Tag: Will

Would I “recommend” a DIY Will?

I’ve been asked about DIY/do-it-yourself Wills with sufficient regularity over the years that I decided to cobble together some points-to-ponder for those considering this for their estate planning. [By the way, the term “lawyer”  as I use it here is intended to include regulated qualified paralegals.]

Some inquiries are open-ended, others posed as a premise/belief, and more than a few seeking comment on a statistic (often unsourced or unverifiable, or drawn from a survey by a DIY Will service) stating or intimating that many/most people don’t ‘need’ a lawyer to prepare a Will. Though technically correct that one is not compelled to hire a lawyer, this misdirects attention away from the benefit of a proper legal review. And while it’s also true that relatively few Wills and estates encounter serious legal problems, it is both dangerous and faulty logic to confuse that with the risk/probability of issues arising in an individual circumstance.

When things go wrong, the fallout – for the people most importantly, and secondarily for the property – could range from inconvenient to inconceivable. While I won’t suggest that every such endeavour is destined for disaster, and acknowledge that in ultimate hindsight a particular DIY Will may have been adequate, I can’t in good conscience “recommend” a DIY approach.

The world has certainly come a long way from the paper-only fill-in-the-blank stationers’ forms of decades past. Whereas those forms left the user very much on their own, today’s online services can guide users through both information entry and document production in a much more interactive way. Even so, it remains the user’s responsibility to follow the service’s instructions. As a mechanical exercise, that’s arguably just a matter of being conscientious. However, a given user may actively or subconsciously treat some aspects of those instructions as being open to interpretation. For example, full disclosure will invariably be requested, but the user could still inadvertently or intentionally downplay or withhold details that are thought to be too small, too remote from the person, too far in the past, too unlikely to be discovered (maybe due to being too embarrassing), or too unlikely to materialize in future. Rather than having to vocally confirm responses and reply to follow-up probing questions while looking their lawyer in the eye, the user will have produced something that rests on an imperfect foundation at best.

Few (if any) online services have a qualified lawyer who conducts person-to-person reviews of entries with the user to determine whether the generated documents truly fit individual circumstances, or provides catered advice on what alternative/additional steps and strategies may be warranted. In fact, the best assurance an online DIY service can likely give is that if you follow their execution instructions, you will have a legally enforceable Will. But the limitation with ‘enforceability’ as a success criterion is that a Will is but one part of estate planning, though of course a critically important part.

The wider scope of estate planning is about taking care of the important people who depend on you (including yourself), now and in future, and when you’re no longer around. Fulfilling that care-imperative commonly involves using, sharing, and transferring property, and conferring legal rights and powers upon others – sometimes now sometimes later, sometimes outright sometimes with strings attached, sometimes by Will and sometimes in other ways. So, the priority is not simply to have a legally enforceable Will, but to have a practical plan and process with coordinated components that are both legally informed, and yes … legally enforceable.

In a retained lawyer situation, that conversation allows for options to be suggested, explored, opined-upon and recommended. This is not a journey that follows the same straight path for everyone, fits neatly into an entry box on a form, or exists within a predetermined list on a service’s database. That’s not to say that a lawyer-prepared Will will be airtight, but it will have the benefit of the lawyer’s training and experience applied in context. This significantly reduces the elements of mystery and chance that can come out of an impersonal and unadvised process.

For many people, a face-to-face professional engagement also provides greater confidence and comfort, as compared to contact-in-the-ether that may lead to lingering unease that things are probably okay. That ‘probably’ is itself probably not too satisfying given that a Will is in many ways the most important document that a person will create in their lifetime – or alternatively that they fail to create, or fail to create properly.

Finally, it is understandable and appropriate for cost to be a consideration, but it is far from the main concern, and definitely should not be viewed in isolation. First in terms of timing/recurring cost, preparation of estate planning documents is a relatively infrequent activity, perhaps revisited every half dozen years or when compelled by joyous occasions like a birth or when tragedy unfortunately strikes. Secondly as a value proposition, it’s far more important that a person’s needs are met than for it to be the cheapest option available. Third and related to the preceding point, low-cost is sometimes expressed along with the sentiment that ‘something is better than nothing’, but that is an arbitrary measurement and risky suggestion. The apparent deal of a low-price service could fall short of needs, or worse yet could lead to a result that is counter to what is appropriate. Ultimately, a Will takes effect on death, meaning that the deceased will never know or have the opportunity to correct for a flawed, but legally enforceable Will.

Please keep all this in mind as you consider what will best serve you and the people whom you are protecting and providing for in your estate planning.

When to revise your Will

Do new rules for trust taxation warrant a review?

For some people, even the thought of creating a Will casts a pall over their mood. Yes, a Will deals with a person’s death, but the broader process of estate planning is about caring for the most important people in your life, and having an up-to-date Will is central in that process.

But how do you know if you are really “up to date”?

While there’s no black-and-white answer to that question, there are principles that can be used as a guide. And within that inquiry, recent changes to the taxation of trusts may be sufficient to prompt a review and potentially a revision.

When to have a Will

Estate planning is about taking care of yourself now and in the future, and taking care of the people around you – now, in the future and when you are no longer there.

Sometimes the need for a Will is obvious: There is a significant other or a child, or a house or business with employees. Consider though a parent forced to deal with the intestacy of a twenty-something child, or an unanticipated large insurance payout or court award from an accidental death. 

In my opinion, everyone who is legally capable of executing a Will should do so.

Having a Will provides certainty, not just about who will receive what, but also because it allows for tailored planning of when an inheritance will be distributed, and how the process will be managed. In this last respect, there is little ability to manage tax concerns without having worked through the issues ahead of time and having executed a Will designed to manage remaining contingencies.

When to review your Will

What then may prompt the review of a Will? (And when I say “prompt,” I am suggesting that a call to your lawyer may be in order to ask whether there is a need to discuss implications.) I would put it into the following three categories, in order of priority:

Changes to the people

  • This includes you, a dependent, a Will beneficiary, an immediate family member (whether or not a beneficiary), an executor, or a trustee or guardian
  • Beginning or end of a close personal relationship, whether or not legally married
  • A birth, adoption, death, mental capacity concern or significant health event
  • Immigration, emigration or change in citizenship
  • A change in liability exposure, such as a bankruptcy, being joined in a lawsuit, signing a guarantee or starting a business

Changes to the property

  • Sale of a large asset, especially if it is the subject of a specific Will bequest
  • A windfall, such as an inheritance, court award or lottery prize
  • A theft, loss or consumption, including a marked decline in or withdrawal from an investment account, especially for an RRSP/RRIF plan where a beneficiary designation factored into inclusion or exclusion of beneficiaries in a Will
  • Ownership change or transfer, including loans or gifts to Will beneficiaries, a change to bank signing authority, or addition of a joint owner on investments or real estate
  • Cancellation or loss of life insurance (for example, on retirement from employment) where the plan proceeds or a beneficiary designation factored into Will planning

Passage of time

Even if you and the property have remained effectively the same, the legal landscape may have shifted beneath you. It is difficult to say exactly how much time would be appropriate, but I would suggest no more than five years. The principal sources of law are as follows:

  • Case law – Judicial decisions where the strategies, circumstances and facts may have relevance to your situation and planning decisions
  • Provincial law – Changing legal entitlements and administrative processes, for example, Ontario creating a more stringent estate-administration tax-reporting regime and Alberta now treating a marriage as not revoking a pre-existing Will
  • Federal law – Mainly changes to tax legislation that could have an impact on drafting Wills and on the administration of estates and trusts

Trust tax changes

First proposed in the 2013 Federal Budget and passed into law in 2014, as of the beginning of 2016, testamentary trusts have lost most of their previous tax preferences.

A testamentary trust is created under a person’s Will. Up to the end of 2015, such a trust was entitled to graduated-tax-bracket treatment, similar to an individual’s personal tax treatment. Though taxable from its first dollar of income, the trust would initially be subject to the lowest combined federal-provincial rate then work its way up through the tax brackets. As of 2016, the top federal-provincial rate – near or exceeding 50% in most provinces – applies throughout.

There are two key exceptions to the new rules, bringing two new acronyms into the lexicon:

  • Graduated rate estate (GRE) – For the first 36 months of a deceased’s estate, graduated tax brackets will remain available. However, the rules are complex, and if not carefully navigated, the preferential treatment may be lost
  • Qualified disability trust (QDT) – Ongoing graduated-tax-bracket treatment may be available to a testamentary trust with a beneficiary who is qualified for the disability tax credit

In the past, an estate-planning lawyer may have recommended the creation of one or more testamentary trusts and drafted the Will accordingly. Today, those trusts may have little or no benefit and may turn out to be an impediment to efficient estate administration. For those who have benefited from what was good planning in the past, it may be time to call the lawyer and discuss appropriate planning in this new environment. 

Wills and public policy

Can an alleged racially-motivated bequest stand?

At issue

Courts are loath to interfere with the final wishes expressed in a person’s duly executed Will, except in the most egregious circumstances.  

One time when it can occur is when a Will includes a provision that offends public policy, such as a bequest that has a racist element.  For example, a bequest may be impugned if it is contingent on a beneficiary entering or ending a relationship based on racial criteria. 

But can a bequest be assailed on the basis that it is racist-motivated, but where the Will says nothing to that effect on its face?

Tataryn v. Tataryn Estate (SCC), [1994] 2 S.C.R. 807 

The Supreme Court of Canada instructs courts to be cautious in dealing with testamentary freedom:  “In the absence of other evidence a will should be seen as reflecting the means chosen by the testator to meet his legitimate concerns and provide for an ordered administration and distribution of his estate in the best interests of the persons and institutions closest to him.”

Against this backdrop, the SCC upheld the British Columbia legislation in issue, which constrained a testator’s testamentary freedom by requiring first that adequate provision be made for a surviving spouse and children.

Canada Trust Co. v. Ontario (Human Rights Commission) (1990), 74 O.R. (2d) 481

This is not a case of testamentary capacity, but sheds light on the interpretation of discriminatory provisions in a trust.

Canada Trust was trustee over a public charitable trust that had been settled in 1923 to provide student scholarships.  The trust had overt discriminatory conditions, including that it was only available to white, Protestant, British subjects, and that no more than 25% of annual funds could go to female students.

The court ruled that the explicit discriminatory provisions be deleted, but that otherwise the trust could continue.

McCorkill v. McCorkill Estate, 2014 NBQB 148, aff’d 2015 NBCA 50

The deceased named as beneficiary of his estate the National Alliance, an anti-semitic white supremacist group in the United States.  The evidence showed that the purpose and activities of the National Alliance – notably the dissemination of hate propaganda – were illegal under the laws of Canada and New Brunswick.   

While there was nothing in the wording of the Will that was against public policy, the bequest was voided because the “the beneficiary’s raison d’être is contrary to public policy.”

Spence v. BMO Trust Company, 2016 ONCA 196

The deceased intentionally left his adult daughter VS out of his Will, stating briefly in it that “she has had no communication with me for several years and has shown no interest in me as her father.”  

VS alleged she was excluded for racist reasons.  In addition to her own evidence, a long-time family friend swore that the deceased had told her on several occasions that he disinherited VS and her son because the son’s father was white.  The deceased was a black man.

The initial ruling went in favour of VS.

In overturning the application judge, the Ontario Court of Appeal found that:

  • Unlike Tataryn, the deceased had no statutory duty to VS under Ontario law,
  • Unlike Canada Trust, the Will had no provisions that offended public policy, and
  • Unlike McCorkill where the executor would effectively be carrying out an illegal act, the named residual beneficiaries were not unworthy heirs so as to warrant disinheriting them.

As to the evidence of VS and the family friend, the court ruled that “extrinsic evidence of a testator’s intentions is not admissible when the testator’s will is clear and unambiguous on its face.”  Allowing such an attack “would significantly erode and arguably displace meaningful testamentary freedom.”

Practice points

  1. Testamentary freedom is a central tenet in estate law, allowing testators the expectation that their wishes will generally be upheld. 
  2. Express racist provisions in a Will or bequests to organizations with illegal racist purposes will not be allowed to stand.
  3. An allegation of a particular motive behind a testator’s choices will not be allowed to supplant an unambiguous motive expressly stated on the face of a Will.
  4. At time of writing, an application for leave to appeal Spence is pending before the Supreme Court of Canada. [UPDATE: The SCC denied leave on both Spence and McCorkill in June 2016.]