The task of executor (or administrator) can be a very thankless one. Often, the beneficiaries get really antsy for their share, and don’t understand why it’s taking so long. They become convinced the executor (that’s you!) must either not be doing their job, or be doing it poorly, and surely you are just holding back the money out of spite.

If someone wants to do you “the honour” of appointing you as their executor, here is what you need to know. Of course, if the “someone” is your significant other, a lot of this doesn’t apply, unless your spouse is one of those very secretive people who doesn’t tell anyone anything. In that case you have bigger problems anyway.

As executor, your job will be to gather together all the estate assets, pay the debts, and divvy up the rest among the beneficiaries. Sounds simple, right? No so fast.
The first thing you need to do if you think you are the executor, is find the original will. It might be at the deceased’s home, or in a safety deposit box or at a lawyer’s office. Or it could be somewhere else altogether. Maybe you are really lucky and you already have it! The ease, or lack thereof, of finding the will is often a sign of what’s to come; it is an excellent indicator of the level of organization (or not), of the deceased’s affairs. You may not want to take this on (unless of course it’s your spouse).

Ok, so lets say you are “it”. Now is probably a good time to talk to a lawyer, at least for some initial advice. If the estate is large or complicated, it may be advisable to get both a lawyer and an accountant to help. The cost of the services will normally be paid by the estate. There may be issues with the will (ambiguous wording, a “hole” in the distribution, a likelihood someone will contest it, etc.) Better you should know up front.

But first, did you know that the funeral is your responsibility? Time to talk to the rellies. Did the deceased tell you anything about what she wanted? It may not be the same as what the relatives want.

At the same time, your job is to ensure that the estate assets are protected. Cancel the credit cards, subscriptions, the apartment rental agreement, change the locks, and put valuables in a safe place. Deal with the social media accounts. Secure valuables. Even if valuables are left to a relative, don’t give them away yet. This may not turn out to be the most recent will, or even a valid will, and someone may yet successfully overturn it. Then you’d be responsible for missing items.

Notify the banks where the deceased held accounts, and don’t forget about the mortgage payments! Also, if there is real estate, make sure insurance is in place, and that the insurer knows the place is vacant, if that’s the case.

Usually, you need “Probate” of the will to actually sell or transfer the deceased’s estate. You get this by applying to the court, using a specific set of documents. Your lawyer will prepare these for you. You have to notify all the beneficiaries, as well as anyone who would receive something if there was no valid will. Who that might be is not always easy to figure out.

Actually, you might luck out and not have to apply for probate. It depends on the type of assets in the estate. For example, probate isn’t required for jointly owned real estate, joint bank accounts or vehicles owned jointly. Just make sure there isn’t also something in the estate that you must have probate for, such as an apartment owned solely by the deceased, or Canada Savings Bonds.

Once you have probate, you now need to liquidate the parts of the estate that aren’t specifically left to a beneficiary. That means hiring an estate liquidator, a realtor, or putting everything on Craigs List. Ultimately it’s up to you to get a reasonable price for the estate assets.

You’ll have to figure out if the deceased had any pension plans (including CPP) since it is your job to notify them of the death and apply for any death benefits. Then you’ll need to deal with CRA. One thing that executors find difficult and beneficiaries have a hard time believing, is the length of time it can take to get final confirmation from CRA that no more taxes are owed. This is an important step because the CRA can potentially impose taxes that you don’t know about. That’s where an accountant can be a big help.

As the executor, you could be personally liable if you don’t pay the debts (including taxes) before you distribute the estate. You should talk to a lawyer about this if you have any doubts. Remember, too that you are responsible if you distribute the assets to the wrong people and could be sued, so make sure you are aware of the Wills Variation Act and what it means to the particular estate you are handing.

There’s more! But before distributing the assets, you need to do an accounting of the estate’s financial transactions and obtain a release from each beneficiary. You should claim for all expenses you’ve paid out of your own pocket. You might also want to claim a fee for acting as executor. This fee can be up to 5% of the estate and is taxable income. If you want to claim a fee, the amount you claim should be included in the accounting that you send to the beneficiaries.

So let’s recap the honour that’s been bestowed upon you: you get to be a detective, an estate agent, a cleaning service, a funeral organizer, a liquidator, a mediator and a complaints service. You get to deal with CRA, even! For that you might get 5% of the estate, on which you get to pay taxes.   Are you still sure you want to do it?

I was one of the bewildered few to be at the Coachella festival last month when the hologram of deceased rapper Tupac Shakur rose out of the stage to perform two songs with Snoop Dogg.

To me it was somewhat exhilarating, mostly creepy. The crew of tattoed and bandanna wearing tough guys standing beside me were less reserved and screamed like little girls.

There’s clearly a market for this kind of thing. Suddenly any dead star can literally (almost) be resurrected to tour. John Lennon could return to the Beatles, Elvis could show up on stage with U2, Jimi Hendrix could play an encore with the Chili Peppers.

Forbes Magazine, among others, suggested the hologram phenomenon is the next big thing in entertainment. Forbes also explored the estate law implications. In this case, the show organizers sought and obtained permission to stage the hologram from copyright holders and from Tupac’s mother who controls Tupac’s estate. Thus, no legal squabbles arose from the performance. This made me curious about the Canadian law as applied to our posthumous hologram selves.

Intellectual property rights are protected and enforced across international borders. Although we could speculate, for the purposes of this post, that there are famous Canadians someone would bother to make into a hologram some day (our biggest celebrities of the modern era –Celine Dion and Nickelback–are still alive, as much as many of us may wish they only existed in hologram form).

So who owns the rights to one’s posthumous hologram self? The short answer, of course, is the person’s estate. Assuming your estate owns your copyright (and not some publisher or record company) your estate retains ownership of the rights to your two-dimensional image and the lyrics, music and performance rights to any songs you may have written during your life.

As with any estate asset the rights to your copyright (and presumably your hologram self) can be left in your will to anyone you choose.  Even if you did not have the foresight to include this as a line item in your will your executor retains the right to negotiate license fees for the performances of your hologram self and distribute any proceeds among your beneficiaries. Enforcement of these rights is codified in the Canadian Copyright Act. But that’s not necessarily the whole package.

Consider this. As much as I may want to, I can’t stage a hologram Nirvana concert in my back yard without committing several copyright violations. But what if, by sheer hubris, I have my computer-nerd friends help me stage a concert whereby Kurt Cobain appears singing songs that I write, whilst copying my awesome dance moves and wearing a Canucks jersey, my favourite pair of slacks and a jaunty cap of my choice? Who owns the copyright to that performance? The outcome of the inevitable Courtney Love backed lawsuit is a little more difficult to predict.

In British Columbia, in addition to the Copyright Act, we have the Privacy Act. The Vancouver lounge, Section (3), is named after section three of the Privacy Act. The Yaletown bar changed its name from DeNiro’s after Robert DeNiro threatened to sue based in part on that provision, which reads:

3  (1) In this section, “portrait” means a likeness, still or moving, and includes

(a) a likeness of another deliberately disguised to resemble the plaintiff, and
(b) a caricature.

(2) It is a tort, actionable without proof of damage, for a person to use the name or portrait of another for the purpose of advertising or promoting the sale of, or other trading in, property or services, unless that other, or a person entitled to consent on his or her behalf, consents to the use for that purpose.

In addition to what is protected under the Copyright Act, the Privacy Act protects the use of a person’s likeness, still or moving. As well, even if DeNiro were dead, his estate could bring the same lawsuit. The Estate Adminstration Act allows any action that can be brought by or against a deceased person during their life to be brought after their death (subject to some limitations and the usual limitation periods).

Notably, and not surprisingly, none of this legislation expressly contemplates the right to create and use a posthumous hologram. Arguably, the statutes are broad enough to apply to such performances. But the law may have to evolve to address this new phenomenon assuming the current media speculation is correct and this is the beginning of a new era of entertainment.

And, on that note, you may want to ask your lawyer to update your will  to include a specific bequest of the rights to your posthumous hologram self. Just in case.

You never know.

dstewart@boughton.ca

The name of the business is a trade name;  you may have a logo, which is a trade-mark, even if not registered.  Your tag line may also be a trade-mark.  Who came up with the ideas?  Your spouse?  A friend? Or maybe you paid someone to create your brand.

Do you have a brochure?  A web site?  Who created the art work?  Who wrote the copy?

What do you sell?  Software? Clothing designed by you?  Furniture or equipment designed by your business partner?  There is intellectual property in all of those things, and that intellectual property is often the only thing of real value in a new business.  Ever watch Dragon’s Den?  What is one of the first things the Dragons ask when someone says they have a great idea they want to commercialize?  “Where’s the patent?”   How is it protected?  Can it be protected?

Of course they are absolutely right to ask, because if you don’t own it, chances are either someone else does (sigh), or no one does.  If no one owns the IP, then anyone can use it, and where’s the fun (and profit) in that?

If you have created the name, logo, designs, artwork etc. before you incorporate, as is often the case, they belong to you personally. Or worse yet, they may belong to another person who created them for you.  Did you realize those things should be assigned to the company?  And what has this got to do with succession planning?

It may not appear to make much difference to you and your day-to-day operation at this point, who owns the IP rights, but it will matter a lot when you (or your estate) want to sell the business and, surprise! the buyer wants assurances about the intellectual property as part of the deal.  If someone other than the company owns the IP, then assignments have to be obtained.  That may be easier said than done, and even if you are the owner of everything personally and you are alive and well, you may now have a tax problem if your IP has increased in value.

If you own the IP personally when you die, then it becomes part of your estate.  Now your personal representative or executor has to deal with it.  If it’s valuable, your estate may have to pay probate tax on it, but certainly any buyer of the IP is going to want to ensure that someone has the ability to sign the necessary transfers of ownership.

Give a bit of thought to what you and/or business might own that isn’t obvious, but has value, and then consider what would happen if you were suddenly out of the picture.  If the result doesn’t look pretty, now is the time to fix it.

follow this link to read Part 1

PART TWO

Your children (and surviving spouse) will always have the right to challenge the contents of your will in hopes of having a court vary it in their favour. This is a matter of some controversy and surprise to those who are drawing their will and learning of this issue for the first time. You cannot make an unchallengeable will in British Columbia. This doesn’t mean you have to give everything to your children for fear that they will challenge your will. However, there are no black and white rules for these things. The appropriate amounts depend on the circumstances and facts of the particular situation.

There are some guideline principles. To start with, there’s the Wills Variation Act which states at s.2:

Despite any law or statute to the contrary, if a testator dies leaving a will that does not, in the court’s opinion, make adequate provision for the proper maintenance and support of the testator’s spouse or children, the court may, in its discretion, in an action by or on behalf of the spouse or children, order that the provision that it thinks adequate, just and equitable in the circumstances be made out of the testator’s estate for the spouse or children.

Then there’s the court’s interpretation of this provision, the most important of which is the Supreme Court of Canada’s judgment in Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807. A discussion of Tataryn and the cases that follow could fill a great many blog posts so we’ll focus on a very brief summary relevant to the topic at hand.

The court in Tataryn found that a parent in British Columbia has what’s called a “legal duty” and a “moral duty” to provide for their children (again, you have the same duties to a surviving spouse but that is a topic for a different day). Even if their children are grown up, working and self-sustaining. Even if their children are any one or more of estranged, entitled, irritating, unlikeable and not still a part of your every day life.

TheBritish Columbiacourts have considered some claims where a parent tries to give all or most of their money to charity. Generally, it helps if you have a close connection with the charity – say you supported it for most of your life and were actively involved in it. You can’t just suddenly find a random organization on the Internet, leave them all your loot and expect a court to allow that on a variation application by your children.

See for example Southam v. Royal Trust Corp. of Canada, 2000 BCSC 559 where the deceased left a will with bequests amounting to $30,000 to her only daughter. The residue was to go to three charitable institutions in equal shares. The residue of the estate was valued at $150,000. The plaintiff daughter was awarded 75 % of that residue and the charitable beneficiaries kept 25% in equal shares.

Justice Low considered the reasons behind the deceased’s decision to divide her estate in such a manner. Notably, Justice Low remarked, at para. 27 and 29:

There is no evidence that [the deceased] was involved with or connected to any of the three defendant charities except for the fact that her husband was a diabetic as is her grandson… however, that is not to say that she should not leave bequests to the charities once she has discharged her moral duty to the plaintiff and if the size of her estate permits.

…

In the absence of a strong connection between the plaintiff and the charity beneficiaries, it is my opinion that more regard must be had to the plaintiff’s financial circumstances and prospects than might otherwise be the case.

Thus, at least one Justice of the Supreme Court of British Columbia was willing to make quite drastic changes to a testator’s wishes where that testator chose to leave a small bequest to her child and the significantly larger portion to charity. However, establishing a connection between the testator and the beneficiary organization may lead to a different result.

In Crowley v. Walkhouse, 2008 BCSC 319 the testator left 25% of her estate, valued at $1 million, to her only son. The testator left the rest to various relatives and to her church. The plaintiff son was 70 years old at the time he brought a Wills Variation claim for 50 to 60% of the estate. The court upheld the testator’s wishes and left the estate to pass as it was outlined in the will. Rogers J. ruled that a court should not interfere with a bequest to an only child that is within the “range of options” that the court could find appropriate under all the circumstances.

Where the plaintiff is an independent, adult child of the testator, the court has very wide discretion to allow or disallow a variation claim. A plaintiff of modest means who did nothing during the life of the testator that would lead a reasonable person to believe that plaintiff should be disinherited will have a strong claim to a share of an impugned estate. Really, the discretion rests with the court to fashion a remedy based on the circumstances.

Clearly the caselaw does not show a lot of consistency. But do not despair. There are some methods you can use to allow all or part of your assets to pass outside of your estate making it more difficult for your children (or spouse) to make a Wills Variation claim. Those methods will be discussed in an upcoming post to this blog.

PART ONE

Your children have driven you crazy all their lives. Meanwhile, there’s the soup kitchen, SPCA or church group down the street that’s doing invaluable work to improve our society and community. Maybe you’re a history buff and would love to give the local historical society a boost. Our society loves a philanthropist. And be honest with yourself, you want your last move to really count. So do it. Go visit your lawyer. Tell them you want to leave it all (or most of it) to the charity or society of choice. And you’re done. Screw the kids. Doesn’t that feel better?

Unfortunately it’s not that simple. Your children (and surviving spouse) can always challenge your will. You cannot just simply leave your estate to whomever you choose, as highlighted in the recent, interesting British Columbia Supreme Court case, Ketcham v. Walton, 2012 BCSC 175.

The written reasons do not tell us too much of the back story. We know that Mr. Eric Worthy Clay died on November 15, 2009 leaving three adult children and an estate worth approximately $800,000. By the terms of Mr. Clay’s will (the “Will”) this money was to be distributed among a number of friends and to the Sooke Region Historical Society and theMetchosinSchoolMuseum. Mr. Clay also instructed his executor, by his Will, that $20,000 was to be spent to “find a suitable place to erect a cairn memorial to Alexander Dawson Donaldson.” The Will named the Dominion Command of the Royal Canadian Legion as a suitable recipient of the residue of the estate, but left the discretion to pay such residue with his executor. No money was left to Mr. Clay’s children who were estranged from him.

Mr. Clay must have been aware of the Wills Variation Act. To paraphrase, the British Columbia statute says that when you die and your estate is distributed by your will and your children or spouse don’t like what you say in your will, they can go to court to challenge the contents in hopes the court will vary the will in their favour.

This statute is great for people who are disinherited by their parents for reasoning that our society has grown to frown on. Say you don’t like one of your children’s choice of religions or choice of spouses. You can’t just decide to write them out of the will. However, the law may also stymie some legitimate philanthropy.

The court, in deciding a Wills Variation claim, must give some deference to the testator’s wishes. But it seems that, no matter how little you like your children, or how deserving that charity is of your money, that your disinherited children will get a least something out of a variation claim.

Mr. Clay tried to circumvent this. He included provisions in the Will such that the executor “should be at liberty, should he deem it advisable, to take a position on the merits of the Wills Variation action to defend the will and the gifts contained therein against the claims made in the Wills Variation action.”  The Will also gave express instructions to the executor to use any and all funds in the estate to defend any actions brought by Mr. Clay’s children under the Wills Variation Act.

Generally, the law requires an executor in a Wills Variation action (or any action involving a will) to remain neutral and simply to carry out the wishes of the testator.

The court chose not to uphold Mr. Clay’s wishes. Instead, it found, Mr. Clay’s instructions in the Will should be void as contrary to public policy as far as they purport to deny Mr. Clay’s children their recourse to the courts. The language, in effect, had the potential to deny the children the fruits of a victory on a Wills Variation action and therefore would not be upheld by the court. Finally, the court found that Mr. Clay’s executor must remain neutral if a Wills Variation action should proceed.

So Mr. Clay’s children are free to bring a Wills Variation claim. We will watch for any report on the outcome. In the meantime, in the next post, we will look at the underlying law that applies to testamentary bequests to charities and how they can be attacked by deserving (or undeserving children).

So, assuming I still have these things when I die, and there isn’t some other technology we can’t even image right now to replace how we use and interact with such stuff by that time, who gets those assets?

If we were talking about all my physical stuff, like my shelves full of books, my CDs and DVDs or my photo albums, those I can leave to my husband or a friend through my Will.  In fact, if I am like many of my clients, those items would just automatically go to my husband or other heir as part of my “items of personal use” or as part of the residue of my estate, and I would not even specifically mention them.

If asked, I think most people would agree that their online “stuff” is also valuable, and that they would want their nearest and dearest to have those things in the event of death.  The problem is, unless you also leave your heir(s) the passwords, it is like leaving someone your treasures locked in a trunk.  The heir has them, no one else can get them, but no one, including the heir, can access them.  Actually, not having a password may be worse, as you can always hire a lock-smith to break a lock, but if the password is a good one and the heir doesn’t know it, it’s going to really hard to find.

The flip side of this issue is that passwords exist for a reason.  It may not be a really big deal if someone accesses your online photos (although it might) but someone cleaning out your bank accounts because they got your PIN may be a very big deal.  So how to ensure that your passwords are available upon your death, but not so long as your are alive and well?  That is not an easy question to answer.  One way of dealing with it, as Byron Cannon of Australia suggests in his article, it to make a list of passwords and kept it somewhere so your executor will have access, but no on else will.  The list could be kept in a safety deposit box with the Will.  However, that would mean each time you open a new account of some sort, or create a new password, you’ll be going to the bank to update your list.  That is not practical.

There are ways of storing your passwords online, which themselves require a password to access.  That doesn’t solve the problem completely, but it might help.  I know someone who gave a friend the first word of a two-part password, and her sister got the second word.  They would have to get together to access the “password vault”  Again it might seem excessive if all we are talking about is access to your Kindle account but if it’s your bank account, it may be warranted.

Who gets your passwords (and therefore access to your online stuff) will depend on a lot of things, including your level of trust, and whether the lucky person is also meant to look after you if you become incapable before you die.  If you think you might need some help with this, or any other matter concerning a new Will or an estate plan, please contact me.

To recap, here are the parties:

Reg Easingwood (the deceased, died Sept 2009)

Kay Easingwood, married Reg in Dec 1983. (2^nd marriage for both)

Reg’s four adult children (Lauren, Vicki, Hank and Edward.  Their mother had died in 1976;  Edward died in 1996, Hank died in 2009, shortly before his father.)

Kay’s two adult daughters from her first marriage (not part of the litigation)

The documents:

1. Marriage agreement. (1983) Mainly dealt with what would happen upon death:  no sharing of assets, not claims against estates.
2. Power of attorney to Reg’s son Hank and his daughter Lauren in 2001.  Unfortunately, the two had to act together, so if one died or become incapable, the other could not continue either.
3. a Will in 2004, creating a life estate in income and his residence for Kay with a gift over to the children/grandchildren.  (house was in Reg’s name alone) That will was in place when Reg died.
4. An Alter Ego trust established in 2007 by the attorneys under the PA.

The alter-ego trust was set up using the power of attorney. The trust terms mirrored those in Reg’s 2004 will, including life interests for Kay in income and the residence.  All of Reg’s assets except his residence and joint accounts he held with Kay were settled on the trust. The declared value assets under his will was $530,000.  The assets in the trust were about $5.6 million.

Hank died in mid Aug 2009;  Reg died four weeks later (Sept 12, 2009) and Kay started a WVA claim two weeks after that.

Kay subsequently amended the WVA action  to add claims under the  Family Relations act and the Fraudulent Conveyances act.  She asked for the following (among other things)

1. a declaration that the Trust is null and void and therefore all assets transferred to the Trust are properly assets of the estate;
2. if the Trust is valid, a declaration that the various transfers of property to the Trust were fraudulent transfers and are void and of no effect;
3. declaration that the deceased, his estate, the Trust, and the beneficiaries were all unlawfully enriched
4. an injunction;
5. a declaration that the deceased failed to adequately provide for Kay in his will (WVA action)

Trustees of the Alter Ego Trust applied for dismissal of everything except the WVA claim (that will be for the executors to do later)

Madam Justice Dillon found that under the power of attorney, Lauren and Hank owed duties of loyalty, prudence, and good faith to Reg, but not to anyone else.  Therefore, the only question to be answered was whether, in exercising the PA, Hank and Lauren were in breach of their duty to Reg (as opposed to a potential claimant against his estate).

The court found Lauren and Hank acted in Reg’s best interest because of the imminent danger that the PA would become inoperable (if Hank died) and because the terms of the trust exactly mirrored what Reg himself had set up in his will.

Next, the court dealt with the Fraudulent Conveyance (FCA) claim.  Kay said she was a creditor, first under the family relations act (all of Reg’s assets being family assets according to her), second under unjust enrichment (the hard work she said she provided to Reg’s companies) and third for breach of the marriage agreement (not argued)

The judge said, first, the claim must have arisen during Reg’s lifetime.  For that reason, because a Wills Variation Act claim arises after death, it cannot support a FCA claim;  ie, a future WVA claim does not make someone a “creditor or other”.

Also the Family Relations act (FRA) could not be used as a basis for Kay to claim status as a creditor or other under the FCA.  No FRA claim existed when the assets were transferred to the trust, so no FCA status.  The fact that a claim could arise in the future was not relevant.

Kay’s claims in unjust enrichment were really against Reg’s companies, not against Reg, and therefore could not affect his estate, and there was no evidence to support that she ever expected to be paid for looking after the household or Reg as became less capable.   Additionally, the court found the marriage agreement provided a bar to any such claim.

Nevertheless, the judge reviewed whether the dispositions of the assets to the trust were made with intent to delay, hinder or defraud Kay.

Because the trust tracked the terms of the will, and because of the marriage agreement, the judge found no such intent.

SUMMARY

1. For anyone advising on powers of attorney, if you are trying to create an enduring powers, make sure it’s not messed up by sloppy drafting.
2. As an aside, this case was decided under the old powers of attorney act.  So do attorneys still have the right to create a trust for the “adult”/donor?  Because the new act creates a number of express restrictions on attorneys, it might be a good idea to express that ability in the PA,  but I think even without that, this case makes it clear that if the trust tracks an existing will, with the requirement in the act that the attorney must act in the adult’s best interests, the answer is yes.
3. A potential WVA claimant is not a “creditor or other” for purposes of the FCA, which will make everyone doing estate planning, whether for tax, creditor proofing or other reasons, breathe a sigh of relief.
4. Also on the “future claim” question, the judge said that since no FRA claim existed when the assets were transferred to the AE trust, Kay could not be a “creditor or other”;  again, the claim must exist at the time of the transfer.
5. Kay was not a creditor or other under her unjust enrichment claims as those claims failed for a number of reasons:  lack of evidence and the marriage agreement being chief among them.

Obviously in circumstances where there is an actual Family Relations act action under way, or a successful unjust enrichment claim, estate planning that removes assets out of reach of the claimant can give rise to a FCA claim, but that’s not news.

The case is under appeal, and the WVA claim remains to be dealt with, but unless the CA overturns the trial court, the assets in the trust will not be subject to the WVA claim.

I’ll let you know what happens at the Court of Appeal level.

In a nutshell, they aren’t. Not only are they not good at it, most aren’t doing it at all.

If you count yourself among those who really need to do some planning, contact me and we can discuss what your business might need. It’s really not as painful as it might seem. Remember, the future is going to arrive whether you like it or not.

Very briefly, the WVA allows a disappointed spouse or child to challenge a will on the basis that the deceased failed his or her legal or moral duty to adequately provide for the spouse or child in the will. The FRA allows one spouse to claim against the assets of the other in the event of a breakdown of the marital relationship (whether a legal or common-law marriage). And finally, the FCA allows a creditor to claim that property which should have been used to satisfy or secure a debt has been improperly transferred out of the debtor’s name. Obviously there is a lot more to each of these laws, and whether a claimant will be successful depends on the circumstances of each situation, but to understand the Easingwood case, this is enough.

Reg Easingwood had four adult children when he married Kay Easingwood, who had two adult children. It was a second marriage for both, and as they both had significant assets, they signed a marriage agreement saying they would keep their property separate and not claim against each other’s estates. They each wanted to ensure their assets went to their own children. Reg and Kay remained married from 1983 until his death in 2009.

In 2001, Reg gave power of attorney to one of his daughters and his son Hank (a lawyer). The power required the two of them to act together, so that if one died, the power would terminate altogether. This was later to become an issue.

In 2004 Reg made a Will. Kay would have an income for her life, and she was allowed to remain in the family home (registered only in Reg’s name) during her life. Reg also left money to pay house expenses so long as Kay lived in the house.

The rest of Reg’s estate was divided among his surviving children and grandchildren. Kay knew about the Will and approved of it.

Reg had a number of business interests, including rental properties. Kay also had her own business, which she operated out of Reg’s offices, and later, as Reg developed dementia, Kay took over some of the duties in operating Reg’s businesses.

When it became clear that Reg was suffering from Alzheimer’s, Hank and his sister started using the power of attorney to manage Reg’s business affairs, with Kay’s blessing. However, in 2005, Hank was diagnosed with cancer, and by 2007 it was clear that he might not survive his father. In order to ensure that Reg’s affairs could continue to be managed after Hank’s death, and for tax planning purposes, Hank and his sister created and settled an Alter Ego Trust on Reg’s behalf. They transferred all of his assets into that trust, except his residence and his Canada Pension benefits. In all, about $5M in value went into the Trust, leaving about $550,000 in the Will. The terms of the Trust tracked Reg’s Will exactly, so that the income fund and the house operation fund were in the Trust.

Reg died in 2009, and Kay filed her first law suit within weeks of his death. She applied under WVA, claiming that Reg had failed to properly provide for her in his Will. She also claimed that the Alter Ego Trust was not a valid trust, so that the assets transferred to it would fall back into Reg’s estate and her WVA claim would include them. Just in case that failed, she also claimed that the transfer of Reg’s assets to the Trust was a fraudulent conveyance, meant to hinder her position as a creditor of Reg’s estate under both family law and unjust enrichment for the work she had done for Reg’s businesses.

So what happened? The Supreme Court judge found that the Trust was valid (it is open to attorneys to settle a trust for the person who gave them the power, so long as the terms of the trust are for the benefit of that person.

Since the trust was valid, was the transfer of the assets to it a fraudulent conveyance? Again the judge said no, because Kay was not a creditor as defined by the law.

Bottom line? Provided it is done properly, (ie, the proper matters are considered when the trust is created and the assets are transferred to it), the creation of an Alter Ego Trust is a good planning strategy.

An analysis of how the judge came to her conclusions will follow in my next post. And of course I’ll be watching for the Court of Appeal’s decision to see if the Supreme Court’s decision stands. I hope it does because it is a good, well-reasoned and very helpful judgment.

If you think your estate plan might benefit from a discussion about an Alter Ego Trust, please contact me.