Joint Tenancy : 5 Common Issues

It has become very popular in British Columbia to transfer property (assets) into joint tenancy.

Usually, it is done as a vehicle to reduce probate fees and legal fees upon the death of the owner of the property. Generally speaking, it is good to have joint tenancy between a husband and wife, because it simplifies matters and saves money. Furthermore, when couples have joint tenancy, it becomes a fairly simple procedure to transfer property from a deceased joint tenant into the name of the surviving joint tenant(s). What complicates joint tenancy is when other parties are added to the title, such as children.

Below outlines 5 common problems:

1. Gift or Trust?

If the property is transferred from one parent into the names of the parent and one of the parent’s children, it can become an issue as to exactly what interest the child holds in the parent’s property. For instance, if the interest is solely held for estate planning purposes and there was no real intention to gift the property to the child, then the child would not hold the property in trust for the parent and parent’s estate.

Bare Trusts: Advantages and Disadvantages

Bare Trusts

A bare trust is a legal structure that facilitates the separation of legal and beneficial ownership over a property.

Generally, it's used in a real estate context. A bare trustee company is created which is a BC corporation that holds the legally registered title on the property.

The beneficial ownership remains with the person who originally purchased the property. The beneficial owner is the person or persons who continue to make all arrangements; they're responsible for leasing the property, receiving rents and reporting income.

The beneficial owner is the real owner of the property.

The bare trustee company is the one that is actually on the title, the company name is registered in the land title office (the “LTO”). From a tax perspective, the trustee company isn't going to be reporting any taxes at all because they don't actually beneficial ownership of the property.

In this article, we’ll cover the following topics:

• What is probate?

• What are the benefits of having multiple wills?

• What are the risks of having multiple wills?

According to the Wills, Estates and Succession Act, all citizens of British Columbia are allowed to use multiple wills. That’s great news for anyone looking to avoid probate fees.

But before we get into the specifics, let’s first cover the basics.

What is probate?

Probate is the process by which a court of law administers certain parts of your estate after your death. Generally speaking, probate is only concerned with assets in your estate that are owned solely by you, whereas the jointly-owned assets in your estate, such as insurance policies, retirement savings, and so on, will not need to go through the probate process.

In this article, we’ll cover the following topics:

- What the benefit is of a corporate will (also known as a ‘secondary’ or ‘restricted’ will)

Why you may need a corporate will

Most Canadians don’t have a single will, let alone multiple wills to cover their various assets. So, why might you need a corporate will? The answer is simple: reduced probate fees.

Corporate wills deal with the certain types of corporate property that you hold (e.g. privately held shares). Typically, before assets in your estate can be disbursed, the will needs to go through probate – an approval process that takes time and costs money, specifically roughly 1.4 percent of the value of the assets being probated. At face value, this might not seem like a lot of money, but it can become quite expensive, especially for large estates. However, eligible corporate property, if properly managed through a corporate will, doesn’t need to go through probate.

Bare Trusts: The Basic Terms Every Canadian Business Owner Should Know

In this article, we’ll cover the following topics:

- What is a bare trust?

- What are the benefits of bare trusts?

- Avoiding property transfer taxes

- Easier change of property ownership

What is a bare trust?

Often used in real estate, bare trusts are legal structures that facilitate the separation of legal and beneficial ownership of a property. The process of creating a bare trust involves appointing a trustee (or ‘nominee’) to be legal owner of the property and hold the legal title on behalf of the beneficial owner. The name “bare trust” is derived from the fact that, unlike in other forms of trusts, the trustee/nominee of the bare trust has no other responsibilities or obligations with respect to the property other than to hold legal title.

Advance Directives vs. Representation Agreements: Key Things to Know

In this article, we’ll cover the following topics:

- What’s an advance directive?

- What’s a representation agreement?

- What’s the difference between the two?

How to Draft a Will: 4 Reasons to Avoid Dying Without a Will

In this article, we’ll cover the following topics:

- Why you should avoid dying without a will

- You can’t choose how your estate gets distributed

- You’re leaving behind a big mess for your family

- You’re giving a tough job to a loved one who doesn’t want it

- You’re not establishing a guardian for your children (and/or pets)

How to Draft a Will: The Basic Terms Every Canadian Business Owner Should Know

In this article, we’ll cover the following topics:

- What makes up an estate?

- What is an executor of an estate?

- What is power of attorney?

- How is power of attorney involved in estate plans?

Power of Attorney: Everything Canadian Business Owners Need to Know

In this article, we’ll cover the following topics:

- What is power of attorney?
- The two types of power of attorney
- Who should receive power of attorney

What is power of attorney?

Power of attorney is one of the two most common ways people plan for a time in their lives that hopefully never comes – the day when they are physically or mentally incapable of making decisions on their own. Establishing power of attorney essentially entrusts another person to be seen, through the eyes of the law, as the person who makes all of your decisions, including those that deal with finances and other legal matters.

The 2 Best Strategies to Optimize Your Family Trust’s Taxes

In this article, we’ll cover the following topics:

Family trust tax planning strategies

Strategy 1: Multiplication of lifetime capital gains exemption

Strategy 2: The prescribed rate loan strategy

Let’s start by acknowledging that family trusts are a very complex subject. As such, this article is not meant to be comprehensive and there are many nuances that require expert legal and tax advice. To determine whether or not a family trust is right for you, it’s best to speak with your tax advisor and lawyer.

That said, there are two important tax planning strategies to keep in mind when considering a family trust.

What Is a Family Trust, and Why Is It Useful to Business Owners in Canada?

In this article, we’ll cover the following topics:

• What is a family trust?

• How does a family trust work?

• Why are family trusts useful?

• When are family trusts needed for a family-held corporation?

• What is an “estate freeze”?

• What happens to a family trust if the family-held corporation gets sued or a dispute arises within the corporation?

Below are 10 key steps to ensure your estate plan is successful:

1. Document Storage

Make sure to store your estate planning documents safely. If you have a safe deposit box, store your important papers there. Give your executor a copy of your estate planning documents and advise them on where the originals are stored.

2. Make copies of your Will and provide to your executor and beneficiaries

It is in your best interest to provide a copy of your will to beneficiaries. This reduces the possibility of confusion. It is unlikely you will ever change your will, but even if you do, providing a copy of your Will to your beneficiaries does not mean you can’t change it.

3. Inform your Power of Attorney

If you have power of attorney, they should be able to access your safe deposit box. It may be a good idea to have your attorney as a signatory on your safe deposit box. Additionally, keep one original Power of Attorney in your home so that your attorney can retrieve your documents.

4. Create a list of assets and liabilities

Parr Business Law can provide you with an estate planning checklist. Please contact us. Additionally, many financial institutions provide an estate planning checklist. Be sure to also include the names of your lawyer, accountant, and other contact people. Additionally, make sure your list of assets and liabilities is always readily accessible to your executor and your attorney.

Having a Power of Attorney is a huge responsibility. If one is ever granted a power attorney by a loved one, the person who grants that authority (the “Grantor”) is putting you in charge of them if they were ever to become mentally incapacitated.

Here are 10 important things to know if you are holding a Power of Attorney.

1. Ensure you have a valid Power of Attorney and financial representation agreement.

Make sure your agreement is valid under the Power of Attorney Act (British Columbia). For instance, if you are appointed an enduring Power of Attorney prepared by a lawyer or notary public in British Columbia, it is likely valid and will continue throughout the Grantor’s incapacity. However, if the document is specific, conditional, prepared, signed in another jurisdiction, or hand-drawn, the document might not be valid. If this happens, you may not have the authority to act under the Power of Attorney. If you are unclear whether or not the Power of Attorney is valid, obtain legal advice as soon as possible. If you are not authorized to act as power attorney but do act, you will be held liable. If the Power of Attorney is invalid, consider handling the matter at the Public Guardian and Trustee or apply to become a committee of the individual.

Making a Charitable Legacy Part of Your Estate Plan

Throughout drafting many Wills in our law practice, we have noticed the majority of people do not provide for charity. Here are four top reasons why the current generation does not provide more to charity:

1. Misunderstanding of the Benefits of charitable giving

There is substantial misunderstanding surrounding the taxation of estates and the benefits of charitable giving. Many people do not realize that RRIFs and RRSPs will go into their income at the time of death (or, if there is a surviving spouse and a rollover of funds, on the spouse’s death). Obviously, this can create a substantial tax liability with items such as RRSPs, RRIFs, and capital gains. Because most charitable bequests are tax-deductible, there is a substantial benefit to providing for charity within your estate plan.

5 Ways To Protect Your Family Financially in Case of Unexpected Passing

Family Estate Planning

Estate planning is so important, yet it is overlooked by many because it may be viewed as being challenging and complicated and bringing about morbid thoughts. However, one of the smartest things you can do is to leave all of your affairs in order so that there is no uncertainty or tough decisions to be made by your loved ones. When undertaking the process of Family Estate Planning, there are some strategies that can be used in order to reduce the financial impact on your estate following your death.

1.Have a Will in place

Life-interest trusts Will, Estate Planning for 65+

When thinking about estate planning, most people think about the usual documents; wills, powers of attorney and representation agreements. However, Canadians over the age of 65 are eligible for two types of life-interest trusts. These trusts essentially act as a substitute for a Will and address some of the disadvantages of having a Will.

Two types of life-interest trusts:

1.Alter ego trust – created for the benefit of the settlor (trust-maker) alone, during his/her lifetime; and

2.Joint spousal trust – very similar to the alter ego trust, except it is created for the benefit of the settlor and the settlor’s spouse, during both of their lifetimes.

Who can Challenge my Will?

A death in the family is often a very emotional time and although a Will may not be the topic of discussion at that time, it is nevertheless very important to know the basics surrounding Wills and potential issues that may arise. In almost every province, a testator is allowed to exercise almost complete discretion over the distribution of their estate. However, BC has some of the most sympathetic laws in all of Canada.

In BC, the Wills, Estates and Succession Act (WESA), provides dependents such as a spouse and/or child with a legal right to challenge a Will. Under s.60,

if the will-maker dies leaving a Will that does not, in the court’s opinion, make adequate provisions for the proper maintenance and support of the will-maker’s spouse and/or children, the court may order a provision that it thinks just and equitable in the circumstances.

Corporate Will | How To Minimize Probate Fees

Multiple Wills?

Most people in Canada don't have a single will, nevermind multiple wills, so why on earth would anybody need a corporate will? The reason is simple, corporate properties such as shares don't need to go through the process of being probated. Wills are normally probated or proven through the court.This is a court-approval process that takes time and cost money.

Transferring Your Business to the Next Generation

So, there are some common mistakes that people often make when they are transferring a business to the next generation. The biggest mistake is that business owners will set the value of their business at a dollar and sell it for a nominal value to the next generation because they essentially want to gift it to the next generation. The problem with this is that the Canada Revenue Agency (CRA) will take a look at that transaction and will assess the value of the shares at the actual fair market value of the shares. So, if the Canada Revenue Agency discovers that the actual fair market value of your business is a million dollars, then they will adjust the selling point of those shares from a dollar to a million dollars, which means that the seller will be hit with the capital gains tax on that amount.

What are the important tax benefits of a family trust?

Family trusts are both powerful and poorly understood structures that can provide significant tax benefits for high-income Canadians. Family trusts are a complex subject and should be reviewed in-depth with your accountant and your lawyer to determine if they are a good fit for you. Today I’m going to discuss two of the most important tax strategies that can be used through a family trust.

First, the multiplication of the lifetime capital gains exemption.

If your family trust is structured to own shares of your privately held corporation, you can multiply the lifetime capital gains exemption on the sale of those shares by making use of the exemption for each of your beneficiaries. A family trust with four beneficiaries, such as yourself, your spouse and two children, could potentially use the LTCGE four times, permitting you to enjoy an exemption of $3.5m on the sale of your company shares at 2020 rates.