Court dings executor for costs for not remaining neutral

In BC, Sheryl Laing brought an action in court to vary a will, and was successful (Laing vs. Jarvis Estate, 2011 BCSC 1411). The executor of the estate, Kevin Jarvis, fought the court action. He wasn't a beneficiary of the estate.

When a beneficiary goes to court to ask for a ruling such as this, or on interpretation of the language of a will, the executor is not supposed to take sides. The executor's job is to present the facts and stay neutral. The executor should not favour one beneficiary over another or put his own interpretation on the meaning of the will.

In this case, Mr Jarvis clearly did not stay neutral. As mentioned, he opposed Ms Laing's court application. Once the matter was settled, Ms Laing asked that instead of taking the costs of the court action out of the estate, the costs should be paid by Mr Jarvis personally.

Another general rule of estates is that an executor is indemnified for fees and costs by the estate, so the court had to take that into consideration. However, Mr Jarvis hadn't followed the rule of neutrality that an executor is expected to follow. The court agreed with Ms Laing that Mr Jarvis had to pay the costs out of his own pocket. The costs were $9,611.04.

I like this ruling. I hear story after story about executors who do whatever they want with the estates they were chosen to look after and don't bother to follow the rules. I'm glad to see the courts sending this warning to executors everywhere.

To read the case, click here.

Literary executor of Wm Faulkner's estate doing exactly what he is supposed to do

As I love most classic literature I was pleased to see that a reputable production company has signed a deal with HBO and the literary executor of the estate of William Faulkner, Nobel prizewinner and author of several important novels and short stories. Click here to read the story in http://www.huffingtonpost.com/.

As an estate planning lawyer, I was even more pleased to see that Mr. Faulkner's literary executor is doing exactly what he is supposed to do. How wonderful to hear about an estate success story rather than a headline-grabbing disaster!A literary executor is one who is named in a will to be the custodian of literary works and incidental items such as copyrights, book-to-movie contracts, foreign rights, sales, etc that arise from the literary works.

The literary executor is not necessarily the executor of the deceased's entire estate, though he could be. The literary executor is often chosen because of his knowledge either of the deceased's creative works or his knowledge of the literary world, or both. A similar role may be assigned to an executor for a painter or craftsperson or anyone who creates works of imagination.

Any novelist, story-writer or other creative artist should consider appointing a literary executor for his or her own estate.

The attached photo of Faulkner by Creative Commons was found on the Huffington Post website noted above.

Junior seniors helping senior seniors

What a great idea for a business! It employs younger seniors who still want to work, and helps older seniors who aren't ill but need help with daily life. Sounds like a win-win to me. Click here to read this story from the Financial Post.

What my father's death taught me about estate planning

I found this story by the daughter of someone who recently passed away. She was so impressed by, and grateful for, the way her father planned his estate, she wrote an article about it for http://www.getrichslowly.org/. In all my years of working in this industry, I've never seen anyone plan their estate with this much care and attention to detail, so I found the story amazing. Click here to read it.

Can I leave my house to my common law if he is married to someone else?

When estate law is applied to a complex family, the results are always interesting.  The following is a question recently sent to me by a blog reader in which family considerations are somewhat complicated:

My common-law husband and I have lived together for twenty years, in a house which is solely in my name, as is the mortgage on it. I want to make sure that when I die, my husband will be the sole beneficiary as stated in my will. Is that sufficient to ensure that he inherits the house as he is still legally married to his "ex" wife and I have brothers and sisters, all of whom live in other countries. I am guessing that as my common-law spouse and I have no children together, my siblings would be my legal next-of-kin.

There are a couple of smaller questions here that add up to your main question of whether you can leave your home to your common law husband in your will and feel confident that the will is going to stand up.

First of all, the fact that you have siblings will have nothing to do with it, in my opinion. Your siblings are not financially dependent on you and therefore don't have the automatic right to contest being left out of your will that, say, a minor child would have. And if they should attempt to contest your will on a moral ground, they would have to prove that it's more fair that they have your house than it is that the man you lived with in that house for twenty years should have it. Obviously I haven't been able to ask you for more details, but based on what you've told me, I don't find their relationship to you to be relevant.

Secondly, I don't believe that your common law husband being married to someone else will in any way interfere with your legal ability to leave him your house. Now if it were the other way around and he, while married, was trying to leave the family home to someone else, that might be a problem as his wife might have some rights to his estate. However from what you've told me, there isn't anyone else (like you having a legally married husband) who would have any say in whether you leave your house to your common law spouse.

Finally, if you have lived in a common law relationship for twenty years, you are required by law to support your common law spouse through your will. If you didn't leave him your full estate (including the house) then he might actually have a claim against your estate to try to receive the house. Check the rules about co-habitation and inheritance with a lawyer local to you.

A valid will leaving your home to your common law husband should be enough. Anyone who has any complications whatsoever in their family or estate  (as you have) should not be writing home-made wills. It's worth the money to have a competent lawyer draw up your will for you. Put some thought into who would be the best person to act as your executor.

Another way to leave a house to someone is to put their name on the title as a joint owner with right of survivorship. In your case, however, I wouldn't recommend it because of the possibility, no matter how slight, that your common law husband might divorce his wife and go through a matrimonial property division.

One more thing. Make sure you also have an enduring (a.k.a. continuing) power of attorney in place that clearly spells out your wish that the house not be sold during your lifetime unless absolutely necessary because you have plans for the house in your will. Have the power of attorney drawn up by the same lawyer who is doing your will. as the documents must work together.

Estate planning: the power behind a power of attorney

This article from yahoo.com talks about the importance of having an Enduring Power of Attorney as part of your estate plan. it gives tips on how to successfully act as attorney. It also talks about how Scotia Private Client Group can help people with their powers of attorney, which of course makes me happy, since I work there! Click here to read the article.

Selling Mom's estate? Know the tax rules

This question-and-answer article about capital gains tax was found on http://www.capitalmagazine.ca/ and was originally published at http://www.montrealgazette.com/. This is exactly the kind of question I'm frequently asked by readers on this blog, so I'm sure many of you will be interested in the article. Click here to read it.

Estate Trustee Insurance

Not long ago I posted an article here about a new product - insurance for executors to cover off liability for making mistakes on an estate. Since then, the idea of executor insurance has been getting noticed more and more and I've been keeping my eye on what lawyers and executors are saying so that I can pass on their comments to you. Click on the link below to see what the lawyers over at Whaley Estate Litigation (they are in Ontario) have to say about executor's insurance.

Estate Trustee Insurance

Save tax when selling a business

This article from http://www.capitalmagazine.ca/ contains a wealth of information for business owners who are in the planning stages of succession planning. It talks about capital gains tax and the lifetime capital gains exemption. And it's easy to read! Click here to read the article.  The attached photo is also from that webpage.

Two RI men charged in $25 million investment fraud using identities of terminally ill

If this turns out to be true, what a relief to get these two off the streets. A lot of creativity and planning went into the scheme described in this story of two estate planners getting rich off stealing the identities of the terminally ill. Click here to read the article from http://www.businessweek.com/.

One executor? Or should I have more?

I'm always telling my readers that they should put some careful thought into their choice of executor, so I was glad to see the following question from a reader who is obviously weighing his or her options. Here is the question:

"What is your opinion in having more than one executor named in a Will vs.one?"
Let me start by saying that there is no one right answer to that question that will suit everyone. My experience over the years has been that when there is more than one executor, they are usually siblings. This is not often a good idea simply because of the friction that develops between them.

That doesn't mean that multiple executors is never a good idea. An idea that is becoming more popular is naming a trust company as a co-executor with a spouse or child of the testator. That combines the expertise of the trust company with the family knowledge of the spouse or child. That is most often very successful.

There are some things you should take into consideration when making your decision about whether to go with one executor or more than one. First of all, ask yourself why you feel you need or want more than one. Is it because you suspect that one of the people couldn't really handle the job? Do you think it's too much work or too complicated? Do you feel that one of them might just need someone to keep an eye on him? Or are you afraid to offend someone by leaving him or her out? If you are honest about your motives, you might just find your answer staring you in the face.

If you're afraid that the job is too complicated for the person you have in mind, then he or she is not the right person. It's as simple as that. You won't be around to offer that person help or advice, so don't put anyone in charge who is going to fold under pressure or be so overwhelmed that they simply walk away from your estate.

If you feel that the person needs someone to keep an eye on them, again, this is not a good choice for you. I can't even begin to describe the number of executors I've seen who have ignored the will or parts of it, or who have dragged an estate out for years because it was to their financial advantage. Why put someone in charge if you suspect they might be unreasonable or bull-headed or even dishonest? Having a co-executor working with that person only means an unending fight and won't solve the problems that the first executor will create.

Many parents automatically name both or all of their children as their executors. They tell me they do this because they want to treat the children the same and not favour one above the other. They even expect the children to work together as executors when one lives in another country or province. In some cases their will states that if the children as beneficiaries can't agree on who gets which items, the executor will decide. But if the children are the executors, then who decides? A better solution is to name one child as the executor (choose the oldest, or the one with a job in law, or the one who lives closest, for example) and name the other as the alternate. The alternate executor takes over if the first named executor refuses or for some reason is unable to act as executor.

Having stated the possible downside of having more than one executor, I am compelled to point out the drawback of having only one. Having just one might create a whole different set of problems, largely because lay executors tend to inadvertently create problems for themselves. These are usually mistakes such as ignoring parts of the will, or withholding information from the beneficiaries. This type of mistake happens because executors in general don't have a good understanding of their role and their limitations.

So, what's the answer? One or more than one? It will depend on who you have available to you, and how the various parties get along. Be realistic about how any given candidate handles money and how he or she communicates with others. Try to leave behind outdated ideas such as "honouring" someone by naming them as your executor, and make a truly business-like decision. Who is the best candidate(s) for the job?

Can I see the will?

Our friends over at http://www.allaboutestates.ca/ have tackled the question of whether a testator (i.e. person who makes up their will) should show the will to his or her named executor while the testator is still alive. Click here to read the article by Paul Fensom.

Domestic violence and disinheritance

Should an abusive spouse be barred by law from inheriting from the spouse he or she abused? What an interesting question! According to http://www.allaboutestates.ca/, this issue is being discussed among estate planning lawyers in Ontario.

In particular, they are talking about cases in which the abused spouse left a will that disinherited the abuser. This contradicts the usual law of estates which in general does not allow one spouse to completely disinherit the other.

Currently Canadian law says that nobody can inherit from the estate of someone they have killed. But our law doesn't say anything about someone they have abused.

Click here to read the article. Also, please vote in a new poll that I've put up about this question on the right hand side of my blog.

Four reasons so many parents leave young children unprotected by their wills

Attached is a link to an excellent article found at http://www.pollexestateplanning.com/ that delves into the reasons that so many otherwise responsible parents fail to name a guardian for their young children in the event of the parents' death. I've met many couples over the years who tell me they haven't yet made wills because of the issues surrounding guardianship of the kids, so this article really rang true for me. Click here to read it.

Co-Executor/Trustee Removed For Lack of Co Operation With Other Executor/Trustee | Disinherited | Estate Disputes and Contested Wills

Those of you who read my blog frequently know that many readers write in to ask what they can do about executors who are obstructive, hostile, greedy or otherwise make it impossible for the estate to be administered. In 2011, the BC Supreme Court removed an executor/trustee who, the court felt, was not acting in the best interests of the beneficiaries.

I like this decision! Click the link below to read a summary of the case from www.disinherited.com. Click here to read the court's entire judgment in the case of Levi-Bandel v. Talesiesen Estate.

Co-Executor/Trustee Removed For Lack of Co Operation With Other Executor/Trustee

Is a beneficiary liable for capital gains tax on a property incurred before he received it?

We all want to know what effect, if any, an inheritance will have on our tax situation. The following is a question received on my blog but it's also one that I'm asked a lot in seminars. I thought I'd share it with you. Here is the question:

If a person inherit a revenue property that was originally purchased many years ago for 100k and is now worth 300k when the beneficiary (that person that inherited)eventually goes to sale the property - say it will be sold for 350k, is he subject to a full capital gain tax, going back to the original purchase price of 100k or just on the gain made from the day he was an owner (50k)?

The fact that the property in question was a revenue property is signficant because it means that the property will be subject to capital gains tax. Let's say the property belonged to Jesse. If it had been Jesse's principal residence, it would have been an exception to the capital gains tax rule, but as it was a revenue property, it will be taxable.

Jesse is responsible for tax on the gain in value from the day he purchased it ($100,000) until the day his estate disposes of it ($300,000). This tax is paid from Jesse's estate. Jesse's executor may not transfer the asset to anyone until the taxes are paid unless he is prepared to risk having to pay those taxes himself.

The property then passes to the beneficiary. Let's call her Laura. When Laura receives the property it's worth $300,000 and when she sells it, it's worth $350,000. Laura is responsible for the tax on this increase in value (i.e. capital gain) only. If I were Laura, I'd want reassurance from the executor of Jesse's estate that all outstanding taxes on the property had been paid in full.

Please understand when reading this post that I have simplified the example to describe how the general rules work. Sometimes there is a delay in an estate and the property ends up sitting in the estate for many months, during which time it increases in value. A beneficiary could be responsible for those taxes. I suggest that executors use experienced estate accountants to deal with capital gains tax questions.

When to cut the inheritance cheque

Most people think of an inheritance as something they may receive from their parents after they have passed away. Giving some or all of an inheritance to a child while the parent is still alive has always been, theoretically at least, an option. Now that option is becoming more popular but it still needs to be looked at carefully before a parent goes ahead with it. Elaine Blades, who blogs at http://www.allaboutestates.ca/ takes a look at the advantages and disadvantages of this early inheritance idea. Click here to read her article.

Assisted suicide/euthanasia case is a recipe for elder abuse

I saw this story a day or two ago, and haven't been able to stop thinking about it. I deal with seniors every day. My business is helping them set up their legal affairs so that when they pass away or lose mental capacity, someone is left in charge and things flow as smoothly as possible. One thing - one very disturbing thing - that I know is true is that family members and strangers alike find ways to abuse seniors financially. They find ways around the law, not to mention common decency.

So whenever the issues of assisted suicide or euthanasia come up, I look at them through the filter of my experience over the last 25 years dealing with the lives of seniors. It isn't pretty out there. The potential for abuse is horrifying to me. And yet, shouldn't an old, sick individual be able to decide that illness and suffering have made life unbearable?

Click here to read an article from http://www.newswire.ca/ about the imminent trial of Carter vs. Attorney General of Canada, which is trying to have assisted suicide and euthansia legalized. I'm looking forward to seeing how our courts deal with these difficult but important topics.

Lest we forget

Tomorrow, November 11, is Remembrance Day, when we take the time to remember and honour the men and women of Canada who fought on our behalf, and particularly those who did not come home.

Above is a photo of the Y Ravine Cemetery, where the soldiers killed at the battle of Beaumont-Hamel during World War I are buried. My great uncle Harry, 19 years old when he died, is among them.

Below is a photo of my grandfather, Ernest ("J.E.") Butler and his four children standing in front of the war memorial in St. John's, Newfoundland. A few months after Harry died, J.E. who was Harry's younger brother, lied about his age to join the Canadian forces. He was just 16 years old. J.E. was taken prisoner of war during World War I but made it home alive.

Do you know your family's Remembrance Day stories?

How to exit your business how and when you want to - free workshop

My friends over at Western Business Brokers are participating in what promises to be an excellent workshop for business owners. And it's even free! They sent me the following notice:

How to Exit Your Business When & How You Want To - Free Workshop

If you or someone you know has a controlling interest in a business generating more than $5 million dollars in annual sales please register for this free and highly informative event run jointly by the

TD Waterhouse Private Client Services Group and Ambergate Group Inc.

The decision to exit a business is a serious step in the evolution of every business owners life.

Business owners need to be aware of all aspects in order to achieve the desired outcomes.

This presentation will discuss all you need to know. 

Topics covered include:

What you need to do before selling,  

Business valuation, Sales process & Negotiation techniques, 

How to incorporate sales proceeds into life goals, 

Free of Charge

Where: Derrick Golf and Country Club
When: November 30th 2011 at 7 am sharp
Space is limited.

Please telephone or email Lois M Labahn to confirm your seats: (780) 448-8386, Lois.Labahn@td.com

We look forward to seeing you there!

It's not easy being an executor - almost 50 tasks, poll finds

Think you can handle being an executor? If so, you may be in the minority. BMO has released an interesting poll that shows that most people underestimate just how tough it is to be an executor. Click here to read an article from the Financial Post about the poll and find out what others just like you think about their stint as an executor.

10 Steps to the Will You Want and Need

We've all seen those newspaper articles about celebrity estates gone wrong, and we all know of someone in our own lives who is dealing with a nightmare estate. In the majority of these cases, there was either no will made by the deceased, or there was an insufficient will. By that I mean a will that simply left too much opento interpretation or failed to address important issues, or simply left the wrong people in charge.

How can you avoid this trap? How can you avoid leaving a legal, financial and emotional mess behind for your spouse or kids to clean up? Follow these ten steps to create your most bulletproof will:

1. Decide what's most important to you, whether that is keeping a farm in the family, or ensuring that your children will be able to access their inheritance to go to college. Talk about your plans with your spouse or partner. Tackle the tough issues, such as what to do about children from previous relationships, or about a child with an addiction.

2. Do your prep work, Prepare a list of your assets including your home, cottage, rental properties, life insurance, RRSPs, pensions, savings accounts etc. Know ballpark values for the assets. Understand how each of these assets is held (e.g. in your name alone vs. in joint names).

3. Find a lawyer who specializes in wills. Thinking that your nephew who works exclusively in mergers and acquisitions, or your neighbour who does criminal law can or will do the same job as a wills specialist is one of the most frequent errors made.  They'll probably do the job for you as a favour, but you're better off if they don't. Find a lawyer through word of mouth or by calling the provincial or territorial bar association.

4. Have an interactive discussion with the lawyer. Describe your goals and your concerns. Be frank about problems or rifts in the family. Listen to suggestions and advice. If, for example, the lawyer advises against leaving your home to all four of your children, ask why. Understand the advantages and pitfalls of the ideas you came in with and those suggested by the lawyer. The wills lawyer should do an overview of all of your beneficiary designations and joint property arrangements as part of the process, and should also alert you to the likely tax consequences of your arrangements.

5. Choose your executor carefully. If you've clarified your goals and you know what is in your estate, you should have a pretty good idea of the job your executor is going to have to do. Who is the best candidate for the job? Consider using a trust company if you need a neutral third party, if you don't have a suitable family member nearby, if you want to spare your kids the headache, or if you have even the smallest concern about your family members having the time, patience, tact, honesty and expertise required.

6. Ask your executor if he or she is willing to do the job. No exceptions.

7. Ask to have a draft of the will and other documents sent to you for review before you sign it. This way you can take your time and read it at home. Make sure you understand what each clause means, and ask the lawyer for clarification if there is anything you don't understand.

8. Make absolutely sure that your will works together with all of your other legal and financial arrangements. For example, don't bother leaving your house to someone if you currently own it jointly with someone else, because the joint asset won't fall into your will. Make sure that the beneficiary designations on your RRSP, RRIF, life insurance and pension don't contradict your will. Understand the effect any divorce documents, separation agreements or child support orders will have on your estate.

9. Back up your will with strong, effective incapacity documents, i.e. an Enduring/Continuing Power of Attorney and Personal Directive. Many a will is ruined when a rogue Power of Attorney spends or wastes the money before the testator even passes away. In cases like that it makes no difference how strong the will is, because the estate has already been dissipated.

10. Use other professional help if the lawyer recommends it, or you simply want the extra back-up. An accountant is the best person to talk to about possible tax on your estate. A life insurance broker can do a review of your current policies and give advice about changes. A financial planner or investment advisor can prepare a full plan that projects your financial picture into the future.

If you follow these steps, you should end up with a will that truly reflects your wishes and intentions, and is strong enough to stand in your place after you've passed away. Though it takes a bit of work on your part, you will have peace of mind knowing that you've done all you can to protect your family.

Retirement can get old very fast

According to the National Post, the concept of retirement is changing dramatically, egged on by the debt problems faced by governments funding pension programs. Click here to read the story.  The attached photo is by Chloe Cushman for National Post.

Not everyone needs life insurance

According to http://www.canadianfinanceblog.com/, not everyone needs life insurance. Do you know whether you are among those who need it, or those who do not? Click here to read this article by Nelson Smith.

I agree with Mr. Smith's comments but would like to add that you likely will hear life insurance mentioned during your estate planning process. Life insurance proceeds are used to pay expenses, pay debts or taxes, create legacies, pay out shareholders of private companies, and to equalize inheritance among children. In other words, your life insurance needs may change over time.

Can I be removed as co-executor because I live outside the country?

The rights and duties of an executor continue to be a mystery to most people. I'm still learning new things about estates after 25 years on the job, so I know how tough it is to fully understand what you are supposed to be doing or not doing.

The following is a question received here on my blog that I believe will interest a number of readers, as so many of you are executors yourselves:

Can a family member who you were co-listed as Executor and Power of Attorney remove your name due to the fact that you live out of the country?

Whenever a question about rights under a document arises, the first place to look is the document itself. It's not unusual for a will to state that if an executor or co-executor lives outside of the country, he/she loses the right to act as executor. While this might appear that it's the co-executor who is removing you, it's really a matter of the executor following what's in the will. Ask for a copy of the will and Power of Attorney so that you can check on that.

When you are named in a will as an executor, or named in a Power of Attorney as an attorney, in law this is considered a benefit, in that you've been given a right. The person who named you gave you the right to administer the estate, or to administer his/her finances while he/she is incapacitated. That person had his/her reasons for choosing you. This is not something that a co-executor or co-attorney can decide; the document states who is in charge and if the co-executor or co-attorney doesn't like it, he/she can choose not to act. Having said that, I can tell you that I've seen a huge number of co-executors and co-attorneys try to re-write the testator's wishes by deciding that a different arrangement would be "better". Unfortunately that only means better for them, not necessarily better for the estate. They get away with it simply because nobody challenges them.

Assuming the will and Power of Attorney that appoint you are valid, you have a choice not to accept the appointment if you think it will be too difficult from your location. You would sign a Renunciation form that would remove you. However, this is something you choose to do, not something that others choose for you.

An entrepreneur's guide to giving wealth away

I always like finding articles that can talk about tax in plain language. The attached is one of those, and author Tim Cestnick does a great job explaining how owners of small businesses can get tax breaks both in their lifetimes and at the time of their deaths. Click here to read the article from the Globe and Mail.

Reduce probate fees

Everyone is interested in keeping probate fees low, though a dismaying number of people take steps on their own without knowing whether it's really going to work. Talking to a professional planner is worth it. For example, check out this article from http://www.capitalmagazine.ca/ that gives two really good ideas for controlling probate fees. Click here to read it.