave him out of our wills?

Not all parents want to treat their children equally in their wills, and they usually have what they consider good reasons for this. A reader recently left me a note asking about leaving out a son who has mental health issues and an addiction. Here is the question, followed by my comments:

"We have two children - one of whom has addiction and mental health issues. We would like to leave the bulk of our estate to our daughter who is married with children. How do we ensure that our son cannot contest the will? What do we leave him to ensure that he cannot contest?"

I assume that the son that you want to leave out is the child with addiction and mental health issues.

This question doesn't have an easy answer. First of all, let's talk about whether you can leave him out of your will. I believe your concern is that a person with addictions may simply blow his inheritance by spending it on his addiction. This is certainly a valid concern, and one that I've heard from many parents over the years.

I'm concerned, though, about the fact that your son has mental health issues. Is this a condition that prevents him from earning a living? The reason this concerns me is that a parent cannot disinherit a child with a mental disability because such a child is considered in law to be a dependent of the parent. Obviously I don't know the facts of your son's situation, but I urge you to consider the fact that he might be a dependent for the rest of his life if his mental illness is in fact a disability.

If your son is a dependent, you cannot ensure that he won't contest the will. In fact, the likelihood that he would contest it is quite high. All provinces and territories have what is known as "dependent relief" laws that give an automatic right to dependents to sue estates which do not properly support them.

If your son is a dependent, you would most likely find that leaving his share of the estate in a trust would work for him. Using a trust, you could restrict the amount of spending money he has available. You could set up the trust so that the trustee pays the basics - rent, utilities - directly without the funds passing through your son's hands.

Now let's look at the situation as it would be if your son is not in fact a dependent. If he is not, you can choose to disinherit him or to leave him only a small part of your estate. You are not required to support an adult child who is capable of supporting himself. (Note that the law in BC is different on this point, but I don't know which province you live in).

There is no magic number or formula that would prevent your son from contesting your will. Over the years, many people have told me that leaving a person $1 prevents them from contesting the will, but that is not true. You can strengthen your will by including a short statement in it that you have your reasons for treating your children unequally in your will.

You might also consider using an in terrorem clause, which is sometimes called a "no contest clause". This is a paragraph in your will that says if a beneficiary contests the will to get a larger share, that beneficiary will forfeit his share and someone else will inherit it instead. Don't try to draft this kind of thing on your own because they are tricky and not always valid, but it's worth considering.

You can never guarantee in advance that someone won't contest your will. All you can do is make it as hard as possible for them to win, thereby discouraging them from attempting it.

Friday, June 3, 2016

If your child gets divorced, what happens to the money he or she inherited from you?

What if you leave your son or daughter a share of your estate, and then the son or daughter's marriage breaks up? Will the money you left as inheritance end up in the hands of the divorced spouse? We don't really want to think about our kids going through a divorce but statistically, we know it's possible.

This topic was recently tackled by Stan Rule, a lawyer in Kelowna, BC who has a great deal of experience with wills and estates matters. To read Mr. Rule's comprehensive discussion on the topic, click here.

What I like about Mr. Rule's post in particular is that he gives a couple of examples that are very true to life. You'll be able to relate his discussion to your own situation.

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