PLANNED PARENTHOOD - Estate Planning Considerations
for Parents
By JAMES I. McINTOSH
, Real Estate, & Municipal Law Departments
A Broader Concept
The understanding of the concept of planned parenthood has
traditionally been concerned with issues of birth control
and the prevention of unwanted pregnancies. As an alternative,
I would like to suggest a concept of planned parenthood
that has broader meaning. It should really embrace the broad
spectrum of parental planning that goes with bringing a
child into the world and raising a family. For some, it
occurs sporadically and on an unconscious level. For most,
it involves active consideration of many issues and options.
Planning the transition from looking after your own needs
to fulfilling the role of parents is challenging and requires
considerable thought. It includes the need to plan for and
deal with the physical, emotional and financial well-being
of each of the family members. It includes both short term
and long term plans.
A key element of parental planning involves management
of family finances. Whether it is done on a day-to-day,
month-to-month or year-to-year basis, it never stops. For
many, their first major exposure to management of family
finances begins with planning for a wedding. After that,
the arrival a new baby or the acquisition of the family
home become planning priorities.
As the family grows, the planning continues. Parents are
now required to plan their child’s involvement in recreation
and education programs. It cannot be left to chance as the
competition to get enrolled in the right program is too
great. The choices are no longer simple and each will have
an impact on your life and, especially, your child’s.
As parents, we are all faced with certain core considerations.
Where will the family live? Where will the children go to
school? How will we make ends meet? Will we be able to pay
for college or university? How can we afford to retire?
Of course, these are just a few of the vast number of questions
we are each faced with during the family and life cycle.
Plan for the Unexpected
One of the key issues to be considered is often overlooked
or put off to a later date. What happens when we die? The
time and place of death is not something we can generally
choose. While we all may hope for a long, healthy and prosperous
life with plenty of time to plan for eventual death, this
is not always the case. Sometimes, it comes unexpectedly,
whether we are prepared or not. As responsible parents,
I am suggesting that we should always be prepared and this
requires planning.
The death of a parent will have a direct impact on children,
whether they are infants, toddlers, teens or adults. Each
will have needs to be fulfilled and, for the adult, responsibilities
to be dealt with. If the parent has failed to plan ahead,
the decisions that are made may not achieve the intended
result. Assets might be depleted or transferred beyond the
reach of intended beneficiaries. Where there is no plan,
you have, in essence, given up your right to control the
process and left it to Provincial law to sort out. It is
often necessary to have issues sorted out in Court.
WHERE TO START - CONSIDERING INTESTACY
Consider what would happen if you should die without having
planned that death might occur unexpectedly. Who will be
responsible for making funeral arrangements? Who will pay
the debts? Who will look after assets and see to it that
they go to or are available for your beneficiaries? Who
decides which beneficiary gets what part of the assets and
when? Who are the beneficiaries? Who will look after the
children and where? These are all good questions. There
are many more.
In Ontario, when someone dies without a Will, there are
certain statutory and common law rules that come into effect
to assist in dealing with your affairs after you die. You
may not like what would happen, but the rules are there
to ensure that your affairs are dealt with in an orderly
manner because you have failed or chosen not to plan ahead.
There are more than 20 statutes in Ontario that may have
an impact on your affairs both before and after your death
and they include the following:
Succession Law Reform Act
Substitute Decisions Act
Family Law Act
Powers of Attorney Act
Estates Act
Perpetuities Act
Insurance Act
Trustee Act
Settled Estates Act
Estates Administration Act
Estates Administration Tax Act, 1998
Accumulations Act
Children’s Law Reform ActThe
Human Tissue Gift Act
Mental Health Act
Mental Incompetency Act
Variation of Trusts Act
Income Tax Act
While theses statutes may have an impact on your personal
affairs whether or not you have planned ahead, it is almost
certain that some will have an impact if you have not planned
ahead.
For example, the Succession Law Reform Act (“SLRA”)
is the corner-stone statute governing estate planning and
administration in Ontario. Part I of the Act sets out the
criteria for the formal validity of Wills, establishes certain
presumptions for statutory interpretation of words and phrases
and deals with issues of conflicting laws for international
Wills. Part II creates statutory rules for intestate succession
(i.e. distributing your assets when you die without a Will).
Part III of the SLRA provides for the designation of beneficiaries
of pensions funds and plans while Part IV creates rules
for survivorship when two or more people die together the
most obvious example being a husband and wife. Part V of
the Act provides for support of dependants. Again, while
the obvious example might be children, it would also include
dependant parents and others under disability.
WHAT ARE THE CONCERNS?
It is often assumed that when we die, our assets will automatically
be transferred to our spouse or to our children. While this
may happen, as you have not made a Will, it may take some
time to sort out the details. It may also require a Court
application to have someone appointed to administer your
estate to make sure all debts are paid including income
tax and to ensure the your assets are dealt with properly.
Until this happens, your assets may be frozen. Why? The
answer is straightforward and is based in common sense.
Because you haven’t planned ahead by naming an executor
to look after your personal affairs, it cannot be assumed
that any particular individual should have that authority.
It is therefore necessary for someone to step forward and
apply to the Court to be appointed to act as your personal
representative or estate trustee. Until that happens, no
one has the legal authority to deal with your assets.
There are exceptions. For example, assets that are jointly
owned should automatically pass to the surviving joint owner.
With jointly owned real estate, title passes automatically
to the joint registered owner by operation of law. All that
is required is to register on title proof that one of the
owners has died allowing the survivor to deal with the property.
With bank accounts, banking rules may allow a joint holder
of a bank account to deal with the money in the account
upon providing proof of death of the joint holder. But this
is not always the case, depending on the value of the assets
in the bank and the relationship of the joint owner, the
bank may insist that an estate trustee be appointed by Court
order to ensure the assets are properly dealt with.
With insurance policies and most pension plans, it is possible
to designate specified beneficiaries. Care must be taken
to ensure that the beneficiaries are appropriately named
and that they are capable of receiving the benefit intended
to be conferred. If the beneficiaries are under age (i.e.
less than 18 in Ontario), the money to be paid out will
have to be placed in trust. Where a trustee has not been
appointed through a Will, it is required that the money
be paid into Court where it will be administered through
the Office of the Public Guardian and Trustee.
THE SURVIVING SPOUSE
What happens where the assets aren’t jointly owned
or there is no designated beneficiary? In the case of spouses,
it is often assumed that the assets will automatically pass
to the surviving spouse. This is not necessarily the case.
The rules are complicated. A married spouse will have different
rights than a common law spouse. Couples with children will
have different obligations than those who are childless.
The SLRA, the Family Law Act, the Children’s Law Reform
Act, the Estates Act and the Trustee Act may and probably
will have something to say about where the assets are to
go and who will be entitled to deal with them.
In Ontario, when a spouse dies intestate, the SLRA provides
that the surviving spouse is entitled to the assets in the
deceased’s estate, where there are no children. If
there is a surviving spouse and one child, the estate would
be divided equally between the surviving spouse and child.
Where there are two or more surviving children, the surviving
spouse gets one third and the children divide the remaining
two thirds. While this may not be the intended result, this
is what must happen where a spouse dies without having made
a valid Will. Remember, only those assets forming part of
the estate of the deceased spouse are affected by the SLRA.
Jointly owned assets will, with few exceptions, pass automatically
to the surviving joint owner(s).
It can get even more complicated. In Ontario, the Family
Law Act provides a surviving spouse, who was married to
the deceased at the date of death and who is not happy with
the share of the estate he or she is entitled to receive,
an opportunity to elect, within six months of the death,
to claim an equalization of net family property. The rules
that then come into play are similar to those in a divorce,
however, there are unique twists that can affect the outcome
of the valuation. The result can be surprising.
Another consideration arises from the legal relationship
between the parties. The definition of spouse under the
Family Law Act has a different, more restricted meaning
than the definition of spouse under the SLRA. The right
of election and equalization under the Family Law Act applies
only to a “married” spouse. Under the SLRA, the
term spouse has a much broader meaning and includes married
and common law spouses. Due to recent changes in the law,
it also includes same sex partners.
ADMINSTRATIVE DELAYS
Let’s assume that you are not concerned about the
statutory division imposed by the SLRA or the rights of
a married spouse under the Family Law Act (as those rights
are the same whether there is a Will or not). What other
issues might be considered?
Where there is just a spouse surviving, there are relatively
few. If you intend for your spouse to get your estate, then
the SLRA will look after this. It may take some time, however,
as you have not designated someone to act on your behalf
as your trustee or personal representative. While you might
assume that your spouse will have the ability to deal with
your assets immediately after your death, this is not necessarily
the case. Assets that are registered only in your name will
likely be frozen until someone is appointed to act as your
estate trustee.
While some financial institutions have relaxed their rules
in the case of small estates where it is obvious that the
only beneficiary is a surviving spouse, in most cases, the
financial institution will insist that an estate trustee
be appointed. The appointment of a trustee affords protection
to the financial institution as they can depend on the formal
appointment to ensure the assets are transferred to the
proper person. This will require a Court application to
be made. This takes time and costs money. It will also require
a calculation of all of the deceased’s estate assets
and payment to the Court of probate fees. While probate
fees may not be significant in the case of smaller estates,
they can become quite significant in estates having a value
exceeding $50,000.00.
Certainly, while cost is one factor to consider, delay
may be the most frustrating aspect that results from not
making a valid Will. If you make a Will naming an executor,
the executor derives the power to act immediately upon your
death. Although an application to the Court may still be
required to formally recognize the validity of the Will
and the appointment of the executor (now referred to as
an estate trustee), the powers given to the executor named
in the Will can be exercised immediately. Where there is
no Will, there has been no appointment and, therefore, no
one has authority to act until the Court makes an appointment.
This can take weeks or event months. It may involve competing
parties where there is uncertainty about who has the right
to apply to be appointed as estate trustee. It may also
involve consideration of who should be responsible for acting
as your estate trustee. In other words, can the person be
trusted and is the person sophisticated enough to carry
out the task of administering your estate as required?
MINOR BENEFICIARY CONCERNS
In most cases, where there is simply a spouse surviving,
it is relatively simple. It is simply a matter of time and
cost. However, where there are children involved, especially
minor children, the issues become more complex. Obviously,
a child of five or ten years of age cannot be trusted to
handle money, especially large sums. Money left to a minor
child would normally be held by a trustee appointed for
this purpose. Where you have failed to make a Will naming
a trustee, the government can only assume that you had no
one in mind with whom you were willing to place your trust.
The government must therefore assume the role of acting
as your trustee.
In Ontario and most other jurisdictions, a person is considered
financially responsible when they turn eighteen. Until they
attain that age, any money or assets they would have been
entitled to receive upon the death of a parent would be
required to be held in trust. In failing to plan ahead and
establish a trust or appoint a trustee, you have left it
to the government to establish the trust and act as trustee.
The value of the assets left to minor children must be paid
into Court and the trustee having authority to deal with
the assets will be the Office of the Public Guardian and
Trustee in Toronto. In order to have the money paid out
for the benefit of the minor children, an application will
have to be made to the Court and the Office of the Public
Guardian and Trustee will have to review and approve any
plan. Again, the issues of time and cost come into play.
The costs can become significant.
Again, the fact that you have not planned ahead by making
a valid Will or have chosen not to make a Will affects the
manner in which your estate will be handled. You may assume
that all of your assets will be available to your spouse
to use for the benefit of your children. This may not be
the case. As I have pointed out earlier, if your spouse
is not the beneficiary of your entire estate where there
is an intestacy, your children stand to inherit a share.
If they are minors, that share is required to be paid into
Court. While your spouse may be able to get the money if
it is needed, the approval of the Public Guardian and Trustee
will be required.
WHEN THE GOVERNMENT GETS INVOLVED
What happens if there is no surviving spouse? Perhaps your
spouse has predeceased you or it may happen that you and
your spouse die in a common accident. In that case, if you
have children, they will inherit your estate. If your children
are minors at the time (i.e. under 18), their inheritance
will be held in trust. By whom? Because you have not planned
ahead and made a Will or established a family trust, the
government assumes the role of acting as trustee. Again,
the Office of the Public Guardian and Trustee is the government
body charged with the responsibility of managing the financial
affairs of your estate when you have neglected or failed
to appoint a trustee.
While a close family member or someone with a close connection
to you who may be financially responsible can apply to be
appointed as Estate Trustee to administer your estate, that
person will only have the power, once appointed, to gather
in and account for all of your assets, pay your debts and,
finally, pay the amount that is left into Court. There is
no ongoing power to hold or invest the money as trustee.
The powers of an Estate Trustee appointed without a Will
are limited to gathering in the assets, paying lawful debts
and accounting for the net residue of the estate. Once this
has been done, the net residue (or balance) must be paid
into Court.
Once the money has been paid into Court, the only way to
get it out is to apply through the Office of the Public
Guardian and Trustee. This takes time and costs money. Until
your children each attain the age of majority (the age of
18 in Ontario), the money is held in trust by the government
and may only be used for the benefit of the children under
supervision of the Office of the Public Guardian and Trustee.
A financial plan may be provided by the custodial guardian
of the children to be approved by the Office of the Public
Guardian and Trustee permitting annual or quarterly support
allowances to be paid to the custodial guardian. Apart from
this, any requests for additional money from the trust fund
must receive further Court approval.
What happens when the child attains 18 years of age? Another
Court application is made to have the money paid to the
child, whatever amount that may be. There is no ongoing
trust and no reason to delay payment. If your estate was
worth $500,000.00 when you died after liquidating all assets,
realizing on insurance policies and paying all debts and
maintained its value while invested with the government,
your child becomes immediately entitled to payment of all
of the money when he or she turns eighteen. This is not
a result that most parents intend. Indeed, most parents
recognize that their children should not inherit a substantial
sum of money until they are older, say 21 or 25 or even
later. Most parents believe that their children need some
additional time to complete their education and/or gain
experience in the working world to fully appreciate the
value of a dollar.
If you haven’t established a trust, either in a Will
or otherwise, you have given up the ability to provide financial
guidance to your child and may even have enabled the child
to squander his or her inheritance. Is this really the plan
that you had intended? Most parents would agree that this
is poor planning.
WHAT ABOUT GUARDIANSHIP?
Another issue should be considered where minor children
may be left without parents. Who will act as the child’s
guardian until he or she has grown up. It is usual for a
parent, when making a Will, to name a guardian for any minor
children. There is no other formal document available that
has been recognized for this purpose. While it may be possible
for a parent to sign a simple paper that appoints a guardian,
apart from the accepted practise of naming a guardian in
a Will, there is simply no approved form.
Even the appointment of a guardian made in a Will is temporary.
Until the issue of guardianship is reviewed by the Court,
an appointment of a guardian, however it is made, is of
limited duration. The guardian(s) appointed by a Will has
interim authority subject to formal review and approval
of the Court. The Office of the Children’s Lawyer may
participate in the formal review of guardianship and make
submissions on the appropriateness of the appointment. Ultimately,
the Court will make a determination of permanent guardianship
based on what the Court views is in the best interest of
the child.
Why is this so? The Court is always responsible for ensuring
that the interests of the child are looked after. Some people
make incredibly poor decisions when it comes to their children.
On the face of it, by failing to make a Will and appoint
a guardian, even on a temporary basis, you have demonstrated
that you have made a very poor choice for your child. It
is arguable that you have abdicated your responsibility
as a parent to ensure that your child is left in good hands
to be cared for. The government can only assume that you
could not decide who should be responsible for the care
of your child and must therefore accept responsibility by
reviewing the matter and making an appropriate appointment.
What will the Court consider? There are many things that
the Court must consider when it is required to make a determination
of guardianship. What may be in the best interests of the
child can involve consideration of a number of things including
the following:
- the expressed wishes of the parents
- the relationship of the child to the proposed guardian
- the circumstances where the child will live
- the ability of the proposed guardian to care for the
child
- the financial resources available to the proposed guardian
- the relative ages of the child and the proposed guardian
- the religious and cultural backgrounds of the child
and proposed guardian
- any educational plans
- the presence of other children in the household
- the proximity of the residence to relatives and friends
These are just a sampling of some of the considerations
that the Court must undertake in reviewing a guardianship
application. If you have failed to name a guardian, you
have given the Court no guidance. While relatives and the
proposed guardian may be called on to make submissions,
the expressed intention of the parents made in writing is
the best evidence to have before the Court.
However, as I have said, some parents make incredibly poor
choices or assumptions and the Court always retains the
right to make a determination that is different from the
expressed wish of the parents. It would hardly be appropriate
for the Court to approve the appointment of elderly grandparents
to be the guardians of a toddler. The grandparents may not
have the time, the energy or the inclination to keep up
with a young child. Apart from that, the day-to-day interests
of a young child and elderly grandparents will likely be
quite different and the grandparents are not likely to be
capable of giving the child the stimulation required through
the growing years. And yet, I have often encountered parents
who have given little thought to the issue and are surprised
when it is suggested that a more appropriate appointment
might be considered.
WHERE THERE IS A WILL
Alright, now that I have you thinking that good planning
for responsible parents includes preparation of a valid
Will, what are the advantages? Including what I have already
discussed, the following are some of the advantages:
- You determine who your executor and ongoing trustee
will be;
- Your executor has authority to act immediately after
your death;
- You establish who will be your beneficiaries subject
to satisfying some basic statutory obligations;
- You can control the distribution of your estate by establishing
trusts;
- Money can be made available for your child’s needs
in a responsible way;
- There need be little or no delay in making money available
to ensure your child’s needs are met;
- You exercise some control over the appointment of your
child’s guardian;
- You can broaden or restrict the powers of your trustee
and empower the trustee to act in a manner that will take
advantage of favourable tax laws;
- You can avoid excessive Court proceedings, costs and
delay; and
- You may be able to minimize the tax consequences to
your estate through proper planning.
The list is not exhaustive. For larger estates, it may
be worthwhile to have multiple Wills to deal with different
assets or assets located in different jurisdictions. This
may help to reduce or avoid estate related taxes and probate
fees. For most, however, the greatest advantage is that
it provides an opportunity to make a plan and minimize the
difficulties that will be left behind.
IS IT DIFFICULT TO PREPARE A WILL
The simple answer is no. It is not difficult to prepare
a simple Will. It is possible to do it yourself. With some
research at the library and/or the purchase of a book or
a Will kit, you may be able to complete the task without
the assistance of a professional adviser such as a lawyer.
However, if you get it wrong, there will be no guarantee
or insurance and no one to blame (or sue).
I am often asked if a handwritten Will is valid. In Ontario,
a handwritten Will that is a document expressing the testamentary
intent of the maker, written wholly in the handwriting of
the deceased individual and signed will be held to be a
valid holograph Will. In its simplest form, a handwritten
Will can be valid to effectively dispose of a person’s
estate. The trouble is often not with the issue of validity
of the form, it is more often with lack of clarity in its
expression. The handwritten Will may fail to validly appoint
an executor or may fail to name beneficiaries or dispose
of the entire estate. It may not establish enforceable trusts
and may even create a trust where none was intended. Is
it better than nothing? Perhaps. It depends on the what
it says and how clearly it is expressed. It is all in the
drafting.
THE WILL KIT
What about stationer’s Wills (now available as Will
kits)? Stationer’s Wills, sometimes referred to as
fill in the blank Wills are now available in most book stores
and office supply outlets. For a small investment of between
$10.00 and $50.00, you can pick up a stationer’s Will
form or kit that provides some guidance in preparation of
the form. The self-help guide available with most kits provides
some basic drafting information and, together with the instructions
that accompany the form, will assist you in the preparation
of your own Will.
The usual criticism heard about the pre-printed form is
that it may not be a valid enforceable Will. While this
may have been true fifteen or twenty years ago, the Courts
are now recognizing the validity of “fill-in-the-blank”
Will forms provided they are properly completed and witnessed
in the proper manner. While minor errors or omissions are
usually overlooked by the Probate Court in favour of validating
a testamentary document (certifying the Will), there are
some fundamental errors that the Court may regard as fatal.
These often involve improper execution of the form and the
failure to properly dispose of the estate. Care must be
taken to ensure that the instructions are properly followed
in completing the form.
In my view, the primary criticism with the Will form is
that you do not get the benefit of the professional advice
that should accompany the making of a proper Will. For some,
this may not matter as their needs in disposing of their
estates and providing for their children are quite simple.
However, it is more often the case that parents wish to
ensure that the assets they have acquired will be properly
used or transferred for the benefit of their children. In
most cases, some tax considerations will be involved. As
well, where there are minor children, a trust should be
established to ensure that the money will be available for
the children as they grow up while maintaining some control
to ensure a pool of money remains until they are financially
responsible.
- Income Splitting Trusts – most commonly
used for the purpose of income splitting with other family
members. Attribution rules under the Income Tax Act and
new split income rules impact on the use of this type
of trust, however, for individuals with high net worth,
they can still use an income splitting trust to advantage
with careful planning.
- Family Law Act Trusts - the general intent of
this type of trust is to avoid the claim of a spouse for
an equalization of net family property upon marriage breakdown
or death. The trust may relate to property being passed
on from a parent to a child who is or may become married
or it may be established in an effort to avoid the complications
of a pending marriage. Other forms of this trust are created
with the intention to ensure that support obligations
are met following marriage breakdown.
- Cottage Trusts - With the value attached to recreational
property today, parents have looked to the creation of
special trusts to deal with the family cottage. One of
the reasons may be to minimize income tax on the eventual
death of the parents that own the cottage. Another reason
could be to ensure continued ownership within a family
following the death of the parents.
- Disability Trusts - Parents of disabled children
have special concerns that often need to be addressed
through the establishment of a special trust that will
ensure income will be available for the disabled child.
Care must be taken in the drafting of such a trust to
ensure that any financial assistance programs available
to the disabled individual are not reduced or eliminated.
The use of a discretionary trust has been useful in ensuring
that the disabled child remains eligible to receive family
benefits.
- Creditor Trusts - The potential claims of creditors
can be of concern for individuals who are involved in
business enterprises. While business entrepreneurs often
operate through a limited company, in many cases, they
are called upon to provide personal guarantees. As well,
with directors’ liability claims and actions new
being successfully brought to pierce the corporate veil,
there is much personal risk for the business entrepreneur
in losing personal assets. A creditor trust can assist
to protect personal wealth from creditor claims. As well,
a creditor trust could be used to protect assets from
being squandered by an irresponsible child. Sometimes
called a “spendthrift trust”, the intention
is to ensure that the foolish son or daughter is protected
from his or her free spending ways by establishing a discretionary
trust that permits an “allowance” to be paid.
- Life Insurance Trusts - This is a trust set up
to receive the proceeds of a life insurance policy rather
than have the insurance proceeds paid to the estate. If
the proceeds of the policy pass through the estate, they
increase the value of the estate for probate purposes
and the probate fees are necessarily higher. This trust
is separate from any trusts established in the individual’s
Will. The trustees named in the trust document would also
be named as the beneficiaries of the life insurance policy.
This form of trust can also assist in avoiding creditors’
claims against the estate where this may be of concern.
As you can see, the trust is a flexible tool that has many
uses. Its purpose and structure must be carefully considered
to ensure the settlor’s intentions will be fulfilled.
In addition, it must be well drafted to avoid unintended
tax consequences and to ensure that the necessary power
and flexibility is available to the trustees to carry out
their duties. Finally, and this may be the most important
consideration, you must be certain that you can trust your
trustee(s).
SUBSTITUTE DECISIONS – THE ULTIMATE TRUST APPOINTMENT
Something that every parent must consider is the question
of what happens if he or she should become incapacitated.
This is not an issue that is restricted to the elderly.
It is becoming more and more apparent today that the onset
of sudden illness or the occurrence of an unexpected accident
can affect the ability of any individual, young or old,
to make decisions for themselves.
In 1994, the Province of Ontario passed legislation that
changed the law with respect to substitute decision making
in Ontario. With the new legislation, it became possible
to appoint someone else to assist in making decisions on
your behalf concerning your health care in addition to dealing
with your assets. The legislation contemplated the preparation
of two separate forms that would give authority to someone
else to make decisions for you in accordance with your instructions
with respect to matters of health or in connection with
your property (assets). This would be accomplished through
the use of a Power of Attorney for Personal Care form and/or
a Power of Attorney for Property form.
Power of Attorney for Personal Care
The Power of Attorney for Personal Care form gives you
the ability to appoint one or more persons and give them
the authority to make health care decisions on your behalf
if you become incapable or to assist you in making decisions
to the extent that you become incapable. You have the ability
to impose conditions and place restrictions on the power
being granted. You also have the ability to include a form
of medical directive that will provide guidance as to your
intentions for the giving or withholding of medical treatment
should you become incapable.
The Power of Attorney for Personal Care form is a very
useful tool to assist in the event you are unable to consent
to medical treatment or to provide guidance with respect
to ongoing personal care if you become mentally incapable.
It allows those in whom you place your trust to assist you
with the continuation of your life or making the transition
to death in accordance with the intentions that you have
expressed while still capable.
Power of Attorney for Property
The Power of Attorney for Property form allows you to appoint
one or more individuals or, if you wish, entities such as
a trust company, to manage your property if you are unable
to do so. As with the Personal Care Power of Attorney, you
have the ability to impose conditions or restrictions on
the manner in which the power is exercised.
While generally intended to operate when you become incapable,
the Property Power of Attorney can become effective immediately
after it is signed unless it specifically states otherwise.
Properly drafted, the form is a highly useful and important
tool. A poorly drafted Property Power of Attorney form could
lead to mischief or abuse or it may be ineffective when
needed. Care must be taken to ensure that the appropriate
powers and controls are in place and that the form can be
used when it is required.
DOES THIS SOUND FAMILIAR?
John and Susan were recently married. It was the second
marriage for each of them. John had two adult children from
his first marriage. He and Susan had two young children
from their present relationship. While driving down Highway
400 to work, John and Susan were in an accident. Unfortunately,
John was killed and Susan was badly injured and required
several months of hospital treatment. Following that, if
Susan recovered, she would require a lengthy home recuperation.
Neither John nor Susan had prepared Wills. It hadn’t
occurred to either of them to prepare Power of Attorney
forms for personal care or property. While their home was
registered in both of their names jointly as was their principal
bank account, the family cottage was registered in John’s
name only as part of his family inheritance. In addition,
John was the sole shareholder in his business which marketed
and installed computer systems.
Following John’s death, the bank became concerned
about the possible failure of his business. In addition,
because John had not made a Will, there was no executor
appointed to take charge of his estate. While Susan would
have been the logical choice to be appointed as his estate
trustee, she was incapable of doing so at the present time.
Given her present medical condition, it was questionable
if she would recover. Faced with this, the bank felt it
had no choice but to freeze the assets until someone could
step forward and be appointed as John’s estate trustee
and assume responsibility to act as guardian for Susan.
To make matters worse, there were no other liquid assets
available to assist in caring for the children. The insurance
policy on John’s life was payable to Susan but, at
the present time, she was incapable of dealing with her
personal affairs. With no Power of Attorney for Property
in place, a guardian would have to be appointed. This required
the preparation of a financial plan and the posting of security
to ensure the performance of the obligations of the guardian.
Finally, it appeared that John’s adult children were
going to fight over his estate claiming that John had promised
that the cottage would always remain in his family from
his first marriage and would be passed on to his elder children.
As John had failed to plan ahead and make a Will, his intentions
were not made clear. John’s elder children feared that
Susan would lay claim to the cottage property as part of
her preferential share in John’s estate under the Succession
Law Reform Act apart from her right to own the jointly held
matrimonial home. Apart from that, if Susan were to die,
having outlived John, the interest of the two youngest children
would have to be sorted out.
It looked as though there would be a long and nasty fight.
The first round started with the fight over who would care
for the young children. John and Susan had never considered
the issue and had given no indication as to who should act
as their guardian. At 3 and 5, the younger children were
vulnerable and something had to be done quickly. John’s
sister thought she should look after the children. Susan’s
sister thought otherwise.
And so they called in the lawyers.
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The above is not intended to constitute
legal advice. Please contact a lawyer to clarify your
legal rights.
