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Flashcards in ROC Ethics and Professional Practice Deck (80)
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1

Legal capacity

Relates to a person's ability to provide valid consent

2

Natural persons (individuals)

Usually defined as a human being

3

Partnerships

Arrangement between two or more parties carrying on business together with a view of making a profit

4

Legal person (corporation)

A separate entity from those that manage or own it. Corporations effectively have most of the property rights of individuals, and so can enter into contracts, and buy, sell, and own all kinds of property.

5

Minors

Persons (individuals) who are under the "age of majority." For contracting a policy (but not as a beneficiary receiving death benefits), a person 16 yers of age or older has the capacity to contract for insurance on its own behalf.

6

Guardian

In their will, parents can appoint a guardian for their minor children and authorize the executor or estate trustee to make payments to such guardian.

7

Power of Attorney (PoA)

A legal document made by one person, called a "principal," who appoints another person, call an "attorney" or "agent," to deal with the business and property of another person and to make financial and legal decisions on their behalf.

8

Enduring PoA

PoA that will continue even if the principal becomes mentally incapable or making decisions.

9

Guardianship

Unlike enduring PoA, guardianships only come into effect after a person has been declared incapable.

10

Marriage

A formal legal status that is acquired and terminated pursuant to federal law. Has significant effects on property ownership and civil rights that are subject to provincial and territorial law. Creates legal rights and obligations. Presumed division.

11

Common law status

Determined by cohabitation in a conjugal or marriage-like relationship for a specific period of time. No presumed division.

12

Family property

Property that was acquired during the marriage, or is used or enjoyed by the family or married spouses, or that generates income that supports the family. Presumed subject to equal division when the married spousal relationship breaks down, but subject to a judge's discretion.

13

Property acquired prior to the marriage or relationship or that came from an inheritance during the marriage

Usually gets protection from division (as opposed to family property).

14

Estate

Collection of property and property rights that the deceased owned. An estate can be bankrupt, in which case the persons named in the will can simply refuse the inheritance.

15

Estate trustee

Person who controls the estate. Has the legal obligation to pay the debts (including taxes) of the deceased from estate assets, and to manage and distribute the remaining assets in accordance with the terms of the will.

16

Joint tenancy

Ownership of property held in joint tenancy with one or more persons usually passes outside the will.

17

Registered plans with a named beneficiary

Including RRSP, RRIF, TFSA, pass directly to the named beneficiary.

18

Life insurance with a named beneficiary vs. life insurance payable to the estate

Passes outside the will to the named beneficiary vs. Payable to the estate of the policyholder (determined under the terms of the will).

19

Surviving spouses under pension law

Obtain rights that have priority over designated beneficiaries, legateers and heirs, which are also received outside the will or the estate.

20

Dependent's relief legislation

Financially dependent persons, such as a surviving spouse or children, can sue the estate for support if the deceased person owed them duty of support and failed to make "adequate" provision.

21

Testate vs. intestate

Testate: Died with a will vs. Intestate: Died without a will

22

Effect of separation of married partners on a will

Has no effect. If clients wish to disinherit a former legal spouse (marriage) after separation, they need to change their will and their beneficiary designations, and sign a separation agreement.

23

Effect of revoked beneficiary designations on a will

If a policyholder's beneficiary designations contained in a will are revoked, and there is no valid beneficiary designation, the insurance or registered plan proceeds will become payable to the policyholder's estate.

24

Inter-vivos trusts vs. testamentary trusts

Inter-vivos trusts: Between living people vs. Testamentary trusts: Trusts established upon and as a consequence of someone's death

25

Guardians/PoA vs. trustees

While guardians and PoAs have certain powers over a person's property, they do not take title to the property vs. Trustees have legal title to the property given to them "in trust"

26

Trustee's obligations

Under a positive legal obligation to act as and when the need arises. A form or surrogate ownership, where the trustee has title to, and control over, the trust property with the obligation to distribute them to the beneficiaries (of the trust).

27

Insurance in trusts

Insurance proceeds can be used to create a trust fund or to enhance the size of an existing one. Trustees can own any type of property that individuals can, so they can also hold an insurance policy, pay the premiums (from trust monies) as long as necessary, and the neither transfer ownership of the policy to the beneficiary or collect and handle the proceeds of the insurance in accordance with the terms of the trust.

28

Effect of bankruptcy on insurance

Life insurance, or financial products that qualify as life insurance (ie life annuities and segregated funds) may qualify for special protection against creditors in the event of an insolvency or bankruptcy of the policyholder.

Insurance proceeds payable to beneficiaries do not form part of the insured's estate.

While a designation is in effect, the insurance money and the rights and interests of the insured therein and in the contract are exempt from execution or seizure.

For beneficiaries to be protected, there must be a specific provincial legislation which clearly states that a specific insurance product is exempt from seizure and under what conditions.

Pension funds are generally exempt from seizure.

In every province other than QC, it is possible for the owner of certain registered products to designate a beneficiary (in that case, the beneficiary will receive the death benefit outside of the estate and avoid probate fees).

29

Irrevocable beneficiary designation

Not common.

30

Asset protection

This is one reason that agents usually advise clients to name direct beneficiaries rather than their estate.