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Gold Diggers Use Marriage To Revoke Will

Samuel Smith’s wife died in June of 2000, leaving him lonely and depressed.

He hired a house keeper, Francine. She did some part-time cooking and cleaning for him. She was rarely in sight when his children visited, but everyone knew she had been hired and it appeared to be a good arrangement. He could afford it.

On May 10, 2001 Samuel was diagnosed with lung cancer. It was inoperable and quick moving. Francine became his full-time housekeeper and moved into a second bedroom in his home.

Francine was recently divorced and needed money. Samuel had money. She decided that she loved him.

His health deteriorated quickly. Before long Francine was changing his diapers and taking care of all of his other physical needs. His mental powers started to suffer. Francine convinced him to marry her. She also convinced him to keep the marriage secret from his five children until after the ceremony.

She made plans for a rush wedding. Samuel had just enough wit left to try to protect himself and the children. It was a feeble attempt, and Francine thwarted it. The pair went to a lawyer and asked him to draw up a prenuptial agreement. It would give Francine $30,000 but no share in his estate after he died. Samuel gave her the $30,000 immediately. She kept the $30,000 but fired the lawyer the next day behind Samuel’s back. No prenuptial agreement was prepared.

Physically, the groom was no catch. Medical records place him at the local emergency ward two days prior to the big day, coughing up blood, suffering from pneumonia, and having difficulty breathing. The cancer was raging. He also had Parkinson’s disease and diabetes.

The marriage proceeded as Francine had planned. Samuel was 70 years old, incontinent, confused, in pain, heavily medicated, and completely reliant on Francine. She was 47, physically and mentally strong, and lived with him twenty four hours a day. No family or guests were in attendance.

Samuel succumbed to cancer and died on October 13, 2001, about a month and a half after the wedding.

Over the last four days of Samuel’s life Francine started going to the bank machine with his bank card. She withdrew several hundred dollars each trip. She made an average of 7 or 8 trips a day. She continued when his body was in the morgue. She made a total of 39 trips over six days and withdrew a total of $26,500. She was industrious. It would have left her little time to hold her husband’s hand during his final hours.

Francine demanded her share in the estate as Samuel’s widow. Marriage has the effect of automatically revoking a person’s last will and testament. Without a will, the laws that applied to Samuel’s estate gave Francine half of his estate. On top of that she demanded support for life, asking for between $2,000 per month from the balance of the estate for the rest of her days.

The kids fought back and everyone went to court.

The judge concluded that Francine was nothing more than a housekeeper who wanted Samuel’s money. The court annulled the marriage, and the kids inherited everything. Francine was ordered to pay everyone’s legal fees.

Samuel’s story is true. The details are taken from the published decision of the court, changing only the names.

In legal circles, Francine’s efforts to cash in on Samuel’s infirmity is known as “predatory marriage.”

Here is how it works. A gold digger, like Francine, targets a person like Samuel, rich, old, infirm and having lost half of his marbles. That last bit is the key. A person with half of his marbles can still legally marry, but cannot enter into a new will. The marriage revokes the old will. That leaves the gold digger with claims to the estate under laws designed to protect innocent spouses. So long as the marriage sticks, it is difficult or impossible to undo the situation once the gold digger has sunk his or her hooks into the target. Marriages are hard to annul.

Predatory marriage exploits a gap in Canadian laws. While it works fine in principle, the body of published court decisions in Canada are full of failed efforts at predatory marriage. When the facts become known, Judges bend over backwards to annul such marriages or to find some other legal grounds to ensure that justice is done.

Next week’s column: Life insurance can be loose end.

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.

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Delusions May Not Interfere With Will

Walter McMann was born in 1908. He married at age 18 and had four children with his wife.

The couple led a perfectly normal married life until Walter deserted his wife without warning or explanation during a family vacation in 1944. The two never met again.

Walter moved in with his parents. He started to express strange ideas about his wife, and eventually found himself under psychiatric care for depression.

He told his doctors that his wife was “weakening his muscles with hypnotism,” and “using mesmerism against him,” and that she was able to “project electricity into his body.” He accused her of bizarre sexual excess. None of it was true.

It reached the point where the mere mention of her name would cause him to suffer abdominal pain and throw up.

Walter’s condition deteriorated further. He attempted suicide. He became violent. Finally, his parents became so concerned that they had him committed to a provincial psychiatric hospital in April 1946. Three psychiatrists diagnosed him as suffering from paranoid delusions.

He was released from hospital after two years but the delusions directed towards his wife persevered. He was told to keep away from her.

While Walter was unlucky at love, he had a magic touch with the stock market. At the same time as he started to develop and display his wacky ideas about his wife, he developed a singular success in picking stocks that increased in value. He never abandoned his off-kilter ideas relating to his wife. He also grew wealthy.

He hired a lawyer on January 25, 1949 to help him draw a will. Walter told the lawyer he wanted to leave his estranged wife the smallest possible inheritance permissible under the law. The lawyer told Walter that he was forced to give his wife one-third of the estate, and Walter did. He believed his children were in cahoots with his wife, and gave each of them a paltry cash inheritance under the will. Two thirds of his wealth was left to charity.

Six years after he signed his will, Walter died at the age of 46 years while living in Calgary.

The charity was happy at the prospect of inheriting Walter’s money. His family was less than happy to see the money go. They applied to court to have the will overturned on the grounds that Walter was mentally ill and lacked the capacity to plan and sign a will.

A person can suffer from delusions and still be able to write a valid will. Crazy ideas are only a problem if they amount, in legal parlance, to an “insane delusion.”

An insane delusion is an ongoing and mistaken belief that perverts a person’s normal sense of who should inherit from them. Thus, if you believe that your wife and children are trying to kill you, but leave them your entire estate – no problem. If you exclude them from inheriting, and are motivated to do so by the insane delusion, then the will can be set aside.

The court held that the content of Walter’s will was inextricably perverted by the delusions he suffered. The will was overturned and his wife and children inherited the whole of his estate. It amounted to more than a million dollars in today’s terms.

Although Walter’s last name has been changed in this article, his story is a real one. The details are from the published decision of the court that overturned the will.

Mistakenly believe that aliens are among us and taking over? — No problem. Believe that aliens are telling you to give your estate to alien-overlord Brad Pitt? – Problem. Mistakenly believe you are Queen Elizabeth? – No problem. Decide to leave half of your estate to Prince Harry? – Problem.

Walter’s situation is rare. After limiting my practice exclusively to estate planning for several years, I have yet to be asked to write a will for a delusional client. The law is clear however. To make a valid will, you have to know the nature and extent of your assets, the persons in your life who might expect to receive them, and understand what a will is and does. If you can hold all of that rationally in mind, your estate plan will generally withstand challenge. That remains true even if you think you are a twelve foot purple chicken — just leave your estate to your chicks.

Next week’s column: Predatory marriages.

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.

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Protecting Children From Prior Relationships

Mr. Jones died and left everything to his wife. His son, Mike, was horrified. Why the big deal? Dad had remarried and his wife was Mike’s stepmother. She had joined the family only recently when Dad tied the knot for a second time in his late 60s.

Mr. Jones and the stepmother had signed simple wills that left everything to the survivor at the first death and then, at the second death, would divide the combined wealth in the second estate into two halves, one half for Mike and his sister and the other half for the stepmother’s children. Here is the problem, however. The stepmother remains free to rewrite her will after inheriting everything.

Mike liked his stepmother, but he had no illusions either. They would quickly lose touch with each other – they had no real tie between them other than Mr. Jones. She had children of her own from an earlier relationship. She might remarry.

What would her last will and testament look like when she passed away, perhaps twenty or thirty years into the future? There was absolutely no assurance that Mike would inherit a penny from her, and she now owned everything. Mike couldn’t help but feel that he had just lost his inheritance.

Mike’s situation is real – names and details have been changed to save the family embarrassment.

Unfortunately, Mike’s fears might be well founded. It happens all the time. Parents in a blended family situation try to “keep it simple,” and use a basic will structure intended for a traditional nuclear family. The survivor inherits everything without strings attached. The ultimate result? The other side of the family is often disinherited.

It doesn’t have to be that way. Mr. Jones and his wife could had entered into a written contract between them under which each promised to always maintain a will that divides the wealth as agreed between both sides of the family, half for his children and half for hers. After the stepmother inherited, she would then be under a binding legal obligation to leave at least half of the wealth to Mike and his sister.

Sometimes referred to as an “estate plan agreement,” or “distribution agreement,” that type of contract would have been a huge comfort to Mike. If the stepmother later changed her will, attempting to leave all of the combined wealth to her own children, Mike and his sister could sue her estate after her death and demand their half.

While such agreements are binding, they are not always easy to enforce. If the stepmother were to remarry and intermingle assets, her new husband might have claims to the property at her death that supersede the claim of Mike and his sister under the agreement. The stepmother might give three-quarters of the wealth to charity while she is still living, or live to be100 years old and gradually spend the combined fortune down to nothing. Her estate would be largely empty. That would leave Mike and his sister with a valid claim against an empty husk.

What if there had been a verbal understanding between dad and the stepmother to give a share to Mike and his sister when the stepmother eventually died? The right litigation lawyer might be able to successfully enforce the understanding in court, saving a portion of the otherwise disappearing estate for Mike and his sister. Court is ugly, and expensive, and uncertain.

A lawyer suggested Mike try to keep in touch with his stepmother. Taking her to dinner each year on what would have been dad’s birthday might be a good touch. Candidly, being really, really, really nice to her would be smart. She may still choose to leave something to Mike and his sister, and they are best not to annoy her.

An estate plan agreement is a great solution for some blended families. It gives the survivor access to the combined wealth — in case they contract cancer and decide to go to the Mayo Clinic — but also provides a significant measure of protection for the children or other beneficiaries on both sides of the family.

Blended families are a common reality these days. Very few families take even simple measures to protect the kids. Ask Mike.

Next week’s column: Delusions.

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.

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Blended Families Creates Estate Planning Woes

Mr. Smith met and married Mrs. Smith later in his life. He was wealthy by most standards, and she enjoyed a good life at his side. The two of them shared a common commitment to charity.

Mr. Smith passed away first and his wealth was set aside into a spousal trust under the terms of his last will and testament. That means it was held by trustees and Mrs. Smith was entitled to the generous income it generated each year. She also benefited from the preferential tax treatment afforded to spousal trusts. Upon her eventual death, the wealth would be given to the charities that Mr. and Mrs. Smith had supported together during their salad years. That suited Mrs. Smith fine.

Trouble was brewing. It boiled over when her memory began to fail and she lost the ability to handle her own affairs. Her children stepped in and took over under a power of attorney she had signed.

Her children did not like Mr. Smith’s will one bit. While their mother enjoyed the income, all of the wealth was ultimately aimed at charity.

The kids sued Mr. Smith’s estate demanding a money judgment for their mother. If successful, they would pull a few hundred thousand dollars, or hopefully a million or two, from the estate and into their mother’s direct ownership. Where would it go from there? Her will left everything to them, not to charity.

Mrs. Smith had shown no inclination to attack Mr. Smith’s estate by making such a claim. Her children were in charge now, not her.

The children lost the court case on a technicality. The claim was brought too late. Otherwise, they might well have succeeded. The details of this story are taken from the court’s written judgment (the names have been changed and some of the facts altered to prevent embarrassment).

Many families rely on good faith to protect their estate plans. They look across the table at each other and promise not to challenge each other’s estates. Unfortunately, that promise is worth the paper it is written on – nothing. The surviving spouse is generally free to change his or her mind later. In other cases, like that of the Smiths, it is the kids who ultimately call the shots, not the parents. The children know nothing of the promise or understanding between the parties, or just get plain greedy.

If Mr. and Mrs. Smith were serious about leaving the wealth to charity, they had a series of options. First, they could have had a lawyer prepare a simple piece of paper. Called a quit claim deed or release, Mrs. Smith would have signed it and thereby formalized an enforceable promise not to bring any form of claim against her husband’s estate.

Properly drafted, that piece of paper is helpful. It would extinguish at least some of the claims she might have against Mr. Smith’s estate. The quit claim deed would not protect the estate from claims under dependants’ relief legislation. A dependants’ relief claim cannot be signed away.

There are other ways to plan around dependants’ relief claims if a couple wants things to be utterly ironclad.

A common strategy involves setting up a “joint spousal trust.” This is only available if Mr. Smith is over the age of 65. He would sign a trust declaration and transfer most of his assets into the trust. Structured properly, there would be no need to pay capital gains taxes when his assets are transferred into the trust. RRIF’s have to be excluded unless Mr. Smith wants a nasty tax bill. Income generated on assets in the trust would be available to the couple for their support and benefit. Mr. Smith could access capital if need arises. When he dies, the assets in the trust would not form part of his estate. Since the assets are outside of the estate, they escape the reach of the children if they try to pursue a dependants’ relief claim on behalf of their mother. Voila.

After the second member of the couple passed away, then the money and other assets in the trust would be distributed to charity. Careful drafting is required on that point. Many trusts are constructed in a way that denies the family the ability to claim tax relief for the assets going to charity, effectively ripping up the donation receipt.

Joint partner trusts are also used to avoid probate taxes on land outside of Alberta, to avoid general creditors, and to allow for assets to pass to heirs outside of the public eye.

A joint partner trust is only one of many tools used in blended family estate planning. At death, a surprising number of blended families descend into acrimony, greed and fighting. Few couples take any reasonable steps to prevent it.

Next week’s column: More fun with blended families.

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.

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Fine Tuning required for Some Estate Plans

Norman and his wife Mary have a significant portfolio of mutual funds and other investments. Even after the recent downturn, the pool of investments still exceeds $1 million.

Until recently, those investments were owned jointly in a series of accounts in the names of both the husband and the wife with rights of survivorship. That meant that when the first of them dies, the survivor would inherit all of the investments outside of the estate. That kind of joint ownership avoids or avoids the probate process. Probate taxes may not be an issue in Alberta, but many couples prefer joint ownership for the convenience when one of them dies.

Norman and Mary are in the process of taking those joint accounts and separating them into two accounts, one in the name of Norman and the other in the name of Mary. No more joint ownership.

When the first dies, the investments in his or her name will fall into his or her estate. If Norman dies first, half of the investments will fall into his estate. The survivor will be put to the trouble of applying for probate, a step that might have been avoided if the investments were left joint.

The survivor, whether Norman or Mary, will be happy to go to the trouble of applying for probate. It means that the investments will be available in the estate to fund a spousal trust each is creating for the other. The spousal trust will generate annual tax savings for the survivor. Those tax savings should amount to approximately $4,000 each year. That means $4,000 in the first year, $4,000 in the second year, and so on. It will add up.

What is more, Norman and his wife are pursuing an estate planning strategy called “spring boarding” (described in an earlier column). It involves having their combined wealth funnel down to their children contained in four testamentary trusts. It is intended to save income taxes for the children on income generated on investments held in the trusts.

For the strategy to work to optimum advantage, they need roughly half of their combined wealth to funnel down to the children in the spousal trust that comes into existence at the first death. Making sure that happens involves some fine tuning while they are still alive. That includes the changes they are making to their non-registered investment portfolio.

No income taxes are triggered when the portfolio is broken into two parts. Transfers between husband and wife do not trigger capital gains taxes. The same is true of transfers between common laws.

If Norman or Mary were to be diagnosed with a terminal illness, things might change again. Say Norman is diagnosed with fast moving, terminal cancer. Under those circumstances, Norman and Mary might be well advised to transfer a significant portion of Mary’s portfolio to Norman. Called “death bed loading,” the ideais to load the dying spouse with assets so, in turn, those assets can fall into the estate of the dying spouse andform part of the spousal trust. It is macabre, but good planning.

Norman and Mary are real. Names and details have been changed to protect the family’s confidentiality.

None of this deals with their registered investments. Registered investments are subject to special tax rules. Those rules make it advisable to have the registered investments pass directly to the survivor and not into a trust.

All of this is a lesson for wealthier families engaged in specialized income tax planning, like Norman and Mary.

There are also lessons here for families of more modest means.

First, good estate planning means not only looking at a person’s will, but looking at their asset holdings to make sure that assets are owned and structured in a way that furthers the estate plan and does not work interference on it. A farmer died in Saskatchewan with a will attempting to give a section of farm land to a specific child. It failed. The land was in fact owned by the deceased’s family farm corporation. The farmer’s will was inconsistent with the structure of his asset holdings. Someone should have checked that along the way. The result for the family was bad.

Second, when a person is terminal and getting his or her affairs in order, there may be last minute adjustments that can be made that will make things work more efficiently. Consider a situation where a wife is dying with a ski chalet in British Columbia in her name. Land in BC attracts probate taxes. A last minute transfer might be considered over to her husband, or into joint names. In the right case, avoiding probate and other legal complications can be valuable. Simple can be good. The right answer in each situation is specific to the situation itself.

Next week’s column: Second marriages and blended families.

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.

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A Literary Masterpiece And A Legal Disaster

George Bernhard Shaw was born in Dublin in 1856 and became one of the most influential men of his generation. He was an author, an orator, and a social activist. Among other causes, he supported woman’s rights before it was popular to do so. The English language was the tool of his trade. He studied phonetics and campaigned for the reform of the alphabet. He won the Nobel Prize for literature in 1925 — he accepted the honour but turned down the money.

He is chiefly remembered today as an author, having penned hundreds of books, plays and articles. His most popular play during his lifetime was Pygmalion. First staged in 1914, the main character was a professor of phonetics. It eventually became a Hollywood movie, and kept on grinding out royalties on the stage and screen decade after decade with a seemingly inexhaustible staying power. We now know it as My Fair Lady.

George Bernard Shaw was also the author of a unique last will and testament.

He wrote it with great care and attention, and signed it in 1950 just prior to falling to his death from a ladder. He had been trimming a tree at his country home just outside of London. He was ninety-four at the time.

The will left his fortune in a trust designed by Shaw in the hope it would revolutionize the English language. His money was to be used to develop and popularize a new alphabet. The new alphabet was to consist of forty or more letters, and was to replace the existing alphabet consisting of twenty- six letters. Each letter in the new alphabet would have its own sound. Gone would be “sent” and “scent” and “cent.” It would no longer be necessary to combine letters into pairs to make different sounds. The sound “th” would be represented with a single letter.

Shaw’s will directed his trustees to finance a series of enquires to determine how much time could be saved by the use of a more efficient alphabet, and to quantify the economic value of the time savings in British and American currency.

He wanted to prove to the world that an improved alphabet would improve the economy. If this document were written in the new alphabet, without blended letters like “th” and “sh,” it might be one or two percent shorter. With millions and millions of documents generated every day using the English language, imagine the savings in time, paper, storage space and transmission time if every one of them was two percent shorter. He also thought it would be easier and quicker for business people to learn and speak English if each letter hasits own distinct sound.

Shaw was not a crackpot. He was a free thinker, and he thought big.

The first problem in his plans was this. His estate had no money. Debts and other obligations left his estate without the financial resources to begin the gargantuan tasks Shaw had directed in the will. Pygmalion came to the rescue. Royalties kept on pouring in. In short order the estate had the wealth available to give effect to his wishes.

The second problem was this. He mucked around and tried to draft the will himself. The first draft appeared to have been done by a legal draftsperson, but Shaw then elaborated on it with his own pen. The judge who came to read the will described it as a “literary masterpiece,” but it was legal garbage. The will was invalid.

His money was eventually divided among the National Gallery of Ireland, the British Museum, and the Royal Academy of Dramatic Art, being other beneficiaries that had been mentioned in Shaw’s will. Royalties from his works have continued to pour into the coffers of those organizations ever since.

There is a practical lesson here. George Bernhard Shaw should have used a lawyer to draft the final version of his will. It was technical work, and had to be done right. The danger of doing it yourself is magnified a hundred-fold when a person’s plans are ambitious or unique, or when their estate is large. A will kit might be an improvement over drafting your own will from scratch, but the kits are far from foolproof. My law firm has litigated more than one will kit fiasco.

Shaw, like Alfred Nobel described in an earlier column, was penny wise and pound foolish. If he had hired a lawyer, and spent some money, his wishes for the English language might have come to fruition (and this column would be two percent shorter).

Next week’s column: Strategies to reduce income taxes for heirs.

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.

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Devil In The Details When It Comes To Estate Planning

Norman Thorton was one of the most prosperous farmers in the Maidstone area of Saskatchewan. He was a perfectionist. He subscribed to farm journals, and studied changing farming methods. He was up on the latest technologies. His machinery was the best money could buy and was then meticulously maintained. After each use he and his hired man would thoroughly wash each piece of equipment before returning it to the sheds. Tools in his shop were organized from largest to smallest. Norman’s world was carefully catalogued, ordered and cared for.

The devil is said to be in the details, and he was a man who took care of details. He was very successful.

The order he sought to impose on the world fell apart when he died. Norman Thorton died poorly, and the reason was in the details.

Here is what happened. He tried to keep his legal affairs in order with the same care he brought to the other areas of his life. He hired a good lawyer, at a good local firm. He incorporated a family farm corporation. His original lawyer became a judge, and one of his partners took over Norman’s legal affairs. The partner did the job when it came time to update Norman’s last will and testament.

It was important to Norman and to his family that he leave some farmland to a specific heir. His will very clearly described the farmland and the person who was to receive it. That should have been a slam-dunk. It wasn’t. Norman did not own the land — the title was held by his family farm corporation. Norman could not give the land away under his last will and testament as the land would never form part of his estate. The lawyer who did the will never checked on that detail. The family member who was supposed to get the farmlandgot nothing. Norman’s estate plan broke down.

His lawyers betrayed him. The family member sued the law firm. Ultimately the lawyer who prepared the will was found to have been negligent, and the lawyer’s liability insurance company had to pay damages. All of the details reported above are taken from the published decision of the Saskatchewan court that held the lawyer responsible for the error.

The court repeated what lawyers already know. To do safe estate planning, the lawyer must delve into the details. Minimally, this means a comprehensive interview with the client. A lawyer should be spending an hour or two with a client before drafting their will — longer if the client’s circumstances warrant it. Sometimes it means searching the title to land, or reviewing a minute book, separation agreement, or insurance policy. The details set out in those documents can be key if the client wants to make a gift of specific land, like a cottage or a farm, or if the client owns a company, or is divorced, or if life insurance forms an integral part of the estate. Bad estate plans are written every day because lawyers fail to take those steps.

One of the toughest challenges in a hospital is getting staff to wash their hands. One of the toughest challenges in estate planning is getting the lawyer to perform a full interview and check the details. Many lawyers push back. Hundreds of clients have come through the lawyer’s office before you do, typically refusing to pay more than $250 for their will. Although most lawyers would deny it, this has conditioned them to do fast and dirtyestate planning. A lawyer who is not charging at least $600 or $800 is losing money badly if they are doing everything they ought to do in helping you with your estate plan. A senior lawyer demanding fair payment for his or her time may demand significantly more.

As a consumer, or as a patient in a hospital, you can benefit from being assertive. Ask the nurse to wash their hands before changing your dressing. If the lawyer can’t or won’t spend the time with you and check the details, go elsewhere. Oddly enough, you should be looking for a lawyer who charges more rather than less. One of the surest ways to get a dangerously haphazard estate plan is to comparison-shop and then go with the lowest fee quote you can get over the phone.

Next week’s column: A unique will by a literary giant.

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.

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Who Should You Pick As Your Executor?

Bob and Sally Smith appointed each other to serve as the executor of each others estate. What happens if both of them die? They have appointed their daughter, Anna, to serve as the alternate executor. It will be her job to divide the estate between her and her brother.

Anna is exactly the right choice for the Smith family as alternate executor. She lives close to them. She has the time. She is responsible. Her brother would have been good for the job too, but he lives in Vancouver and is really busy.

Who should you appoint as executor of your estate?

Most people pick a family member, such as a son or sister. Other people pick friends, or close business associates. Some ask a professional advisor, such as family lawyer or accountant. Still others pick a trust company.

There are advantages to picking a family member. A spouse, child, brother, or other family member will know your affairs. They can clean out your house and identify family heirlooms. If they are a beneficiary, then they are interested in the outcome. They want to get the money out of the estate as quickly as everyone else does.

A family member may not be a good choice if your affairs are complex and he or she will not have the skills for the job. That might be the case if you have a business, or if the family members available to you are young and inexperienced. A family member may be a poor choice if you see the possibility of a fight among the beneficiaries of the estate.

Should the executor live in the same city as you do? It is generally more convenient. There can be a lot of legwork. An executor who lives outside of Alberta may have to fly in and out more than once. Appointing an out-of-province executor can be more than simply inconvenient. The executor will be forced to post a bond unless the court can be convinced to make an exception. That bond is usually placed through an insurance company. It can get very expensive. That by itself is a good reason to pass over someone outside of Alberta.

Appointing an executor from a different country is more trouble still. As a rule, an estate is tax resident wherever the executor happens to reside. If you appoint a child who lives in the US to be your executor, your estate will be governed by US income tax laws. That can be a huge complication.

Inside of Canada, that same rule can work to your advantage. If you pick a child who lives in Alberta, then any income earned on estate assets will be taxed in Alberta under lower tax rates. If you pick a child in another province then income on your estate will be taxed at higher rates in that other province. For some estates, the tax savings can be significant.

You can appoint joint executors to serve together or a single executor to serve alone. Which is better? If one person has all of the skills, then one person alone is generally a good idea. Having two executors doing everything together doubles the work.

Sometimes a team does make better sense. Different people bring different strengths to the job. One might know your business affairs and the other your personal affairs. Together, they can do a better job.

Every executor is entitled to a fee. Family members tend to charge less. Friends and extended family tend to charge more. Trust companies and professional advisors tend to charge the most. You may want to give some thought to setting the amount of the fee in the will itself, or by advance written agreement with the executor. That avoids fights.

Fifty years ago, it was quite common to appoint the family lawyer to serve as an executor of the estate. Things have changed. Most lawyers will now refuse the job if you ask them. Professional advisors are often too busy, and it is not their normal work.

Trust companies are a popular choice. They have professionals on staff that do nothing but administer estates. They are good at it. A trust company will charge significant fees, but you generally get what you pay for in this world.

A trust company is an option only if your estate is going to be fairly substantial. Many trust companies will not agree to serve as executor unless the estate is projected to exceed $500,000.

The Smith family is real. Names were changed to protect confidentiality.

Next week’s column: An estate plan gone wrong.

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.

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Choice of Executor Critical When Trouble Is Brewing

Gerald Conner died in Ontario on April 26, 2004. He had no spouse and no children. He did have five siblings and decided to divide his estate among four of them. The fifth, a brother named Sam, was cut out of the will. That always hurts.

Gerald’s will named another one of his brothers, Marvin, to be the executor of the estate. It is unlikely that Marvin knew what he was in for.

Sam, the disinherited brother, never sued but threatened to. He appears to have hovered on the outskirts and yapped a lot. Maybe that is what started the trouble.

Everyone started to bicker with Marvin about his job as executor. They argued about the delays in finalizing the estate. They argued about how much information should be shared with Sam. Eventually, they argued over the fee that was to be paid to Marvin as executor.

The beneficiaries turned on Marvin, their brother, like a pack of wolves. They took him to court, claiming he had been doing a terrible job as executor. That hurts too.

The judge criticized everyone, but told Marvin to finish the job. The court case ended and each of the four siblings included under the will took away a quarter of the estate.

Where did that leave Marvin? His parents were dead. Worse, his siblings had become his enemies. No one wants that.

The result might have been different if Gerald had picked a different person to serve as executor of his estate.

In some estates, you can predict tension. That might be the case when a family member is disinherited, as was the situation under Gerald’s will. It might also be the case in a blended family, where an estate is being divided up between a current spouse and children from an earlier relationship. It might also be the case when putting the estate in a trust that restricts the beneficiary’s access to cash, perhaps because a beneficiary has a history of drug abuse.

Whenever tension might be predicted, consider going outside the family when looking for an executor.

Some people appoint a family friend for the role. Others appoint a member of the extended family, such as a cousin or uncle.

Be candid with the prospective executor. The executor needs to know that the job might get ugly. Fees should be discussed.
An outright gift of cash might also be considered in favour of the executor, on top of the fees they are able to charge. A will can be drafted that makes a gift of $25,000 to uncle Bob and concurrently appoints him as executor. The gift is not instead of a fee but in addition to it.

Why is that a good idea? Compare a fee to a gift. A fee gets paid at the tail end of estate administration. The family can legitimately fight over the amount of the fee. Unlike a fee, a gift gets paid early in the estate administration process. Generally speaking, the family cannot oppose the payment of a gift or its amount. A fee is taxable income to uncle Bob. A gift is received tax free.

If a fight boils up over the administration of the estate, uncle Bob can take solace in the $25,000 in tax free cash while he listens to the bickering.

It is important to remember that a gift is a gift. Bob can claim his gift even if he is unable to serve as executor. If he has lost his marbles, he’ll get the $25,000 gift but won’t be able to serve as executor and referee the anticipated fight.

A trust company is another alternative when tension is in the air. A trust company is in the business of serving as executor. The employees of the trust companies have handled thousands of estates. They can’t be bluffed and aren’t afraid of a fight. While a trust company will charge significant fees, there are many situations where it is completely worth it.

Why appoint an outside executor where tension is in the air? If the executor gets sued, the bad blood spills outside of the immediate family not in it. The family can go to Christmas dinner, together, and complain about the outside executor.

Marvin’s story is a true one, taken from the published decision of the judge who heard the case. Names were changed to save the family embarrassment.

Next week’s column: More guidance in selecting an executor.

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.

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An Estate Planning Lesson From Ronald Reagan

When Ronald Reagan was diagnosed with Alzheimer’s disease, he announced his condition to the American people in a letter dated November 5, 1994, stating “I intend to live the remainder of the years God gives me on this earth doing the things I have always done.” He was able to.

Other than a brief hospital stay in 2001 when he broke his hip, he was tended around the clock by caregivers in his home. His wife Nancy was able to continue making public appearances (the two of them championed are search foundation for Alzheimer’s). He loved chocolate, and continued to enjoy the good things in life as long as he was able until his death in 2004.

Not everyone will be as lucky as Ronald Reagan was.

Jacqueline lived in Ottawa all of her life and spent her last seven years in a personal care home. Her daughter was horrified.

The staff at the personal care home worked hard but they were burnt out, and there were just too many residents and too few staff. Jacqueline spent time in a dirty diaper. Towards the end of her life, she had trouble eating. The staff did not have the time to help Jacqueline with her meals. She was prone to falling, and she was eventually in a wheelchair. When her mind began to fail, she was restrained in the wheelchair so she wouldn’t get up and try to walk on her own.

Her daughter was able to make arrangements with an understanding employer allowing her to take two hours off in middle of the day to go and feed her mother in the personal care home. She visited Jacqueline twice each day. She stopped taking out of town vacations. There would be no one to feed mom and clean her up if the daughter went on a winter vacation somewhere warm.

Jacqueline was blessed with a daughter who lived in the same city who was willing to roll up her sleeves and put her life on hold for a few years. Her daughter knew her mother’s likes and dislikes. Jacqueline hated hospital-cooked fish, and her daughter made sure she never, ever, had to eat it. Jacqueline’s name and some of the facts have been changed to protect her privacy.

What will happen to you and me if we find ourselves in the same situation as Ronald Reagan or Jacqueline?

You may have no children. If you do, they may live far away. If they live close at hand, can they put their lives on hold? Do you want them to?

You can control your destiny with a little forethought and a little money.
First, you will need a financial plan to guarantee your future care. Can you afford, like Ronald Reagan, to stay in your home and have private nurses and home-care workers come in? If that is too expensive, could you afford to have a private nurse or home care worker come into the personal care home each day for eight hours? Four hours? Two?

Some people are willing to deplete their wealth and leave a smaller estate to guarantee their own comfort and care. Others want the extra help, but not to the extent that it robs the next generation.

Second, you may need a very special and customized power of attorney or other legal instrument to make sure that your wishes are implemented on a mandatory basis.

Third, if you want the job really done right, you need to take the time to assemble personal information for your future caregivers. If you, like Jacqueline, get squeamish at the sight of the salmon they serve in health care institutions, your caregivers need to know that. If you, like Ronald Reagan, love chocolate, your caregivers need to know that. If you love NFL football, and like the idea that you would be parked in front of a TV every Monday night to watch it, your caregivers need to know that. All of this should be written out. A family conference might be a good idea to discuss your plans after they are perfected.

Part of this is guaranteeing yourself that you will get all the care you need. Part of this is protecting your family from the burden of trying to do it themselves.

All of this is doable with a little elbow grease. Start now, or hire someone to coordinate everything. There is at

least one consultant in Calgary who specializes in helping families work through and develop coordinated care plans.

Next week’s column: Choose your executor carefully.

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.

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