September 2016 - Garton & Harris

Navigating estate litigation after the death of a loved one

September 30, 2016/in Wills /by gartonandharris

There is an old Roman saying that says the people who want to have peace should always prepare for war. In some ways, this notion applies to estate planning. Indeed, a good estate plan will seek to achieve several very important goals, and one of the most important ones is the avoidance of family infighting, disagreements and ugly legal battles between heirs.

That said, despite the best plans of British Columbia estate planners, families may still end up in disagreement. When this happens, estate lawyers will need to examine the situation closely to resolve the point(s) of contention. A lot of disputes relate to the validity of the last will and testament and other testamentary documents that may be called into question.

For example, if more than one will was drafted by the decedent, family members who stood to benefit from the first will might try to allege that the second will was drafted when the decedent was not of sound mind. Or, they might try to show that the decedent was pressured into drafting a new will to benefit a certain family member inappropriately.

Regardless the nature of the dispute, British Columbia residents may benefit from seeking out the assistance of an estate lawyer to help them with their estate litigation proceedings. Estate lawyers can evaluate the situation to determine the most appropriate legal strategies to employ. All the while, an estate lawyer must try to keep the peace between family members, reverting to estate litigation as a last resort when all attempts at amicably resolving the disputed matter(s) have failed.

Source: Huffington Post, “Estate Planning: Avoiding (Or At Least Managing) The Family War,” Suzana Popovic-Montag, Sep. 16, 2016

The advantages of a power of attorney

September 20, 2016/in Power of Attorney /by gartonandharris

Canadians of all ages are encouraged to have a power of attorney document on file. In fact, this is one of the most basic estate planning documents that — in many ways — is even more important than a will. That’s because, if you pass away without a will, the law will still provide a way for your estate to be distributed to your heirs in some way or another, but if you don’t have a power of attorney, you could be in serious trouble before you die — in the event that you become incapacitated.

Let’s take a look at some of the advantages of a power of attorney:

— Allows you to clearly indicate who will handle your property and money matters if you can’t manage them yourself, even if it’s only temporary.

— Your attorney is bound by law to make decisions that benefit you, and only you.

— Your power of attorney document can provide only very specific powers to your attorney or it can broadly give general powers to your attorney.

— You can appoint more than one attorney, and require them to make joint decisions in order to limit the chances of fraud.

— You can appoint secondary attorneys who will take power in the event that the other is unable.

— A general power of attorney can let someone take over your affairs if you are gone for a certain period of time.

— An enduring power of attorney gives someone power of your affairs in the event of mental incapacitation.

Without a power of attorney in place, the relatives of an incapacitated person may need to take time-consuming legal action in order to assume control over the person’s affairs. Also, the incapacitated person will not have the ability to select who the attorney will be. Clearly, it is therefore best to handle this as soon as possible to prevent delays and difficulty at the time your power of attorney is needed most.

Source: seniors.gc.ca, “What every older Canadian should know about: Powers of attorney (for financial matters and property) and joint bank accounts,” accessed Sep. 20, 2016

What are the inheritance tax laws in Canada?

September 16, 2016/in Wills /by gartonandharris

Technically speaking, Canada does not have inheritance tax. Rather, the Canada Revenue Agency sees the transfer of an estate’s wealth after someone’s death as a “sale.” If the estate is not received by a common-law partner or a surviving spouse, then the estate will pay taxes owed to the CRA instead of the beneficiaries needing to pay it. As such, beneficiaries themselves should not need to worry about the taxes.

Here’s how inheritance tax laws work. After someone passes away, the legal representative of that person will submit a deceased tax return to the Canadian government. Taxes still owed at that time will be removed from the decedent’s estate. Next, the estate will be settled by the executor after all the taxes have been paid. Later, after the clearance certificate is received, the estate and its property can be distributed to heirs.

As for specific taxes that the estate will pay, those include taxes on income earned by the decedent. They also include taxes on non-registered capital assets, which are considered sold at the moment of the decedent’s passing. Capital gains resulting from those sales are then hit with 50 per cent fees. Registered Retirement Savings Plan or a Registered Retirement Income Fund are also taxed.

When planning a British Columbia estate, lawyers may be able to organize the estate in a way that prevents and/or limits huge estate-related taxes. A lawyer will be able to determine what savings can be achieved given the unique facts and information surrounding the estate, and families are often surprised at just how much money can be saved through this process.

Source: Turbo Tax, “Canada Inheritance Tax Laws & Information,” accessed Sep. 16, 2016

Powers of attorney: Why you do not want to wait

September 7, 2016/in Power of Attorney /by gartonandharris

British Columbia residents may want to consider getting their powers of attorney drafted and signed now, before it’s too late. Indeed, illness can come on fast — and sometimes it’s instantly — and once someone becomes incapacitated, it’s no longer possible to set up a power of attorney when it’s needed most.

Countless Canadians have been surprised to find that after their aging parents become too ill to handle their own affairs, they do not have any authority to help their parents with their finances and health decisions. However, just the simple act of signing a power of attorney document can be enough to alleviate families of the stress and legal red tape of getting a guardianship order after incapacitation occurs without a power of attorney on file.

For example, an aging parent might suddenly suffer a stroke and be unable to coherently speak or even think on his or her own behalf. In this case, the family could be facing some very difficult obstacles in making sure that their sick family member’s finances stay in order and that medical decisions are swiftly made.

One reason why some Canadians delay the creation of a power of attorney is because they wrongly believe that having a power of attorney means that the named attorney can come in and completely take over one’s affairs. However, this is not how powers of attorney work. In many cases, powers of attorney can be specially drafted so they are only activated in the event of incapacitation.

British Columbia residents are encouraged to get their powers of attorney documentation completed now — before it is too late — no matter what their ages. When completing this documentation, individuals may want to discuss their financial, medical and life situations with a qualified estate planning lawyer who can help them select the best power of attorney strategies to employ.

If I inherit $100,000, what should I do?

September 2, 2016/in Estate Administration & Probate /by gartonandharris

Receiving a sudden and unexpected inheritance of $100,000 is quite a gift, especially if you already have your retirement planning settled and the extra money is nothing more than that, extra money. The question is, what should you do next?

When it comes to what the receiver of a $100,000 inheritance “should” do, it seems that every financial advisor will have a different idea. A lot will tell you to pay down your credit cards, pay down your mortgage or try to pay off your car, and perhaps invest the rest for retirement. One of the key points here is to establish a relationship with a trusted financial advisor who you’ve done your background research on, discuss your financial needs and goals, see what kind of advice you receive and decide whether you want to follow it.

Another key point is that you may want to speak with an estate lawyer, and also a tax lawyer. Taxes could be an issue relating to the inheritance. For example, what if the $100,000 isn’t cash, but it’s a family cottage. In this case, the recipient of the cottage may want to think about the tax consequences of keeping the cottage. If the cottage has risen in value considerably since it was purchased, the recipient will want to know whether inheritance tax and capital gains tax will need to be paid on the cottage. These taxes could be prohibitive and necessitate the sale of the cottage or taking out a mortgage on the property to pay them off.

Yes, receiving a large inheritance is definitely something to be thankful and grateful for, but money requires a responsible and informed attitude in order for its recipients to keep it. In many cases, a consultation with a skilled and experienced lawyer is all that Canada heirs require to stay grounded, responsible and informed with regard to their newly received assets. At Garton & Harris, we have highly experienced estate lawyers on staff to speak with new clients about every aspect of their inheritances.

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