Written on April 18, 2013 – 5:41 am | by Elaine Blades
- If you die intestate, and without a spouse or children, the government get your money. This is false. If you die intestate, your estate is distributed according to the applicable provincial formula. Pursuant to Ontario’s Succession Law Reform Act, an intestate’s property becomes the property of the Crown (ie goes to ‘the government’) only where the deceased left no surviving spouse, issue, parent, brother, sister, nephew, niece or next of kin.
- Testamentary trusts are taxed at the same graduated rates as individuals. This is true (for now, at least). Note however that in last month’s budget, the Federal Government announced plans to consult with stakeholders on possible measures to eliminate the tax benefits that arise from taxing testamentary trusts!
- An executor may incur liability for distributing an estate too quickly. This is true. Should an executor proceed to distribute an estate prior to the expiration of applicable claim periods (and/or without first obtaining consent and releases from any potential claimants – spouse, dependents, creditors), they may become personally liable should a challenge prove successful.
- An executor may incur liability for distributing an estate too slowly. This is true. Where, for example, cash legacies remain unjustifiably unpaid one year from the testator’s date of death (expiration of the ‘Executor’s Year’), the excecutor may be personally liable for paying interest on the legacy.
- An executor is responsible for filing the deceased’s terminal T1 return and any still-unfiled returns from prior years. This is true. It is not uncommon for an executor to have to file at least one additional T1 return. If, for example, the deceased died today, there is a chance they would not yet have filed their return for 2012 (just under two weeks till standard due date). Their executor would therefore be responsible for filing both their terminal T1 (reporting on income earned from Jan 1- date of death, 2013 and their 2012 return. Less commonly, an executor may find themself facing several years of unfiled returns.
- An attorney under a Power of Attorney for Personal Care has final say with respect to the deceased’s funeral arrangements. This is false. Funeral arrangements are the responsibility of the executor.
- Ontario’s Estate Administration Tax (EAT, ‘probate fees’) is calculated based on the net value of the deceased’s estate governed by the Will. This is false. EAT is calculated based on the gross value of the deceased’s estate governed by the Will, with one exception. The only liability that may be deducted is a mortgage on real property.
- If you become incapable of managing your financial affairs, the Public Guardian and Trustee (PGT) automatically takes over. This is false. In the vast majority of cases where an individual becomes incapable of managing their property, the PGT is never involved. See s. 15 of the Substitute Decisions Act for situations where the PGT will become involved.
- Alter ego and joint partner trusts may be used as a substitute for a Will and/or a Power of Attorney for Property. This is true. Where all of a settlor’s property is transferred to an alter ego (joint partner trust), a non-settlor trustee/successor trustee may continue to manage all of the settlor’s property during their subsequent incapacity while providing for the distribution of all of the settlor’s property at death. More commonly, alter ego and joint partner trusts are prepared as part of an integrated estate plan that includes a Will and Powers of Attorney.
- As a general rule, Canadians are deemed to have disposed of their capital property, immediately after death, for proceeds equal to fair market value. This is false. Under the Income Tax Act, the taxpayer is deemed to have disposed of all capital property for proceeds equal to fair market value immediately before death.
So, now you know! Thanks for reading.