Living Wills (Expression of Wishes)

“Living wills” have been legally valid in BC since 2000. A living will is a written statement that expresses your wishes regarding medical treatment and personal care in case you are unable to express your wishes at the relevant time. The term “living will” is a legal term in some US states but not in Canada, and is more correctly referred to as an “Expression of Wishes” or “Health Care Directive”.

In an Expression of Wishes you can set out the treatments that should or should not be given in specified circumstances. For example, you may direct that “heroic measures”, such as cardiopulmonary resuscitation (CPR), should not be used to prolong life if you suffer from a severe irreversible condition. You may direct that medication be administered to alleviate suffering in those circumstances.

An Expression of Wishes can prevent conflict and guilt among family members. If family members ask the doctors to do “everything” to keep a loved one alive and that person dies, the family may feel guilt for putting the person through needless tests and treatments. On the other hand, if they let their loved one “die with dignity”, they may feel later that they should have done more.

Conflict can also arise if family members cannot agree. Children who have been out of contact for years may return and want the doctors to do “everything” to try to bring a parent back so they can make peace. Other family members who remained in close contact are more likely to accept the person’s death, and want only palliative care for the parent. Further complications can arise when children from divorced marriages resent stepparents or common law spouses from making decisions. These conflicts can leave lasting bitterness.

If you have stated your wishes clearly in an Expression of Wishes, your doctor and family won’t have to second-guess what kind of treatment you would want. You will receive the treatment you want and your family will be “off the hook”.

Under the Representation Agreement Act, you may make a Representation Agreement authorizing a representative to make health and personal care decisions for you. Your Representative will be need to know about your Expression of Wishes so that they can follow your wishes.

Under the (unfortunately named) Health Care (Consent) and Care Facility (Admission) Act, if you are incapable of giving or refusing consent to medical treatment, the health care provider is to go to the highest ranking of the following people who are available and willing to decide:

your court appointed guardian (committee), if any, or representative under a Representation Agreement, if any

your spouse (including common law or same sex spouse)

• any adult child

• a parent

• a sibling

• a grandparent

• a grandchild

• anyone else related by birth or adoption

• a close friend

• someone related to you by marriage

• if no one else is available, or there is a dispute about who is to be chosen, someone authorized by the Public Guardian and Trustee.

The person making the decision will be bound to comply with any wishes you expressed while you were still capable. Accordingly, an Expression of Wishes is legally valid (although it won’t authorize who can make the decision for you – that can only be done in a Representation Agreement). If you haven’t expressed your wishes, the person deciding for your must make the decision on the basis of your known beliefs and values. If your beliefs and values are not known, then the decision must be made on the basis of what is in your best interests.

We recommend that our clients who wish to plan for the possibility of disability consider making an Expression of Wishes and Representation Agreement, as well as an enduring power of attorney for financial matters. For more information, please contact us.

Leave a gift to charity in your will?

Often the people we meet have a cause they are passionate about. They make the world a better place, through monthly donations or as volunteers. But what is the best way to make a difference when you are gone? If you are one of those people, the logical next step may be to leave a gift to charity in your will.

You may be surprised to learn how big a contribution to shaping the future is possible, with a gift in your will of only 1% of the estate. You are still leaving 99% to support your loved ones. In this way, you are doing more to help than you ever thought possible, simply by giving in a different way.

Here are a few tools you can use to get started with thinking about leaving a gift in your will: *

• Estimate your gift. Consider how much you want to give, using this Legacy Calculator tool.

• Get inspired. Consider what purpose you want to support, using your will to do good and make a lasting difference in the world. Need some ideas? Take a look at some donor stories.

• Keep the love going. Find out what specifically your gift could accomplish at your chosen charity. Perhaps you could help preserve a natural area, research a cure, start a scholarship, or create an arts endowment. This Charity Finder tool allows you to search by cause and location, and explore ideas.

*tools provided by Will Power, a Canadian public education campaign about charitable giving.

The combination of estate planning and philanthropy is also gaining popularity in Canada as more people discover that Canada has some of the best tax incentives in the world to support giving to charity.

If even a small percentage of us Canadians left 1% their estate to charity, the result could be as much as $40 billion per year to advance the causes that we care about.

Who would have thought that a gift of 1% in a will could be a powerful tool to make change in the world? But we know that if many people each do a little, it adds up fast. “Many hands make light work!”

If you are looking for someone to talk to about charitable giving, or estate planning generally, please contact us for a free initial consultation. We can help you support your loved ones and your passion, both.

Estate Law Considerations: Executors Proceed Cautiously

Here’s What We’d Hope For

If we must die, we’d like:

• things to be organized and simple, so we can enjoy our final days with family or friends.

• our assets to transfer smoothly to our chosen family, friends, or charities.

• to save costs, if we can.

Probate Is Not Always Required

If your spouse survives you and is your primary beneficiary (or with a very simple estate), the transfer of your assets to your spouse can be easily achieved with proper planning. Minor legal assistance may be needed. The survivor spouse’s Will, Power of Attorney and Health Care Agreement may also need to be updated at this time, or new planning considered to efficiently pass the couple’s wealth to the next generation.

For the executor of a person who made their will at Beacon Law Centre, a free consultation is available to clarify the steps to follow.

When Probate Is Needed

When the last of two spouses dies (or with more complex estates) a BC Supreme Court Order, called a “Grant of Probate” (or “representation grant”), may be needed to handle the Estate. Here, the executors really should seek legal assistance in carrying out their responsibilities.

Liability Concerns Arise

Probate involves a variety of complex laws. While your executor may be bright and confident there is a high risk of personal liability if the estate incurs financial losses (even if mistakes are made innocently). Common risky behaviours exhibited by lay executors include:

• Starting to deal with the assets and then deciding not to act as executor.

• Failure to act impartially in the distribution of personal items.

• Failure to identify all the assets.

• Failure to identify (or pay) a liability before distributing funds to beneficiaries.

• Keeping risky or unauthorized investments, or failure to adequately insure property.

• Failure to include the proper parties in the Probate process.

• Failure to adhere to legally required time limits on distribution.

• Distributing without appropriate waivers or releases from beneficiaries.

• Failure to keep proper records and account adequately to beneficiaries or creditors.

• Errors in the handling of income tax matters.

• Paying out Executor fees without the proper approvals.

• Often, executors who are family or friends don’t discover that their handling of the matter was problematic until it is too late.

Family Strife Problems

When Probate is necessary, it will take several months to administer the Estate, even when the Executor is advised of all of the steps and is extremely efficient. Beneficiaries are often unaware or not sympathetic about the work required, and can be critical of the executor and the timeline and costs of proper administration. For this reason, some will-makers choose a friend or a professional advisor as executor in an attempt to preserve the relationships between their children. Others encourage their family member executors to engage an estate lawyer, to help them to avoid errors and give the others a further assurance that the estate is being well handled. We encourage our clients to think critically about their choice of executor.

Choice of Executor

The role of executor is not for the faint of heart, nor for the ’emotional one’ in the family. The most successful executors are objective and careful. They don’t let paperwork accumulate on the desk corner. They figure out what work to delegate, and what work to do themselves. They are not baited by petty displays or poor behavior, and will patiently and calmly rise above unwarranted criticism. So, look for these characteristics in choosing your executor.

Executor Fees

When Probate is involved, the person who acts as executor will nearly always decide to charge an executor fee because so much work is required. The fee (payable from your assets and regardless of who acts as executor) is usually in the range of 2% to 3.5% of the value of the estate assets. The maximum allowed (for disputed or complex estates, and also for small estates) is 5% of the value of the estate assets.

Too much emphasis is placed on avoiding or minimizing executor fees. Given the work involved, some kind of compensation is appropriate. The law has checks-and-balances to ensure the amount is reasonable. It is a much lower amount than the real estate commission payable when a house is sold, even though the executor’s duties often last for one or more years. Rather than worry about an executor fee — worry about choosing the right executor!

Opportunities and Action Steps

We advise to keep your will and other estate planning documents up to date, and to encourage your beneficiaries to do the same. Also, if your spouse or main beneficiary dies, update your documents and explore new ways to provide for your beneficiaries. The efficient passage of wealth from one generation to the next is a matter of being well informed and well organized. Contact Beacon Law to discuss further.

Roles of Godparents & Legal Guardians

Godparents and guardians can both play an important role in the life of a child but they have different origins and their roles are also different.

Although, in the Christian faith tradition, godparents were once legally responsible for caring for an orphaned child, today godparents do not have any legal responsibility. The child’s legal guardians now assume the role of the parent if the parent has passed away. A godparent can still help the parent raise a child by providing spiritual guidance and support to the child.

Godparents are usually appointed by the parent at the child’s Christian baptism. Legal guardians are most often appointed in the parent’s Will. Appointment in a Will is the best way to make sure that the parent’s wishes for legal guardians are respected.

Often godparents do not change during a child’s lifetime, whereas legal guardians can and often do change. As personal circumstances change, and families relocate and grow, that child’s legal guardians might need to change. The consent of a former legal guardian is not required to appoint a new legal guardian. Likewise, a parent who has made a Will without appointing a legal guardian for a child can change the Will at any time to add an appointment of a legal guardian.

Of course, the same person can be named as both a child’s godparent and as legal guardian! However, as they have different origins and roles, they must be appointed separately to each role.

Joint Tenancy as an Estate Planning Tool – Pros and Cons

Estate planning means different things to different people, but most people agree that some of the goals of estate planning include:

• Simplifying the administration of an estate

• Minimizing probate fees

• Ensuring that property passes to the intended person

One of the most common strategies used to achieve these goals is to own property with another person in a joint tenancy.

Joint tenancy or tenancy in common Property owned by more than one person must be owned in one of two ways: joint tenancy or tenancy in common. In practical terms, the chief distinction between joint tenancy and tenancy in common is the right of survivorship. Only joint tenants can enjoy right of survivorship.

If you own property with another person as tenants in common, on your death your interest in the property becomes part of your estate to be passed on according to your will. If you own property with another person as joint tenants, on your death your interest in the property normally passes to remaining joint tenant(s) by right of survivorship, and does not form part of your estate.

In British Columbia, the law presumes that an asset (other than land) held in two or more names is owned as a joint tenancy, unless there is an indication that the owners own it in shares. So, for example, household goods, vehicles, bank accounts and investments owned by two or more persons will be presumed to be owned by them as joint tenants, unless their respective shares of the assets are specified or there is a statement that the asset is held by the owners as tenants in common.

However, in the case of land the common law presumption of joint tenancy has been altered by statute, so that land owned by two or more persons is presumed to be owned by them as tenants in common unless the title expressly states that they are joint tenants.

Right of Survivorship Because of the right of survivorship, a joint tenancy can meet the estate planning goals of simplifying the administration of an estate, minimizing probate fees and ensuring that property passes to the intended person. It is a strategy used by the majority of married couples, who own their major assets, such as their home, as joint tenants. The right of survivorship ensures that when the first spouse dies, these assets pass to the surviving spouse without being subject to the delays and expense of an application for probate (with a little extra planning, it is often possible to avoid probate altogether on the death of the first spouse). The right of survivorship also ensures that ownership of the assets will not be affected by claims under the Wills Variation Act, if there is a will, or by the rules for intestate distribution under the Estate Administration Act, if there is no will.

Beware of the Consequences While joint tenancy is most common between spouses, it is becoming increasingly common between parents and children. The purpose is the same – to simplify administration of the parents’ estates and to minimize probate fees. Often the joint tenancy is created after the death of one of the parents. However, this can result in some unintended and undesirable consequences. Consider the example of a parent who has transferred her assets into a joint tenancy with one of her adult children:

Loss of control The parent cannot later cancel the transfer if she changes her mind. As well, in the case of land, she will not be able to sell or mortgage the land unless the child also signs.

Income tax The transfer is a disposition for income tax purposes. The 50% interest in the property transferred to the child is deemed to have been sold at its fair market value and, unless the asset is the parent’s principal residence, a portion of any capital gains will be added to the parent’s income. This could result in the parent having to pay tax even though she received no payment from the child. In addition, one half of any future capital gains will accrue to the child. If the property is the parent’s principal residence and the child lives elsewhere, the principal residence exemption will be lost for the child’s share of any future increase in value of the home.

Property transfer tax In the case of land, property transfer tax will be payable at the time of transfer, although there may be an exemption available if the property is the principal residence of either the parent or the child.

Exposure to creditors The child’s interest in the property will be subject to claims by the child’s creditors. If the child is married and the property is used for a family purpose, it could be subject to claims by the child’s spouse if there is a breakdown of the child’s marriage.

Death of The child may pass away before the parent, negating the purpose of the joint tenancy. If other children were also on title with the parent as joint tenants, on the death of the parent the asset would pass only to the surviving children, and the family of the deceased child would receive nothing.

Blended Families Another unintended result can occur if spouses in a second marriage own property together as joint tenants, and each have children from previous relationships. On the death of the first spouse, the property will pass by right of survivorship to the surviving spouse. The spouses may have had wills that provided that the property would ultimately pass to the children of both spouses, on the death of the last of them. However, the surviving spouse can change his or her will so that the property goes only to that spouse’s children, and the children of the deceased spouse would receive nothing.

Resulting trust The law presumes that a joint tenant who contributed nothing toward the property holds his or her interest in trust for the contributing owner. An exception is the presumption of advancement (meaning a gift in advance of a person’s death). According to case law, the presumption of advancement applies to transfers of property from one spouse to both spouses, or from a parent to a minor child.

However, in 2007 the Supreme Court of Canada stated (in the Pecore and Madsen decisions) that the presumption of advancement does not apply to transfers between parents and adult children. An adult child who receives an asset by right of survivorship from a deceased parent can no longer rely on the presumption that the deceased wanted the child to take the asset at death. Additional evidence is required to prove that the transfer into joint tenancy was intended to be a gift and that the surviving child was intended to receive the asset on the death of the parent.

The Pecore and Madsen decisions also raised the possibility that the right of survivorship itself could be gifted from one person to another. This presents several unanswered questions, however, such as the tax implications of such a gift. As well, it is not clear whether the gift of the right of survivorship applies to real estate.

Put it in Writing To avoid the possibility of a dispute with other family members, and to clarify the tax consequences, it is now imperative to put the parent’s intention into writing. If the transfer to joint tenancy would not result in capital gains tax, or the parent is prepared to pay the tax, the parent could sign a deed of gift to confirm that beneficial ownership in the property is transferred to the parent and child as joint tenants with right of survivorship. On the parent’s death, it would be difficult for other beneficiaries to argue that the child holds the property in trust for the parent’s estate. Alternatively, the parent could require the child to sign a declaration of trust confirming that the child does not have beneficial ownership in the property, but simply holds his or her interest in trust for the parent. In addition to reducing the possibility of a dispute between the child and the other beneficiaries of the parent’s estate, the declaration provides the parent with a greater amount of control over the property, and may prevent the deemed disposition of the property for income tax purposes (because beneficial ownership of the property remains with the parent). However, Canada Revenue Agency (“CRA”) has suggested that the existence of a declaration of trust will not, in and by itself, be conclusive evidence that beneficial ownership of the property has not changed. It would depend on all of the circumstances. CRA’s position is that if legal title to an asset is transferred from a parent to the parent and a child, but beneficial ownership remains with the parent (as confirmed by the declaration of trust and other circumstances), a disposition for income tax purposes has not occurred. Having said that, CRA pointed out that in such a situation a true joint tenancy with the child would not exist and, in its opinion, the goal of reducing probate fees would not be achieved because the property would not pass to the child by right of survivorship. Joint tenancy can be an effective part of an estate plan, but must be used with caution. If you have questions about creating a joint tenancy or other estate planning strategies, call us first for professional advice.

For a discussion of other strategies to avoid probate and probate fees, contact Beacon Law.

Power of Attorney ABCs

This article is a general introduction to the “enduring” Power of Attorney, often simply called a “POA”. It is perhaps the most common and useful estate planning document, and one of the more dangerous, if not made and used correctly.

With a POA, you can choose a person (“attorney”) to act on your behalf. This can be very useful during a future loss of mental or physical capacity due to illness or accident, or for a person working or travelling abroad.

Even a simple POA will usually avoid both the need for a court-appointed adult guardian, which is uncertain, time-consuming and costs thousands of dollars to arrange, and the problems that can result from creating joint accounts just to manage funds.

Only an adult with legal capacity can make a POA. The British Columbia Power of Attorney Act requires that you must be able to understand all of the following:

• what assets you have, and their approximate values;

• your obligations to your dependants;

• the scope of what the attorney will be able to do on your behalf;

• that, if the attorney does not act prudently, your estate may lose value;

• that the attorney might misuse the authority, causing you harm; and

• that as long as you have capacity, you may remove the attorney.

A POA can grant very broad powers, such as managing, selling, investing, or spending any income or asset. However, it can also have limits and protections:

• requiring a doctor opinion to confirm your incapacity first;

• limiting the attorney’s authority, in time or in scope;

• naming an alternate attorney, in case the first is unable to act; and

• naming more than one attorney, who must act together.

Under the British Columbia Power of Attorney Act, every attorney has a list of basic duties, such as keeping records of all decisions and actions and producing them (a process called “accounting”) on demand. The attorney can face removal as well as legal liability if those rules are not followed.

Although POAs do not automatically expire, many older POAs are missing terms and guidance that you may consider to be important or desirable, such as to allow the attorney to support family members, to continue a pattern of charitable giving, or to compensate the attorney for their time spent on your affairs.

There is no mandatory form of POA, so your POA can be customized according to your wishes and circumstances. This requires a thorough discussion to make sure that you understand the risks and options before deciding what to do.

If you have any questions about a Power of Attorney or another type of estate planning, please contact us for accurate, respectful, and practical advice.

Do You Need a Second Will?

Thanks to a recent change in BC’s estate laws, business owners can now reduce the amount of probate fees payable by their estate by utilizing a second will. Probate usually becomes necessary because third parties, such as financial institutions, or the Land Title Office, want assurance that the executor has the authority to deal with a particular asset. Probate fees are payable to the government based on the value of the estate assets.

The articles of most private companies allow for the transfer of a deceased shareholder’s shares to the estate without probate. However, if probate is required because other assets were owned solely by the deceased (such as a vehicle, bank account or real estate), the company shares must be listed in the probate application and will be subject to probate fees. If the company shares are dealt with in a separate will, probate fees for the shares are avoided.

To benefit from a second will, you must appoint a different executor under each will. If you think you would benefit from dual wills, we can help.