five common misconceptions about estate & incapacity planning in canada

Financial Literacy Series

Five Common Misconceptions about Estate and

Incapacity Planning in Canada

Speaker:

Brad Armes, PFP TEP

Agenda

1. Dealing with Incapacity

2. Efficient Estate Transfer

3. Certainty

Sources

▶ STEP Vancouver Branch Presentations 2015-2017

▶ http://www2.gov.bc.ca

▶ http://www.trustee.bc.ca/documents/STA/It%27s_You

r_Choice-Personal_Planning_Tools.pdf

▶ www.bclaws.ca

▶ www.cbabc.org

Dealing with Incapacity

Number one: Everything is joint

True Cost of Sudden Incapacity

▶ Emotional difficulty

▶ Potential Family disagreement

▶ Court Application cost and process

▶ Public Guardian and Trustee(PGT)

Potential Financial Cost

Fee Amount

Capital commission 4% of the total assets

Income commission 4% of all income received

Asset management fee

(AMF)

0.7% per annum,

computed monthly, on the

gross value of all assets

Estate liaison

administration fee$120 per month

PGT acting as a Financial or Legal Representative

One Very Important Word

▶ 2011 – “Power of Attorney Act” specifically references the

term “Enduring Power of Attorney”

▶ “Enduring Power of Attorney” remains valid through

incapacity

▶ Previous Power of Attorney would be sufficient for legal

and financial transactions for “convenience” purposes

Complexities of Joint ownership

When, Why and How

1. Immediately

▶ Named POA must sign in front of one witness

if a Lawyer or Notary in BC (in good standing)

▶ Otherwise, must have two witnesses

2. Springing

▶ Not valid until event (likely incapacity)

▶ Regular doctor visits

Duties (Sec 19)

▶ act honestly and in good faith

▶ exercise the care, diligence, and skill of a reasonably

prudent person

▶ act within the authority given in the enduring power of

attorney

▶ keep proper records for inspection and copying

▶ act in the adult's best interests, taking into account the

adult's current wishes, known beliefs and values, and any

directions to the attorney set out in the enduring power of

attorney

Duties (Sec 19)

▶ give priority when managing the adult's financial affairs to

meeting the personal care and health care needs of the

adult

▶ invest the adult's property only under the Trustee Act,

unless otherwise stated

▶ foster the independence of the adult and encourage the

adult's involvement in any decision-making that affects

the adult

▶ not dispose of any property that the attorney knows is

specifically gifted in your Will, unless it’s necessary to

comply with their duties

▶ keep the adult’s assets separate from the attorney's assets

Fair or Equal?

Not that kind of agent

How Long

1. End of life

2. Revoked – as long as determined mentally

capable

3. Marital Breakdown – if former spouse or

common law partner is named

4. Acting POA files for bankruptcy

5. Is a corporation and the corporation dissolves

6. Convicted of POA Fraud

Other Considerations

▶ Limited POA at Financial Institution

▶ Charitable Donations or Gifts to Family

▶ Multiple POA

▶ Agency

▶ Compensation

▶ Where to store it

▶ Communication between parties

▶ Register at Nidus?

Health Care Agreements

Representation Agreement

▶ Many people reference “Living Will”

1. Personal/Health Care RA9

▶ Will be consulted to make medical and personal (living)

decisions on your behalf

▶ Take care of your pets

2. Advance Directive

▶ A written consent to give authority or refuse medical

treatment, when the adult is unable to make the decision

▶ Should be referenced in Representation Agreement

Efficient Estate Transfer

Number Two:

It all goes to my spouse

Where does it go?

Will Estate Succession Act

(WESA) March 2014

▶ Subsequent to Wills Variation Act (2011)

▶ Spouse, common law partner, blood or adopted child

(estranged or otherwise) have the ability to contest testators

wishes

▶ Definition of Spouse – 2 years in a marriage like relationship –

no mention of co-habitation

▶ Marriage no longer revokes previous will

▶ Must survive by 5 days to be considered to receive a bequest.

Will Estate Succession Act

(WESA) March 2014

▶ Hotchpot rule no longer applies

▶ Gifts to children of someone who dies are no longer accounted for

in Intestacy Provisions

▶ Documents other than a will are potentially admissible to the

courts.

▶ “Undue Influence” – now must be proven by the person who was

named to receive the bequest in the will

▶ Make a will at 16, witness at 19.

▶ Beneficiary designation is deemed to be valid when the will is

signed. Prior was considered to be the day before death

Intestacy Rules

Children with Same Spouse

▶ First $300,000 to spouse

▶ 50/50 split with Children

Children with Previous Spouse

▶ First $150,000 to spouse

▶ 50/50 split with Children

▶ Family Law Obligations?

▶ Spouse no longer has a “Life Interest” in the matrimonial

residence. Must purchase within 180 days of Representation

Grant.

My executor can get help

from the bank

Certainty

Number Three: The Beneficiary

will get the RESP proceeds

RESP is an Estate Asset

▶ RESP is not actually considered a Trust.

▶ 3 way contract between Subscriber, Promoter and a Trustee

▶ Not all Financial Institutions allow for a “Successor Subscriber”

▶ Capital becomes part of the Estate if the Subscriber dies

▶ Testamentary Trust could be setup in the Will with the exact same

beneficiary(s) as are listed on the RESP plan

▶ Will should include instructions that contributions could still be made

if that was the testators intent.

Number Four: Digital Assets

and Passwords

Canadian Submission

▶ Uniform Access to Digital Assets By Fiduciaries Act

(2016)

Number Five: Charitable Discussions

with Financial Advisors

Methodology

▶ 2013 US Study by US Trust & The Philanthropic Initiative

▶ September 2014 two quantitative online surveys across Canada through Ipsos

Canada

▶ Random Sample:

▶ 258 financial advisors (low response of FAs serving in the province of Quebec)

▶ 178 High Net Worth Individuals (investable assets >$1MM)

High Net Worth Donors -

Potential To Give

Summary

▶ Advisor Coordination (Tax, Legal, Financial) is in

clients’ best interest from a Financial Literacy

perspective

▶ Communication between clients and the people

they choose for “Fiduciary” responsibilities would

be a positive development

Thank You