CANADA

5. Property, Estate And Probate

A. Introduction

Although the provinces have similar rules, there are differences. No province has forced heirship laws. Most provinces specifically recognise rights of common-law and same-sex couples for purposes of entitlement under dependant relief, family law and/or intestacy legislation. Entitlements and rules differ for each province. In Quebec, the Code confers no status to de facto spouses, but some recognition is granted in specific legislation. The Code provides a regime known as 'civil union' that is entered into, produces effects between the parties and is terminated in a manner similar to marriage.

B. Wills

I. Requirements For Valid Will

The requirements for a valid will are set out in legislation. Generally, a will must be made by a competent adult (over the age of 18 or 19, depending on the province). The test for capacity follows 19th-century English case law. All provinces except British Columbia and Prince Edward Island recognise holograph wills; however, these provinces recognise holograph wills prepared by someone in a jurisdiction where holograph wills are recognised or where that jurisdiction is the testator's domicile. In these provinces, a holograph will is not valid to transfer real property interests situated within the province.

Ii. Forms/types Of Will

There are four types of will recognised in Canada. The most common is the conventional will signed at its end by the testator in the presence of two witnesses who also sign. Holograph wills are in the handwriting of the testator. In Quebec, although conventional wills and holograph wills are recognised, the most common will is a notarial will, signed by the testator and witnessed by the notary and one other witness. The notary holds the original copy of the will, notarised copies of which are deemed to be originals. A notarial will does not need to be probated in Quebec and usually does not need to be probated in other Canadian jurisdictions. The fourth is the international will. The provinces of Alberta, Manitoba, Ontario, New Brunswick, Newfoundland, Nova Scotia, Prince Edward Island and Saskatchewan have all signed the Convention providing a uniform law on the form of an international will, which states that if a testator executes a will according to the terms of the Convention, all other jurisdictions that signed the Convention will accept the will as having been validly made. An international will requires two witnesses and an 'authorised' person. Only a lawyer is an authorised person under provincial legislation.

Iii. Revocation And Alteration Of Wills

A will may be revoked by making a new will that revokes all previous wills, or by destruction. If two wills are prepared to deal with different assets or assets in other jurisdictions, one will must not revoke the other. Changes to a will may be made at a later date with a codicil that must be prepared in accordance with the rules for making a will.

Marriage revokes a will unless the will was specifically made in contemplation of marriage. Quebec does not have this rule. New Brunswick, Ontario and Nova Scotia have rules that may save a will prepared prior to marriage.

Divorce does not revoke a will. In most provinces (except Alberta, New Brunswick, and Newfoundland), the spouse is deemed after a divorce to have predeceased the testator for purposes of accepting the appointment of executor and in respect of any gifts to that spouse. Nova Scotia passed legislation in 2006, not yet proclaimed, which would deem a former spouse to have predeceased. In Quebec, divorce revokes bequests made to a spouse unless the testator has provided otherwise.

Iv. Testamentary Gifts, Lapse, Abatement And Ademption

There are four classifications of testamentary gifts:

  • specific legacies and bequests that identify personal or real property to be delivered to a beneficiary
  • demonstrative legacies, which are gifts to be paid from a specific fund or pool of assets
  • general legacies or a sum of money, and
  • residue, or the remainder after all debts, testamentary expenses and legacies have been satisfied.

If a specific legacy fails because the asset does not exist at the time of death, it adeems unless that asset was replaced by an identical asset. Demonstrative legacies that fail because, at death, the fund does not exist will be added to the class of general legacies. Devises (i.e. gifts of interests in land) may be specific or general.

If, after payment of debts and testamentary expenses, there is no residue, gifts will abate in the following order: first the general legacies, second the demonstrative legacies, third the specific legacies of personalty, and finally the specific bequests of real estate. (Quebec has a different set of rules found in articles 813 and 814 of the Code.)

When a beneficiary has predeceased the testator, the gift lapses unless there is contrary intention in the will. Legacies to these beneficiaries fall into residue. If the beneficiary was to share in the residue, then that share of the residue is distributed as if there were an intestacy, again subject to contrary intention in the will. These default rules are subject to legislated anti-lapse rules for gifts to children and siblings of the deceased. In this situation, the gift usually goes to the predeceased beneficiary's children. Gifts for charitable purposes are also saved, under the cy-près rule. In Quebec, the Code authorises a court to modify a 'social utility trust' pursuant to process that is similar in concept to the cy-près rule.

Gifts to a class of beneficiaries are distributed to the remainder of that class, subject to statutory anti-lapse rules. Gifts to two or more persons (i) as joint tenants (i.e. with right of survivorship) are distributed to the survivor(s), (ii) as tenants in common are subject to the lapse rules, above.

C. Dependants' Relief

Each province has legislation permitting dependants to apply for support from the estate if they do not believe that the will, or the devolution on intestacy, makes adequate provision for them. (The dependants' relief rules in British Columbia and Nova Scotia apply only to devolution by will, with no remedies under intestacy.) Access to assets disposed of inter vivos by the deceased may or may not be recoverable by the court. The law of each province must be reviewed. The legislation of British Columbia, for instance, authorises provision by the court that is 'adequate, just and equitable', even where there is no dependency. Generally, spouses (including common-law and same-sex spouses), children (including natural children of the deceased), and sometimes other persons financially dependent on the deceased at the time of death may make a claim. Claims must usually be made within six months of the grant of probate or letters of administration.

In Quebec, married and civil-union spouses are the only beneficiaries of the family law regime, such as spousal support, matrimonial property and intestate successions. In Quebec, married and civil-union spouses as well as descendants in the direct line may claim support from the succession of a deceased. The amount that can be claimed is limited depending on who is making the claim and the nature of support being received before the death. The status of common-law spouses as to their right to claim spousal support and matrimonial property is currently under review by the Supreme Court of Canada.

D. Intestacy Rules

Intestacy rules are similar across Canada. The spouse is entitled to a specified amount, and the residue is divided between the spouse and children. If an individual dies without a will, leaving only a spouse, the spouse usually takes the entire estate. If there is no spouse, the children share equally. If there is no spouse and no children, the parents take equally (or their survivor). If there are no parents, siblings share. If there are no siblings, more remote relatives inherit.

Where there is both a spouse and one or more children, the rules for preferential shares and division of residue are as follows: generally, after the preferential share, if there is one child and a spouse remaining, the remainder is divided equally (except in Quebec, where the spouse receives one-third). If there are two or more children, the spouse receives one-third and the children divide the remaining two-thirds (except in Manitoba, where the spouse takes one-half). The preferential shares differ by province.

As with the anti-lapse rules that apply to gifts by will to certain relatives, the intestacy rules also provide for representation of the predeceased by the children of siblings or the issue of the deceased's children.

Definition of 'spouse': rights of common-law and same-sex partners in this field are evolving and should be reviewed carefully. Many provinces now recognise these individuals as potential beneficiaries on intestacy. In Quebec, intestacy rules apply only to married partners or partners who entered into a civil union, which includes same-sex partners. In Nova Scotia, if two persons register a domestic partner declaration, they will have, among other rights, the rights of a 'spouse' for purposes of intestate succession and spousal rights on death. In Ontario, only legally married spouses are entitled to share under the rules of intestate succession. Alberta permits adult interdependent partnerships to be registered, invoking certain spousal rights. Where common-law relationships are defined by the duration of the relationship, the period can range from one year to three years, depending on the province and the governing legislation.

E. Spousal Rights On Death

On the death of one spouse, for all provinces except British Columbia and Prince Edward Island, the surviving spouse (this may or may not include a common-law spouse depending on the province) has a statutory right to elect to claim a division of family property under family law legislation rather than to take under the will or under the intestacy rules where there is no will. In Quebec, one of three matrimonial regimes will be applied, but the relationship of persons cohabiting is not recognised. In Alberta, statutory claims may only be made if an action was commenced before death. The time frames for the elections range from four months from death to one year from probate, depending on the province.

F. Powers Of Attorney

All provinces have legislation allowing a court to declare a person incapable of managing his or her personal and financial affairs. The court appoints a guardian (or committee, or a curator or tutor in Quebec) to make these decisions on the individual's behalf. For all financial transactions, the legislation requires the guardian to account to the provincial public guardian. This process can be expensive and impose restrictive conditions.

Instead, it is possible to prepare a power of attorney for financial affairs that continues into one's incapacity. In Quebec, the power of attorney terminates automatically when the mandator (the principal) becomes incapacitated. If the mandator wants the mandate to continue in the event of incapacity, a mandate which authorises this must be 'homologated' by a court to confirm the individual's incapacity before the mandatary (attorney) can act. In the common-law provinces, a grant of a power of attorney that is not to take effect at once may set out terms as to the circumstances that will bring the power into effect. Caution is required when creating such terms, but they help donors in giving assurance that the power of attorney will not be used until incapacity has occurred.

Provincial rules differ significantly on how to plan for one's personal and health care. Most provinces recognise a 'decision-maker', appointed to make decisions for the adult person who no longer has that ability. Although 'living wills' are not formally recognised, decision-makers can reflect the wishes expressed in such documents.

The British Columbia Representation Agreement Act allows an adult to give a representative power to make personal and health care decisions. Representation agreements can be prepared by an adult (donor) who has limited capacity to deal with routine financial and/or health care matters. An adult with full capacity may make a representation agreement that authorises the representative to refuse medical treatment. Bill 29, once in force, will also give recognition to 'advance health care' directives in certain situations. While a Representation Agreement can be used for both personal/health care and routine management of financial affairs, most commonly people tend to use Powers of Attorney for their financial affairs and Representation Agreements for personal/health care decisions.

G. Probate Matters

A grant of probate is a court order that confirms the will as the last will of the deceased and provides the executor with authority to administer an estate. A third party who relies on the grant of probate will not be liable for paying assets of the deceased to the named executor. If there is no will, the grant is made to an 'administrator' in a grant of letters of administration. Usually, an executor is able to obtain a grant through proof in common form, a court order that does not require a court appearance. The executor swears an affidavit confirming that the will is the last known will and supplying the value of the assets and liabilities. Probate fees are paid on the value of the assets of the estate and vary considerably across Canada.

Proof in solemn form (a full court hearing) is required for any question concerning the testator's capacity to make the will, or, where, there is an allegation of undue influence, suspicious circumstances or fraud.

Proof of validity is not required in Quebec for notarial wills but the validity of other forms of wills must be proved.

Ontario has different terminology for personal representatives. An executor is called an 'estate trustee with a will'. If there is no will, the administrator is an 'estate trustee without a will'. Those in the industry still use the term 'executor'. In Quebec, a personal representative is called a 'liquidator'.

H. Assets Not Requiring Probate

Probate may not be required when dependant or spousal claims against the estate are not in issue. Assets other than real property can then be transferred on behalf of the deceased privately.

Where assets were held by the deceased as a joint tenant with right of survivorship (not applicable in Quebec), then the survivor(s) take(s) ownership of the assets outside the estate upon proof of death. However, decisions of the Supreme Court of Canada in 2007 raised questions about 'joint accounts'. Personal representatives must now conduct careful investigations to determine true ownership before allowing assets owned by a deceased as 'joint tenant with right of survivorship' to pass to the survivor(s).

Life insurance can be transferred outside the estate if there is a designated beneficiary. Pursuant to life insurance legislation, these funds are not subject to claims of creditors.

In all provinces except Quebec, assets held in a registered retirement savings plan (RRSP) or registered retirement income fund (RRIF) may also be transferred to designated beneficiaries. If the designated beneficiary is the spouse or a dependent child (a minor or an adult in limited circumstances), the plan assets are not taxed on death. In all other situations, the estate is required to report the value of the plan assets as income in the year of death. The beneficiary is only liable for the tax if the estate does not have sufficient assets to pay the tax. In Quebec, if a RRSP or RRIF is issued by a life insurance company, beneficiary designation can be made on the plan so that the asset passes outside the succession. In all other situations, a bequest of a RRSP or a RRIF must be made in the will.


Advert

Article Search

  Freemont Group

© 2013 Society of Trust & Estate Practitioners