Insolvent Estates – Administration Options


Written on August 25, 2014 – 6:00 am | by Jasmine Sweatman

An emerging trend in estate administration in the past few years seems to be an increase in the number of insolvent estates. An estate is insolvent if it has liabilities in excess of its assets and therefore is unable to meet financial obligations with creditors as the debts become due.

There are two primary methods for administration of insolvent estates: common law and statutory schemes under the Trustee Act or bankruptcy under the Bankruptcy and Insolvency Act. Both methods have benefits and drawbacks and should be considered in the context of the facts of the estate, not just at the beginning, but also during the course of the administration. As estate practitioners we sometimes forget about the bankruptcy option, which can be a viable alternative to an insolvency administration under the Trustee Act.

This emerging trend seems to call for us, as advisors, to ensure the named estate trustee carefully examines the assets and liabilities of the estate and to be careful with the timing of distribution and payment of the debts. Often times more investigations should take place before the Certificate of Appointment is applied for. While attention to these details in the beginning of estate administration may help, often the full extent of the assets and liabilities cannot be known until after the Certificate of Appointment is granted and sometimes fairly along in the administration process, requiring us and our clients to keep on top of the administration. Estate trustee insurance may also need to be considered if insolvency is suspected.

Lesson Learned: During an estate administration keep an eye on the liabilities vs. the assets and keep in mind the various options for administration.

Until next time,

Jasmine Sweatman /Leigh Sands

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    Capital Inheritances; Further Thoughts


    Written on August 22, 2014 – 7:23 am | by Paul Fensom

    In my last blog I referred to Thomas Piketty’s new book, ‘Capital in the Twenty First Century’. Thomas Piketty is an acclaimed economist and his book is a compilation of extensive studies about capital and capital flows.

    Capital has a variety of different meanings. In this book ‘capital’ is defined as the value of all private and public assets, both financial assets and real estate, less debt. The term capital is also interchangeable with the term Wealth’. The book is somewhat provocative and it provides a unique perspective on the ownership of wealth and wealth transfer trends.

    One of Piketty’s conclusions is that an ‘inheritance’ will be the most important factor in wealth creation, in the 21st century. This particular conclusion was based on trends which emerged from a significant amount of research, in a number of ‘old world’ countries such as France and England. Do the conclusions apply to Canada? If and when you get an opportunity to read the book, consider the following two points from a Canadian context;

    One motivation for creating wealth is ‘planning for retirement’, or using Piketty’s terminology, ‘precautionary savings’. Unlike many countries Canada currently has substantial wealth locked into defined benefit pension plans. To date many Canadians have relied on these pension plans for retirement, many of which have no residual value and as a result do not create wealth transfers. That however, could change. Most provincial governments have recognized that pensions alone won’t provide the desired precautionary savings. In fact the projected household rates of savings in Canada is only in the neighbourhood of 4%.   To address this issue many provincial governments are considering legislation to introduce a new form of group pension plans to encourage savings. These proposed new plans will have residual, transferrable, values. This will lead to larger wealth transfers in Canada.

    My other observation is how similar Canada is in respect of the differential between the rates of returns on investment and labour. Please don’t misinterpret this point. Investments in training and skill development have positive effects for everyone. However, it is worth noting that the rate of return on invested capital, in Canada, over the past 10 years has been approximately 5% for investments linked to the stock market and 4% on 10 year government bonds. These returns, even after adjusting for tax and inflation, are still higher than the rate of economic growth, which has averaged approximately 1% over the past decade. As this trend continues, it will mean that invested wealth will grow faster than wealth created by labour.

    What does all this mean? In my personal view this means that both a solid financial plan and a well thought out estate plan will continue to be the cornerstones to financial security for individuals and families.

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      Congratulations-It’s a Girl!


      Written on August 21, 2014 – 11:06 am | by Diane Vieira

      A new study reported on this week found that daughters are significantly more helpful than sons when it comes to taking care of their elderly parents.  Referencing data found from surveying 26,000 Americans, it seems that daughters spend on average 12.3 hours a month looking after an elderly parent versus sons who spend on average 5.6 hours a month caring for their elderly parents.  Significantly, gender is an important factor when it comes to taking care of a parent and not “free time”.  Overall, a son will decrease his caregiving duties to a parent when he has a sister regardless of any other factors.

      The study suggests that daughters are the ones who bear the primary responsibilities of caring for the elderly.  As such, there is a corresponding loss of career opportunities and financial hardships suffered by the caregiver daughters.  Additionally, the study goes on to examine the mental and physical toll on women who are the primary caregivers to elderly parents.

      For a funny and poignant look at caring for elderly parents, Roz Chast’s Can’t we talk about something more pleasant? documents her journey caring for her parents as they age and decline mentally and physically. Chast, an only child and a New Yorker cartoonist, illustrates the struggles with her parents who refuse to acknowledge they need help. Anyone who has been through this process with their own parents or elderly relatives will recognize their own experiences in Chast’s book, from the reluctance to move into an assisted living facility (and how to pay for it all) to discussing an estate plan.  One particular chapter focuses on Chast’s mother’s reluctance to appoint a power of attorney.  Chast’s recommendation that she needs one is dismissed with the suggestion it affords children an opportunity to steal from their parents.

      As baby boomers become the caregivers to their parents and become seniors themselves, we can expect more attention and discussion on how to deal with changing family dynamics.

      Thanks for reading

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