January 2020 - Canada

Audits and investigations by Canada Revenue Agency

Posted on January 14, 2020April 18, 2023 By Louise Polcaro

The CRA is the federal agency that administers tax laws for most provinces and territories, as well as the Canadian government. The Canadian tax system is based on self-assessment, which means that every corporation and every taxable individual, estate or trust is mandated by law to file an annual income tax return. In order to maintain the self-assessment tax system, the CRA performs detailed and continuous inspections. Such reviews range from “processing reviews” of a single item or line in the tax return, matching of slips filed with CRA to the tax return, to tax audits of one or several amounts of income or expense.

CRA’s reasons for auditing a taxpayer

Screening Process: CRA performs computer review of filed returns. Tax returns are sorted by various categories, considering unusual items, CRA’s prior experience with certain income or expense items, or industries, and the risk evaluated by CRA of potential tax loss. This review generates lists of returns for potential audit selection. Specific files are chosen for audit regionally. This is the most common method for selecting files to audit.
Audit Projects: The compliance of a particular group of taxpayers is tested. If the test results suggest that there is significant non-compliance within that group, its members may be audited on a project basis.
Leads: Information from other files, audits, investigations or outside sources may lead to a file being selected for audit.
Secondary Files: A file may be selected for auditing because of its connection to another file that was also selected for audit.

Technically, everyone and anyone can be audited. Practically speaking, however, CRA narrows in on certain categories of taxpayers, who raise red flags in the tax system. Some of these categories of taxpayers include:

Self-employed individuals
Businesses which are heavily cash-based, such as construction or restaurants
Individuals who own offshore assets

CRA Tax Audit

When a tax return is assigned for audit, the auditor will review the return or income/ expense items and request the taxpayer to provide supporting information for examination, such as:

Business records (such as invoices, receipts, contracts, and bank statements);
Personal records (such as bank statements, mortgage documents, and credit card statements); and
The personal or business records of other individuals or entities not being audited (such as a spouse or family members).

During an audit, the auditor will identify issues with the tax return and discuss them with the taxpayer. There are two potential outcomes from the audit process:

No reassessment: If the auditor determines that the original or previous assessment was correct, nothing further is required. The taxpayer will be notified by letter and the audit will be closed.
Reassessment: If the auditor determines that the tax return requires reassessment (meaning that more taxes must be paid or that the taxpayer is entitled to a refund), the taxpayer will receive a proposal letter outlining the reasons for reassessment. Typically, the taxpayer is given 30 days to advise whether they agree or disagree with the proposed reassessment. If no response is given, CRA will reassess according to their proposal.

When the audit is complete, a final letter and any reassessment will be sent to the taxpayer.

CRA investigation

Unlike a tax audit, a tax investigation is a deeper review where the CRA looks for evidence to criminally prosecute an individual. In a criminal investigation, the Crown must prove beyond a reasonable doubt that the taxpayer intentionally violated Canadian tax laws. If convicted, a tax payer may be required to pay court fines and/or face imprisonment.

CRA’s Criminal Investigations Program (“CIP”) investigates substantial cases of tax evasion, and where appropriate, refers cases for criminal prosecution. Tax evasion is a criminal offence that involves deliberately ignoring the law to evade paying taxes. CIP is designed to focus on the most serious of cases. Those convicted of tax evasion can face court fines ranging from 50% to 200% of the taxes evaded, and up to five years in prison.

When dealing with the CRA…

Tip #1: Seek Professional Advice Immediately

Seek an advisor who specializes in dealing with the type of audit or investigation you are facing. It is important to have your tax advisor attend any meetings you may have with CRA. As noted above, your ability to dispute or object to CRA’s findings is often only available for a limited amount of time. Depending on the circumstances you may be required to act within 30 – 90 days. Notifying your advisor of the CRA correspondence immediately will ensure your advisor can help you meet these deadlines or obtain extensions from the CRA where available.

Tip #2: Answer Questions

If being investigated, answer what you have been asked truthfully. It is generally preferable, however, to ensure answers are limited to what is asked rather than providing additional information that may broaden the investigation.

Tip #3: Cooperate

If the CRA asks you to send a certain document, send it. Ensure that your records and supporting documents are organized and easily accessible.

For further information, or assistance with tax disputes, please contact a TEP.

How can I make sure my child who has a disability is provided for when I die?

Posted on January 14, 2020April 17, 2023 By admin

There are several options to consider when planning to provide for a child with a disability after death. These options include Henson trusts (a form of discretionary trust), Qualified Disability Trusts, Registered Disability Savings Plans, Lifetime Benefit Trusts, and Preferred Beneficiary Elections.

What is a Henson trust?

A Henson trust is a trust designed to benefit persons who are receiving or may become entitled to receive disability benefits from the government. The purpose of a Henson trust is to protect assets of a beneficiary while preserving the right to collect government benefits. Henson trusts are sometimes also called “absolute discretionary trusts”.

Henson trusts are often set up in a parent’s will (i.e., as a testamentary trust), but can also be set up during the lifetime of the parent. Testamentary trusts may be eligible for more favourable tax treatment if the trust also qualifies as a Qualified Disability Trust (see below).

How does a Henson trust work?

The key to a Henson trust is that the trustee has “absolute discretion” to decide whether, and in what amount, to provide assistance to the beneficiary using the assets of the trust. Because the trustee has this “absolute discretion,” in most provinces the assets are not considered to be vested in the beneficiary and cannot be used as a basis for the denial of government benefits that are calculated based upon the assets of the beneficiary.

Where does a Henson trust work?

Henson or Henson-style trusts are available in Ontario, British Columbia, Manitoba, New Brunswick, Newfoundland, Nova Scotia, Prince Edward Island, Saskatchewan, the Yukon, Alberta and Québec. Outside of Ontario, these trusts are typically called “discretionary trusts”.

What is a “Qualified Disability Trust”?

Henson trusts may qualify for lower tax rates if they satisfy the “Qualified Disability Trusts” (QDT) criteria as defined in the Income Tax Act. To qualify as a QDT, the following criteria must be satisfied:

The trust must be a testamentary trust (i.e. made by a Will)
The trust must be resident in Canada for the trust year
The trust and beneficiary must have made a joint election for the trust to be a QDT
The beneficiary must be approved for the Disability Tax Credit
The trust must be the only QDT for that beneficiary

The limitation of one QDT per beneficiary means that if both the parents and the grandparents want to set up a Henson trust, only one of the trusts could qualify as a QDT. Further, eligibility for the Disability Tax Credit requires certification by a medical professional that the beneficiary has a severe and prolonged physical or mental impairment.

Choosing a trustee

It is important to keep in mind that a trustee position may continue for an extended period of time after the death of the person creating the trust. Further, because a properly drafted Henson trust grants absolute discretion to the trustee, the trustee will be closely involved and have broad discretion in determining when and how much to provide for the child with a disability. It is therefore important to select a trustee who is trustworthy and who understands the needs of the child.

What is a Registered Disability Savings Plan?

A Registered Disability Savings Plan (RDSP) is a savings plan intended to help save for the long-term benefit of a person who is eligible for the Disability Tax Credit. RDSPs provide access to grants and bonds on a means-tested basis for beneficiaries up to the age of 49. To be eligible as the beneficiary of an RDSP, an individual must:

Be eligible for the Disability Tax Credit;
Have a valid social insurance number;
Be a resident in Canada at the time that the plan is created; and
Be under the age of 60 (an application must be made before the end of the calendar year in which the individual turns 59)

There is a lifetime contribution limit of $200,000 to an RDSP, and contributions are allowed until the end of the year in which the beneficiary turns 59. The holder of the RDSP opens and manages the RDSP. Contributions to the RDSP can be made by anyone but must be authorized by the holder. The parent of a child with a disability can open an RDSP for the child if they are under the age of majority and may continue on as the holder of the plan after the child reaches the age of majority. If the child is over the age of majority and contractually competent at the time of opening the RDSP, the child must be the plan holder.

What is a Lifetime Benefit Trust?

A Lifetime Benefit Trust (LBT) is a trust created to eliminate tax where an RRSP or RRIF is left to a dependent child with a mental infirmity. An LBT may be structured as a Henson Trust. If a parent intends to leave an RRSP or RRIF to a child with a disability, it may be beneficial to set up an LBT. Please speak with a TEP if you think an LBT may be in the best interests of your child.

Preferred Beneficiary Election

Income of a trust is generally taxed in the trust or taxed in the hands of one or more beneficiaries who have received the income. The Preferred Beneficiary Election allows income to be taxed in the hands of one of the beneficiaries without any payment actually being made.

One potential benefit of making the election is that it may be possible obtain a lower tax rate on income of the trust. Additionally, if the amount is not actually paid to the beneficiary, this allocation may not be counted as income for the purposes of provincial disability payments, thereby protecting and preserving the right of a disabled beneficiary to collect government benefits.

If an individual is eligible for the Disability Tax Credit, they are generally also eligible for the Preferred Beneficiary Election. Since only one QDT can be created per individual, if the parents and grandparents both want to set up trusts benefitting that individual, it may be advantageous to make the preferred beneficiary election for trusts other than the QDT.

For further information or assistance in estate planning to benefit a child with a disability, please consult a TEP.

My parents have dementia – how can I help them?

Posted on January 13, 2020March 22, 2023 By admin

If a parent becomes or may become mentally incapable of managing their own affairs, there are a few options to consider. The following information may be helpful if your parent(s) have been diagnosed with dementia or are experiencing the early onset of this disease. Please note that this article gives general information for provinces other than Québec. For information regarding Québec, please see the article “Incapacity Planning in Québec”.

Appointing a Power of Attorney for Property (POAP)

The role of someone appointed under a POAP is to step into the shoes of an incapable individual for the purpose of making financial decisions that they can no longer make for themselves. The purpose of a POA is to protect the interests and welfare of the individual who appointed the attorney.

An individual who has been appointed under a POAP can manage the grantor’s financial affairs and make legal decisions with respect to physical assets. Unless the grantor restricts these powers, the attorney will be able to do almost anything that the grantor can do concerning finances. They can sign documents, start or defend a lawsuit, sell property, make investments and purchase things for the grantor. However, under a POAP, an individual cannot make or change an existing Will, change beneficiaries on a specific insurance product or transfer their duties under the POAP to someone else.

Appointing a Power of Attorney for Personal Care (POAPC)

A POAPC is a legal document that gives an individual (the attorney) the power to act on someone else’s behalf by making personal care decisions. If an attorney has been appointed, they will be legally capable of dealing with the affairs of someone who is incapable of making their own such decisions. Unless the attorney’s powers are restricted, they will be able to make almost any decision pertaining to the incapacitated individual’s personal life, including choices as to medical treatment, housing, food, and other care. The PAPC will come into effect only when an individual is deemed mentally incapable of making their own personal care decisions.

It is possible that an incapacitated parent has already created a POAPC without the knowledge of one or more of their children. Inquiries should be made to legal advisors to determine whether a POAPC has been signed. If there is no pre-existing Power of Attorney, it may still be possible for a parent who is experiencing the early onset of dementia to execute one, so long as there is still sufficient mental capacity to do so.

If an individual becomes incapable of making personal care decisions, and they have not appointed an attorney for personal care, a family member will automatically have the right to make decisions on the individual’s behalf, unless someone else is appointed. A Court may appoint a guardian to make decisions on behalf of an incapable person for some or all aspects of personal care.

Become a guardian

If a parent becomes or may become mentally incapable of managing their own affairs, there are a few options to consider. The following information may be helpful if your parent(s) have been diagnosed with dementia or are experiencing the early onset of this disease. Please note that this article gives general information for provinces other than Québec. For information regarding incapacity planning in Québec, please see the article “Incapacity Planning in Québec”.

Appointing a Power of Attorney for Property (POA)

The role of someone appointed under a POA is to step into the shoes of an incapable individual for the purpose of making financial decisions that they can no longer make for themselves. The purpose of a POA is to protect the interests and welfare of the individual who appointed the attorney.

An individual who has been appointed under a POA can manage the grantor’s financial affairs and make legal decisions with respect to physical assets. Unless the grantor restricts these powers, the attorney will be able to do almost anything that the grantor can do concerning finances. They can sign documents, start or defend a lawsuit, sell property, make investments and purchase things for the grantor. However, under a POA, an individual cannot make or change an existing Will, change beneficiaries on a specific insurance product or transfer their duties under the POA to someone else.

Appointing a Power of Attorney for Personal Care (PAPC)

A PAPC is a legal document that gives an individual (the attorney) the power to act on someone else’s behalf by making personal care decisions. If an attorney has been appointed, they will be legally capable of dealing with the affairs of someone who is incapable of making their own such decisions. Unless the attorney’s powers are restricted, they will be able to make almost any decision pertaining to the incapacitated individual’s personal life, including choices as to medical treatment, housing, food, and other care. The PAPC will come into effect only when an individual is deemed mentally incapable of making their own personal care decisions.

It is possible that an incapacitated parent has already created a PAPC without the knowledge of one or more of their children. Inquiries should be made to legal advisors to determine whether a PAPC has been signed. If there is no pre-existing Power of Attorney, it may still be possible for a parent who is experiencing the early onset of dementia to execute one, so long as there is still sufficient mental capacity to do so.

Become a Guardian

A ‘Guardian of Property’ (also known as a “Trustee” in some provinces) is a person who is appointed to manage the financial affairs of an individual who is mentally incapable of doing so themselves. A Guardian may be appointed one of two ways:

(1) By a provincial Public Guardian and Trustee, or

(2) By a Court.

A Guardian of Property can do almost anything the incapable person could do in relation to their property. This may include collecting and depositing income, paying bills, making purchases and looking after legal matters. However, a Guardian of Property cannot make or change a Will.

A ‘Guardian of the Person’ (also known as a “Committee” in some provinces) is an individual authorized by the courts to make personal decisions for someone who is mentally incapable of doing so themselves. Generally, a Court will not appoint a Guardian of the Person if someone has been appointed under a Power of Attorney for Personal Care.

For legal advice with respect to becoming a Guardian of Property or a Guardian of the Person, please contact a TEP.

Other Options

Another option to consider under certain circumstances is a limited ‘trusteeship’. The administrators of some government benefits such as Canadian Pension Plan or Old Age Security can appoint a “trustee” to manage income on behalf of a recipient who has been deemed mentally incapable. This option is not appropriate for a recipient who also receives income from other sources, or has assets or legal matters that require management.

For further information and help planning for family members with dementia please consult a TEP.

Power of Attorney for Personal Care

Posted on January 13, 2020March 22, 2023 By admin

elderly man with wife or carer and cup of tea

A Power of Attorney for Personal Care (POAPC) is a legal document in which an individual (known as the “grantor”) appoints another individual (known as the “attorney”) to make decisions about their health care, housing and other aspects of personal life should the grantor become mentally incapable of making these decisions on their own. In some jurisdictions, a Health Care Directive or Representation Agreement may fill a similar role.

This article provides an overview of the law in provinces and territories other than Québec (for information regarding incapacity planning in Québec, please see the article “Incapacity Planning in Québec”). Since each province and territory has separate legislation governing the creating of a POAPC, appropriate legal advice should be sought in the relevant province.

How to Create a Power of Attorney for Personal Care

The grantor of a POAPC must be considered mentally capable of executing that document. To be considered mentally capable, it must be clear that they understand:

The need to choose an attorney who has a genuine concern for the grantor’s welfare, and
That there may be a need for the attorney to make personal care decisions on the grantor’s behalf.

In most provinces, there is no special form required to execute a POAPC. Generally, to be valid, the document must:

Name one or more persons to act as attorneys in the event that the grantor is deemed mentally incapable;
Be signed and dated by the grantor (or someone on their behalf and direction if they are not physically capable of doing so); and
Be signed by two witnesses who witnessed the signing of the POAPC.

The grantor may incorporate “wishes” or instructions regarding treatment or care into the POAPC. A “wish”, also known as an “advance directive”, is a treatment decision. It may be made orally or in writing, by a mentally capable person. It is binding on the attorney, as well as on the grantor in cases of emergency. An “instruction” is a decision regarding some aspect of personal care. It must be made in advance by a mentally capable person and may be relevant to ancillary issues such as hospitalization or placement. Wishes or instructions are legally binding only if they were made while the grantor was capable of making decisions regarding treatment or care.

Who can I name as my Attorney?

A grantor can name almost anyone as their attorney, including a family member or personal friend. The grantor should choose someone they trust and who has the ability to carry out the grantor’s wishes. A grantor cannot appoint someone as an attorney for personal care if the grantor pays them to provide services, unless the payee is also a spouse. Individuals under the age of 16 and those who are mentally incapable cannot be appointed as attorneys for personal care.

More than one person can be named as an attorney under a POAPC. If multiple attorneys are named, the POAPC should be clear as to whether attorneys must act together (jointly) or may act independently (jointly and severally). If there are more than two named attorneys, a POAPC should be clear as to whether a majority of them may act.

What types of decisions will my attorney be permitted to make?

Unless the POAPC includes specific restrictions, an attorney will be allowed to make almost any decision pertaining to the grantor’s personal life that the grantor could normally make themselves. Decisions about medical treatment, housing, visitors, attending religious services, food, hygiene and safety are examples of “personal care” decisions.

Important medical wishes are often included in a POAPC. The document might state that an individual does (or does not) wish to receive life-preserving treatment if they are in a vegetative state, or that no ‘heroic measures’ should be taken to keep the person alive.

If an individual is considering medical assistance in dying as part of their end-of-life care plan, they must be capable of making decisions with respect to their own health in order to meet the criteria for assisted dying. Accordingly, consent to medical assistance in dying cannot be provided by a substitute decision maker.

When will my POAPC come into effect?

A POAPC may only be used while the grantor is mentally incapable of making their own personal care decisions. The term “incapable of making personal care decisions” generally means that the grantor cannot understand the information that is relevant to that particular decision or cannot appreciate the results of making a specific decision.

Generally, it is up to the attorney to determine whether the grantor is mentally incapable, with some exceptions. Where a decision is required about medical treatment or admission to a long-term care facility, a healthcare professional must determine whether the grantor is incapable of making such decisions before the attorney can act. Moreover, the grantor can require that the attorney obtain independent evidence of their incapacity – such a letter from a doctor – before they are permitted to act on the grantor’s behalf.

Will my POAPC be recognized abroad?

When planning to move abroad, it is important to recognize that not all jurisdictions define mental capacity or treat POAPCs in the same way. Ideally, POAPCs should be obtained in the foreign jurisdiction to avoid any delays or potential issues in personal decision-making.

If a POAPC has not been created in the foreign jurisdiction, the Canadian POAPC may still be acceptable under certain circumstances. It is imperative to consult a TEP in that jurisdiction to ensure that the document complies with the local requirements for a POAPC.

What happens if I don’t make a POAPC?

If an individual becomes incapable of making personal care decisions without having a valid POAPC, a family member would ordinarily have the right to make most treatment decisions for them unless someone else is appointed. If there is no family member or representative who is able, capable or willing, the Public Guardian and Trustee of the jurisdiction of residence may make these decisions on the individual’s behalf.

In Canada, each province has its own laws dealing with substitute decision makers. The relevant statutes include:

Ontario – The Substitute Decisions Act
Quebec – Public Curator Act
British Columbia – Health Care (consent) and Care Facility (Admission) Act
Alberta – Personal Directive Act
Saskatchewan – The Health Care Directives and Substitute Health Decision Makers Act
Manitoba – Health Care Directives Act
New Brunswick – Infirm Persons Act
Nova Scotia – The Medical Consent Act
Newfoundland and Labrador – The Advance Health Care Directives Act
Prince Edward Island – Consent to Treatment and Health Care Directives Act
Yukon – Care Consent Act
Northwest Territories – Personal Directives Act

For further information or help preparing a POAPC, please consult a TEP.

What are my duties as executor?

Posted on January 13, 2020April 17, 2023 By admin

In the unfortunate event of death, the executor(s) named by a Will (liquidator in Quebec, see below) is charged with carrying out the final wishes of a deceased testator and administering the estate. The estate is, in general terms, all the money and property left behind by the testator. The executor(s) will be required to pool all the remaining assets of the deceased, pay any debts or taxes, and distribute the remainder in accordance with the Will.

Executor(s) have an obligation to administer the estate in a timely manner. Although there is no stated time period during which a trust must be administered, the common law presumes that an estate takes approximately one year to administer properly. This is known as the “Executor’s Year”. After the Executor’s Year, in some cases beneficiaries may be permitted to seek payment.

I have been named in a Will as an executor. Do I have to accept?

A person appointed by Will may decline to be an executor. However, if an appointee is considering declining the appointment, it is imperative for them not to begin administering the estate. Once an individual begins to act as an executor, a court order may be required in order for them to resign.

What should I do next?

If a potential executor has not been named by Will as estate trustee, they will need to obtain a Grant of Administration or a Certificate of Appointment. If an executor is explicitly named by Will or has obtained a court order permitting them to administer the estate, they should begin by identifying anyone familiar with the business and private affairs of the deceased such as lawyers, accountants, business partners, etc.

A named executor can begin making funeral arrangements. The Will may outline funeral instructions or pre-paid plans. If the Will contains no requests, it is prudent to involve family members in decision-making, since they will likely have thoughts about the deceased’s funeral wishes, and may have wishes of their own.

If the estate is sizeable or complex, an advisor may be engaged to draft and review the probate paperwork. The ultimate responsibility for review and signing of probate paperwork lies with the executor, but the use of an advisor can simplify and expedite the process. The cost of any legal fees and taxes are deducted from the estate once the legal work is complete. A TEP can act as an advisor or assist in engaging, instructing, and comparing specialists.

Satisfying debts and obligations of the deceased

One of the key responsibilities of an executor is to ensure that any outstanding debts or obligations of a deceased are settled, including any outstanding tax obligations. People familiar with the deceased may provide some guidance on known debts. However, in order to give notice to any other potential creditors, a notice should be posted in a local newspaper and (if appropriate in the province) in the provincial gazette. The notice must provide the deceased’s name and a request for any potential creditors to come forward.

How do I obtain a death certificate?

A proof of death certificate can be obtained from the funeral home. This document should be registered with the Vital Statistics Agency in the province in which the deceased resided. This Agency can provide an official death certificate. A proof of death certificate will be sufficient for most purposes in some provinces.

What if there is not enough money in the estate to cover funeral expenses?

The executor may apply to the deceased’s municipality for funding to assist with funeral expenses. Arrangements should not be made until eligibility for assistance has been determined.

Notifying beneficiaries named in the Will

Executors are legally required to notify all beneficiaries named in the Will. If the executor applies for probate, courts will require proof that beneficiaries have been notified.

Valuation of the estate

An executor is required to establish the value of the deceased’s estate for the purposes of filing the terminal year tax return of the deceased, calculating capital gains taxes, and determining probate fees/estate administration tax to be paid on the value of the estate. A TEP can help with the process of estate valuation.

Do I have ongoing obligations? How long does this take?

The length of time required to administer an estate depends on, among other factors, the complexity of the estate, size of the estate, and number of beneficiaries named in the Will. With a standard estate, it is assumed that the bulk of the process will take approximately a year. Tax matters will generally take longer, especially if a Clearance Certificate is requested from the Canada Revenue Agency. As part of the distribution of the estate, the executor may need or wish to present a formal “passing of accounts”. This process involves the presentation of written accounts to a Court and items of controversy may be challenged by one or more beneficiaries.

Do I get paid as executor?

The Will may or may not explicitly provide for executors to be compensated. If the Will is silent on the matter, the appointee may still be compensated for acting as an executor. This would either require approval from all of the beneficiaries, or an order from the Court as part of a passing of accounts. A Court can order that any compensation taken by an executor without approval be repaid.

What is a liquidator?

In the province of Québec, a liquidator plays a similar role to an executor in other provinces. Liquidators are responsible for distributing the succession of the deceased. This role has slightly different obligations than the requirements for an executor in other provinces. For example, in Québec, there is a legal duty to not only notify the beneficiaries in the Will, but also to notify anyone who would inherit if the person died intestate.

For further information or assistance in carrying out your duties as an executor, please consult a TEP.

The myths of common-law marriage

Posted on January 13, 2020March 22, 2023 By admin

The Myths of Common-Law Marriage

The term “common-law marriage” generally refers to couples who cohabitate or are in an exclusive relationship that mirrors a marriage (conjugal like relationship), but without a legally binding ceremony or marriage certificate. Common-law marriage is a widely misunderstood concept, which is problematic because there are real legal consequences to being in a so-called common-law union. This article identifies and clarifies some of the myths surrounding common-law marriage in Canada.

1. Common-law marriages are the same across the entire country

Each province and territory across Canada has the power to establish its own laws regarding property and civil rights, including common-law unions. A relationship that constitutes a common-law marriage in one province may not constitute common-law marriage in another province. Provinces diverge widely on key points, such as the required duration of cohabitation to be recognized under common law and the rights conferred to partners after such time.

Required Duration of Cohabitation for Recognition of Common-law Status
Province	Years
Alberta	3
Ontario	3
British Columbia	2
Nova Scotia	2
Saskatchewan	2
Manitoba	3
New Brunswick	3
Newfoundland and Labrador	2
Prince Edward Island	3
Québec	N/A

The required duration of cohabitation is typically reduced if there are children born into the relationship.

2. Common-law partners have the same rights as married spouses

Provinces differ on the rights they confer to individuals after cohabitation for the required period of time. For example, while common-law couples in British Columbia may be considered full spouses and receive nearly identical benefits to those in a marriage, common-law couples in Ontario are entitled to spousal support but no property rights (unless there is a separate cohabitation agreement). In the province of Québec, there are very few rights for cohabitating couples.

Common-law partners are often not entitled to participate in the property division scheme which is available to legally-married couples. As such, the relief available to common-law partners upon death or separation is limited to certain equitable remedies.

3. Common-law couples have claims to assets and/or property

In most provinces, common-law partners have no claim to the assets or property of their partners. This means that once the relationship ends, each individual is only entitled to the items registered in their own names. Jointly owned items are divided evenly, subject to equalization of net family profit (if applicable).

Some exceptions may apply. For example, in the event that there is a cohabitation agreement, division of property and assets will likely proceed according to the terms of the contract. Furthermore, if one spouse has contributed significantly to a piece of property but does not have legal title to it, they may make a claim for unjust enrichment. Such a claim is difficult to make and expensive to pursue.

4. There is an automatic right to inheritance

If a partner in a common-law marriage dies intestate, there is no automatic right of inheritance for a surviving spouse. In other words, if you die without a Will and are in a common-law marriage, you may leave your partner with virtually nothing after your death. Your partner will be entitled to your joint home if it was held in a joint tenancy, but if the legal title was held as tenants-in-common, then your share of the home will pass on to your estate. This could also potentially force the sale of your home.

One option which protects common-law partners from the potential legal complications of common-law marriage is the creation of a cohabitation agreement, which sets out how the property and assets will be divided in the event of separation. Further, preparing a Will is key to protecting your partner and ensuring that they are the beneficiary of your estate.

For further information on the implications of common-law marriage and cohabitation agreements, please consult a TEP.

Power of Attorney for Property

Posted on January 13, 2020March 22, 2023 By Joanna Pegum

A Power of Attorney for property (POAP) is a legal document that allows an individual (called the “grantor”) to appoint someone (called the “attorney”) to act on their behalf to make decisions about legal and financial affairs.

This article provides an overview of the law in provinces and territories other than Quebec (for information regarding incapacity planning in Québec, please see the article “Incapacity Planning in Québec”). Since each province and territory has separate legislation governing the creation of a POAP, appropriate legal advice should be sought in the relevant province.

Types of Powers of Attorney for Property

A POAP may be a general POAP, which allows the attorney to deal with all decisions regarding finances and property, or it may be a limited POAP, which allows the attorney to make decisions for a specific purpose or time (for example, to complete a particular transaction).

An ‘enduring’ or ‘continuing’ POAP remains in effect once the donor loses capacity. If the POAP is not specifically designated as enduring or continuing, it ceases to be effective when the donor loses capacity to manage property.

Normally, a POAP takes effect when it is signed. A ‘springing’ POAP only takes effect after a certain event or trigger (such as if the donor becoming incapable of making decisions).

Who can I name as my attorney?

When choosing an attorney, consider whether the person named is someone who can be trusted with handling money. They should be able to understand the affairs of the grantor, and be able to pick up managing them at whatever stage. An attorney must be 18 years of age or older. Some provinces have additional requirements, such as conditions that the attorney cannot be mentally incompetent, or bankrupt.

More than one person can be named as an attorney under a POAP. If multiple attorneys are named, the POAP should be clear as to whether attorneys must act together (jointly) or may act independently (jointly and severally). If there are more than two named attorneys, a POAP should be clear as to whether a majority of them may act.

While it is generally possible to appoint an attorney from another jurisdiction from a legal perspective, many practical and other issues may arise. For example, residents of the USA may not be permitted to give trading instructions on the investment account of a Canadian resident in certain situations. It is important to consult with a TEP prior to designating an attorney or attorney(s) to ensure that they are appropriate for this role.

Creating an Enduring or Continuing Power of Attorney for Property

Anyone who is 18 years of age or older and who has the necessary level of mental capacity can create an enduring or continuing POAP. Mental capacity, in this situation, requires that a grantor:

Knows what property they have and its approximate value;

– Is aware of their obligations to people (if any) who depend on them financially;

– Understands what they are giving an attorney the authority to do;

– Understands that the attorney is required to account for the decisions they make about the grantor’s property;

– Understands that, as long as they have mental capacity, they can revoke (cancel) the POAP;

– Understands that if the attorney does not manage the grantor’s financial assets properly, their value may decrease; and

Understands that there is always a chance of the attorney misusing their authority.

To create a valid enduring or continuing POAP, the document must:

– Be called an ‘Enduring’ or ‘Continuing’ Power of Attorney for Property (as appropriate) or say explicitly that it allows an attorney to continue acting if the grantor becomes mentally incapable;

– Name one or more persons to act as an attorney for property;

– Be signed and dated by the grantor; and

– Be signed by two valid witnesses who witness the document (in some provinces, it may be possible to have only one witness where that witness is a lawyer or notary public).

In certain jurisdictions, additional witnessing requirements may be in effect. For example, in British Columbia it is generally required that the attorneys execute certain documents acknowledging that they are aware of the POAP and consent to act.

Once the POAP is executed, it should be stored in a safe place where the attorney can access it quickly if needed. A POAP can also be stored with a trusted third party (such as the drafting lawyer), with specific instructions regarding when to release it.

When does a POAP take effect?

An enduring or continuing POAP takes effect immediately upon being signed and witnessed, unless the document states otherwise (i.e., unless it is a springing POAP). If the POAP is to take effect only after the grantor has become mentally incapable of managing their finances, the document must be clear about that limitation.

When does my Enduring or Continuing POAP end?

An enduring or continuing POAP ends when:

– The named attorney(s) die or become mentally incapable;

– A Court appoints a Guardian of the Property for the grantor;

– The grantor signs a new POAP while still mentally capable (this is not the automatic result of signing a new POAP in all provinces. Accordingly, the new POAP should be clear with respect to whether or not it is intended to revoke existing POAPs);

– The POAP is revoked while the grantor is still mentally capable; or

– The grantor dies (on the death of the grantor, attorneys will no longer be able to deal with bank accounts or other assets).

Will my POAP be recognized abroad?

A Canadian POAP may be valid in foreign jurisdictions, although third parties in other countries will likely require a court order to validate the POAP. To avoid any delay or minimize any concerns associated with the validity of a Canadian POAP while abroad, individuals are generally encouraged to execute Powers of Attorney in each foreign jurisdiction where property or money is situated.

In the event that arrangements have not been made to create a Power of Attorney in the foreign jurisdiction, a Canadian POAP may be acceptable. Some jurisdictions have specific wording and signing requirements for foreign POAPs to be valid. Anyone affected by this situation should seek advice from legal professionals in those jurisdictions. A TEP can direct inquiries to trusted advisors in their international TEP network.

What if I don’t have an Enduring or Continuing POAP?

A guardian (or trustee) may be appointed by the Court for individuals who become mentally incapable of managing property without a valid enduring or continuing POAP. A family member or friend may apply to a Court to be given permission to manage the individual’s assets. If family or friends do not want to be burdened with this role, they may ask a trust company to apply to the Court to be a statutory guardian. If no one else has been appointed, the Public Guardian and Trustee of the jurisdiction of residence may take on this role.

For further information or help preparing a POAP, please consult a TEP.

What is a Power of Attorney?

Posted on January 13, 2020March 25, 2020 By Joanna Pegum

A Power of Attorney (or “POA”) is a legal document by which an individual gives someone they trust (the “attorney”) the right to make decisions on their behalf if they are no longer capable of looking after their own matters. This authority may be general in nature or limited to specific actions and situations.

This article focuses on the general options available for creating a POA in Canada for provinces other than Québec. For information regarding Québec, please see the article “Incapacity Planning in Québec”. The specific rules for each province vary; please contact a TEP to discuss the rules in your province of residence.

Why have a Power of Attorney?

In personal and estate planning, a POA is generally executed when contemplating the possibility of future physical and/or mental incapacity that renders the grantor incapable of making his or her own decisions. While creating a POA is voluntary in that there is no law mandating that everyone must create one, all individuals over the age of 18 who are competent to grant a POA should consider executing one. In the event of unexpected incapacity, a POA will ensure that a person’s wishes are respected, and that carrying these wishes out is easier and less expensive for their families.

Types of Power of Attorney

Generally, there are two main types of POAs:

A continuing or enduring Power of Attorney for Property (POAP) covers financial affairs, such as managing investments, granting gifts, or borrowing money. For more information, see “I have been given Power of Attorney. What does that mean?”
A Power of Attorney for Personal Care (POAPC) (also known as a “Personal Directive”) covers personal decisions, such as housing and health care. For more information, see “I have been given Power of Attorney. What does that mean?”

How to properly execute a Power of Attorney

The law does not require the use of a lawyer’s services to create a POA. However, individuals with even modestly complicated affairs are generally advised to consult a lawyer to ensure that the POA is neither too broad nor too specific, and that the document is executed properly. A POA can be created in a few different ways:

A lawyer can draft a POA; or
A grantor can use online forms provided by reputable sources (such as forms made available by the Attorneys General for the applicable province).

Generally, a valid POA must:

Name the person the grantor has chosen to act on their behalf;
Be signed and dated by the grantor; and
Be signed and dated by two witnesses who saw the grantor signing the document.

The witnesses to a POA typically cannot include:

A grantor’s spouse, partner, child or someone treated by the grantor’s child;
The person the grantor is naming as attorney or the spouse of that person;
Anyone under 18 years of age; or
Anyone who is incapable of making their own property or personal care decisions.

Generally, there is also no requirement that these documents be registered. However, it is important to ensure that the people who need to know about the document – especially the attorney(s) – have a copy of the POA or know where to get one if needed.

What happens if there is no Power of Attorney?

In the event that an individual who does not have a valid POA is or becomes incapacitated, a family member has the right to make health care decisions or apply to become the “guardian” of their person and/or property (the person occupying this role is also known as a “trustee” or a “committee”, depending on the jurisdiction). In certain cases, someone else, such as a close friend, could apply to act for the individual in these matters. The only time the provincial government, through the office of a Public Guardian and Trustee, will act, is in situations where there is no suitable person able or willing to act on behalf of the incapacitated person.

For further information or assistance in preparing a POA please consult a TEP.

What happens to my assets when I die?

Posted on January 13, 2020April 17, 2023 By Joanna Pegum

Is there tax charged on death?

There is no inheritance or estate tax in Canada. However, any capital property owned by the deceased is deemed to have been disposed of at fair market value immediately prior to death. The deemed disposition triggers the realization of any accrued capital gains or unrealized capital losses. Any disposition of capital assets (including deemed dispositions) made in the year prior to death must be reported on the deceased’s final tax return. The final tax return must be filed for the deceased by the executor or administrator of the estate.

What is a “deemed disposition” and why does it matter?

When someone dies, the government treats any property or items owned at the time of death as though it was sold immediately before death. For example, if the deceased owned stock, it would be treated for income tax purposes as though the stock was sold on the day the person died.

In many cases, this deemed disposition of property triggers additional capital gains tax to be included in the deceased’s final income tax return.

The deemed disposition can be deferred until the date of death of a surviving spouse or common-law partner if the deceased’s assets pass directly to the spouse or common law partner, or to a Qualifying Spousal or Common-Law Partner Trust (“QST”) for their benefit.

What is a QST?

A QST allows an individual to provide for a surviving spouse or common-law partner during their lifetime and to have any remaining assets transfer to the original testator’s chosen beneficiaries (e.g., children from a first marriage). The surviving spouse or common-law partner must be entitled the QST’s annual income and can (but need not) be able to access the assets of the QST during their lifetime.

Detailed estate taxation planning – including setting up a QST – should be undertaken with the assistance of a licensed professional such as a TEP.

How are capital gains taxed?

A capital gain is the excess of the fair market value on the deemed disposition date and the adjusted cost base (i.e., the purchase price plus any capital costs) of the property. Conversely, a capital loss is the excess of the adjusted cost base over fair market value. Currently, only 50% of any net capital gains (i.e., capital gains less capital losses) are subject to tax at the deceased’s marginal tax rate, which is dependent upon their other income for the year of death.

Not all capital gains are subject to taxation. If a property would have qualified as the taxpayer’s principal residence, the principal residence exemption may be available to reduce or eliminate capital gains realized on the disposition of that property. If the property is shares of a qualified small business corporation or qualified farming or fishing property, the capital gains exemption may be available to reduce the amount of capital gains tax.

Will my beneficiaries have to pay tax when I am gone?

In most cases, inheritances are received after-tax and the beneficiary acquires the property at a cost equal to the deceased’s deemed disposition value. For instance, if a beneficiary is left a house, they will pay no tax on receiving the property. Once the house is in their hands, they will be liable for standard taxes such as property tax and income tax if the house is sold at a profit and was not their principal residence.

Note that some jurisdictions outside Canada tax beneficiaries by way of an inheritance tax. As such, it is possible that a beneficiary may be subject to an inheritance tax, and the Canadian estate will be subject to capital gains tax on the deemed disposition of assets. A beneficiary residing in a foreign jurisdiction should contact a licensed tax professional for advice on how different tax systems will impact estate planning.

How are my RRSPs or RRIFs taxed when I die?

When the holder of an RRSP or RRIF dies, the remaining balance is treated as ordinary income to the deceased in the year of death from a tax perspective. If the RRSP or RRIF can be transferred to a surviving spouse or common-law partner, taxation of the RRSP or RRIF can be deferred until the death of the survivor.

What are Probate Fees / Estate Administration Tax?

Probate fees (known in some provinces as probate tax, probate charges, or estate administration tax) are fees or taxes charged in relation to obtaining a grant of probate (or Certificate of Appointment in Ontario). The name of the fee/tax and amount of tax charged varies from province to province and territory to territory.

Are there any exemptions from Probate Fees?

The list of items and estates eligible for exclusion from probate fees varies from province to province. Estate planning can be undertaken in certain provinces to minimize probate fees through the use of Multiple Wills. For more information on probate exclusions and rates, please refer to the “What is Probate?” and “Probate by Province” sections of this website.

For further information or assistance in drafting a Will, please consult a TEP.

What is capital gains tax?

Posted on January 13, 2020April 18, 2023 By Joanna Pegum

The sale or gift of an asset that is capital property which has increased (or decreased) in value while it was held by an individual will attract capital gains tax (or a capital loss) on disposition. The gain or loss is the difference between any proceeds received (or deemed received) on disposition and the purchase price (less any costs associated with the disposition). The deemed proceeds for a gift is equal to the property’s fair value at that time.

How are capital gains taxed?

Only 50% of all capital gains (or losses) are taxable (deductible) in Canada. This 50% is added (or deducted, in the case of a loss, against any capital gains) to personal income and taxed at an individual’s marginal income tax rate.

What is exempt from capital gains tax?

Capital gains are not generally taxed (and capital losses are not available) on the following items in Canada:

The principal residence of an individual
Transactions in tax-sheltered plans such as Tax-Free Savings Accounts (TFSAs), Registered Retirement Savings Plans (RRSP’s) and Registered Retirement Income Funds (RRIF’s)

What is a lifetime capital gains exemption and am I eligible?

A lifetime capital gains exemption may apply to the gains on dispositions of farm or fishing property, as well as shares of a qualified small business corporation. There are lifetime limits to the exemption which are calculated by individual.

For further information, or assistance with tax planning, please contact a TEP.

How can I leave my pension to the person I choose?

Posted on January 13, 2020March 27, 2023 By Joanna Pegum

Whether pension payments can be left by will to another person depends on the type of pension plan. The rules differ depending on whether the pension is paid from a private pension plan, such as an employment pension, or a public pension plan such as the Canadian Pension Plan (CPP).

Canada Pension Plan

Survivor’s Pension

The CPP survivor’s pension is a monthly payment paid to the individual who, at the time of death, is the legal spouse or common-law partner of the deceased contributor. Establishing proof of a common-law relationship or that a common-law relationship existed prior to marriage, requires the execution of a statutory declaration.

The amount received by the surviving spouse or common-law partner will depend on the following factors:

Whether the deceased contributor is also a recipient of CPP disability benefit or retirement pension;
The survivor’s age; and
How much, and for how long, the deceased contributor paid into the CPP.

It is the responsibility of the surviving spouse or common-law partner to apply for the survivor’s pension. Eligible individuals should apply as soon as possible after the contributor’s death, since delays may result in a loss of benefits. The CPP will only make back payments for up to 12 months, which means that any further delays will result in lost benefits. At the earliest, a survivor’s pension will begin one month after the contributor’s death.

Death Benefit

The CPP death benefit is a one-time, lump sum payment to the estate or other eligible individuals on behalf of the deceased contributor. If the deceased leaves an estate, the executor is responsible for applying for the death benefit and should apply within 60 days of the date of death. If no estate exists, or the executor has not submitted an application, payment may be made to other persons who apply for the benefit in the following order of priority:

The person or institution that has paid for, or is responsible for the funeral expenses of the deceased;
The surviving spouse or common-law partner; and
The next-of-kin of the deceased.

Children’s Benefit

The CPP children’s benefits provides monthly payments to dependent children of a deceased or disabled CPP contributor. In order to be eligible for this benefit, the child must be either:

Under the age of 18; or
Between the ages of 18 and 25, and attending a recognized school or university on a full-time basis.

In addition, the child must be in the custody and control of the contributor while under the age of 21 and either (i) a natural child of the contributor or (ii) adopted legally or “in fact” by the contributor. A child is no longer eligible for benefits once they turn 25 years old. For 2023, the current flat rate for the children’s benefit is $281.72 monthly.

Private Pension Plans

A private pension plan (“Individual Pension Plan” or “IPP”) is another form of retirement account created by a corporate employer or incorporated professional. IPP’s are governed by the Income Tax Act and various provincial legislative instruments.

A successor annuitant is a person who collects the benefits of a pension. Generally, the ability to appoint a successor annuitant depends on the type of pension plan. Often, such plans will permit pensioners to appoint a specific individual as their successor annuitant. However, in some jurisdictions, you may be permitted to only name your spouse as a successor. In addition, plans may also permit a pensioner to designate an individual as a “beneficiary” rather than a successor annuitant, in which case, the slightly different rules will apply

For further information about leaving your pension to a specified individual, please consult a TEP and, if applicable, your pension benefits contact at your employer.

10 Tips to help you get started as an Executor

Posted on January 12, 2020April 18, 2023 By admin

Serving as an executor can be a lot more challenging than is initially expected. People often underestimate the amount of work that goes into the role. This article will provide executors with helpful tips for carrying out their obligations successfully.

1. Understand an executor’s duties

The executor of an estate is the representative of the estate of a deceased person. Being an executor can be difficult, time-consuming and stressful. The executor is responsible for everything from obtaining a copy of the Will to communicating with beneficiaries and creditors. While not an exhaustive list, here are some of the duties of executors – review insurance coverage, close financial accounts, pay debts, taxes and fees and distribute assets to the beneficiaries. In some cases, an executor can be found personally liable for the debts of an estate. It is important that a person appointed as an executor educate themselves about what is involved before taking on the role, in order to ensure that they are comfortable with everything that is required, as once an individual begins to act as an executor is it is difficult to leave the role.

2. Locate important documents

One of the first obligations that an executor has is to locate and read the original and most recent Will of the deceased. In an ideal situation, the testator will have informed the executor as to the location of the Will and other important documents. If this has not been done, the executor will have to conduct a search for the Will. The executor should also obtain the original death certificate of the testator and certified copies which may be required by third parties such as Financial Institutions to confirm the executor’s appointment and enable them to act on behalf of the testator’s accounts and other assets.

3. Communicate

Settling an estate can often create tension amongst family members. Executors will be required to speak regularly with beneficiaries and family members to ensure that they understand the process and balance any potential conflicts of interest. It is important to be as transparent as possible and keep the lines of communication open. Family members should be told what actions are being taken to settle and distribute the estate, and what their interests are in the estate.

4. Carry out the Will as it is written

It is crucial that the executor abide by the terms of the Will. While this may seem obvious, sometimes executors may feel tempted to change an unpopular part of the Will in favour of what they believe to be fair or efficient. At other times, family members or beneficiaries of the Will may encourage the executor to alter a certain provision in their favour. It is important to remember that the executor’s role is to distribute the estate strictly as it was set out in the Will.

5. Pay debts and taxes before paying beneficiaries

One of the most important responsibilities of an executor is paying off any outstanding debts, taxes and fees. Sometimes, executors feel pressure by family members and/or beneficiaries of the will to distribute their interests right away, but if an executor pays a beneficiary before clearing all liabilities, they may be held personally responsible for doing so.

It is best practice to obtain a Clearance Certificate from Canada Revenue Agency which confirms that any taxes owing, interests and penalties have been paid by the estate. Doing so, provides the executor with clearance to distribute the estate assets with the knowledge that tax obligations have been satisfied. Executors who fail to obtain a Clearance Certificate may be held liable for paying any outstanding taxes up to the value of the estate (and possibly beyond in the event the executor was found to be grossly negligent).

6. Take your time – within reason

Administering an estate is time consuming. It can often take more than a year and could stretch out even longer depending on the complexity of the Will and nature of the various assets. An executor must strike the correct balance between ensuring that they take the time to understand the issues involved in the administration of the estate, while keeping estate settlement moving forward. Executors should be aware of the concept commonly referred to as the “executor’s year” during which time there is an expectation that the executor gather the deceased’s assets and administer the estate in a manner so that at least any cash bequests can be made within the year of death. It is possible that interest may accrue to cash bequests not made within the executor’s year unless the Will specifically disallows the application of interest.

7. Maintain records

Keeping good records is crucial. If beneficiaries have questions, the executor must be able to back up and support their decisions with the correct documentation. Since the executor is accountable to the beneficiaries for the assets of the deceased, it is vital that accurate records are maintained when dealing with the distribution of the estate, as well as records of all debts, expenses and taxes. Further, it may be necessary to submit the records to the court for approval known as the “Passing of Accounts” therefore detailed accurate records are essential.

8. Seek professional advice

Once you obtain the necessary documents, an executor will have a better understanding of just how complicated administering an estate may be. At this point, they may wish to seek advice from professionals whose expertise will assist in preventing costly mistakes. Executor duties often require consulting multiple professionals, including lawyers and accountants. In most cases, it is not appropriate to undertake the process of estate administration without the involvement of professionals.

9. Delegate where appropriate

An executor is not obliged to do everything personally. Executors are entitled to outsource many of the necessary tasks of estate administration. It is expected and encouraged that executors seek advice from professionals and other advisors. Delegation should be limited to appropriate tasks.

10. Protect yourself

Executors have a number of different responsibilities when managing the distribution of an estate. For peace of mind, there are two principal ways executors can protect themselves from personal liability:

(1) Executor Insurance: executor insurance will protect trustees who face any legal issues relating to decisions made in the course of estate administration.

(2) Obtain Releases from Beneficiaries: releases operate to discharge an executor from personal liability. They are typically presented to the beneficiaries at the time of distribution. The release should contain an acknowledgment that the beneficiaries received a full and adequate accounting of the administration of the estate and are satisfied with the information that was provided

For further information, or assistance with estate administration, please consult a TEP.

Should we own our home as Joint Tenants or Tenants in Common?

Posted on January 12, 2020April 17, 2023 By admin

two women who are tenants in common look at house

Should we own our home as Joint Tenants or Tenants in Common?

When purchasing a home with another person, it is important to identify the most suitable ownership structure for the property. In provinces other than Quebec, there are two common ways in which individuals can co-own property: tenancy in common or joint tenancy. This article provides an overview of each type of co-ownership to help determine what type of co-ownership is most appropriate for a given situation.

Tenancy in Common

Tenancy in common is a type of co-ownership that may be well-suited for individuals who are not legally married, who are buying property with a friend or business partner, or who are on a second marriage and want to leave their interest in the property to a third party (i.e., someone other than their spouse) in their Wills.

Tenants in common hold an individual and divided interest in the land. Each party has the right to transfer their ownership interest at any time. If one owner dies, their portion of the property interest forms part of their estate and can be transferred to a third party by a Will.

Joint Tenancy

Joint tenancy is the most common form of property ownership for those purchasing a home with a spouse or partner. Joint tenants have full ownership of the property and have an equal and undivided right to keep or dispose of the property.

The chief distinction between joint tenancy and tenancy in common is that joint tenancy creates a right of survivorship. A joint tenant’s share of the property passes to the other joint tenant(s) upon death. As such, joint tenants cannot leave their portion of the property to a third party in their Will. Practically speaking, this means that when one spouse dies, the other spouse becomes the sole owner of any jointly-owned property (typically, this would include the marital home).

Other features of joint tenancy include:

Avoiding Probate Fees: Since the property is transferred to the surviving owner(s) by way of the right of survivorship, the deceased owner’s estate can avoid paying probate fees on their interest.
Equal Use and Possession: Joint tenants are “jointly” allowed full use of the property.

In order for a joint tenancy to exist, four conditions must be met:

All tenants must own the interest at the same time;
All tenants must have an equal interest in the property;
All tenants must acquire title by the same deed or Will; and
All tenants have an equal right to possession.

If any one of these four conditions is not satisfied, or if it is unclear whether a joint tenancy has been created, Courts will typically presume that a tenancy in common was formed. As such, it is important to precisely indicate the intentions of the co-owners.

It is possible to sever the joint tenancy and create a tenancy in common if the co-owners decide that joint tenancy is no longer suitable for their needs. Joint tenancy may be severed in several ways:

One joint tenant unilaterally destroys the joint tenancy by transferring title of their share of the property to themselves, selling their interest, or mortgaging their interest. This would destroy the “unity of title” which is a formal requirement for joint tenancy (see number 3, above).
Joint tenants may enter into a written agreement with a provision that outlines the severance of a joint tenancy upon the occurrence of certain events.
Joint tenants may inadvertently sever the joint tenancy if they act in a way that supports a tenancy in common, as determined by the court on a case-by-case basis.

Legal advice should be sought not only to determine the most appropriate type of co-ownership, but also to ensure accurate and effective creation of such co-ownership.

For further information regarding co-ownership, including co-ownership of a marital home, please consult a TEP.

Do I need a Marriage Contract?

Posted on January 12, 2020March 22, 2023 By Louise Polcaro

Do I need a Marriage Contract?

Newly-engaged couples often spend thousands of dollars and months planning the perfect wedding ceremony, but most do not spend sufficient time or energy reflecting on what is to come after the “I dos.” A marriage contract (also referred to as a prenuptial agreement) is an important part of the planning process, permitting couples to plan for a joint financial future and discuss their visions together, whether or not the marriage lasts. The binding effect of a marriage contract brings clarity and grants legal protection in the unfortunate event of a divorce.

What is a marriage contract?

A marriage contract is a legally binding contract generally entered into before marriage, although it can also be entered into after a couple is already married. A marriage contract addresses legal claims over assets owned by each partner prior to marriage, as well as any property acquired during the marriage, in the event that the marriage ends in divorce or separation.

Is a marriage contract required?

There is no legal requirement in Canada for couples to enter into a marriage contract, although they are becoming increasingly popular. Historically, marriage contracts were primarily recommended for anyone who was wealthy. Opinion has shifted in recent years and most married couples are now advised to sign a marriage contract. If you intend to own property together, have income separate from your spouse, or choose to alter your career path to raise children, you may want to consider entering into a marriage contract.

A cohabitation agreement is similar to a marriage contract but is used by couples who are not married (i.e., are common law spouses). It can be used to ensure the fair treatment of each partner upon the breakdown of their relationship.

Myths about marriage contracts

Confusion surrounding marriage contracts has led to a series of popular misconceptions. In this article, we review some common myths about these agreements.

Marriage contracts are only for the wealthy

Marriage contracts are important for everyone. Given high legal fees associated with divorce, the extreme stress surrounding separation, and increasing financial independence among Canadians, a marriage contract can be beneficial for most couples. In the event of divorce, having a plan for separation which was made during a period of good will and mutual trust will expedite the process, protect your assets, and save legal costs.

Marriage contracts are not binding

Marriage contracts are generally enforceable in Canada, although typically, full financial disclosure and independent legal advice are required. Pursuant to provincial legislation, two people who are married or intend to marry normally have the authority to enter into a marriage contract. The agreement sets out their rights and obligations to one another during marriage, and in the event that the marriage ends. Typically, marriage contracts do not become enforceable until after the marriage has taken place.

These agreements assume our marriage will end in separation and/or divorce

Creating a marriage contract provides a meaningful opportunity for couples to speak openly about their finances, wishes for taking care of children from prior relationships and taking care of one another. Arranging for a marriage contract is nothing more than a couple implementing safeguards in the event their marriage breaks down.

Couples do not enter into a marriage with the idea that it will end in divorce, but the reality is that divorce rates are high. Developing a marriage contract may actually strengthen the relationship as partners speak candidly about their plans for a future together.

For further information, or assistance in creating a marriage contract, please consult a TEP.

Things to Consider when Making a Will

Posted on January 12, 2020April 17, 2023 By admin

The thought of making and planning the distribution of your estate can be daunting. It can be difficult to grasp where to start or who to ask for advice. This following considerations should be taken into account when planning for and preparing a Will.

Appointing a Guardian for your Minor Child

When one parent dies, the other parent typically gets legal custody of any minor children. However, if one parent is unfit to care for the child, or if both parents die, the deceased’s family and the Courts will look to the Will to determine who should become a child’s guardian. If there is no guardian named in a Will, or if the named guardian is unwilling or incapable of acting as a guardian, the Courts will make a decision on behalf of the deceased individuals.

To avoid complications, it is wise to name guardians and alternate guardians for your minor children in your Will. It is also important to speak with potential guardians prior to appointing them, in order to ensure that they are willing and able to assume this responsibility.

Choosing the Beneficiaries of your Will

The individuals named in a Will are called “beneficiaries.” The most common types of beneficiaries are family, close friends and charities. A Will outlines the inheritance to be received by each beneficiary after a person’s death.

Value your Assets

In making a Will, it is helpful to consider and list all known assets. If there are significant assets, such as a house, property or motor vehicle, it is important to identify whether the asset is owned independently or in conjunction with someone else. With respect to real property, there are two ways in which property can be co-owned: (i) a joint tenancy, or (ii) a tenancy in common. The nature of the property ownership will impact whether or not the testator’s share of the property can be included in the Will and gifted to a beneficiary.

Specific Gifts

Many people include specifics gifts of items with sentimental value in their Wills so they can ensure that these items are given to a specific person. Even if there is little to no monetary value in the object, sometimes a small personal item will be the one which is most crucial to a beneficiary. Specific gifts may include jewelry, artwork or other family heirlooms.

Appointing an Executor

It is important to consider who should be appointed as the executor of an estate when an individual passes away. The executor is an individual who carries out the instructions in the Will and administers the estate, including paying any taxes and debts, and distributing the property in accordance with the Will. Choosing an executor is an important decision. The named individual should be trusted to carry out the testator’s wishes and instructions honestly. They should be organized and understand their responsibilities as an executor.

For further information or assistance in drafting a Will, please consult a TEP.

I made a Mistake on my Tax Return. What do I do?

Posted on January 12, 2020April 18, 2023 By Louise Polcaro

Mistakes happen, even on tax returns!

If you’ve filed your tax return timely, you can request the Canada Revenue Agency (CRA) to amend and reassess the return to include the income omitted or deductions missed. The request should be made in writing to the CRA.

For circumstances where the omission or mistake would result in a penalty, a voluntary disclosure program (VDP) may be used. The VDP offers taxpayers a chance to correct errors on a previously filed tax return, or to file a return which should have been filed but was not.

The VDP provides two streams, one for income tax disclosures and one for GST matters. Tax professionals should always be contacted first when using the VDP.

1. Income Tax Stream

Income tax applications to the VDP are processed under “two tracks”: (1) the general program and (2) the limited program. Each case is assessed individually as to which track will apply.

General program

This program provides relief to taxpayers who intend to correct unintentional errors. If an application is accepted into this program, the taxpayer will not be subject to any penalties, nor referred for criminal prosecution. The taxpayer may also be granted partial relief of interest for assessment for a certain number of years.

Limited Program

This program limits the relief available for taxpayers who intentionally avoided their obligation to pay taxes. If a taxpayer is accepted to this program, they will not be referred for criminal prosecution, or charged gross negligence penalties, but may be charged other penalties as applicable. No interest relief will be provided.

CRA considers the following factors in determining acceptance into the limited program:

Efforts were made to avoid detection through the use of offshore vehicles
The dollar amounts involved
The number of years of non-compliance
The sophistication of the taxpayer

The existence of one or more factors does not automatically make the taxpayer ineligible or eligible for the limited program.

2.GST/HST stream

Registrants and other taxpayers required to report GST/HST apply to this stream of the VDP. This program provides taxpayers the opportunity to voluntarily correct inaccurate or incomplete GST/HST information, or disclose any information that should have been reported initially but was not.

Applications under this stream of the VDP are processed under three categories: (1) the wash transactions program, where one party may have reported and another has not; (2) the general program; and (3) the limited program, similar to the income tax limited program.. The determination of which category the application will be processed is based on a case-by-case assessment.

Executors and Powers of Attorney

If you are acting under a Power of Attorney or as an executor and notice that taxes have not been reported properly, you can apply on behalf of the grantor or deceased to the CRA’s VDP.

For further information, or assistance with voluntary disclosure, please contact a TEP.

Don’t forget your digital assets

Posted on January 12, 2020March 27, 2023 By admin

Making a list of personal assets is one of the first things that people do when planning their estate. Included in this list are typically physical or monetary assets such as bank accounts, investments, real estate, jewelry and other personal effects. Usually, digital assets are left out of estate and incapacity planning – an oversight which has real consequences if an individual becomes incapacitated or passes away.

With the advent of e-mail, social media, electronic banking, online investments, and digital vaults, people increasingly have significant and valuable online presences. Many also use digital programs to safeguard family photos and music. As these assets and memorabilia continue to become digitized, there are important issues to be considered in the context of estate planning – such as if, and how, these assets will be accessed upon incapacity or death.

Digital assets are often overlooked in a will or power of attorney because they rarely have monetary value, but including them in estate planning is vital to having agency over how these assets should be managed after your incapacity or death.

Gaining Access to your Accounts

One of the biggest issues surrounding digital assets is the fact that they are typically username and password protected. If the executors of an estate are not provided with this information, they may encounter issues with accessing the account of a deceased person. In order to address this issue, individuals should consider providing friends, family and/or executors with a detailed list of any and all virtual accounts and the relevant information associated with each account. This list should be stored in a safe, secure place. Family members or executors should be given information regarding access.

Below is a list of common digital accounts to consider:

Online banking
E-mail
Social media
Sentimental items stored on your hard drive
Hardware, such as a cellphone, laptop, or tablet, that requires a password
Online accounts such as Amazon or PayPal

By planning ahead, individuals can arrange full access to digital assets at an appropriate time, and ensure that no valuable or digital property is overlooked.

Social Media Accounts

Prudent estate planning should also consider what will happen to Facebook, Twitter, Instagram, and other social media accounts on death. There are different ways in which people deal with such accounts. Some prefer to have the account removed and deleted, whereas others prefer retention – including the option to have certain accounts memorialized. Given these different approaches, it is wise to provide direction to executors in order to avoid any unnecessary issues. The key to preparing for a digital “afterlife” is important to indicate what is to happen with digital assets in writing.

For additional information on estate planning to include digital assets, please consult a TEP.

How do I make decisions for my disabled child?

Posted on January 12, 2020March 27, 2023 By Louise Polcaro

The ultimate responsibility to look after and care for a child up until the legal age of adulthood falls with the child’s parents. The age of adulthood in Canada is generally considered to be 18 or 19 years of age, depending on the province of residence.

The age of majority is 18 in six provinces: Alberta, Manitoba, Ontario, Prince Edward Island, Quebec, and Saskatchewan. The age of majority is 19 in four provinces and the three territories: British Columbia, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, and Yukon.

When an individual attains this age of majority, they are presumed to be capable and competent to make decisions about their own health and well-being, as well as finances. While many adults with disabilities can manage their own affairs independent of parental assistance, others cannot. In the event that a disabled adult child is incapable of making decisions for themselves, there are a number of options available to parents who wish to make decisions on their child’s behalf.

The starting point for a disabled person and/or their parent is to assess each need for a decision individually and determine whether the child is capable of making a decision themselves. In addition, provinces have enacted legislation regarding what may happen if and when an individual is incapable of making certain decisions about their finances and/or personal care.

Provincial law governs the procedures by which a decision-maker may be appointed for a mentally incapable person. Such procedures depend on the type of decision the person is incapable of making. One set of rules applies when a person is incapable of making decisions about their property or finances and another set of rules applies if the incapacity relates to personal care decisions. A person who makes decisions on behalf of another may be referred to as a ‘substitute decision-maker’.

Decision-Making for Property/Finances

If an adult is incapable of making decisions relating to their property or finances, there are three ways by which a decision-maker may be appointed:

Enduring or Continuing Power of Attorney: Written authorization by an individual specifying a particular decision-maker of their choice. This must be made before the person becomes incapable.
Statutory Guardianship: This process only occurs if a person has not made a continuing power of attorney concerning all of their property and is assessed as incapable. In such instances, the statutory guardian of property will be the provincial Public Guardian and Trustee unless a family member or other authorized person applies to assume this role.
Court-Appointed Guardian of Property: An individual can be appointed and authorized by a Court to act on another person’s behalf with respect to decisions about property and finances. Provincial legislation describes the material that must be submitted to the Court and outlines who may be appointed and under what circumstances. The title of this person varies by province, including Guardian of Property or Trustee.

Decision-Making for Personal Care

If an adult is incapable of making personal decisions, there are two ways in which a decision-maker may be appointed:

Power of Attorney for Personal Care: Written authorization by an individual specifying a particular decision-maker of their choice. This must be made before the person becomes incapable. This document allows the appointed individual to make decisions about a multitude of issues such as medical treatment, day-to-day living, and admission to long-term care facilities.
Court-Appointed Guardian for Personal Care: An individual can be appointed by a Court to act on another person’s behalf in relation to decisions about personal care. The Court may delegate all personal care decisions or specify which decisions are to be made by the person and which decisions are to be made by the individual for themselves. The title of this person varies by province, including Guardian of Property or Custodian.

The chief distinction between attorneys and guardians is that an attorney’s right to act on behalf of another individual must be given while the individual is still mentally capable. A guardian, on the other hand, is appointed by a third party after the person whose affairs are to be managed has become mentally incapable. An experienced professional should be consulted to consider the available options and help determine the best solution for a given situation..

For additional information or assistance with ensuring that your disabled child is cared for, please consult a TEP.

Marriage, divorce and the effect on Wills

Posted on January 12, 2020March 22, 2023 By admin

Marriage, Divorce and the Effects on Wills

Marriage

In many jurisdictions in Canada, getting married automatically revokes any pre-existing Will created prior to the marriage. This means that the Will is cancelled out in its entirety unless one of several conditions are met. These conditions include:

A declaration is in the Will indicating that it was made in contemplation of the marriage;
An election is filed with the provincial Estate Registrar within one year of the testator’s death; or
The Will is made in the exercise of a power of appointment dealing with property that would not form part of the property of the deceased if they died intestate.

Divorce and Separation

Unlike marriage, divorce does not revoke a Will – or at least, not the entire Will. In many jurisdictions, gifts or appointments made to former spouses by Will are automatically revoked if there is a subsequent divorce. In many ways, Wills are treated as though the former spouse has predeceased the person making the Will. However, these laws should not be relied on as a substitute for updating Wills for a number of reasons:

A Will is not revoked by the separation of legally-married spouses prior to a formal divorce;
There could be unintended consequences if there are no substitute beneficiaries, the shares left to them are uneven, or they are no longer appropriate; and
Gifts made by Will to former common-law partners are not revoked by separation and must be updated by a new Will or codicil.

In addition, in most cases, separation from a common-law partner does not affect any beneficiary designations relating to assets such as RRSPs, TFSAs, or insurance policies. Given the extensive differences in legislative regulations, it is imperative to consult an estate specialist in the Province or Territory to ensure that wills are compliant with the jurisdiction of current residency.

Depending on the jurisdiction where you live, separating spouses may discover that their separation impacts their estate plan. For couples that are separating, this process provides an opportunity to reconsider your entire estate plan and make changes to reflect the new situation.

For legal advice regarding updating your Will due to a change in family circumstances, please consult a TEP.

Making gifts during your lifetime

Posted on January 12, 2020March 22, 2023 By Joanna Pegum

It has become increasingly common for parents to give gifts to their children during their lifetime rather than leaving it in a Will. Whether motivated by a desire to view the recipient enjoy the benefits of the gift during the lifetime of the giver, or by the circumstances of the recipient (e.g., a child needs to move out, buy a house, or attend university), gifts made during the lifetime of the giver warrant specific consideration.

Inter vivos vs. testamentary gifts

Gifts made during the lifetime of the giver are called “inter vivos” gifts. Gifts made by Will are referred to as “testamentary” gifts.

Is there a tax on gifts in Canada?

There is no tax on gifts in Canada, either to the giver or to the recipient. However, there may still be tax consequences to making gifts. The most common consequence is that when an asset – such as stock, real property, or even art – is gifted, the item is deemed to have disposed of by the giver at fair market value. Tax will apply to the increase in value, if any, of the asset. In general, the giver of the gift will be liable for tax on half the value of the increase at their marginal tax rate.

One potential advantage to an inter vivos gift is that, generally, any further appreciation of the asset is deferred until the beneficiary disposes of the asset. An inter vivos gift may be appropriate as part of estate planning in situations where the asset is likely to increase further in value.

To avoid adverse tax consequences property should not be sold to the recipient at a price below fair market value. This may result in double tax as the giver’s sale price will be based on fair value whereas the recipient will have a low tax cost equal to the price paid.

Inter vivos gifts as a means to avoid probate fees

Consider the motivation behind making inter vivos gifts carefully. While such gifts are appropriate when made out of a genuine desire to permit the recipient to have the asset, they may not be appropriate as a means to avoid probate fees. Gifting assets during the lifetime of a testator or setting up joint accounts as a means of avoiding probate fees may have unintended results, complicate the administration of an estate, incur unwanted taxes, and/or result in a disproportionate distribution of assets. Also, commencing in 2023, it may also require compliance with the new “trust reporting rules”. It should be noted that there has been a great deal of litigation regarding gifts made to avoid probate, which is time consuming and expensive, so any attempts to reduce probate fees should be planned and documented appropriately.

For further information or to plan appropriately for inter vivos gifts please consult a TEP.

Planning for your baby’s future

Posted on January 11, 2020March 27, 2023 By admin

The arrival of a new baby is joyful and exciting, but also comes with a series of responsibilities. Beyond day-to-day tasks associated with changing diapers and adjusting to feeding schedules, there are important responsibilities associated with planning for the baby’s personal, educational, and financial future. Taking the following steps will help new parents ensure that they are effectively planning for a child’s future.

Create a will

Creating a will is an important first step in ensuring that a child will be looked after in the event of an untimely death. Appointing a guardian for a child in the Will ensures that an appropriate person will be tasked with care of the child in the event of a parent’s untimely death.

A will also ensures financial security for children, who can be left their parents’ assets with age-appropriate oversight and distributions. Without a will, the rules of intestacy will govern the distribution of assets, which may not result in what a parent intends for their child.

Create a Registered Education Saving Plan (RESP)

An RESP is a government-sponsored savings plan which helps anyone – including but not limited to parents – save for a child’s post-secondary education. The principal benefit of an RESP is that it is ‘tax-sheltered’. Money held in an RESP can be invested without the growth being subject to taxation. In addition, the federal government will match a portion of the contributions into an RESP under the Canada Education Savings Grant (CESG), with a lifetime maximum of $7,200 per beneficiary.

There are lifetime and yearly contribution limits to using RESPs. Withdrawals may be subject to tax if made inappropriately. No contributions may be made after the calendar year in which the plan has been open for 31 years, and the plan must be wound up during the calendar year in which the plan has been open for 35 years.

Buy Life Insurance

In the event of a disaster which takes the life of both spouses, sufficient life insurance provides assurance that the economic needs of the child will be met. Even where there is one parent who is living, life insurance can provide additional assets to cover loss of income and additional expenses associated with caring for a child. Accordingly, life insurance should be purchased by parents as soon as possible as part of prudent financial planning for a child. If a parent-to-be already has life insurance, they may wish to consider increasing coverage, at least while the child is financially dependent on the parents.

Life insurance comes in different forms and with different caveats. In order to determine what types of life insurance make the most sense for your situation, please contact a TEP.

Create a Power of Attorney or Mandate

A Power of Attorney (or Mandate in Anticipation of Incapacity in Quebec) is a legal document whereby a trusted person is appointed to make decisions for an adult in the event that they become incapable of doing so for themselves. This document can give the named attorney the legal authority to look after an individual’s personal well being and/or finances (and those of their dependents). Parents can benefit from peace of mind knowing that their child’s best interests are served by someone they trust.

If you have questions or to determine what additional planning may benefit your growing family, please consult a TEP.

I am retiring abroad – what should I do?

Posted on January 11, 2020March 22, 2023 By admin

Many Canadians decide to spend their retirement years in another country. Retiring abroad is not as simple as booking plane tickets; planning to spend all or part of this time abroad can be complicated from both a financial and a personal perspective. Some of the key factors to consider are discussed below.

Tax Planning

The length of time that an individual spends outside of Canada has implications for the way in which their tax return must be filed. Canadians living abroad may still have to pay Canadian and provincial or territorial income taxes. It is important to determine residency status and applicable income tax rules prior to retiring abroad.

Residency status depends on a number of factors:

Why and how long a person spends outside of Canada;
How often and for how long a person returns to Canada;
Residential and social ties established in the new country; and
Residential and social ties to Canada

These factors will determine whether a retiree is considered a resident or non-resident of Canada for income tax purposes. Find additional information about the categories of residency status here. Or contact a TEP to discuss how these rules apply to your specific situation.

Medical Care

Retiring outside of Canada may impact medical coverage from a provincial or territorial health plan. Generally, provincial and territorial plans will only cover a limited number of costs associated with emergency health services received while living temporarily outside of Canada. Treatments must be medically necessary, provided at a licensed hospital or health facility, and for an acute illness or injury that is medically necessary and not pre-existing.

To plan for retirement abroad, it is helpful to consult the guides published by the applicable provincial or territorial health plan regarding medical coverage outside of Canada. It will likely be necessary to purchase additional medical coverage.

Financial Planning

It is important to speak with a financial professional to plan for all contingencies associated with living and retiring abroad. Useful first steps include opening a foreign bank account in the host country and advising Canadian banks and credit card companies of living abroad.

Retiring abroad poses a number of challenges and can be risky if not planned properly.

For further information or help planning a retirement abroad, please consult a TEP.

How is an estate taxed?

Posted on January 11, 2020April 17, 2023 By admin

Canada does not have an estate tax. However, capital gains and income taxes are generally triggered by death.

An executor must file the deceased’s final income tax return for the year in which they died and pay any tax owed up until the date of death (including taxes on any deemed disposition of assets, see below). This final return is called a “terminal return”.

An executor may also need to file an estate income tax return for each taxation year of administration to report income earned and capital gains and capital losses realized while the deceased’s affairs are being administered (i.e., until assets are distributed to beneficiaries).

Prior to distributing assets, the executor may request that the Canada Revenue Agency (CRA) issue a “clearance certificate”, which certifies that all taxes of the deceased for have been paid.

In addition, some provinces and territories also have additional taxes in the form of probate fees, sometimes referred to as Estate Administration Tax, Probate Tax, or Probate Charges.

Is a clearance certificate required from CRA?

It is important that the executor pays any final tax owed prior to distributing anything from the estate. An executor can be held personally liable for any outstanding taxes of the deceased if a clearance certificate is not obtained prior to distribution of assets. Accordingly, it is generally prudent to seek a clearance certificate from the CRA (though it should be noted that processing times for the clearance certificate can be quite long).

In some cases, executors may make interim distributions when:

The assets are sufficient to do so;
There is enough certainty with respect to the potential tax; and
The executor has obtained indemnities or releases from the beneficiaries.

What is a “deemed disposition” and why does it matter?

When someone dies, CRA treats any capital property owned at the time of death as though they were sold on the day the person died. For example, if the deceased owns stock, it would be presumed for income tax purposes that the stock was sold the day the person died. Any accrued gains (or losses) would be taxed accordingly.

Deemed dispositions of property may trigger additional capital gains tax to be included in the terminal tax return.

What is a Qualifying Spousal or Common-Law Partner Trust (QST)?

The creation of a QST allows the payment of capital gains tax to be deferred until both spouses or common-law partners are deceased.

A QST allows spouses to provide for the surviving spouse or common-law partner during their lifetime and then have any remaining assets transfer to their own chosen beneficiaries (e.g., children from a first marriage). The surviving spouse or common-law partner must be entitled to the QST’s annual income and can (but need not) be able to access the assets of the QST during their lifetime.

Detailed estate taxation planning – including setting up a QST should be undertaken with the assistance of a licensed professional such as a TEP.

How is an estate taxed?

A deceased’s estate is treated as a trust for tax purposes and a T3 trust tax return must be filed to report any taxable income earned during estate administration.

For the first 36 months from the date of death, the estate may qualify as a graduated rate estate (GRE). Qualification as a GRE may have significant tax advantages, including the ability to access graduated tax rates, certain exemptions, special tax rules regarding losses realized in the first tax year and flexible charitable donation claims.

What happens when property is distributed from an estate?

A deceased’s assets can be given directly to a beneficiary or as discussed below, put into a trust for their benefit.

Generally speaking, assets can be given to a beneficiary without triggering any further capital gains tax on any increases in value. Instead, the beneficiary will pay tax when they actually dispose (or are deemed to dispose) of the property.

What is a testamentary trust, and how is it taxed?

Generally, a testamentary trust is any trust that arises on death due to the operation of a Will.

A testamentary trust creates a legal relationship between the deceased person, the trustee and the beneficiaries. The trustee is often the executor, but can be a separate person named in the Will. The beneficiaries are the family members or other persons specified in the Will. The trustee is responsible for payments to the beneficiaries based on the terms specified in the Will. Beneficiaries can have a fixed interest or discretion may be given to the trustee to make allocations amongst the beneficiaries.

Since 2016 all ongoing trusts created under a Will (except qualified disability trusts) are subject to tax at the highest marginal tax rate for individuals. If the trust’s income is paid out to a beneficiary it will be taxed in their hands at their rates which may be lower than the trust’s tax rate. The trust must file an income tax return for each calendar year reporting its income earned and prepare a T3 reporting slip for any allocations made to its beneficiaries.

Why use individual trusts for my children?

If gifts are made to an adult child using a trust instead of being made directly, the adult child may be able to split the income of the trust with their own children. Depending on the number of grandchildren and their age, and the amount of income being produced in the trust, this could offer significant tax savings. For more information on the benefits of individual trusts, speak with a TEP.

Does this mean beneficiaries pay no tax for inheritances?

In most cases, inheritances are received after-tax and the beneficiary acquires the property at a cost equal to the deceased’s deemed disposition value. For instance, if a beneficiary is left a house, they will pay no tax on receiving that property. Once the house is in their hands, they will be liable for standard taxes such as property tax and income tax if the house is sold for a profit and was not their principal residence.

Note that some jurisdictions outside Canada tax beneficiaries by way of an inheritance tax. As such, it is possible that a foreign beneficiary will be subject an inheritance tax while the Canadian estate is subject to capital gains tax on the deemed disposition of the deceased’s assets. A TEP should be consulted for advice on how different tax systems will impact estate planning for foreign beneficiaries.

What are Probate Fees / Estate Administration Tax?

Are there any exemptions from Probate Fees?

For further information or assistance in administering an estate, please consult a TEP.

What is my residence?

Posted on January 11, 2020March 22, 2023 By admin

Under Canada’s tax system, residency determines how much worldwide income will be subject to Canadian income tax. Canadian residents are taxed on all worldwide income, whereas individuals who are not Canadian residents are subject to Canadian income tax only on certain types of income that have been earned in Canada.

Although there is no statutory definition of residency for tax purposes, individuals are typically described as ‘factual residents’, ‘deemed residents’, ‘non-residents’ or ‘deemed non-residents’.

Factual residents

According to legislation, individuals who are “ordinarily resident” in Canada are considered to be ‘factual residents’ of Canada. The most important consideration in determining whether someone is resident in Canada is their residential ties with Canada. Primary factors to consider include:

A home in Canada
A spouse or common law partner in Canada
Children or other dependents in Canada

Other secondary ties that may be relevant include:

personal property in Canada, such as a car or furniture
social ties in Canada, such as memberships in Canadian recreational or religious organizations
economic ties in Canada, such as Canadian bank accounts or credit cards
a Canadian driver’s licence
a Canadian passport
health insurance with a Canadian province or territory

An individual who has left Canada may still be considered a factual resident if they maintain these types of residential ties. An individual who has recently arrived in Canada can be considered factually resident as of the date of immigration if they establish the above types of residential ties.

Deemed residents

Individuals who are not factual residents of Canada may still be deemed residents for tax purposes under the Income Tax Act. For example, individuals are deemed resident in Canada for tax purposes for a given year if they:

Spent 183 or more days in Canada during that calendar year
Served in the Canadian Forces during that calendar year
Worked as an ambassador, minister, high commissioner, officer or servant of Canada

Non-residents

Individuals who do not have significant residential ties with Canada and who lived outside of Canada during a given calendar year, or who stayed in Canada for less than 183 days of a given calendar year may be considered non-residents. Non-residents are only taxed on certain types of income that has been earned in Canada.

Deemed non-residents

Individuals who have close connections to more than one country may qualify as deemed non-residents even if they would otherwise meet the criteria for residency in Canada.

Part-year residents

Individuals arriving in or leaving Canada partway through a calendar year are typically considered part-year residents in the year of immigration or emigration. If an individual is considered a part-year resident, they are taxed on worldwide income only for the part of the calendar year during which they are resident in Canada. Part-year residents are not generally taxed on worldwide income for the portion of the year during which they are not resident in Canada.

If you have any questions about whether you are a resident of Canada for tax purposes, please consult a TEP.

Where is my domicile?

Posted on January 11, 2020March 22, 2023 By admin

man looks at earth, searches for domicile

A domicile is the country that a person treats as their permanent home, or alternatively, a country that a person lives in and has a significant connection to. A domicile is a permanent or semi-permanent legal residence.

The term “domicile” is distinct from the term “residence”. A residence is any place where an individual dwells – temporarily or permanently – which may or may not be their domicile. You can have multiple residences but can only have one domicile at any one time. For a more detailed definition of Residence please see (insert link to the Residence page)

An individual’s provincial and federal domicile determines many of the laws which apply to them (including tax, estate, family, etc.). In Canada, there are two different types of domiciles:

Domicile of Origin: where a person is born
Domicile of Choice: where a person takes up residence with the intention of residing there permanently

Can I change my domicile?

Yes, a person’s Domicile of Origin will apply unless they use their discretion to change their domicile . The following two factors must be satisfied in order to carry out a change in the domicile:

A person must acquire a residence in the new jurisdiction; and
Intend to settle there permanently and indefinitely

Both elements must be present in order to effect a change in domicile.

If a person abandons their Domicile of Choice but does not acquire a new one immediately thereafter, their Domicile of Origin is revived.

Why Does my Domicile Matter?

A person’s domicile determines what laws apply in certain situations. For example, the formal validity of your will, the distribution of assets under your will, who can challenge your will etc.

If you are uncertain of your domicile or require any additional information please consult a TEP.

Do I need to declare my cryptocurrency to CRA?

Posted on January 11, 2020April 18, 2023 By Joanna Pegum

Yes. Digital currencies, including cryptocurrencies, are subject to taxation under ordinary income tax rules. Gains and losses from buying and selling cryptocurrencies must be reported as part of income when filing a tax return. Since cryptocurrencies are not government-issued currency, they are treated by the Canada Revenue Agency (“CRA”) as a commodity.

Depending on the extent of the trading activities, the transactions may be characterized as being on account of income or capital. Generally, if an individual is in the business of trading cryptocurrency, any gains or losses will be treated as being on account of income. If an individual is not engaged in the business of trading cryptocurrency, any gains or losses will be treated as being on account of capital.

Using cryptocurrency to pay for goods or services is viewed as a barter transaction and is subject to the barter rules of the Income Tax Act. The monetary value or equivalent of the cryptocurrency is counted as the amount of the payment, or receipt, and the transaction is reportable for tax purposes.

Trading cryptocurrency for another type of cryptocurrency

Generally, when you trade one type of cryptocurrency for another type of cryptocurrency, CRA believes that the barter transactions rules will apply to that transaction. For example, if a taxpayer converted Bitcoin to Ethereum, CRA would consider this a disposition for tax purposes. This disposition for tax purposes must be reported on your income tax return as either business income (or loss) or a capital gain (or loss) depending on your specific circumstances.

How much tax will I pay on my cryptocurrency?

If transactions are characterized as being on account of income, the net income will be taxed at an individual’s marginal income tax rate. If transactions are characterized as being on account of capital, 50% of the realized capital gains will be taxed at an individual’s marginal rate.

If I gift my cryptocurrency, am I liable to tax?

When any item is donated or gifted for a value different than its acquisition cost, CRA will treat the donation or gift as a disposition of property. Accordingly, this applies to a gift or donation of cryptocurrency. The cryptocurrency will be valued at fair market value at the time of donation, and any capital gain or loss from the disposition must be reported. If the gift is made to a qualified donee (such as a registered charity), it may be possible to receive a tax receipt from that donee. The amount of the gift for tax purposes will be determined by the fair market value of the cryptocurrency at the time of the transfer.

How will CRA know about my profits?

Not reporting income from cryptocurrency transactions is illegal. In order to ensure a fair tax system, the CRA actively pursues non-compliance with respect to reporting income from cryptocurrency trading. Cryptocurrency exchanges increasingly require personal information in order to set up an account. CRA may be able to access this information and verify it with other sources to identify individuals who seek to avoid paying taxes on transactions.

What if I have made a loss?

Individuals in the business of trading cryptocurrency can deduct losses when computing income from a business. Losses that occur as a result of theft are likely deductible if they can be considered an inherent risk in carrying on the business and if the loss is reasonably incidental to the normal income-earning activities of the business.

How is cryptocurrency mining treated by the CRA?

Mining cryptocurrency involves solving complex computer problems in exchange for an award of cryptocurrency. This type of computer problem requires high processing power, often resulting in high electricity costs. The CRA has suggested personal mining may be treated as a non-taxable hobby or personal activity, whereas mining for commercial or business purposes should be reported as income. The electricity costs reasonably attributable to the cryptocurrency business may be deducted as business income.

What if I fail to declare any taxable profits?

It may be possible to correct a declaration made to CRA by pursuing a voluntary disclosure or by filing an amended return. Consult a licensed professional in order to ensure that these steps are taken appropriately and without risk of further penalty.

For further information, or assistance with tax planning, please contact a TEP.

I have been given Power of Attorney. What does that mean?

Posted on January 10, 2020March 22, 2023 By admin

Outside of Québec, the role of someone appointed under a Power of Attorney (POA) is to step into the shoes of an incapable individual for the purpose of making financial decisions and/or personal care decisions that they can no longer make for themselves. The purpose of a POA is to protect the interests and welfare of the individual who appointed the attorney.

For information regarding incapacity planning in Québec, please see the article Incapacity Planning in Québec.

The duties of the attorney are outlined in the POA legal documents. Generally, the attorney will be able to do everything that the grantor can do with respect to their personal matters, unless they are explicitly restricted from doing so.

The nature of the role will depend on the type of POA which has been executed. Generally, there are two main types of POA appointments:

Power of Attorney for Property (POAP)

Power of Attorney for Personal Care (POAPC) (also known in some jurisdictions as a personal care directive)

Appointed as Power of Attorney for Property (POAP)

An individual will be able to assume responsibilities under a POAP as soon as it is signed and witnessed, unless the document says otherwise. An attorney is required to keep the grantor’s financial information confidential and should respect the grantor’s privacy unless: (1) the grantor specifically authorizes them to disclose information by saying so in the POAP; or (2) they need to disclose this information to carry out their duties or to abide by the law.

When carrying out their obligations under a POAP, an attorney is generally entitled to take payment from the grantor’s funds at a rate specified by law, which varies by province, unless the grantor states otherwise in the document. An attorney is also required to provide the grantor with a full accounting whenever asked.

Appointed as Power of Attorney for Personal Care (POAPC)

An individual appointed under a POAPC is responsible for managing the personal care and health care decisions of the grantor. With regard to personal care, they may make decisions pertaining to housing, diet, personal hygiene and social life. With respect to health care, they may make decisions regarding medical treatment or the withholding of such treatment. Under a POAPC, the attorney can only make decisions about those aspects of personal care that the grantor cannot make themselves.

Unlike a POAP, a POAPC may only be used during a time that the grantor is mentally incapable of making their own personal care decisions. The attorney is typically responsible for deciding whether the grantor is mentally incapable, with a few exceptions (such as if specified otherwise in the PAPC).

An attorney appointed under a POAPC is also required to keep the grantor’s personal information confidential. As with a POAP, the grantor’s privacy should be respected unless: (1) the grantor specifically authorizes them to disclose information by saying so in the POAPC; or (2) they need to disclose this information to carry out their duties or to abide by the law.

In some instances, a grantor may include “advance directives” in their POAPC. Advance directives are more commonly known as “wishes” and they serve to provide personal instructions to attorneys about the grantor’s personal preferences regarding personal care and health care. An attorney is legally obligated to follow these wishes, if possible.

If you have been appointed under a Power of Attorney and/or have any additional questions please consult a TEP.

Who should be executor of my Will?

Posted on January 10, 2020April 17, 2023 By admin

One of the most important decisions to make when preparing a Will is choosing an executor (referred to in Quebec as a liquidator and in Ontario as an Estate Trustee), i.e., the person charged with administering an estate and carrying out the final requests of a deceased individual. Appointing the right executor ensures a quick and accurate distribution of an estate, while minimizing animosity among beneficiaries.

Duties of an executor

The duties of an executor are plentiful and include the following.

Immediately After Death

Determine whether deceased left a Will
Make funeral arrangements
Open a bank account for the estate
Notify beneficiaries of their interest in the estate
Cancel health insurance, driver’s license, credit cards
Pay outstanding debts and taxes of the deceased
Secure estate assets (ensure proper insurance)

Interim Matters

Prepare an inventory of assets including real estate, bank accounts, life insurance, investments, and personal property
Arrange for valuation of assets
Assess the rights of the surviving spouse (if any) under provincial law
Assess the rights of any dependents who were financially dependent on the deceased
Pay any outstanding debts and taxes of the deceased

Final Matters

File a final T-1 personal tax return and an T-3 trust tax return for the estate
Obtain a clearance certificate from Canada Revenue Agency
Arrange for transfer of real property
Dispose or distribute personal effects in accordance with the Will
Distribute the remainder of the estate as indicated in the Will
Close estate account

Who can be an executor?

Generally, anyone over the age of 18 who is mentally competent can act as the executor of a Will. The person named as an executor may also be a beneficiary of the Will. When choosing an executor:

Consider naming more than one executor

Multiple individuals (or co-executors) may be appointed to share the burden of administering an estate. One pitfall of this approach is that naming multiple individuals can make decision-making more difficult. If the Will is silent about decision-making, then unanimous consent will be required. However, this may still be the correct approach, and a Will can always provide for a tie-breaker if executors disagree on a decision.

Name a back-up executor

It is important to appoint an alternate executor or executors in the event that the primary executor is unable or unwilling to fulfil their role. Accordingly, Wills should list both primary and alternate executors in order of preference.

Consider the residency of your executor(s)

In addition to the practical difficulties of overseas estate administration, naming an executor who resides in a foreign jurisdiction will cause complications for post-death estate planning. For example, naming a foreign executor could change the tax residency of the estate or prevent the executor from being entitled to make trading decisions on certain investment accounts. There may also be bonding requirements for a foreign executor.

Consider naming an estate professional as an executor

Generally, people appoint family members or close friends to be the executor(s) of their Wills. However, in situations where there is a complex estate, or acrimony among beneficiaries, dependents or family members, it may be appropriate to consider appointing an estate professional as an executor. Estate professionals who provide these services include trust companies, lawyers, and accountants.

Who should I choose as executor of my Will?

The executor is tasked with the responsibility of administering an estate in accordance with a Will. The executor should be someone who:

The testator trusts to administer their affairs in accordance with their wishes;
Lives within reasonable proximity of the testator so that it is easier to deal with the deceased’s family and assets;
Has a degree of knowledge pertaining to the complexities involved in the testators tax filings, investments and financial decision-making;
Is driven and able to get things done promptly; and
Is likely to survive the testator’s death.

These responsibilities should be assigned to someone who is aware that the duties of an executor are both time-consuming and stressful. In some provinces, once an individual begins the process of dealing with estate assets, they are legally bound to see the administration of the estate to its end, unless relieved of their duties by a court order.

How do I appoint an executor?

The best practice is to first have a discussion with a chosen executor prior to naming them in a Will. If they are amenable to the role, they may be appointed as executor in the Will. Their contact information should be included in the Will, or given to a trusted advisor who holds the Will and will contact the executor.

For additional information or assistance with appointing an executor of your Will, please consult a TEP.

Can I Exclude Dependents From Receiving Assets From My Estate?

Posted on January 9, 2020April 18, 2023 By admin

donating to charity - giving money - piggybank

Some people may wish to leave money or other assets to individuals or organizations other than relatives in their Wills. These situations may arise when an individual feels a strong calling to leave most or all their assets to a charity, or in cases where family members are not perceived as those in the most need of subject assets.

While, in theory, a testator can dictate the distribution of their assets however they would like, the right to choose how assets are distributed may be limited by dependants’ relief legislation and family law obligations. Dependants’ relief legislation is in place to ensure that dependants who relied on loved ones for support are not unfairly left out of a Will.

Provincial law

In Canada, each province has its own law dealing with dependant relief. The relevant statutes include:

Ontario –Succession Law Reform Act
Quebec – Civil Code of Quebec
British Columbia – Wills, Estates and Succession Act
Alberta – Wills and Succession Act
Saskatchewan – Dependants’ Relief Act, 1996
Manitoba – Dependants Relief Act
New Brunswick – Provision for Dependants Act
Nova Scotia – Testators’ Family Maintenance Act
Newfoundland and Labrador – Family Relief Act
Prince Edward Island – Dependants of a Deceased Person Relief Act
Yukon – Dependants Relief Act
Northwest Territories – Dependants Relief Act

In British Columbia, the courts have wide latitude to vary a deceased’s Will if the court thinks the Will does not adequately provide for the spouse or children of the deceased. In that jurisdiction, is a moral obligation to provide for spouses and children in a Will, even if the children are self-supporting adults.

By contrast, in most other Canadian jurisdictions, an adult other than the deceased’s surviving spouse must demonstrate that they were dependant on the deceased for support in order to bring an action to vary a deceased’s Will (for example, the adult child of a testator). For advice on how to navigate dependants’ relief legislation in your jurisdiction, contact a TEP.

Who are my dependants?

Dependants eligible to challenge a Will typically include spouses and children who depended on the testator for support immediately prior to their death. Depending on the testator’s province of residence, this may include common law partners and stepchildren. A Court can vary the Will plan if it decides that the dependants are put into financial difficulty by the terms of the Will.

Avoiding disputes with your family

If there is any possibility that a Will may be challenged (for example, a controversial position is taken in the Will), a TEP should be consulted for advice on how to avoid expensive and draining litigation.

If you are concerned that family members may challenge a Will, you may wish to consider the following steps:

Tell your family why you decided not to leave anything to them.
Write a letter to accompany your will explaining your reasons.
Get a doctor’s certificate confirming that you were of sound mind when you made the will, to minimize the risk that it can be successfully challenged on the grounds of mental incapacity.
Clearly communicate your intentions to your TEP in writing.

For further information, or assistance with drafting a contentious Will, please contact a TEP.

Preparing for retirement

Posted on January 8, 2020March 22, 2023 By admin

The prospect of retirement is exciting but planning for it requires making important decisions in order to ensure that retirement is fulfilling and free of worries. Ensure that you are fully prepared for this significant stage of your life by considering the following.

Determine how much money you need for retirement

The amount of money you will need to save depends on the ways in which you plan to spend your retirement. Some important factors to consider include:

Travel plans
Hobbies
Age at retirement
Supporting children or grandchildren
Place of living
Outstanding debts
Other dependents

Familiarize yourself with sources of retirement income

There are a variety of income sources available to retiring Canadians. Some of the most common include:

Canada Pension Plan (CPP): This pension provides individuals and their families with partial replacement of earnings in certain situations, with retirement being one of them. Almost all individuals who work in Canada (with the exception of residents of Québec) contribute to the CPP. The amount paid as a CPP benefit is dependent on how much and for how long a person has contributed to the CPP.

Old Age Security (OAS) Pension: OAS is a monthly benefit for Canadian citizens and residents over the age of 65. Canadians over the age of 65 are entitled to OAS regardless of whether they are currently employed, were employed in the past, or have never been employed. Eligibility for OAS is dependent on the length of time during which a person has lived in Canada.

Pension from Employment: Some employers provide for a defined benefit or a defined contribution pension plan which will be paid out on retirement. Contact your employer for further details specific to your plan.

Personal Retirement Savings and Investments: You may have other source of income that you can rely on during your retirement. Two common sources of retirement income include Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs).

This list is not exhaustive, and there are many other sources of income for retiring Canadians. Please consult a TEP for further information.

Create a Budget

Creating a budget is vital to retirement planning – as is following the budget during retirement. Having a plan to manage money can help balance income with everyday expenses and guide spending. In addition, as someone retires, their expenses change. For example, while a person may no longer spend money on commuting to and from work, or their residence may be paid off, they may spend additional money on interests and hobbies, travel, or supporting dependents.

How long someone lives will also impact how much money they will need for retirement. Statistics indicate that people live longer than in the past. As such, new retirees are advised to budget for at least 30 years of retirement.

Pay outstanding debts

As sources of income are less flexible once a person is retired, it is important to ensure that retirement income stretches as far and as long as possible. As such, it is important to clear as many outstanding debts as possible. Such debts may include credit card bills, mortgage payments, lines of credit, etc. Even if it is not possible to clear the debts entirely, lowering the amounts owed is prudent when planning for retirement.

Deciding when to retire

Deciding when to retire is a significant decision. It is important to have a basic idea of how long someone will be retired in order to plan accordingly and ensure that there is enough money to support the retiree throughout the entire duration of retirement.

In deciding when to retire, some factors to consider include:

Desired lifestyle
Spouse’s retirement plans
Health and spouse’s health
Current financial obligations and living expenses

For further information, or assistance in preparing for retirement, please consult a TEP.

Why is CRA investigating my deceased relative’s tax affairs?

Posted on January 7, 2020April 18, 2023 By Louise Polcaro

When a loved one dies, and you are named executor of the will, or you are assisting the executor with their duties, you may deal with the process of estate administration, filing tax returns and distributing all or portions of the estate. At what can be a stressful time, it may be difficult to find that the Canada Revenue Agency (CRA) is reviewing your deceased loved one’s affairs.

CRA may start an investigation for different reasons, including screening processes, audit projects, and information from connected files that have been selected for auditing. If a CRA auditor notices problematic information on your deceased relative’s tax return, such as inconsistences with information provided, that return may be selected for review or audit. If selected, the auditor will consider several types of records, including previously filed tax returns, business records, and personal records. Accordingly, it is important to keep well-organized records of your deceased relative’s tax information, business records, and personal records in the event of an audit.

I found a mistake on my deceased relative’s tax return. What do I do?

If you are acting under a Power of Attorney or as an executor and notice that taxes have not been reported properly, you may be entitled to apply to the Voluntary Disclosure Program (“VDP”).

The VDP offers taxpayers, dead or alive, a chance to correct errors on a tax return they had previously filed, or to file a return they should have filed, but did not. Voluntarily disclosing mistakes or newly found assets of your deceased relative may avoid some penalties that CRA would otherwise impose. For more information on the VDP, see Voluntary Disclosures Program – Introduction.

Updating CRA with any newly obtained information is important. An estate trustee can be held personally liable for any outstanding taxes on assets of the estate if assets are distributed prior to obtaining a clearance certificate from CRA. However, clearance certificates are issued on the assumption that information provided by the applicant is accurate and up-to-date. If new information comes to light, it should be disclosed to the CRA.

If you are uncertain whether you should enter the VDP and disclose newly found information to the CRA, it is possible to commence anonymous preliminary discussions with a CRA official to gain insight into the program and better understand the risk and benefits. Such discussions are meant to be informal and non-binding and can occur without disclosing the taxpayer’s identity. It is imperative to contact a tax professional before deciding how to proceed with the VDP.

How long after death can CRA reassess my relative’s affairs?

CRA can reassess tax returns for individuals for up to three years from the date of the original Notice of Assessment. After this date, returns may only be reassessed if the taxpayer made careless or neglectful misrepresentations to CRA.

For further information, or assistance with voluntary disclosure, please contact a tax professional.

I don’t believe it! Common excuses for not making a will

Posted on January 6, 2020March 27, 2023 By admin

Making a will is important for various reasons. Not only does executing a Will ensure that assets are distributed according to the testator’s wishes, it also saves family members the energy and expense associated with Court and filing an application to enable the administration of your estate. Despite the importance of making a Will, many people put it off for various reasons. This article is designed to provide you with some of the most common, misguided excuses for not executing a Will.

I don’t need a will because my partner will get everything.

A common misconception is that a romantic partner will automatically inherit all property left by the deceased, but this is not always the case. Without being legally married – even in cases of long-term cohabitation – surviving partners may, in fact, receive nothing if the other partner passes away. In addition, even married couples cannot count on automatic inheritance of all property left by the deceased. In the absence of a Will, the laws of intestacy determine the division of an estate.

Making a will is too expensive.

Individuals are often put off by the purported cost of making a will. This fails to take into account the fact that dying without a valid will(intestate) may cost the family and loved ones of the deceased much more in the long run. Moreover, simple wills are often not expensive and can be bundled with Powers of Attorney in order to reduce overall costs. Focus on the value of having a valid will versus the cost.

I don’t have the time.

Making a will does not have to be time consuming. Compare it to the time it takes for commute to work or drive to the cottage. Creating a will brings peace of mind, encourages appropriate estate planning, and ultimately spares family and loved ones much more time after your death.

I don’t have much to leave.

Making a will is a good idea for anyone, no matter how large or small their estate. A will serves several purposes in addition to determining the division of an individual’s assets. For example, any individual with minor children needs to ensure that their will appoints a guardian who is responsible for their care. It also enables one to appoint the person who is able to make decisions on behalf of the estate, and to deal with government agencies, banks, and other third parties.

Moreover, as an individual gets older, the value of their assets and real property is likely to increase. A will can ensure that the increased assets are distributed appropriately in the case of untimely death.

I’m too young, I don’t need to make a will.

For adults, there is no age too young to create a will. People are rarely given time to plan for accidents and illnesses. Life can happen when you least expect it. A will brings the peace of mind of knowing that children will be cared for, assets will be distributed appropriately, or even that spouses will not have to sell the family home due to an untimely death.

Making a will is important for several reasons. Not only does executing a will ensure that assets are distributed according to the testator’s wishes, it also saves family members the energy and expense associated with to Court and filing an application to enable the administration of your estate.

Despite the importance of making a will, many people put it off for various reasons. This article is designed to provide you with some of the most common, misguided excuses for not executing a will.

1. I don’t need a will because my partner will get everything.

A common misconception is that a romantic partner will automatically inherit all property left by the deceased, but this is not always the case. Without being legally married – even in cases of long-term cohabitation – surviving partners may, in fact, receive nothing if the other partner passes away. In addition, even married couples cannot count on automatic inheritance of all property left by the deceased. In the absence of a will, the laws of intestacy determine the division of an estate.

2. Making a will is too expensive.

Individuals are often put off by the purported cost of making a will. This fails to take into account the fact that dying without a valid will (intestate) may cost the family and loved ones of the deceased much more in the long run. Moreover, simple wills are often not expensive and can be bundled with Powers of Attorney in order to reduce overall costs. Focus on the value of having a valid will versus the cost.

3. I don’t have the time.

Making a will does not have to be time consuming, compare it to the time it takes for commute to work or drive to the cottage. Creating a will brings peace of mind, encourages appropriate estate planning, and ultimately spares family and loved ones much more time after your death.

4. I don’t have much to leave.

Making a will is a good idea for anyone, no matter how large or small their estate. A will serves several purposes in addition to determining the division of an individual’s assets. For example, any individual with minor children needs to ensure that their will appoints a guardian who is responsible for their care. It also allows appoints the person who is able to make decisions on behalf of the estate, and to deal with government agencies, banks, and other third parties.

5. I’m too young, I don’t need to make a will.

For adults, there is no age too young to create a will. People are rarely given time to plan for accidents and illnesses. Life can happen when you least expect it. A willbrings the peace of mind of knowing that children will be cared for, assets will be distributed appropriately, or even that spouses will not have to sell the family home due to an untimely death.

For additional information, or advice in drafting a will, please consult a TEP.

What is Probate? What does it mean to probate a Will?

Posted on January 6, 2020April 17, 2023 By Louise Polcaro

Probate, from the Latin probare, “to test or prove,” involves the act of proving the legal validity of a Will. In certain situations (for example, to access a deceased’s bank accounts or to transfer land), a legal document must be issued by a Court proving that a Will is valid and the person named as Executor within the Will has the authority to act on behalf of the Estate. In most provinces and territories, the Court issues a certificate called ‘Letters Probate’, the ‘Grant of Probate’, or ‘Grant of Certificate of Appointment of Estate Trustee With (or Without) a Will’. The process is commonly referred to in short as “Probate.”

The process for verifying Wills in Quebec differs from the rest of Canada.

If the deceased left a Will

If the deceased left a valid Will, the document should provide who the appointed authorities are (i.e. Executor(s)) to look after the estate administration, who the beneficiaries of the Estate are, and any specific intentions as to how the deceased’s possessions, money or property are to be distributed to them.

The Executor named in the Will may be required to obtain Letters Probate (or Certificate of Appointment of Estate Trustee With A Will, in Ontario), in order to administer any estate assets or settle any claims of the deceased. If required, a probate application form would be prepared and submitted to the Courts, along with other required or supporting documentation. This process varies slightly from province to province. For more information regarding probate in the specific province of residence (determined with reference to the deceased), please click the name of the province below.

If the deceased did not leave a valid Will

If the deceased did not leave a valid Will, they are said to have died “intestate.” Generally, when a person dies intestate, an application must be made to the Court. The Court will appoint an authority (i.e. Administrator(s)) to administer and distribute the Estate according to specific laws called the laws of Intestacy. These laws determine who is eligible to receive assets in the estate, and they do vary province to province as well.

How does the Grant of Probate different than the Grant of Administration?

Although the naming varies slightly between provinces, Courts generally have three different grants they can issue when a person applies to administer an Estate. It depends if the deceased died with a Will or without one. It is the responsibility of the person applying to determine what type of grant they are applying for and to apply for the appropriate grant. Each type of grant will have different application requirements.

(1) If the Will names you as the Executor, you will apply for a Grant of Probate (or in Ontario, a Grant of Certificate of Administration with a Will).

(2) If the Will ‘does not’ name anyone as Executor or the person named as Executor is unable or unwilling to act, it will be necessary to apply for a Grant of Administration with Will Annexed (or in Ontario, a Grant of Certificate of Administration with a Will).

(3) If the deceased died without a Will, you will need to obtain a Grant of Administration (or in Ontario, a Grant of Certificate of Administration without a Will).

There are other grants for more complex situations, which may include replacing an acting Executor or Administrator, or recognizing a foreign Grant of Probate from another province or territory. It is prudent to seek legal assistance prior to making applications to a Court.

Most provinces will not issue grants of administration to people who reside outside the province. In provinces where grants of administration are made or made to people who reside outside the province, the court may require some form of security or bond to be placed by the person assuming the role of administrator. These requirements vary from province to province and a TEP should be consulted regarding the rules specific to the applicable jurisdiction.

Do I need a lawyer to probate a Will?

Estates vary substantially in terms of size and complexity. If the Executor is required to obtain the Grant of Probate, the application process can be very complex. Although most Probate applications do not require a formal appearance in Court, there are a number of legal forms that must be filled out correctly. Determining which forms are necessary, completing them accurately, and enclosing appropriate supporting documentation can be daunting. Legal assistance is recommended, although may not required for simple estates.

If an Estate is contested by a beneficiary or involves administration outside the scope of what is discussed in this overview, Executors should strongly consider seeking formal legal advice.

Is it necessary to probate a Will?

Not all Estates will require the Will to be Probated. The Grant of Probate will provide legal authority to an Executor(s) to handle any assets held by an Estate. Generally, any land or real estate held in an Estate may only be handled by and Executor who has received Probate. If the deceased died with bank accounts in excess of $25,000, the bank may only release those accounts to the Executor if Probate was issued by the Court. For Estates with assets of lessor value, banks may accept other forms of indemnity to handle those assets rather than obtaining the Grant of Probate.