property Archives

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 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.

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.

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.

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.

Who should I appoint as legal guardian for my children?

Posted on March 20, 2017April 17, 2023 By admin

A parent may appoint a guardian and custodian of their child in their Will, subject to Court approval for the remaining time where the child is a minor. The term ‘minor’ refers to a child who is under the age of majority, which is 18 or 19 depending on the jurisdiction in Canada1. When considering who to appoint as a legal guardian, it is important to understand the distinction between appointing someone to care for the child and appointing someone to deal with their property.

Caring for minor children

An individual who is appointed to care for a minor child has custody of a child and is tasked with the rights and responsibilities of a parent in respect of that child. The person with custody will generally make decisions regarding the child’s living arrangements, schooling, and if necessary, medical treatments.

The ability to appoint someone to take custody of children is subject to certain restrictions, which can include that:

The person naming a custodian must be the only person who is entitled to custody of that child. If someone else with legal custody of the child survives the first parent’s death (such as the child’s other parent) then the appointee will not acquire custody.
The appointee must consent to act as the child’s custodian.
In some jurisdictions, the appointment of a custodian is subject to approval by the Court.

When considering whether to grant an order for custody, the Court will consider the best interests of the child, including the child’s needs and circumstances and whether the person applying has any history of violence or abuse. The Court will also consider the views of the deceased custodian of the child as provided by their Will, but the Court has complete discretion to make the appropriate order and is not bound by the designation in the Will.

Dealing with your minor children’s property

The person appointed to care for your child generally has the right to deal with limited assets (in most cases up to $10,000.00, which, it should be noted is generally the maximum a parent may deal with absent a Court Order). In order to obtain the right to deal with additional assets, a Court Order giving the person the authority to manage the property must be obtained in most jurisdictions. This can be referred to as a guardianship of property or a trusteeship, depending on the jurisdiction.

Who should I appoint?

An individual has complete discretion over appointing a guardian. In most cases, the person caring for the child is either a close friend or family member. The following is a list of factors to consider:

Pre-existing relationship with the child
Location
Age
Health
Suitability

Ultimately, the individual appointed should be someone trusted with that child’s welfare.

For further information regarding guardianship for minor children, please consult a TEP.

1. 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.

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.