Estate 2 Flashcards
(161 cards)
1
Q
the parent who does not have a court appointment as guardian of the minor child’s property has no
A
authority to appoint a guardian of property by will
2
Q
Funeral and burial instructions
A
estate trustee has control of the body and therefore has the authority to determine the place and manner in which the funeral and, if applicable, the burial will take place. In this regard, the testator cannot bind the estate trustee by means of instructions in the will
3
Q
In the case of a named individual bene
A
ask for the relationship, if any, to the client and the city or town of residence (to assist the estate trustee)
4
Q
In the case of a description of bene by class in terms of legal relationship
A
Ensure that the client understands that step-children do not normally fall within the meaning of “children” (and likewise for step-siblings).
Confirm whether the client intends to include or exclude a person born outside marriage or the tracing of his or her entitlement through a person born outside marriage (the default being inclusion of such persons, unless the will provides otherwise).
Ascertain when the class is to close (date of the testator’s death, date of death of the life tenant, etc.), explaining to the client, where appropriate, the administration problems that could arise from requiring a class to be kept open out of “fairness.”
5
Q
For charitable bequests
A
confirm the name by contacting the charity directly or by looking up the name on the Canada Revenue Agency’s List of Charities webpage
6
Q
Where the property in question is deemed, for income tax purposes, to have been disposed of by the testator at its fair market value immediately before death, the testator should be asked for a clear direction as to who is to bear any increased income tax liability arising as a consequence: the recipient of the property or the residuary beneficiaries. Absent any provision to the contrary, that tax liability will be borne by
A
residuary estate
7
Q
duty of the estate trustee to turn assets that are not income-producing into
A
ones that are
8
Q
unless the estate trustee is given express direction and authority to retain the family home or family cottage for the benefit of specific persons, the estate trustee will be obliged to
A
sell the property (or properties) in due course and invest the proceeds
9
Q
If the client is content that the estate trustees will give effect to the client’s wishes, the will may refer to
A
memorandum that the client prepares at some future time (and amends from time to time) and keeps among the client’s personal papers
10
Q
Are the client’s wishes legally binding on estate trustee
A
no
11
Q
Is a testamentary binding on estate trustee
A
yes
12
Q
If the client expects the dispositions to be testamentary, the lawyer should instruct the client to prepare
A
the memorandum before the will is signed and advise the client that any changes made to the memorandum subsequent to the will’s signing have no legal effect
13
Q
“incorporation by reference.”
A
memorandum must have come into existence prior to the signing of the will, and the court must have no doubt that the document is the one referred to in the will
14
Q
Where the interest fails because of a predeceased residuary beneficiary, the interest will
A
pass as on an intestacy
15
Q
What is not subject to this lapse rule
A
Class gifts are not subject to this lapse rule, since the testator is considered, in such circumstances, to have expressed the requisite contrary intention
16
Q
As a result of a recent amendment to the FLA, a surviving spouse who elects in favour of an equalization of net family properties is required to
A
set off against the equalization entitlement the value of any property acquired as a consequence of the deceased spouse’s death, including property received from a third party.
17
Q
Simultaneous deaths (or deaths in quick succession within the survivorship period stipulated in the will) will result in
A
cash legacy being paid from each of the estates (assuming there are sufficient assets in each estate).
18
Q
Doubling-up of legacies
A
If my spouse predeceases me or survives me for a period of less than 30 days…
19
Q
all interests in property must vest within the so-called
A
“perpetuity period.” In the case of a will, the perpetuity period commences on the death of the testator and ends on the 21st anniversary of the date of death of the last relevant life-in-being at the beginning of the period
20
Q
The weight of authority appears to be that “the income that is the subject of that void direction,” if arising from a specific fund vs residue
A
if arising from a specific fund will fall into residue, but if arising from residue will pass as on an intestacy
21
Q
only exception to marginal tax rate rule
A
testamentary trust for a named beneficiary who qualifies for the disability tax credit. For those trusts only, taxation of undistributed income at graduated rates is possible provided appropriate elections can be made
22
Q
“claw-back” rule that will apply if the beneficiary does not ultimately receive the benefit of the undistributed income
A
trust will have to pay all of the income tax savings over the years during which the graduated rates applied
23
Q
Rule in Saunders v. Vautier
A
where all of the beneficiaries having an interest in a trust are of the age of majority, they may together demand the distribution of the trust property, notwithstanding a direction that the trustees are to continue to hold the trust property until a specified date or until the happening of a specified event
24
Q
if a gift, when properly construed, is an absolute one, the beneficiary can demand to
A
receive it upon attaining the age of majority, irrespective of a direction that distribution be delayed until some later time.
25
if property is held in trust for a class of beneficiaries, the beneficiaries can collectively demand
distribution when the last of them has attained the age of majority
26
Typical language that will risk a beneficiary’s “busting the trust” is the following
My trustees shall keep the trust invested until my son attains age thirty (30), at which time they shall pay or transfer the trust capital to him
27
Signing the will
signed at its physical end by the testator and by at least two witnesses
28
A testator who is illiterate or is for any other reason unable to sign the testator’s name may instead
make a mark such as an “X” as indicative of his signature or another person on the testator’s behalf may sign it in the testator’s presence and at the testator’s direction
29
each of the required witnesses need sign only
in the presence of the testator
30
Neither witness should be
beneficiary or the married spouse of a beneficiary. Otherwise, any bequest or devise to the beneficiary will be void, unless a court is satisfied that neither the beneficiary nor the spouse exerted “any improper or undue influence” on the testator
31
Who can be will witness
nothing to preclude the will drafter or an executor from acting as a witness
32
What will avoid the problem and added costs where, at the time the will is to be submitted for probate, each of the witnesses is deceased, mentally incapacitated, or cannot be found
An affidavit of execution from one of the witnesses should be procured at the time the will is signed or as soon as possible thereafter
33
Holograph wills formalities
requires no witnesses or other formalities of execution
34
The client knows what the client wants to do but time or other constraints preclude a meeting with the lawyer
lawyer to dictate the essential terms of the will (or codicil) over the telephone or to send the text via fax or email
35
What if a person attempts to make a holograph will by filling in the blanks of a do-it-yourself will kit of the type that is often found in bookstores and, in modern times, proliferates on the Internet?
Canadian case law is clear that if the witnessing formalities are not present, all that can be admitted to probate as a holograph will is the handwritten portion of the document.
36
lawyer should secure a written direction from the client that if, for any reason, the lawyer is at some future time unable to contact the client, the lawyer may, at the lawyer’s own expense
deposit the will with the local registrar of the Superior Court of Justice (r. 74.02 allows for such a deposit by a lawyer who has custody of the will and intends to retire from practice or by a lawyer who has been given the testator’s written authority to so deposit the will)
37
powers of attorney are governed by
common law of agency
38
agency relationship terminates when
donor becomes mentally incapable
39
In the absence of a continuing power of attorney for property
third party stakeholders (e.g., financial institutions) will normally freeze the assets until a person with legal authority to manage the property is appointed by the court
40
Grantor scope of authority
do anything in respect of property that the grantor, if capable, could do, except make a will for the grantor.
41
Unless the document provides otherwise, two or more appointed persons must act
jointly
42
appointments as being “joint and several.” This language is appropriate only where
document is affixing liability between or among 2 or more persons and not, as here, where it is assigning authority between or among 2 or more
43
If the client intends that any one of the persons appointed can act alone, do not describe the appointments as being
“joint and several.”
add the words “either/any one of whom can act alone.”
44
Powers of attorney require execution by the grantor in the presence of
two witnesses
45
Certain persons are disqualified as witnesses
▪ the attorney or the attorney’s spouse or partner; ▪ the grantor’s spouse or partner; ▪ a child of the grantor or a person whom the grantor has demonstrated a settled intention to treat as the grantor’s child; ▪ a person whose property is under guardianship or who has a guardian of the person; and ▪ a person under 18 years of age.
46
Despite these formal requirements for execution, a court may declare the efficacy of a continuing power of attorney for property that does not comply with them “if
court is satisfied that it is in the interests of the grantor or his or her dependants to do so
47
The SDA contains transitional rules for powers of attorney for property signed on or before October 3, 1995 (the date after which the SDA requirements as to execution must be met).
If such a power of attorney contains the requisite language regarding its continued efficacy notwithstanding the grantor’s loss of capacity, it will be valid even if it has only one witness, so long as it meets all the other requirements of the prior legislation under which it was signed.
48
attorney’s resignation will not be effective until
copy is given to the grantor and any other named attorneys, including substitutes
49
If the grantor has become incapable and there is no substitute attorney appointed by the instrument who is able or willing to act, the attorney’s notice of resignation must also be given to
the grantor’s spouse or partner and relatives who are known to the attorney and reside in Ontario
50
If the grantor and the grantor’s spouse are living separate and apart
notice need not be given to the spouse or to persons related to the grantor solely by marriage
51
execution of a new continuing power of attorney for property automatically revokes a previous continuing power of attorney for property, unless
new document provides that there are to be multiple powers in co-existence
52
The grantor’s property cannot be unduly depleted so as to
become insufficient to satisfy the support, education, and care of the grantor himself or herself
53
Charitable gifts by the attorney are permitted if
specifically authorized in the document or if there is evidence of similar gifts made by the grantor while capable
54
Charitable gifts are limited under these circumstances to
20% of the grantor’s income in the year or the maximum set out in the continuing power of attorney for property document, whichever is less
55
Such charitable gift limits can be exceeded only by
obtaining a court order
56
any attempt to enter into a large-scale gifting program for the grantor during the grantor’s lifetime would be
an attempted circumvention of the will making prohibition—and therefore subject to attack— unless the grantor was in the midst of such an inter vivos gifting plan prior to incapacity
57
prohibits the attorney from disposing of property specifically given in the will (s. 35.1(1)), unless
disposition is necessary to comply with the guardian’s duties or the property is given to the intended beneficiary within the terms of the guiding principles for gifts or loans
58
Two differing standards of care are applied to the attorney
An attorney who is not receiving compensation must exercise the degree of care, diligence, and skill that a person of ordinary prudence would exercise in the conduct of the person’s own affairs.
A paid attorney, on the other hand, has the higher standard of a person in the business of managing the property of others
59
passing of the attorney’s accounts
with leave of the court may apply for a passing
60
If the document is silent re compensation, the SDA provides that an attorney under a continuing power of attorney for property may
take annual compensation from the property in accordance with the prescribed fee scale on a monthly, quarterly, or annual basis
61
General, O. Reg. 26/95, made under the SDA, sets out fees of
3% of capital and income receipts, 3% of capital and income disbursements, and 3/5 of 1% of the average market value of the assets as an annual care and management fee
62
On the passing of accounts, the court has the authority to
reduce that quantum
63
Powers of attorney for personal care take effect when
(a) when the HCCA applies to the decision and authorizes the attorney to decide, or (b) when the HCCA does not apply and the attorney has reasonable grounds to believe the grantor is incapable of making the decision, subject to such limitations as the document itself might specify
64
Two Ontario statutes may circumscribe the client’s testamentary freedom
(1) Part V of the SLRA (dependant support), and (2) Part I of the FLA (property rights of married spouses)
65
The person appointed as an attorney under a power of attorney for personal care will, subject to any conditions or restrictions contained in the document, place the attorney
ahead of all of the grantor’s relatives for purposes of giving or withholding consent to a treatment
66
authority under a power of attorney for property to continue, notwithstanding the donor’s loss of mental capacity, if
donor declared that intention in the document evidencing the attorney’s authority
67
Formalities for memo
There are no witnessing or other formalities for making a memorandum intended to have legal effect.
68
where a beneficiary predeceases the testator
intended testamentary gift will lapse.
69
A power of attorney for property is a continuing power of attorney if the document
(a) so declares itself, or (b) expresses the grantor’s intention that the authority given to the attorney may be exercised during the grantor’s subsequent incapacity to manage property
70
Avoiding the application of the Rule in Saunders v. Vautier
suffice to provide for a gift over to another or others in the event the beneficiary dies before the date or event described. In that case, one cannot say that the beneficiary has an absolute gift. Rather, vesting of the beneficiary’s interest is subject to a condition, either precedent or subsequent, with another or others having an interest as well.
71
Capacity - in order to be capable of giving a power of attorney for personal care, the grantor must
▪ have the ability to understand whether the proposed attorney has a genuine concern for the person’s welfare; and ▪ appreciate that the person may need to have the proposed attorney make decisions for the person.
72
A person may be ______ of personal care/property and yet be _________ of giving a power of attorney for personal care/property
A person may be incapable of personal care and yet be capable of giving a power of attorney for personal care
73
Qualifications – attorney for personal care vs property
Care – at least 16
Property – at least 18
74
Certain individuals are prohibited from acting under a power of attorney for personal care
individual provides health care to the grantor for compensation or provides residential, social, training, or support services to the grantor for compensation
75
SDA defines a spouse to include a common-law relationship of
one year or longer, or a shorter conjugal relationship if the parties have parented a child together or have entered into a cohabitation agreement
76
“partner” is someone who has lived with the grantor for at
least one year in a close personal relationship that is of primary importance in both persons’ lives
77
A “relative” of the grantor would include relations by
marriage, adoption, and blood
78
Alternative methods for witnessing a will
▪ remote witnessing by appropriate technology that allows the testator and the two witnesses to see and hear one another in real time and, in particular, to watch one another sign the will (with the proviso that one of the two witnesses must be a licensee under the Law Society Act); and
▪ the use of counterparts of the will so that the testator and the two witnesses (again, where one of the two witnesses must be a licensee under the Law Society Act) can sign separate but substantively identical documents, using the remote technology referred to above, with the result that the counterparts will together constitute the will.
As of May 20, 2021, the first option was no longer permitted while the second, “counterparts” option (with the added requirement that the counterparts be made contemporaneously), was made permanent and is now a valid legal alternative to the in-person witnessing of wills.
79
Suppose a grantor of a power of attorney for personal care is incapable of making a decision respecting the grantor’s personal care while in a foreign jurisdiction
make inquiries in that jurisdiction as to the extent, if any, to which the authority of the attorney under a power of attorney for personal care will be recognized locally
80
power of attorney for personal care/property is terminated on the happening of any of the following events
▪ The attorney dies, becomes incapable of personal care/property, or resigns, unless the document has appointed a co-attorney or provides for a substitute attorney in such an event. ▪ A court appoints a guardian of the grantor’s person. ▪ A new power of attorney for personal care is signed, unless it states that there may be multiple powers of attorney for personal care. ▪ The grantor revokes the power of attorney for personal care/property
Property one more – grantor dies
81
revocation must be in
writing, and the formalities for revocation are the same as those for making one
82
With regard to a health care decision governed by the HCCA, a dispute between co-attorneys with respect to a particular decision will result in the decision’s having to be made by
by the PGT
*even if the grantor has included a rule for dealing with such disputes (for example, majority rule in the case of three co-attorneys)
*If the grantor intends rule be followed, include a direction that the PGT, if called upon to make a health care decision, shall decide the matter in accordance with that rule
83
if no incapacity testing method has been set out in the document itself
SDA contains a test of last resort involving an assessment by an assessor
84
power of attorney for personal care purports to authorize the attorney or others to use necessary or reasonable force to undertake the capacity assessment
an authorization requires the grantor to sign a statement in prescribed form at the time of execution of the power of attorney or within 30 days afterwards acknowledging an understanding of the effect of the provision, and the completion of an assessment by an assessor confirming capacity
85
Revocation of a power of attorney for personal care containing above provisions
an assessment by an assessor confirming capacity no more than 30 days before the revocation is signed
86
“Living will” provisions
rules governing the exercise of a power of attorney for personal care in relation to health care decisions are set out in the HCCA. The HCCA requires any substitute decision maker (including the attorney appointed under a power of attorney for personal care) to follow the wishes of the grantor, if known
87
the power of attorney for personal care can function as a so-called “living will”
- b/c both the SDA permitting the appointment of a substitute decision maker for, inter alia, health care decisions and the HCCA requiring the attorney to follow the grantor’s wishes
- setting out instructions in the document as to what treatments may or may not be administered
88
Legally bound to respect wishes?
yes
89
medical assistance in dying (MAID)
power of attorney for personal care is not the appropriate vehicle
90
A later wish or instruction expressed while the grantor was capable prevails over
an earlier wish or instruction
91
If the attorney does not know of a wish or instruction applicable to the circumstances that the incapable person expressed while capable or if it is impossible to make the decision in accordance with the wish or instruction, the attorney shall
make the decision in the incapable person’s best interests
92
The power of attorney for personal care may stipulate the compensation to be paid to the attorney for acting as such. If the document is silent
the attorney may claim such compensation as is prescribed by regulation. No such regulation has yet been made
93
What is expressly set out in the statute (s. 47(1)) is that in order to be capable of giving a power of attorney for personal care, the grantor must
▪ have the ability to understand whether the proposed attorney has a genuine concern for the person’s welfare; and ▪ appreciate that the person may need to have the proposed attorney make decisions for the person.
94
Practice for docs for property
One or two signed original powers of attorney of property may be needed for each piece of real estate held by the grantor, depending on the location and registration system that applies, and a copy may be needed for each institution with transfer authority over assets.
95
“standard procedure” vs the “summary disposition procedure.”
summary disposition procedure - two assessments (at least one by an official “assessor”) are required, appointing a guardian of property without a hearing, i.e., “over the [registrar’s] counter” to a sitting judge’s chambers
standard - hearing, and the summary procedure is “over the counter,” meaning the application is read by a judge in chambers without a hearing
96
A proceeding to have a person appointed as guardian of another’s property is commenced by
notice of application
issued (meaning filed in court and served on all required parties)
97
POA - notice of application should seek a finding that
person is incapable of managing property and, as a result, it is necessary to appoint a guardian of property
98
POA - Type of service of the notice of application on res
Personal
99
POA - Type of service of the notice of application on specified relatives
Ordinary mail service
100
require evidence of incapacity in the form of
capacity assessment by a duly-qualified assessor
101
POA - Evidence may be given by affidavit, but such evidence is not to be on
“information and belief” except with respect to facts that are not contentious
102
POA - Affidavit of applicant
- nothing in the SDA requiring an affidavit
- unless the applicant intends to call viva voce evidence, an affidavit by the applicant will be required
103
procedure in accordance with Re Avery
some lawyers use affidavits from at least two physicians
104
POA - Specified relatives and parties
specified relatives are not automatically parties to the proceeding. However, r. 38.07(3) authorizes them to become parties at any stage of the application
105
Management plan in judgment
no provision that specifically requires the court to incorporate the management plan or a form of management plan into the judgment. However, s. 32(10) requires the guardian of property to act in accordance with the plan
106
Property - summary disposition procedure
- statements from at least two medical assessors, or one assessor and another person (who saw the alleged incapable person within one year prior to the issuance of the notice of application), who must meet with the alleged incapable person and provide statements in a prescribed form
- At least one of these statements must include the opinion that it is necessary to appoint a guardian for property to make decisions on the allegedly incapable person’s behalf
107
Property – summary disposition - To arrange a capacity assessment
either write a letter to the Capacity Assessment Office advising that an assessment by one or two assessors is required or phone directly to make the request.
108
Section 1 defines “assessor.”
Assessors must be a member of one of the colleges specifically listed in Capacity Assessment, O. Reg. 460/05, made under the SDA
109
Property – summary disposition - Conducting the assessment
made during the “six months before the notice of application to appoint a guardian of property was issued.”
110
Property – summary disposition - notice of application must be issued when
after the assessment has been conducted, or this element is not met
111
Property – summary disposition - If a non-assessor provides a statement
person knows and has been in personal contact with the alleged incapable person during the 12-month period before the notice of application was issued
112
Property – summary disposition - If a non-assessor provides a statement, notice of application must be issued when
after the date of such personal contact
113
Property – summary - substantive portion of the prescribed statement provides an opinion regarding
- person is incapable of managing property and sets out the details upon which that opinion is based
- provide an opinion in the statement as to whether it is necessary for decisions to be made on behalf of the alleged incapable person by a guardian for property
114
Property – summary - registrar is required to submit the documents directly to a judge if the applicant certifies in writing the following
▪ No notice of appearance has been delivered. ▪ The appropriate documents accompany the application. ▪ At least one of the s. 72 statements indicates that its maker is of the opinion that it is necessary for decisions to be made on the person’s behalf by a person who is authorized to do so.
115
Property – summary - if the applicant is seeking costs payable out of the property of the mentally incapable person, this must be
set out in a draft judgment
116
Property – summary - Disposition by the court
▪ make judgment without a hearing; ▪ require the parties to provide additional evidence or attend at a hearing; or ▪ order that the application or any issue proceed to trial and give directions for the trial.
117
Where a non-assessor expresses the view that a person must be appointed to make decisions for the incapable person but the assessor does not express that same view
the court might refuse to grant the order
118
Property — summary disposition procedure – app record
notice of application, the affidavit of the applicant, the statements received from the assessor(s) and non-assessor, as applicable, and the consent of each proposed guardian
119
Care - summary – dispositions by court
all of the steps in the “standard” route, plus two assessments by assessors from the Capacity Assessment Office
120
Care – standard - Initial documentation to be prepared for care
a notice of application (SDA, ss. 55 and 69(3)), an affidavit of the applicant, and arguably a capacity assessment
121
optional third-party statements
Guardian of the person — standard procedure
122
The court makes an appointment of a full guardian only if
the person is incapable of all the functions in s. 45 (s. 59(1)). Otherwise, the court makes a judgment for partial guardianship regarding some but not all of the functions set out in s. 45
123
Guardian of the person — summary disposition procedure
Two assessors must meet with the alleged incapable person, perform an assessment of the person’s capacity during the six months before the notice of application is issued, and provide statements in the prescribed form
124
Ranked list of substitute decision makers - separated spouse
remains a “relative” (s. 20(10)) and could give or refuse consent if there is no one above that separated spouse in the statutory hierarchy who is available and willing to do so
125
“guardian” is a person who has guardianship of the
property of the minor.
126
testamentary appointment of a person to have decision-making responsibility with respect to a minor child is effective only if the person making the appointment
(1) is the sole individual having decision-making responsibility with respect to that child on the day immediately prior to the day the appointment is to take effect; or (2) has, together with another person, decision-making responsibility with respect to the child and the two of them die at the same time or in circumstances that render it uncertain who survived the other.
127
With respect to (1), if a minor child has a sole living parent, the previous testamentary appointment by the now deceased other parent of that minor child would be
ineffective. (Equally ineffective would be the testamentary appointment by a parent who had previously lost the entitlement to decision-making responsibility by order of a court.)
128
no testamentary appointment is effective without
consent of the person appointed
129
testamentary appointment expires when
90 days after the appointment becomes effective
The appointed person will have to apply to the court within the 90-day period prescribed by s. 61(7) to make the appointment “more permanent,”
130
any person can when apply to be granted decision-making responsibility with respect to a minor child
any person is at any time entitled to apply
subordinates any testamentary appointment to the outcome of a s. 21 application by someone other than the appointee
131
inherent right to possess or control property of child?
Neither a parent nor any other person having decision making responsibility with respect to a minor child has an inherent right to possess or control property or assets otherwise belonging to that child. Such parent or other person may, however, apply to the court to become appointed as a guardian of that minor child’s property.
132
the surviving parent may die intestate or may die with a valid will that fails expressly to authorize the estate trustee to retain a minor child’s inheritance in trust and administer the trust during the child’s minority.
estate trustee is generally required to pay into court the estate funds to which the child is entitled
133
Absent a court appointment of a guardian of the minor child’s property, such entitlements (with the exception of amounts qualifying under s. 51 of the CLRA, as described below) would be
paid into court to the credit of the minor child and held there during the child’s minority or until a subsequently appointed guardian of property makes a successful application to control those funds.
134
Pursuant to s. 47 of the CLRA, any person, including a parent, may apply to the court to be appointed as guardian of property of such child. Where such an order has been obtained, all of the monetary amounts and benefits envisaged in the foregoing paragraphs may
be paid to the appointed guardian of property
Such an application must be made on notice to the Children’s Lawyer, pursuant to s. 47(1) of the CLRA
135
parents of minor children to put together a letter or memorandum to the appointed person with decision-making responsibility and/or estate trustees binding?
no
136
Who can possess and spend trust funds on behalf of the minor child
appointed trustee
137
where no guardian of a child’s property has been appointed, the estate trustee may
pay or deliver to the child’s parent (or other individual having decision-making responsibility for the child), cash or personal property for the benefit of the child up to an amount prescribed by regulation (currently $35,000)
138
if the testator wishes to permit a parent (or individual having decision-making responsibility for a minor child) to receive distributions from the estate trustee for that child’s benefit, the will should expressly appoint that recipient as
“special trustee” for such purpose, thus giving rise to all the obligations that flow from the appointment of a trustee
139
Income Tax Act (ITA) defines the term “common-law partner”
▪ has so cohabited throughout the 12-month period that ends at that time; or ▪ is a parent of a child of whom the taxpayer is a parent.
140
income tax treatment afforded spouses and common-law partners is
identical
141
The two essential features of an express trust are
creates a fiduciary relationship between the trustee and the beneficiary and it involves a transfer of property to the trustee.
142
Trustees as agents
trustees are not normally agents of the beneficiaries.
*The trustees act as principals and not as agents in their transactions with third parties
143
Bene power over trustees
beneficiaries generally have no rights or powers against or over the trustees except to insist that the terms of the trust are performed in accordance with the provisions of the trust instrument
144
trustees’ primary obligation is to
carry out the instructions of the settlor by exercising powers and performing obligations for the benefit of the objects (beneficiaries) of the trust
145
One exception to the principle that the trustees are not agents of the beneficiaries is
bare trust; namely, a trust under which the trustees have no independent powers or discretions and are subject to the primary and overriding obligations to carry out the instructions of the beneficiaries
146
for an express trust to be effective and recognized, it must have three essential characteristics
- The intention of the settlor must be imperative
- The subject matter or trust property must be certain (certainty of subject matter).
- The objects or persons intended to have the benefit of the trust must be certain
147
revocable trust
may be revoked and the property comprising the trust assets returned to the settlor
148
trustee cannot normally delegate
decision-making power. Although a trustee may seek advice, responsibility for the ultimate decision lies with the trustee
149
Taxation of trusts
deems a trust or estate to be an “individual” for tax purposes
150
A testamentary trust (which includes an estate) that has been created by will and the estate of a taxpayer who has died intestate are both treated, for tax purposes, as
trusts
151
For tax purposes, the estate of a deceased is
separate and distinct from the deceased
152
The deceased is taxable on the deceased’s income up to
the day of death, and any income after that time is taxed separately as the estate’s income
153
Such amounts constitute income to the beneficiary, and in order to ensure that the trust is not taxed on the same income, the ITA provides
the trust with a deduction for all amounts flowed through to beneficiaries.
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There are two main circumstances in which a trust or estate may flow income through to its beneficiaries and claim a deduction
▪ The trust or estate actually distributes the income to its beneficiaries (or expends funds on behalf of its beneficiaries). ▪ The income is declared “payable,” although not actually paid, to the beneficiaries.
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trust is generally considered to reside where
the trustee, executor, administrator, or other person who de facto exercises central management and control over the trust assets does so exercise those powers
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taxation year of an inter vivos trust must always coincide with
calendar year
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non calendar year-ends are now only available to
“graduated rate estates,” i.e., estates in the first 36 months after the individual’s death.
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graduated rate estate will have a deemed tax year-end on the day on which
estate stops being a graduated rate estate, which will be no later than the day on which the 36-month period after the death of the individual ends, and later tax year-ends will be on a calendar-year basis.
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Every person acting in a fiduciary capacity, such as an executor, trustee, or administrator, and having ownership or control of property on behalf of some other person must file a
“trust income tax and information return” (T3 return).
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An inter vivos trust is taxed at
flat rate of tax equal to the highest marginal tax rate applicable to individuals
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estates of deceased individuals are eligible to retain, as testamentary trusts, access to which rates for up to the first 36 months of the estate administration
graduated rates
After the 36-month period that follows the individual’s death, the estate is subject to the flat top rate. These measures apply to existing and new estates for the 2016 and later taxation years.
