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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.

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.

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.

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.

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.

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.

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.

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.

The risks of not making a will

Posted on March 15, 2017April 17, 2023 By admin

Making a will can seem like an unpleasant or dreary task to be put off indefinitely. However, there are serious implications for the loved ones of someone who dies intestate (without a will). This article highlights some of the consequences associated with not preparing a will.

1. Your estate will be distributed under the rules of intestacy

A person who dies without a will is considered to have died “intestate”. Legally speaking, an intestate person has left no instructions as to how they wish for their assets to be divided and distributed on their death. In such circumstances, provincial legislation governs how property will be distributed amongst surviving relatives. Typically, these rules indicate that if a married person dies, an initial lump sum amount will be left to their spouse, plus a portion of the residue of the estate (the amount depends on whether there are any children of the deceased). If there are children, the residue is divided proportionately between any children and the surviving spouse. Where there are no children or spouse, the estate generally goes to the next of kin.

2. There is no opportunity to appoint guardians for minor children

One of the most important aspects of a will is appointing a guardian to look after minor child in the event of an untimely death. In the event all of the legal guardians of a child pass away without leaving wills, a Court Order will be required to select a guardian for the child. In the absence of such an order, the applicable provincial government would become involved.

3. There is no named executor

An executor is typically named when a person prepares their will. An executor is someone who is trusted to administer the estate according to the deceased’s wishes. However, if there is no will, there is also no appointment of an executor. As such, someone must apply and be appointed to act as administrator of the estate, which may result in delay, expense and frustration for family, friends and loved ones.

Other potential implications of not creating a will include:

Stepchildren and, in some jurisdictions, unmarried partners will likely be discounted from the estate;
Families may face additional administrative burdens which add to suffering at an already difficult time;
Familial disputes may arise; and
Expensive legal action may be required to resolve complications.

There are many risks associated with not preparing a will. As such, it is crucial that everyone prepare a will, preferably with the assistance of an experienced professional who can ensure that it is done properly.

For further information or assistance with drafting a will, please consult a TEP.