Does the Timing of their Father’s Death Disinherit Them?

Written on May 18, 2016 – 9:19 am | by Jacob Kaufman

In Royston et al v Alkerton et al, 2016 ONSC 2986 (CanLII) the estate trustees of Recia’s estate sought the court’s advice and direction to interpret her will.

Recia had five children. Two of them, Alan and John, predeceased her. Alan had two children; John had none. Subsequent to Alan and John’s death, Recia made a will with the following provision:

My Trustees shall divide the residue of my estate equally among my children alive at my death; but if any child of mine dies before me, leaving issue alive at my death, my Trustees shall divide the part to which that deceased would have been entitled if alive on [sic] at my death among that child’s issue in equal shares per stirpes.

Alan’s children argued that Recia’s estate should be divided into four shares, and that they should receive the share which would have passed to Alan. Laura (one of Recia’s daughters) argued that as only three children were alive when Recia made her Will, the residue estate should be distributed between the three surviving children.

Laura and Alan’s children filed dueling affidavits regarding their relationship with the grandmother. Laura believed that Recia didn’t intend to benefit Alan’s children as they were brought up in a “happy, healthy and wealthy family situation”. The estate trustee also filed an affidavit stating that he was present when Recia instructed her lawyer regarding the Will, including that she wanted her three living children who were alive to be the beneficiaries under her Will.  He also attested that he advised Recia that the residue of her estate would pass to her three children and the lawyer did not contradict him.

Justice Taylor found that much of this evidence was inadmissible, as it was direct evidence of a testator’s intentions. As the Court of Appeal had held in Rondel v. Robinson Estate, much uncertainty would be introduced into estate litigation if disappointed beneficiaries could challenge a will based on their subjective belief of the testator’s intention. As such, his Honour interpreted the clause at issue in the context of Recia’s entire Will.

Justice Taylor ruled that the phrase, “my children” should not be restricted to anything other than their plain meaning: all of her children. If Recia wanted to benefit only the issue of children living at the time of her Will or to expressly exclude Alan’s children she could have done so. She did not.

Furthermore, Recia had made a previous will before Alan’s death which had similar language to her Will. There is no evidence that Recia intended to effect a change to her intent on how to deal with Alan’s children when the new Will was drafted.

Finally, Justice Taylor noted that the Will stated that the share of any beneficiary who died before reaching the age of 21 without issue would be divided amongst her issue per stripes. As this would include Alan’s children, it supports the conclusion that Recia intended to benefit Alan’s children.

As such, Justice Taylor held that Alan’s children were entitled to a quarter of Recia’s estate.

Justice Taylor correctly noted that the estate trustee’s opinion that the clause at issue did not express Recia’s wishes is inadmissible. However – and without being able to review exactly what the estate trustee attested to – it appears that the estate trustee may have attested not only to Recia’s intention but also as to the specific instructions given to her lawyer. While any evidence relating to a testator’s alleged intention or wishes is inadmissible, some evidence relating to instructions given to a lawyer has been admissible in rectification applications. In such proceedings, the court may rectify a will where there is an accidental slip or omission because of a typographical or clerical error, where the testator’s instructions have been misunderstood or where the testator’s instructions have not been carried out (e.g., where a testator instructs a lawyer to leave a beneficiary $100.00, but the lawyer accidentally writes $10,000). The application at issue, of course, was one by the estate trustees for advice and direction, not rectification. We do not know whether any disappointed beneficiary has brought an application to rectify the Will which would attempts to use the estate trustee’s evidence. It is therefore an open question whether this issue will ever be adjudicated by the courts.

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Written on May 17, 2016 – 7:00 am | by Steven Frye

Last month, a fellow blogger Audrey Miller wrote on care expenses and services in general which may be eligible for a tax credit in one form or another.

Co-incidentally the Canada Revenue Agency (“CRA”) was recently asked to comment on the tax system overall as it applies to seniors and gave some of their perspective.

The taxpayer making the enquiry to the CRA was concerned about seniors who pay for their own in-home and end-of-life care. The taxpayer indicated that his( her) father, who resides in a residential facility, pays more income tax than when he lived independently, and maintained the Income Tax Act did not provide any tangible recognition of the funds he uses to pay for his own care…

The taxpayer’s father primary sources of income were his registered pension plan (RPP) and registered retirement income fund (RRIF). The CRA noted that while pension income and withdrawals from RRIFs are included in taxable income, the contributions the father made to the RPP and the registered retirement savings plan (RRSP) were deductible from his income at that time, which reduced his taxes payable for the respective tax years. The CRA also noted that income a taxpayer earned in registered plans, including RRSPs and RRIFs, grows tax-free within the plans until the taxpayer withdraws it.

The CRA commented that the personal income tax system has generally used non-refundable income tax credits rather than income tax deductions to offer assistance for personal expenses. The CRA noted that there are several tax credits that assist disabled and senior individuals. The disability tax credit (DTC) is a non-refundable tax credit that helps persons with disabilities reduce the amount of income tax they have to pay. The purpose of the DTC is to ensure tax fairness, the CRA noted, by allowing some relief for disability costs incurred by individuals who have one or more severe and prolonged impairments in mental or physical functions.

To assist individuals who have significant medical expenses, the CRA reminded the taxpayer that a non-refundable medical expense tax credit is available if the individuals” eligible medical expenses are greater than the lesser of 3% of their net income or $2,208 (for the 2015 tax year), the medical expense tax credit is available to individuals who have attendant care or nursing home costs. Individuals who have attendant care or nursing home costs and qualify for the DTC can claim the greater of:
* The DTC plus a maximum of $10,000 in salary and wages for attendant care; and
* The full amount paid for salary and wages for attendant care or for nursing home costs.

The CRA noted that it is responsible for administering the tax system and enforcing tax policy and legislation, while the Department of Finance Canada is responsible for changing tax policy and legislation. Because most of the taxpayer’s concerns related to tax policy, they sent a copy of the correspondence to the Department of Finance, for their consideration. Interesting that the CRA would think enough of the enquiry to send it to the tax policy folks.

I had one further thought on this. As an executor or trustee for an estate for someone who may have incurred significant care expenses in the latter years of their life, keep in mind that much of what Audrey wrote about and the some of what is written here may be applicable to the terminal return and possibly for prior years if applicable. Make sure you consult a professional.

Happy Reading

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