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The-Last-Word

Making sure your will is valid

Setting your final wishes

What are the magic words necessary for a will to be legal (or “valid” as we say in legal circles)?

In my last column, I explained that even the most minimal of your words can be “cured” as a valid will, even if they are in a computer file. What’s necessary is for a judge to be satisfied that your words set out your fixed and final wishes about what you want done with your estate after you die (your testamentary intentions).

Many people make notes about what they might want to do with their estate without intending those notes to set out their fixed and final expression. For an invalid will to be cured, there must be reliable evidence that the document was created by you and that it actually sets out your testamentary intentions.

It’s best not to leave it up to an uncertain court application—particularly uncertain because you won’t be there to tell the judge that you are the one who wrote those words, nor what your intentions were.

And the court application isn’t cheap.

Let’s get back to the scenario in my last column. You’re on your way to the hospital for major surgery. Any major surgery comes with the risk of death, however minimal. You realize you have never made a will.

I’ll add some details to make it more interesting.Your only close family are your brother and father. You have a very close relationship with your brother, who has been an incredible support. The most significant was helping with the down payment on your condo. Without his help, purchasing it would not have been possible. What a wonderful brother.

Your dad’s a different story. After your mom passed away, your dad found a new partner who you can’t stand. You might have received the down payment help from your dad, but his new partner convinced him to leave you on your own.

It’s very important to you that your condo go to your brother if you don’t make it through the surgery. Certainly, anyone other than your dad.

The stakes are high because if you do not create a valid will, that’s exactly what will happen.

Why? British Columbia has a law that sets out a hierarchy of who will get your estate if you die without a will. Absent a spouse or children, it goes to your parents. Magic words? There are none.

Your words must simply make it clear you are setting out your testamentary intentions, i.e. who you want to receive your estate if you die. Having a title that says “Will” or “Last Will” is a very helpful indication of that intention. But it’s not a legal requirement.

The following would be plenty: “I want my estate to go to my brother”. If you’ve only got one brother, there is no need to even name him. You would save your brother a bit of hassle by appointing him your executor (“I appoint my brother as executor”), but the appointment of an executor not required for a will to be valid.

The only magic to making a will valid has to do with how it’s signed and witnessed. To be valid, you must have two adult witnesses who are present with you when you sign the will, and who then each sign the will in your presence.

One of those witnesses should not be your brother. A gift to someone who witnesses your will is void. Though like many other things in this area of law, even that can be fixed by an application to a judge if the judge is satisfied that you truly intended to make that gift.

And that’s it. It can be handwritten on whatever you’ve got to write on. ( i.e. a napkin would do.)

You can then be rolled into surgery, comforted that you have a valid will naming your brother as beneficiary.

I want to be very clear here, I don’t recommend this kind of bare bones approach, though it will do in a pinch.

I recommend taking the time and incurring the expense of consulting a lawyer with estate planning expertise, as well as an estate tax accountant, as soon as possible after you make it through your major surgery.

A valid will is not the end goal. The goal is the outcome, after you die, that you wanted. In this extremely simple fact pattern, that goal will very likely be achieved if you die during surgery.

I say “very likely” because there are unlikely scenarios I could share with you where the estate would actually go to your dad, even with that valid will. A lawyer with estate planning expertise can anticipate and deal with those scenarios to ensure that doesn’t happen.

As I’ve indicated before, I don’t provide those services, but I can refer you to those who do.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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When is a will actually a will?

Last-minute will

You come to terms with your mortality on your way to hospital for major surgery.

You never got around to having a will prepared. Can you quickly write a will while you wait to be processed? Are there special words necessary to make it legal? Can it be written on a scrap piece of paper? Does it have to be signed in some specific way?

I’m going to answer those questions by telling the true story of a Mr. Hubschi.

A detailed version of the story, along with fascinating legal analysis, is the reported decision of B.C. Supreme Court Judge Trevor Armstrong in the case of Hubschi Estate (Re), 2019 BCSC 2040 that can be accessed online here.

Hubschi was born in Vancouver on March 7, 1961, to a Swiss mother. He never knew his mother, who had put him into the care of a children’s aid society at birth. At age three, he was placed into the foster care of Mary and Jack Stack, who already had five of their own children.

It was a wonderful foster home. The Stacks treated young Hubschi as one of their children.

Armstrong described Hubschi’s relationship with his foster siblings: “There is no doubt that Mr. Hubschi had a close attachment to all members of the Stack family and considered them, as they did him, siblings in this tight knit family relationship”.

But Hubschi was never adopted. He never married and had no children of his own.

In the spring of 2017, at the age of 56, he underwent a surgery and passed away 22 days after being discharged from hospital.

At the time of his death, he had approximately $175,000 in savings and some other assets.

I will devote a future column to what happens to your assets if you die without a will. There is a set of rules but in Hubschi’s circumstances, his estate would have gone to extended relatives in Switzerland who he never met or had a relationship with.

His foster siblings searched his apartment unsuccessfully for a will. They managed to unlock his computer and found a file called “Budget for 2017” that appeared to have been modified on the day of his death.

Armstrong described Hubschi’s circumstances at the time: “…at that time he was physically unable to move around due to pain in his leg and was most likely confined to his apartment due to his post-surgery complications.”

The computer file included the following words: “Get a will made out at some point. A5 – way assets split for remaining brothers and sisters. Greg, and at or Trevor as executor.”

That’s an exact quote, you can read it for yourself in paragraph 15 of the court decision.

Circling back to the scenario I presented at the beginning of this column. There are no special words. It’s was not even in print, let alone on a scrap of paper, and of course it’s unsigned.

British Columbia law does have some specific requirements for a will to be valid. The computer document did not meet those requirements. But B.C. law allows a judge to “cure” a defective will if the judge is satisfied it represents the deceased person’s testamentary intentions.

After considering all the circumstances, Armstrong was satisfied the computer file contained Hubschi’s testamentary intention that his estate be divided five ways between his brothers and sisters.

The court order said: “[60] I order that the document prepared by Mr. Hubschi will be fully effective as though it had been made as the testamentary intention of Mr. Hubschi and that probate of the will be granted to Gregory Kenneth Stack on the basis each of the Stack children will receive a one-fifth interest in his estate”.

So yes, you can quickly write a will on a scrap of paper on your way into surgery without any magic words and without following proper signature/witness protocols and that scrap of paper will be “cured,” provided a judge is satisfied that what you wrote represents your testamentary intentions.

Please read my next column, when I share the magic required for your handwritten, scrap-of-paper will to be valid and not require your beneficiaries to go through the uncertain and expensive process of asking a judge to “cure” it.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



Fending off the greedy capital gains 'fairy'

Capital gains avoidance

I slipped it in a brief tax warning at the tail end of my last column.

I know, it was unfair to those struggling to stay awake to the bitter end.

So, let’s hit it head on. Buckle up. First, if you’re new to my column please read my last two, which explain how joint ownership can sidestep probate.

Canada is a fantasy land. A little fairy pops out the moment before we die and waves their magic wand. Poof! Everything we own has been sold and repurchased.

I’m not making this up.

Who did we sell everything to? The fair value monster. The monster pays us fair market value for everything we own.

The home Greg paid $440,000 for 10 years ago? The moment before Greg passes away, the fair value monster purchases it for $900,000, the exact amount it would sell for if listed for sale. Brilliant! No real estate commissions.

But Greg doesn’t get to keep the cash. The party “poofer” is Greg immediately buys it back for the exact same amount of money.

What does that have to do with tax? That fanciful little transaction triggered a capital gain.

A capital gain is when you earn money by selling something at a higher price than you bought it for. The capital gain Greg earned on the fanciful sale of his home was $460,000 ($900,000 market value minus the $440,000 he paid for it 10 years ago).

Thank goodness for the homeowner’s exemption or Greg would have to pay a boatload of tax on that massive capital gain.

Well, not Greg. He’s dead. That tax would be paid out of his estate.

But what if, when Greg purchased his home 10 years ago, he cleverly transferred title so it would be held in joint tenancy with his daughters, Maria and Grace, so they would avoid probate fees?

Over those 10 years, Greg owned only on-third of his home. As such, the little fairy trick triggers the homeowner exempt capital gain on only the 1/3 owned by Greg.

The joint tenancy trick works. Maria and Grace get the home fully in their names without having to pay probate fees.

But the massive capital gain on the two-thirds of the home Maria and Grace have owned for 10 years was not triggered. It will be triggered whenever Maria and Grace sell the home, and they will have to pay an amount of tax that makes probate fees look like chicken feed.

Does all this sound complicated? It gets much, much worse.

Let’s change things around. Instead of an owner-occupied home, it’s Greg’s Big White condo we re talking about and there is no homeowner exemption.

Greg puts the condo in joint names with only Maria because he has other assets of similar value that he’s going to give to Grace in his will. Maria is happy with getting a $900,000 condo because she and her family love to ski. Grace is happy as well, because she doesn’t like to ski and is getting $900,000 of other assets Hopefully they’re both sad about losing their dad, though.

The moment before Greg dies, the fairy trick triggers a capital gain on Greg’s 50% ownership of the condo. That’s a capital gain of $230,000 (50% of the $460,000.00 calculated above).

Whose capital gain is that? It’s Greg’s. And it’s paid out of his estate. That means it’s paid out of the $900,000 that was supposed to go to Grace. Not quite what Greg intended!

I’ve scratched only the surface of consequences of Canada’s little fairy, and only as related to real estate. The fairy’s wand applies to all assets—RRSPs, investment accounts, you name it.

And the fairy doesn’t care about fairness. There is a risk, with shares in closely held companies, of the fairy trick resulting in tax being paid twice on the same gain.

My head spins when delving into the nuances —and the clever strategies that estate tax accountants come up with to circumvent the fairy.

If you’re feeling the pressing need to consult with an estate tax accountant, I’ve achieved my goal.

Unless you’re way smarter than me and have the time to learn and stay up-to-date about the ever-changing tax laws, it’s dangerous not to get estate tax advice to avoid unfairness and ensure your estate passes the way you intend.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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The pitfalls of putting adult children on property titles

Trying to avoid probate fees

Is it a good idea to hold bank accounts and property in joint names with your intended beneficiaries to avoid probate fees and expenses?

My last column explained how the probate process and associated legal fees can be avoided if joint ownership deals with all assets that would have required an estate grant. I ended the column with a caution that one should consider the potentially bad consequences of taking that step.

Brenda is a 78-year-old widow with two children, Jessica and Dave.

Jessica is a divorced mother of Brenda’s grandchild, Stacey, who has a wonderfully close relationship with Brenda. Jessica has been cohabiting with a new partner, Steve, for a number of years.

Dave goes in and out of relationships and has no children.

Brenda lives on a modest pension in a small condo worth $450,000. She has a TFSA worth $65,000 and a savings account that fluctuates but is usually above $50,000. She wants to make things as easy as possible for Dave and Jessica. She has decluttered her belongings, discussed with her children who will get anything of value, jewelry and furnishings, and has pre-planned and pre-paid for her funeral.

She read my column about how the time-consuming and expensive process of probate can be avoided and added Jessica and Dave as joint-owners of her condo and savings account. She also named them as beneficiaries of her TFSA, which is how that asset can go to them without probate as well. She threw my caution about joint ownership to the wind.

Dave makes a good living in the oil industry but overextends himself with an expensive lifestyle, driving an expensive jacked up pick-up truck and always has the latest quad and snowmobile. His financial world collapses when a quadding injury disables him from working. He doesn’t have disability insurance. Making matters worse, his quadding passenger is seriously hurt and pursues a legal claim because of Dave’s carelessness.

Intending to reimburse the account as soon as he recovers, Dave starts paying rent and making his high credit payments out of the joint savings account. Brenda gets the shock of her life when her son comes clean about draining her savings account. That’s when she also learns about the lawsuit which, if successful, will put her home in jeopardy because Dave is on title and has no other assets to pay a judgment.

Dave offers to remove his name from the title to protect the home from circling creditors, but he learns that property transfers made with that goal are unlawful and can be reversed.

Then there’s Jessica. She and her partner Steve have been living large, expecting to share in the proceeds from the sale of Brenda’s home after she passes away. But their relationship sours and they break up. Their separation would be clean and easy if not for Steve’s claim against Jessica’s joint ownership interest in Brenda’s home. Steve’s lawyer gets a court order freezing Jessica’s assets immediately upon their separation.

Yikes!

What about the wonderful scenario of Brenda finding love with someone she meets at her weekly bridge club. The two lovebirds decide to live their lives to the fullest, with plans to travel the world and indulge themselves with life’s expensive pleasures. To do so, Brenda needs to access equity in her home. The only way she can get a reverse mortgage is to get her children off title.

Jessica and Dave are concerned their mom, who has become more and more forgetful, has fallen for a shyster who is only after her money. They refuse to transfer title. Their well-meaning refusal causes a rift in their relationship with Brenda.

How awful!

Finally, consider a scenario where Brenda suffers cognitive decline and then Jessica dies of cancer. Brenda is unable to change things on Jessica’s death because she no longer has the cognitive capacity to do so.

The problem is when Brenda dies, everything will pass to her son with nothing for Brenda’s granddaughter Stacey.

Probate fees on a $450,000 home and $50,000 bank account are only $6,450. Adding legal fees might bring the expense to $10,000 to $15,000.

These nightmare scenarios, and many others I could come up with, make probate sound like a walk in the park.

And then there’s tax implications. One of the most significant tax breaks we get is the capital gains exemption for our principal residence. When you sell your home, you don’t have to pay tax on what is often a significant increase in value.

That exemption is not enjoyed by a joint owner who does not reside in the home with you. Trying to save a few thousand dollars of probate expense might result in tens of thousands of dollars of tax liability.

I recommend you invest the time and fees to consult with both an estate planning lawyer and an accountant with estate tax expertise so you can make fully informed and wise choices.

I do not provide estate planning services and I am not an accountant, but I will be happy to refer you.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

Lawyer Paul Hergott began writing as a columnist in January 2007. 

Achieving Justice, based on Paul’s personal injury practice at the time, focused on injury claims and road safety.  It was published weekly for 13½ years until July 2020, when his busy legal practice no longer left time for writing.

Paul was able to pick up writing again in January 2024. After transitioning his practice to estate administration and management.

Paul’s intention is to write primarily about end of life and estate related matters, but he is very easily distracted by other topics.

You are encouraged to contact Paul directly at [email protected] with legal questions and issues you would like him to write about.



The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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