CH 2 - FAMILY LAW & ESTATE PLANNING Flashcards
What are the three main types of legally mandated support ?
1)Child support
2)Spousal Support
3)Filial Support
What is Filial support ?
Where adult children are required to support their parents who are in need. This may be required in some Jurisdictions.
- A lot of this and details are determined in the courts.
what are the various events that can trigger a division of assets between spouses ?
- Separation
- Death of a spouse
- Improvident depletion of assets
- Terms of a domestic contract
what assets are excluded from net family property division ?
*Property acquired by gift or inheritance, damages for personal injuries
*Proceeds of a life insurance policy
*Properties that have agreed to be excluded by a Domestic Contract.
what does the term “unjust enrichment refer” to ?
refers to a client receiving benefits from the other spouse under circumstances that
are considered morally unfair.
[the wronged spouse may have a claim on the property. However, the
wronged spouse must prove that the unjust enrichment caused the other spouse to be enriched, while the wronged
spouse was deprived, and that there was no legal reason for the enrichment and deprivation.]
When proven that a spouse has been unjustly enriched what must happen ?
When a spouse has
been unjustly enriched at the expense of the other spouse, a constructive trust may be formed as compensation for
the wrongful act.
[The court may impose an obligation on the unjustly enriched spouse to compensate, or transfer
property to, the deprived spouse.]
What primarily does a Trust do ?
A trust separates legal ownership from the beneficial ownership of the property.
[ - and by so doing, distinguishes
between those who have the authority and responsibility regarding the management of the property from those who have entitlement to its enjoyment. ]
Who are the various parties of a trust ?
Settlor- the person who creates the trust.
Trustee - the person appointed by settlor to manage the trust property.
Beneficiary- the person entitled to enjoy and benefit from the trust property.
What are the entitlements of the beneficiaries ?
*Absolute income interest
* Contingent income interest
* Capital interest
* Life interest
* Remainder interest (also known as residue interest)
* Discretionary interest
* Vested interest
* Contingent capital interest
What are some advantages of a Trust ?
- Income splitting with family
- Multiplying tax exemptions
- Minimizing probate fees
- Avoiding a disposition on death
- Accomplishing an estate freeze
- Protection of assets
- Management of asset
- Protecting privacy
What is a corporate trustee ?
A trust company named to carry out the function of trustee when a client’s situation
is complex, or if the client does not have family or friends nearby with the technical knowledge or skills to be
attorneys.
What are the advantages of using a corporate trustees ?
*Experience
* Security
* Continuity
* Availability and permanence
* Impartiality
* Record keeping
*Standard of care for fiduciaries (common law and civil law).
*Confidentiality
What must a client consider before hiring a corporate trustee ?
*Cost
* Personal knowledge
[cost - more expensive than naming family member or friend.
Personal knowledge - do not have a personal relationship with the settlor or beneficiaries. So many not have the best discretionary judgement on matters when it comes to specific discretionary distribution of assets].
What are some types of inter vivos trusts ?
Alter ego trust
* Spousal or common trust
* Joint spousal or common-law partner trust (also known as a joint partner trust)
Family trust
Asset protection trust
Charitable remainder trust
Cross-border trust
What are the various types of testamentary trusts ?
*Spousal or common law trust
*Non-spousal or common law trust
*Life insurance Trust
What is a discretionary trust ?
A discretionary trust allows the trustee to decide when, to whom, and how much income and capital to pay a
beneficiary or group of beneficiaries.
Factors to consider when considering a henson trust ?
- Payments from the trust—Does the beneficiary have sufficient income and assets to remain above the threshold
for government benefits? - Disability benefits received by the beneficiary—Does the beneficiary qualify (or expect to qualify) for government
benefits? - Province of residence—Does the beneficiary reside (or expect to reside) in a jurisdiction that allows trusts that
protect disability benefits?
If your client’s response to all of the above questions is no, a regular trust may be more appropriate, where the
grantor can direct how the trust income and capital is distributed.
Name some various absolute discretionary trust ?
Henson Trust
Inbound Trust
What is a henson trust ?
A client can create a Henson trust (also known as a disability trust) to provide for a person with a disability, and also
to protect disability benefits received from the provincial government (e.g., social assistance payments, access to
government housing)
What determines the order of payment when it comes to an Estates obligations ?
It is whether the estate is covered by common or civil law.
What is the general order of pmt of a deceased client’s debts ?
- Funeral and burial expenses
- Income taxes
- Probate fees and estate taxes
- Legal fees
- Estate administrator costs
- Payment of debts
- Property taxes
- Utility payments
Can bankruptcy proceedings that were started before a clients death continue ?
The answer is yes, they can.
-The Canadian Bankruptcy and Insolvency act which the federal govt is responsible for has made it this way.
Can anything be paid if a bankruptcy application is filed against a deceased clients estate ?
Only funeral and Testamentary expenses may be paid until the conclusion of banktruptcy proceedings.
Who are considered dependents of a deceased client ?
Spouse, and minor children of the deceased.
What measures must one consider taking, to ensure that the client’s assets do not form part of the estate and are protected ?
Naming beneficiaries
* Inter vivos trust
* Testamentary trust
* Individual pension plan
* Inter vivos gifts
* Joint ownership with right of survivorship
When you die with a valid will what is it referred to as ?
died testate.
When distributing assets by shares, your clients must consider two factors, what are they ?
*Shares per capita
* Shares per stirpes (common law) or by roots (civil law)
What is Abatement ?
Abatement is a reduction of the amount of a gift, or all gifts, when the value of the estate is insufficient to satisfy
the gift or gifts. A general gift (also called a legacy) does not specifically identify a particular asset; it is a gift paid
out of the testator’s general estate.
What is Lapse ?
If the beneficiary who was expected to receive a gift or asset is not alive (or does not exist) at the time of death
of the testator, the asset will lapse (unless the will states otherwise). If the gift is specific property, it falls into the
residue of the estate and is distributed to the surviving beneficiaries
Lapse -
Class gifts
* Gifts to joint tenants
* Statutory anti-lapse—If a gift is made to a statutory beneficiary who predeceases the testator, it passes on to a
relative of the statutory beneficiary according to provincial law, which varies by province (unless the will states
otherwise).
* Cy-près
What is Dying intestate ?
When a client dies without a will, or if the will does not account for disposal of all of assets, provincial and territorial
laws set out how the estate assets are to be distributed.
When does partial intestacy occur ?
*The testator tries to dispose of each asset separately or by categories and fails to provide for a residuary
bequest.
* One or more of the residuary heirs predeceases the testator and the will does not include a provision for the
share to be paid to other heirs.
* There is a lapse of a gift.
What are the risks of partial intestacy ?
- Distribution of assets against the client’s wishes
- No trust in place
- Age of majority
- Delay and expense
What is prefrential share and when does it occur ?
In most provinces, the surviving spouse is given a preferential share of an estate if the client died intestate, as well
as interest in the residue of the estate.
[The surviving spouse the household effects and a life interest in the matrimonial home.]
What are the differing amounts of preferential share by jurisdiction ?
BC $300K , $150K
MB, ON $200K , $50K
In British Columbia, the surviving spouse of a client who dies intestate receives a preferential share of $300,000
if the testator’s children are also children of the surviving spouse; otherwise, the preferential share is reduced to
$150,000. The remainder of the estate is then split equally between the surviving spouse and children.
- In Manitoba and Ontario, the surviving spouse of a client who dies partially intestate receives a preferential
share reduced by the amount of benefits received under the will. For example, in Ontario, a surviving spouse
who has already received $200,000 in benefits under the will does not receive a preferential share from the
undistributed portion of the estate. In Manitoba, the surviving spouse has a $50,000 preferential share if the
children of the intestate client are not children of the surviving spouse.
What is probate ?
The process of courts validating a will.
How can one reduce probate fees ?
*Not owning the asset
* Designating beneficiaries
* Joint ownership of assets
*Multiple wills
* Donation mortis causa
Before choosing a strategy to reduce probate fees, the client must consider several key factors ?
- Immediate income tax consequences
- Future income tax liability
- Impact on probate
- Costs
- Potential claims by creditors
- Potential claims under family law
- Loss of control of property
- Impact on beneficiaries
- Impact of death of beneficiaries prior to testator
