FAQ about Wills, Enduring Powers of Attorney and Personal Directives
We conducted a very successful seminar in Athabasca on February 11, 2017 about estate planning: Wills, Enduring Powers of Attorney and Personal Directives. Local Accountant Glenn Martin of Martin Romanchuk also came to speak about some tax considerations in estate planning.
The seminar was a success. I credit its success to the participants. They were engaged, enthusiastic, and inquisitive. I told them that my 12 year old had wanted to come with me to try to stump me with a question. I told the participants that my son would be delighted to know that they were doing a great job at it themselves.
Over the next few weeks, we want to answer more fully (than we were able to in our seminar) some of the interesting and more difficult questions that were asked:
1. How can I avoid probate?
Owning land as joint tenants or owning bank accounts jointly avoids the need for probate because this property then passes by right of survivorship and not through the Will. Basically, if a Land Title describes the owners as “Joint Tenants” each person listed on title owns the land fully with unity of title, until one person dies, at which point, the remaining Joint Tenant(s) each have unity of title to the land, until one person dies again, and then again the remaining Joint Tenant(s) own the land fully with unity of title, and so on and so forth. The final person standing passes the land by their Will or by laws of intestacy (if he or she dies without a Will). This is the basic concept of right of survivorship, without getting into the issue of “resulting trusts”, which I will talk about later.
However, applying for a Grant of Probate is not as intimidating or costly as one might think.
What is a Grant of Probate? A Grant of Probate is the court’s affirmation that this Will is, in fact, the Last Will and Testament of the deceased. In the process of applying for Probate, the Will has been “tested” by the Court, and the Court has found it satisfactory.
Institutions such as Land Titles and banks can rely on the Grant of Probate as satisfactory proof that Lands can be transferred and funds can be released in accordance with the testator’s directions in the Will. Also, with a Grant of Probate in hand, Personal Representatives (also known as the executors or executrixes) can confidently follow the directions of the Will without fear of being sued because they are acting on an “untested” Will document.
The cost of obtaining a Grant of Probate is minimal compared to the risk of proceeding on a Will document that is not probated. There are no “Estate taxes” in Alberta like there are in the United States. The filing cost of probating a Will in Alberta is minimal, with the smallest estates costing $35.00 and the largest estates only costing $525.00. Legal fees may vary in accordance with the size and complexity of an Estate. However, our standard fee for “Core” legal services in Probating the Will is $2500.00 plus 1% of the gross aggregate value of the estate.
Individuals who want to put the names of their beneficiaries on title to their property in order to “avoid” probate risk the following:
1. If you change your mind and want to remortgage that property, sell that property, transfer that property to a different beneficiary or do anything with that property, you now need the permission and agreement of those in joint tenancy in order to act on your wishes.
2. A joint tenancy may invite litigation, if it does not name all the individuals the testator intended that property to benefit.
For example, let us say that Joe put his one child Suzie on as a joint tenant of the lake lot, and in his Will states that both his children, Suzie and Jimmy, are to be given each ½ the interest in the lake lot (or even that each of them are to get 50% of the residue of the estate).
Jimmy might choose to litigate, arguing that Dad’s intention was only that Suzie hold it in trust for Dad in his lifetime, and in trust for the estate in his death. He might argue that Dad had only transferred the property to Suzie as a joint tenant in order to avoid probate costs. He would argue that the presumption of resulting trust should apply, and that the property should be divided between him and his sister in accordance with the Will.
Suzie might choose to defend against the claim, saying that Dad told her that his intention was to gift her the property in his lifetime, as she and her family were the ones who used the lake lot and maintained it over the years. She might do her best to rebut the presumption of resulting trust, and might successfully convince the court that the gift to her was intended.
An intervivos transfer (gifting during lifetime) of land to a child as a joint tenant might contradict a testamentary transfer of that same land, or of the residue of an estate, as directed by the Will. Without the testator alive to give testimony, has the testator set up a confusing situation in which the courts must decide what the testator’s intentions were? If so, the Court may order that the estate pay for the costs of litigation.
I have certainly simplified the potential scenarios; however, one can see that by avoiding probate, the costs to the estate might be far more substantial if litigation ensues.
3. Putting the investment accounts or bank accounts into joint names can open the door to financial abuse. Once a bank account is opened up as between the one who earned the investment (the beneficial owner) and one who has access to the investment (the trustee), both individuals now have access to the money at the bank. The trustee has the ability to withdraw the money without the permission of the owner. As far as the bank is concerned, both account holders have access to the funds. The withdrawal(s) if for the benefit of the trustee may be wrong at law and such financial abuse may be the subject of both a criminal and civil investigation and law suit. However, if financial abuse does occur, it may be impossible to recover the spent money.
4. Further, adding children as joint owners to property or accounts could make these assets vulnerable to creditors of your children or ex-spouses of your children within a matrimonial property claim.
How are some other ways that individuals might accomplish their intentions without needing to fear some of the unintended consequences of joint tenancy?
First, individuals can consult with a lawyer to have a consistent and intended estate plan in place. The well-drafted Will and Enduring Power of Attorney can provide clear intentions and directions so that your loved ones know with certainty what you wanted to do with your money and assets.
Avoiding probate is not the only reason you should have when transferring property into the names of other joint tenants. It is usually not a good reason at all.
- What does joint tenancy mean? Can a Will sever a joint tenancy?
- What compensation should I give my personal representative? Is the compensation I give to a personal representative taxable income?
- If my estate is not big enough to cover my debts, will my beneficiaries be responsible for paying these debts?
- Should I designate a beneficiary and possibly an alternate beneficiary on my investment accounts and insurance policies?
- How do I avoid litigation in regard to my estate after I die?
- My spouse and I separated a long time ago, would he or she have a claim on my estate
- My obvious choices for the roles of personal representative of my Will, Attorney of my EPA and Agent of my PD live outside of Alberta. Is this a problem?
- Can I leave an adult child out of my Will?
- How can I protect my estate from being depleted when my EPA is in effect?
- Within a blended family scenario, how can I provide for both my new spouse and my children from a previous relationship?
- Can I just use a Will template form? Would it be valid?
NOTICE TO READER: The summaries of legal rights and remedies described above are general references to the Alberta laws existing at the date of the publication and may not apply to the reader’s individual circumstances. Also, the laws may change. These legal summaries are not to be relied upon as applicable to your individual circumstances and are subject to a complete review of the facts and applicable laws in every case.