Wills and Estate Law

For most of the 20th century, the transfer property or assets to your beneficiaries following your death was relatively straightforward. Most assets had an easily traceable paper trail. However, with more companies moving to paperless transactions, physical documents are becoming a thing of the past. Think about it – when was the last time you received a physical bank statement?

In recent years, our digital footprint has increased exponentially, to the point where it is nearly impossible to conduct business, play music, organize parties and stay in touch with friends without using an app or a website. So, what happens to your digital assets when you die?  How does a personal representative step into the “online” shoes of the deceased?

The online world raises some real-life issues when it comes to estate planning and the ability of personal representatives to access a deceased’s digital assets. Your digital assets include any information stored on a computer or other digital devices, content uploaded onto websites, and rights to digital property such as domain names. Examples include email accounts, social media accounts, digital music libraries, and even cryptocurrency wallets.

Digital assets are governed by privately held corporations. When you create an online account or sign up for an online service, you are almost always asked to agree to the service provider’s terms of service, data, and privacy policies. These service agreements can often be restrictive when it comes to allowing a person other than the original account holder to access the account. If a fiduciary – such as a personal representative – tries to gain access to a person’s digital assets after the account holder dies, they may be prevented from doing so by the terms of the service agreement.

Estate planning lawyers are beginning to include clauses in Wills that specifically speak to the disposition digital assets. However recent cases have shed light on the fact that simply including these clauses may not be enough. Some online service providers don’t recognize the authority granted to a personal representative under a Will or alternatively, have terms that specifically prevent access by any other person other than the original account holder. Furthermore, the agreements are often governed by US law, giving rise to some jurisdictional issues. This can result in an estate incurring significant legal fees, including filing court applications seeking orders for access.

Legislative reform has started addressing these issues. In Canada, a few provinces, namely Saskatchewan and Prince Edward Island, have adopted legislation aligned with the Uniform Access to Digital Assets by Fiduciaries Act which confirms that the usual powers of fiduciaries (like a personal representative) extend to digital assets. The goal of the Uniform Act is to compel online service providers to provide the fiduciary with access to a digital asset, regardless of the terms and conditions of a service agreement.  Under the Uniform Act, fiduciaries can submit the proper documentation that establishes their authority (ie: a valid Will) and upon receipt, the service provider must provide the fiduciary with access to the digital asset within 30 days.

Unfortunately, the Uniform Actis still not law in Alberta and there is nothing in force that is comparable. While we wait for Alberta legislators to update the laws or service providers change their policies, it is prudent to ensure your Will includes proper clauses that allow your personal representative to deal with your digital assets in the event of your death.

The estate planning lawyers at Getz Collins & Associates can discuss your specific digital assets with you and guide you through the necessary clauses to consider to ensure these assets are managed accordingly.

A trust can serve at least one of two primary functions; to reduce a family’s taxes by shifting certain assets and income to family members in lower tax brackets or by controlling the finances of family members who have proven unable to hold money.

A trust in Canada is not considered its own legal entity but a taxpayer under the highest rates in Canadian law. There are two types of Canadian trusts – Testamentary Trusts and Inter Vivos Trusts.

What is a Testamentary Trust?

The Revenue Agency of the Government of Canada defines a testamentary trust as a trust or estate that is generally created on and as a result of the death of a person. The terms of the trust are established by the will or by court order concerning the deceased’s estate under provincial or territorial law.

If assets in a testamentary trust are not distributed to beneficiaries as per the wishes of the deceased, the trust may default to an inter vivos trust. A testamentary trust may also convert to an inter vivos trust if it incurs a debt or other payment obligation to a beneficiary or any other partner. Debts that circumvent this rule are:

Incurred by the trust in the fulfillment of a beneficiary’s right to implement payment of an amount owed by the trust to the beneficiary or to accept any part of the trust’s capital

Owed to a beneficiary due to services provided to the trust by the said heir

As a result of payment on behalf of the property transferred to a specified party within 12 months of payment, if the beneficiary has been dealing with the trust at arm’s length

What is an Inter Vivos Trust?

Put simply, an inter vivos trust is created by a live person to benefit someone else, also referred to as a “living trust.” There are several reasons why someone would institute an inter vivos trust. A parent may create a college education fund to mature when their child comes of age, or a business magnate may place his property assets into a trust to avoid probate or estate taxes.

There are several different types of inter vivos trusts. The Canadian Revenue Agency recognizes 33 separate types of inter vivos, or living trusts. Some of the most common are:

• Alter Ego Trusts; allowing a settlor over the age of 65 to receive income after retirement
• Real Estate Investment Trusts (REIT); allowing rent-generated income to gather
• Master Trusts; which is only for Canadian residents, cannot take deposits, and can only invest in its own funds
• Employee Trusts; are made by employers to benefit their employees

What is a Public or Public Investment Trust?

A public trust is any trust that is listed on a designated stock exchange in Canada. If a substantial amount of that trust’s fair market value comes from units of public trusts, partnership interests in public partnerships, shares of capital stock in public corporations, or any combination of those properties; then it is known as a public investment trust.

Investing in a public trust requires additional effort during tax season, such as forwarding certain information to the CDS Innovations Inc. website within sixty days of the end of your tax year.

Estate planners often recommend that seniors create joint accounts in order to avoid the probate process. However, there are benefits and risks associated with joint accounts such as the unintended consequences that cause family rifts.

A joint bank account gives two people equal legal title to the whole balance in that account. There are several benefits to having joint accounts. Spouses can share control over managing assets, for example. An adult child caring for an elderly parent can help them with their banking. Money can pass to the joint account holder upon death without the funds having to go through the probate process. A bank account goes directly to the surviving account holder through the “right of survivorship,” and that person is the sole owner of the whole account. This side steps the need for that account to be included in the probate process and subject to probate tax.

However, there are risks with joint accounts too. Married or common-law partners might consider having a joint account that they both pay into for covering household expenses and bills. Most financial planners will advise couples to retain their personal bank accounts as well if they choose to set up a joint account. By putting two people’s names on the account, either one could empty the account at any time. So, this is one of the risks. When relationships go sideways, this is not an uncommon occurrence.

There are risks for families where a parent dies, and the parents shared a joint account, or a parent shared an account with an adult child.

In 2007, the Supreme Court of Canada decision in Pecore v. Pecore brought clarity to what occurs when one of joint account holders passes away. The court no longer makes a presumption about a deceased’s wishes.

Parents and Minor Children

For a joint account held between a parent or parents and minor children, the court will presume, without evidence to the contrary, that the parent(s) intended the funds in the account to be gifted to their children and that they would inherit the funds through survivorship.

Parents and Adult Children

Many people assume that joint accounts held between parents and adult children are treated the same as those held between parents and minors. The 2007 Supreme Court decision confirmed that this is not so. Instead, the courts will apply the presumption of resulting trust to joint accounts between parents and adult children (including dependent adult children).

This means the adult child is viewed to hold the account in trust for their parent’s estate. Unless the adult child can provide evidence that proves that their parent intended for them to inherit through survivorship, the funds will revert back to the estate to be shared among the deceased’s heirs and will be subjected to tax. The question that courts will always ask in these cases is: What was the deceased’s intention at the time of making the joint account? Was that documented?

Courts will look at several factors to determine whether the deceased intended for their adult child to inherit the funds left in the account. For example, they would look at who used the bank account, who paid income tax on the account, and of course, the bank documents from when the account was established. Simply checking off “joint tenants” on a bank account application is not adequate evidence by itself to rebut the presumption. Courts might look at the relationships between the joint account holders, the dependency of the child on the parent, and statements made to banks or lawyers regarding the ownership of the account.

Document Your Intentions

Parents who want their children to inherit their joint account through survivorship should consider expressing this intention in their will. However, if they would simply like some help managing their banking and finances, they could consider appointing their child as having power of attorney(“POA”) instead. This can give the adult child access to the account on their parent’s behalf and nothing more. However, parents wanting their children to inherit the joint account could designate them as having POA in addition to having a joint account. This reinforces the idea that the parent wanted them to inherit the account, because they did not need to add them to the account to get help with banking since they already had POA.

Seek Advice

If you are considering setting up a joint account with a spouse, common-law partner, parent, or a child, obtain professional advice regarding your financial and estate planning. Make sure you understand the specific risks and how best to mitigate those risks by documenting clearly what your intentions are with the account, (and what your parent’s are) and what your wishes are for the joint account holder should you pass away. This will reduce potential future litigation costs as well as the personal and emotional costs for your loved ones in the future.

Getz Collins & Associates – Estate Planning Lawyers are ready to help

What is probate?

Probate is the process in which your Will is administered according to your wishes. The Court appoints a Personal Representative to take action on your behalf, and allows them to access and distribute your assets and bequests in accordance with your Will.

What are the requirements for a Will?

The requirements of a valid Will are that it must be made in writing (either handwritten or typed), it must bear the signature of the Testator (the person making the Will) and must be apparent of the face of the document that the Testator intends, by signing, to give effect to the writing contained in the document as the Testator’s Will (“This is the Last Will of…”). Additionally, the Testator is required to acknowledge his or her signature in the presence of 2 witnesses, who are both present at the same time and sign in the presence of the Testator.

What is an EPA?

The term ‘EPA’ stands for Enduring Power of Attorney; this is a document that comes in to effect when you are still living but have become incapacitated. The EPA allows the person you have appointed as your Attorney to act on your behalf with respect to financial decisions. This may include banking, dealing with real property and accessing a Safety Deposit Box, among other powers.

Can a Will be handwritten?

Yes! A holograph Will, which is a Will written entirely in the Testator’s own handwriting does not need to be witnessed provided it is signed by the Testator.

How do you change a Will?

For a simple change, a document referred to as a Codicil can be drafted to effect a change. For multiple changes, it is recommended that a new Will be drafted.

What is a PD?

Similar to an EPA, a Personal Directive (PD) is a document that comes into effect upon your incapacity allowing your named Agent to act on your behalf. The difference is that the PD pertains to personal matters such as whom you may live and associate and health care directives, rather than financial matters.

What happens if you die without a Will?

If you die Intestate (without a Will), any assets that form your estate will be distributed in accordance with the laws of Intestacy. There are specific rules the Court will follow, including who has the right to apply as the Personal Representative and who is to receive a share of your estate. Without adequate estate planning, your assets will be distributed in accordance with legislation and not necessarily in the manner you had intended.

How do you change a Will?

For a simple change, a document referred to as a Codicil can be drafted to effect a change. For multiple changes, it is recommended that a new Will be drafted.

Can you be ‘cut out’ of a parents’ Will?

Yep! It is completely up to the Testator who is to be included to receive a share of their estate. There are always extenuating circumstances in each familial situation so if you have questions or concerns, seek legal advice.

Contact our office today to discuss planning for the future and safeguarding what you’ve worked for during your lifetime.