Estate Planning – Ontario Perspective The Bank of Nova Scotia Trust Company Estate Planning – Ontario Perspective Christine Brunsden Estate and Trust Consultant __________, 2017

Ontario Intestacy Rules * Surviving spouse receives preferential share ($200,000.00) Remainder divided depending on children surviving Intestacy is a combination of per stirpes and per capita distribution Common-law spouses are not considered a spouse in relation to intestacy division

Two forms of Wills considered valid in Ontario Will Formalities Two forms of Wills considered valid in Ontario Formal Will – signed at the bottom by the testator, and witnessed by two or more people in the presence of the testator Holograph Will – written entirely in the testator’s handwriting, signed by the testator at the bottom (no witnesses are required)

Marriage and Marital Breakdown Certain events can have unexpected results on one’s Will Marriage: automatically revokes a Will in Ontario, unless made in contemplation of marriage Separation: has no effect on testamentary gifts Divorce: revokes any testamentary gifts to the ex-spouse, and revokes their appointment as an Executor, but does not revoke the Will itself (the testator is treated as having survived the ex-spouse)

Family Law Act (FLA) and Dependant’s Relief A legally married spouse has the option to take under the Family Law Act (as if for a marriage breakdown) vs their entitlement under the Will Certain individuals, including spouses, children, grandchildren, and siblings who were dependent on the testator may make a claim for support from the Estate under the Dependant’s Relief section of the Succession Law Reform Act (SLRA) As common-law spouses do not have a right to make a claim under the Family Law Act, Dependant’s Relief is often the only remedy available to them

Income Tax Consequences on Death: General rule is that an individual is deemed to have disposed of all of his/her assets upon death This may result in significant tax liability (income inclusion of full proceeds of RRSPs/RRIFs, triggering of unrealized capital gains, etc) Certain assets are exempt from taxation, including but not limited to: 1) Principal residence 2) Tax-Free Savings Accounts (TFSAs)

Income Tax Deferral Opportunities Rollover of RRSPs/RRIFs to surviving spouse/ common- law partner’s RRSP or RRIF Rollover to capital property to spouse/ common-law partner or a trust for spouse/common-law partner Rollover of RRSPs or RRIFs to financially dependent minor child or grandchild* Rollover of RRSPs/RRIFs to mentally or physically infirm, financially dependent child or grandchild* Rollover of RRSPs/RRIFs to Registered Disability Savings Plan (“RDSP”) for a disabled child or grandchild* Rollover of RRSP/RRIF proceeds to a lifetime benefit trust for a mentally infirm spouse/common-law partner/child/grandchild* * Subject to certain eligibility criteria

Certificate of Appointment (“Probate”) Obtaining Probate is the process of authenticating the authority of the Executor with the provincial Estate Courts Benefits to obtaining Probate: Limiting liability of the Executor Provides proof to third parties that the executor has the authority to deal with the estate assets

Estate Administration Tax (“Probate fees”) Ontario levies a provincial tax on the value of the assets that flow into the Estate, which is paid to obtain Probate The schedule is as follows: 0.5% on the first $50,000 of Estate assets 1.5% on the value of Estate assets in excess of $50,000

Strategies to Minimize Estate Administration Tax Many strategies exist to minimize Estate Administration Tax (a.k.a. Probate Fees) payable. Some of the most common are: Holding property as joint tenants with right of survivorship (JTWROS) Designated beneficiaries on registered plans and insurance policies Multiple Wills Trusts – Such as Alter Ego or Joint Partner Trusts

Two types of joint ownership of property in Ontario: Joint Accounts Two types of joint ownership of property in Ontario: Tenants in Common (TIC) – each individual owner owns a respective interest (may not be equal), which they can deal with as they see fit during their lifetime or upon death JTWROS – Each individual owner is considered to have an equal interest; upon death, their interest passes by operation of law (outside the Estate), to the surviving joint owner(s) equally * * Subject to intention

Potential Pitfalls of Joint Accounts When considering making property joint, one should be aware of the potential pitfalls, which may include: Creditor claims Marital claims Income tax considerations Estate litigation (based around intention of transferor)

Multiple Wills in Ontario Having multiple Wills is a strategy in which an Estate is divided between assets that require Probate and those that do not The main benefit is Estate Administration Tax savings (i.e. a $1 million Estate would pay approximately $15,000 in Estate Administration Tax) Some examples of assets that could be included in a Will that does not need to be Probated (i.e. a Secondary Will) are: Private corporate shares Personal effects Certain trust interests Certain forms of real estate

Executor Compensation No legislated Executor fee in Ontario However, a tariff system has evolved in the courts that leads to a general rule of 2.5% on receipts and 2.5% on disbursements The courts have been willing to adapt this based on a 5-factor model, which looks at the following criteria: Size of Estate Care, responsibility and risks undertaken Time spent by the Executor managing the Estate Skill and availability demonstrated by Executor in managing Estate Results reached by the Executor in managing the Estate

Trust Basics What is a trust? A relationship between three parties – settlor, trustee and beneficiary. Separation of legal and beneficial ownership Two main types of trusts: 1) Testamentary trusts 2) Inter-Vivos trusts

Inter Vivos Trust Set up during your lifetime Avoids Probate Speeds up the distribution time upon death Not a public document Sets plan in place now, in case of your subsequent incapacity Allows for income splitting Can address the claw back issues Corporate Trustee offers professional asset management

Alter Ego and Joint Partner Trusts Alter Ego- Individual Joint Partner- Spouses/Common Law Partners Differences from Standard Inter Vivos Trusts Must be 65 years of age or older Alter Ego - Settlor is the only person entitled to receive the capital and income during his/her lifetime Joint Partner - Settlor & Settlor’s spouse are the only ones entitled to receive the capital and income during his/her lifetime Assets transferred into the trust do not trigger a capital gain upon transfer providing

Reasons for Creating a Trust Blended families Spendthrift beneficiaries Disabled/vulnerable beneficiaries Minor beneficiaries Income and Probate Tax Planning Long-Term Charitable Gifting Capacity Planning

Scotiatrust’s Service Offerings Estate Administration Trust Management Power of Attorney for Property Personal Office Estate Assist Philanthropic Advisory Services Institutional Custody

Individuals who could benefit from our professional services: Complex family situations Subsequent marriage Blended family Disabled child Complex asset situations Large estate with varied assets Operating companies Assets in foreign jurisdictions Compliance / Regulatory issues Non-resident beneficiaries Non-resident executor/trustee Foreign tax-reporting requirements Wishing to include long-term trusts Spousal Henson Philanthropic Multi-generational

Question & Answer Session Questions?

Not intended to provide legal advice The Bank of Nova Scotia Trust Company Thank You! Not intended to provide legal advice These are the rules at present time, subject to future legislative changes