Note to Readers: The information provided in this article is a brief summary for information purposes
only and is applicable only for the Province of Ontario. It is not intended to be legal advice. Full and complete
advice can only be given by a lawyer who has detailed information about your individual circumstances.
LIFE AND ESTATE PLANNING
Temiskaming may be far away from the World Trade Centre and the Pentagon, but the tragedies there bring home to us our own vulnerability - how many fatalities have there been on Highway 11 in recent years? And what about heart (we will hear of a few deaths from the first snow shovelling), cancer and maybe even worse, disability from Alzheimers or stroke.
The greater tragedy can be not leaving your affairs in order. A saddened, even distraught family, and no will or planning in place. How about: no executor to administer your estate, no guardian for your under aged children, no trustee to look after the children's share of the estate until they reach 18. This last one is easy - the Province of Ontario will look after it for the children. Do you want the same government that can't manage Ontario to try to manage your assets? Is this any favour to leave your family?
Far better - a will well thought out, one that provides for an executor (also called an "estate trustee") to immediately step in and manage your affairs and administer your estate, one that has a trustee to look after under age children's shares - and how about to an age greater than the age of 18 that prevails if there is no will with a children's trust - a guardian to raise the children, and broad powers for the executor/estate trustee to manage any trusts.
Estate planning will have you consider with your lawyer what assets should be held jointly with someone else (your spouse for example) and designating beneficiaries on insurance and RRSP's. A misdesignation here can result in a tax tragedy for your estate.
Have you discussed your funeral with your loved ones? Should it be elaborate? Simple? Viewing? Service? Cremation? Your family will take pride in giving you're the funeral you wanted, if you just tell someone what you want. Many, usually elderly people, prepay and prearrange their funeral with the funeral home. They are understanding and helpful. Don't give any direction and the grief stricken family, probably feeling guilty because they think they did not do enough for you, will spend too much.
Life planning will have you consider how to manage your affairs if you are incompetent. A large percentage of us will end up unable to look after ourselves. Powers of Attorney, jointly held assets, trusts, the possibility of abuse by those to whom we are vulnerable, all need to be considered. You want to appoint one or more attorneys to look after your financial affairs and your personal care. Choose wisely, choose attorneys in whom you have the utmost faith and trust. Consider adding a living will to your Power of Attorney for Personal Care so you can die with dignity.
MAKING YOUR ASSETS JOINT
Jointly held assets seem like a great idea. In fact it often is a great idea, for the right people.
Ramsay Law Office recommends joint ownership of assets in the right circumstances as an estate planning tool. Houses, cottages, farms, bank accounts, savings, investments can all be jointly held. This is sometimes called "on joint account with right of survivorship". When one joint owner dies, the asset passes to the survivor quickly, cheaply, efficiently. Probate and legal fees are saved, change of ownership can be done at the bank or wherever while you wait. Joint real estate takes a little longer and is a little more expensive, but not much. Assets are available to the survivor right away.
Who should own the assets jointly? The obvious people are husbands and wives. They will be each others beneficiaries, and the estate is needed to support the surviving spouse, not the government or lawyers. There are no particular tax implications for dealings between spouses, and the savings in probate fees and estate administration costs can be significant.
If joint ownership is so good for spouses, what about doing the same thing after dad dies. Let's make the assets joint between mother and one or more of the children; then when mother dies the same simplicity will apply in administering her estate, and the same cost savings will be available. Your bank will recommend this. BUT FIRST CONSIDER:
- the Income Tax Act says that a transfer into joint names may be a deemed disposition and capital gains tax and other taxes may apply. This does not apply between spouses, but it does apply for parents and children;
- you may lose all or part of the principal residence exemption from capital gains tax for the home. Capital gains tax can go up to 25%; now the ½ to 1 ½ % probate fees and some legal fees don't look so big;
- the joint asset is now subject to the claims of the jointly owning child's spouse and creditors;
- you gave up control of the asset - your security for your old age;
- how do you know the jointly owning child will divide the asset up amongst his siblings after you die?
- Worst of all, what if the jointly owning child cashes the investment or spends it on himself while you are alive?
We recommend caution in making assets joint with children. Discuss it with your lawyer first. There even are some circumstances like business reasons or marital discord where it is not recommended between spouses.