Christine Borstinsong died in Ontario on June 13, 2006. She had no will, and no family members to step forward and claim her estate. There were no children, no siblings, no parents or grandparents, no nieces or nephews, and no first or second cousins. All she had was her boyfriend, Nick.

Because she had no family, the government started the wheels in motion to claim her estate. Nick, who had little property of his own, stepped forward and started a court action, hoping he could convince a judge that he had been her“common-law husband.” A common-law is generally able to exert rights and claim cash from a partner’s estate if they have been left out.

Seven witnesses were called over a three day trial, including neighbors, friends, and Nick himself. Christine had been a unique lady, and the witnesses were a colourful group.

It became clear that Nick had stayed with her at her house for extended periods. He shared her bed. The two of them went for walks in the neighborhood. He was seen cutting the grass and cleaning the pool. He claimed that they had considered each other as husband and wife.

On the other hand, he also had a wife across town during the entire time he was seeing Christine. His wife lived in a house she jointly owned with Nick and he had a room there. Nick said that he was estranged from his wife. Why no divorce? He said that getting a divorce from his wife would be too expensive. Nick took the position that although he was married to his wife across town, he was still a common-law husband to Christine.

Christine liked to dance and have fun. Nick was the last in a long string of boyfriends — she favoured exotic men who spoke English as a second language. The most colourful of all of the witnesses at the trial was one of those former boyfriends. His name was Constantine. He told the court that Nick was just Christine’s casual boyfriend, no more.

The court had trouble believing Constantine. He was a butcher and, according to the judge, had been injured several years prior “when a side of beef fell on him, which impacted his hearing, his vision, and his memory.” Constantine was also very emotional as he gave his testimony. It became clear that Constantine was jealous of Nick. At one point during his testimony, he told the judge that Christine had always “wanted to be a stripper,” and offered to show the judge a photo. The judge declined.

Nick won his case. The judge concluded that Nick had indeed been Christine’s common-law husband during the years prior to her death.

Several lessons emerge from Christine’s story.

First, a common-law has rights to property at your death. If you live with a person for long enough, he or she has a legitimate legal expectation that you will take care of them at your death. Even if you have a will, they can override it by bringing a claim under dependents’ relief legislation. They might be entitled to a part of your estate, or all of it. It depends on the facts. If they are wealthy in their own right, they might be entitled to “nil.” Some estate planning strategies are available in provinces like British Columbia, Saskatchewan, Alberta and Manitoba to limit or avoid the claim of a dependent. Interestingly, a common-law spouse cannot sign a contract giving up claims as a potential dependent of an estate.

Second, a side of beef can do a lot of damage.

Third, if you have no will and no family, your property will go to the government when you die. Property must have an owner under our legal system. In legal terms when a person dies without family, property is said to “escheat” to the provincial government, “propter defectum sanguinis” (lawyers love Latin). Having a will avoids that.

What did Nick get? The judge ordered that Nick be allowed to live in her house, with the pool, for the rest of his life. Nick was also given a living allowance to be paid to him monthly out of the estate assets. After his death, whatever was left would go to the provincial government.

Christine’s story is a true one. The facts are taken from the published decision of the judge who heard the case. The names were changed to prevent embarrassment.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

Amber is a doctor. Her husband Rob is a dentist. Both are successful at what they do. Their combined income is impressive. In their early fifties, Rob and Amber have three young children and no spare time.

Rob and Amber are also the kind of people who like to plan. They both have wills. The wills are tax efficient.

Those tax savings work fine under current rules. Yet the tax savings are not a sure thing. Why? Rules change. The government can always amend the Income Tax Act to change the income tax provisions at work in structures like those being put in place in the wills for Rob and Amber. The younger the person is, the greater the risk that tax changes will occur before they die.

That got Rob and Amber thinking about their parents. Amber is an only child and expects to inherit roughly $800,000 from her father. Dad’s will is a six-page, dime store special. She will inherit in the form of cash on the barrel head after he dies and the dust has settled on his estate. Investing her inheritance, she can expect to generate upwards of $40,000 a year in income. Because she is has a high income of her own, that additional income will be taxed at the top income tax rates under the Income Tax Act. That means that nearly half of the income generated by the inheritance will be taxed away.

It does not have to be that way. Her father can replace his six page will with a twenty-six page will. The extra pages are to structure and establish a testamentary trust for Amber. When the dust settles, the inheritance will be owned inside the trust. The income it generates will be the trust’s income, not Amber’s.

A testamentary trust is taxed as a separate tax-payer, and accesses a fresh set of marginal rates under the Income Tax Act. That means that more than $100,000 of income can be generated in the trust without seeing any of it taxed at the top tax bracket applicable to Canadians. The first $40,000 or so will be taxed in the bottom tax bracket.

In Amber’s situation, the tax savings from accessing a separate set of graduated rates will amount to nearly $7,000 a year. It works even if the trust pays the income out to Amber. Special provisions allow it to be taxed in the trust even if it has been used by a beneficiary.

If her father dies while Amber’s three children are still financially dependent on her, the trust can be designed to support income splitting. She can use income from the trust to support the kids, paying for things like bicycles, books, music lessons, and private school tuition. Because her children are small, and have no income of their own, she can spend roughly $10,000 per year of trust income on each child and have it sheltered in their hands using their personal exemptions. That will effectively increase the tax savings available in the structure from $7,000 per year to a larger annual figure of $14,500. That will add up.

Amber would love it if her dad did the longer, fancier will. The new will would be costly. On the other hand, dad is old and apt to die sooner rather than later. Old means that tax rules are more likely to remain in place and unchanged when he dies. His tax planned will is a better investment than the one Amber has put in place for her own estate.

What should Amber do? Talk to her dad. He may be willing to change his will if he understands the benefits she hopes to reap. Some families are open about such things, and dad wants the best for his daughter and his grandchildren.

Amber might also consider volunteering to pay for the new will. Dad will not object to that. When he hears the price per page of the new will, the shock might kill him.

Amber would be well advised not to wait. As Dad gets older, each week that passes is a risk that he might die before a new will can be put in place.

Amber is not real. Her circumstances blend the facts taken from the dozens of clients who approach us each year with their parents in tow.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

Harriet Thomson had three sons and lived Niagara Falls, Ontario. As the decades came and went, one or two of the boys appeared to be living at home pretty well all of the time. That was true both before and after her husband died. That remained true as she grew older, and as her health began to fail. They lived with her until she died. It was a family wide “failure to launch.”

The boys were named Robert, William and David.

After the death of her husband in July of 1994 Harriet redid her last will and testament. At that time Robert was at home as part of a 14year stint with his mom. Her 1994 will gave Robert the right to live in her house for a year after she died, and to buy the house for 60% of its fair market value at the end of the year. The house was her major asset, and the discounted purchase price was a huge bargain. The will also divided her remaining wealth among her three boys, but not equally. The split was 20%, 40%, 40%. Robert not only got the house, but one of the larger shares of 40%. Advantage: Robert.

Robert moved out three years after the 1994 will was signed. That was a mistake.

It left William at home with Harriet. He looked at the will and decided it was time for a new one, even though Harriet was old and sick. It would cut out the house clause for Robert – a major victory for William. Also, because William was on social assistance at the time, he made sure that his share would go to his daughter, not directly to him. That made sure the government would not get at his inheritance.

He hand wrote the will for Harriet in 2004, and then invited a camera person and a pair of friends over to the house to act as witnesses. He had decided to shoot a video to prove his mom, Harriet, had the necessary mental capacity to do a new will.

He had the camera set up, and the witnesses in the room and, presumably, said “action.”

As the camera started to roll he asked his mom “What was dad’s regiment number in the war?” She answered correctly. A coup! He then repeated a family story and asked his mother if she remembered it. She did. Another coup! After that he read the will to her and had her sign it along with the two witnesses.

The new will exterminated the sweetheart deal for Robert.

It was also kept secret from Robert. Moreover, William made sure that Robert was never, ever, alone with his mother again. William, or someone of his choosing, was there “24/7” to make sure that no one could talk to Harriet about a new will. By that point she was terminally ill and the finish line was close at hand. Advantage: William.

After Harriet died, Robert discovered that a new will had been orchestrated after he moved out.

Robert sued. He alleged that Harriet did not have the necessary mental capacity to do a new will – she was too sick and too malleable. William defended the action, pulling out the video for its screen debut for the lawyers and the court. The third son, David, did not take a position in the litigation – he appears to have been the quiet one, and happy with his 20% share.

What did the judge say about the video? Two thumbs down. First of all, the judge said the whole thing looked and felt like a staged play. It did not, in any way, convince the judge that Harriet had her marbles. On the contrary, it showed how easy it was to manipulate her. The judge could not resist, and went on to say that William was guilty of “overacting.” The court refused to accept the will for probate.

There are lots of examples of cases where a video or audio recording have been successfully used to buttress a will. William did not know what he was doing and asked Harriet the wrong questions. If William had hired a lawyer to be the “producer,” and to ask the right questions, the will might have stood up.

One more lesson can be drawn from all of this. Greed is transparent.

Harriet’s story is a true one. The details were taken from the published decision of the court that heard the case. The names were changed to save the family embarrassment.

Next month’s column: Giving advice from the grave.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

John Jones was 88 years old when he decided to draft a new will. His family was convinced that he had lost his marbles years earlier. That was a problem.

The will he wanted to put in place would change who was to receive his wealth. Having no children, his will would divide his wealth among his siblings and nieces and nephews. The particular family members who stood to inherit before the new will was signed were not the same family members who stood to inherit afterwards.

John had a house, farmland, investments, and life insurance. His estate would be worth a lot of money. More than enough to money to fight over after his death.

His memory was failing. His doctors were aware of it, and dementia had been diagnosed.

It was a recipe for disaster. There was a real possibility that some of his family members would go to court and have his new will declared invalid.

John hired a lawyer to help with his will – one that knew how to draft a will protected against court challenge. She met with him twice. One of the meetings lasted a full 90 minutes. She talked to his doctors and collected medical evidence. She asked John all of the right questions, and made detailed notes in the file she opened to document the preparation of his will. She kept that file in storage waiting for the inevitable fight at his death.

It was a good thing she did. After he died, the family went to war. The lawyer testified with the file in her hand, and was able to use it while giving detailed and comprehensive evidence to support the validity of the will. John’s will withstood the attack and was declared valid.

The lawyer had taken all of the steps necessary to “bullet-proof” the will. When the attack came, all of the evidence necessary to prove that John had capacity was ready to hand. A judge was able to conclude that while John suffered from diminished mental capacity, he retained enough of his marbles to sign a new will.

John’s story is a true one. The details are taken from the published decision of the Alberta court that confirmed the will in 2007. John’s name has been changed to protect his family from embarrassment.

Wills are set aside all of the time.

Here is the recipe for a failed will. The will is done at the last minute, after the person is old and sick and

infirm. The family member who stands to gain from the new will either writes the will, or finds and brings in the lawyer. If a lawyer is brought in, the lawyer does a slipshod job – the wrong questions, no notes, no enquiries of medical staff. The will changes who gets the wealth, and someone is left with no inheritance under the new will.

After the person dies, the family members who are disinherited hire a litigation lawyer to try to overturn the will. The family members hoping to defend the will hire a lawyer of their own, and then scramble around looking for evidence that might be used to defend the will.

Everyone is shooting in the dark. No evidence was collected when the will was drafted and signed. It is up to the family members defending the will to prove it is valid. They are the ones who have to produce enough evidence to satisfy a judge. If there is insufficient evidence, the will fails.

There is no shortage of lawyers willing to attack a will under those circumstances. Many lawyers are willing to do so under a contingency fee arrangement. Under a contingency fee, the lawyer gets paid a fee based on a percentage of the money he or she successfully collects from the estate. They only get paid if there is a successful result. Because most wills are not bullet-proofed, some lawyers enjoy a pretty good track record in successfully overturning wills as invalid. Fees based on a percentage can be substantial.

None of this means that a person cannot make a will at the last minute when they are already starting to suffer from diminishing mental capacity. They can. It just has to be done right. That means bullet-proofing the will. Some estate plans need armour plating.

The key in bullet-proofing a will is to collect all of the evidence when the will is prepared to prove its validity later. That assumes that the will-maker has the capacity to sign a new will in the first place. No marbles, no will.

Next month’s column: Beware of frivolous estate litigation.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

Gerald Anderson was a successful dairy farmer but an unsophisticated businessman. He was in charge of the cows and the milk. His wife, Mary, was in charge of the business side of things. She made business decisions, signed cheques, and paid the taxes. The farm thrived.

Gerald and Mary had six children – two sons and four daughters. The two sons worked with their parents on the farm. So did one of the daughters, Loreen. The couple’s estate plan was simple. The sons would each get half of the farm. The daughters, including Loreen, would get life insurance money.

Was the estate plan fair? Loreen spent fifteen years working in the family farm operation alongside her brothers. She felt that she deserved a part of the farm too. Her parents did not see it that way. Loreen was paid a salary for her help on the farm. Her brothers shared in profits, if any – in lean years they would take a beating financially. She had worked on the farm for fifteen years. Her brothers had worked on the farm for their entire adult lives. For better or worse, Loreen was always treated by her parents as an employee, not an owner.

The whole family knew the parents’ plan. While Loreen may have been irked, she did not challenge them – at least not while her mom was alive.

Her mother died in 2001 and Loreen swung into action.

Her father, Gerald, was seriously ill with a terminal disease at the time. He had trouble walking. He could not speak clearly or easily. It looked like Gerald would be following his wife into the grave — quickly.

Loreen invited him for dinner. When he got there, he was met by four people, two documents, and a pen. The dinner guests included Loreen, a commissioner of oaths, and persons to serve as witnesses. On the table were two transfers of land. It turned out to be less of a dinner party and more of a give away the farm party.

The effect of the transfer documents was to place a significant portion of the farmland in joint names with Loreen. Gerald and Loreen would be on title as “joint tenants.” That meant that as soon as Gerald died, Loreen would be able to ask the land titles office to put the land in her name alone. Voila – half the farm for her.

Gerald’s will had been drafted and signed earlier, when he was healthy and had his wife at his side acting as his business partner. The will would have passed the farmland in question to one of his sons, Donald. Loreen’s plan was designed to change that.

Joint tenancy passes land directly to the surviving co-owner when the first co-owner dies. The land never goes into the estate. Since the land that was jointly owned with Loreen would not form part of Gerald’s estate, Loreen understood that the land would not be governed by his will.

After Gerald passed away, Loreen invited her brother Donald over for a coffee date. It turned out to be less a coffee date and more of a get your farm equipment and livestock off of my land date.

Donald did not say a word to his sister when she told him he was no longer a farmer. He quietly set his coffee cup down and walked out of her house.

He walked from her house and into a lawyer’s office.

Donald and his lawyer sued Loreen for ownership of the farmland that would rightfully have been his under the will. Donald won the court case.

The law that applies to joint tenancy was trickier than Loreen thought. When a parent places land in joint tenancy with an adult child, a “legal presumption of resulting trust” operates. The court assumes that the child holds the land in trust for the persons who would have inherited it under the will. That meant that Loreen had to override that assumption by proving to the judge that her dad intended that she keep the land for her own. She failed.

The judge also concluded that Gerald did not know what he was signing that day. His daughter had misled Gerald. Further, he was sick and weak, and would have signed anything Loreen put in front of him.

In the end result, Donald got the farmland back. Loreen kept her share of the insurance money. We can assume that she lost her job on the family farm.

The saga of Gerald, Loreen and Donald is a true one. All of the sad details are taken from the published decision of the Alberta court that heard the case. The names have been changed to save the family embarrassment.

Next week’s column: the knickerbockers trust, a bizarre foray into the law of trusts.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.