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Wealth Management Essentials > Chapter 15 > Flashcards

Chapter 15 Flashcards

1
Q

If Bill does not provide adequately for his spouse, Alice, in his will, Alice could initiate a claim based on the

A

matrimonial property legislation.

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2
Q

The legal process by which courts confirm a person’s will to be their valid last will and testament. It also validates the authority of the executor.

A

Probate

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3
Q

In common law provinces, a document that authorizes the appointed donee to manage the donor’s financial affairs, even if the donor becomes mentally incapable (common law provinces only).

A

continuing power of attorney

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4
Q

A court order proving that a will is the deceased’s last will. It also gives the executor control over the estate’s assets and liabilities and the authority to administer the estate.

A

Letters Probate

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5
Q

The person who settles the estate of a deceased person and distributes the assets according to the terms of the deceased’s will.

A

executor

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6
Q

A clause in a will that allows for more flexibility in regard to the executor’s investment decisions.

A

investment discretion clause

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7
Q

In Quebec, all property in the estate of a deceased person, including all assets and liabilities, as well as the whole of the person’s rights and obligations.

A

patrimony

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8
Q

An amendment to a will that is technically considered to be a will on its own.

A

codicil

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9
Q

A clause in a will that allows the executor to use assets for the benefit of minor beneficiaries until they reach the age of majority.

A

discretionary encroachment clause

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10
Q

In Quebec, the person who settles the estate of a deceased person and distributes the assets according to the terms of the deceased’s will.

A

liquidator

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11
Q

A document that allows a donor to appoint someone to make certain non-financial decisions (such as choosing the donor’s place of residence, food, or medical treatment) if donor becomes mentally incapable.

A

power of attorney for personal care

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12
Q

A clause in a will that allows the surviving beneficiary to use, occupy, and enjoy a specified property during their lifetime. The testator may wish for another beneficiary to receive the asset itself when the surviving beneficiary dies.

A

life interest in a specific asset clause

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13
Q

A will written and signed entirely in the handwriting of the testator, without using any mechanical device. No writing of any sort can appear on it other than handwriting of the testator.

A

holograph will

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14
Q

A person who dies without having made a will or having made a will that was revoked or otherwise determined to be invalid.

A

intestate

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15
Q

A document that allows a donor to appoint someone to make monetary decisions on their behalf, such as paying bills and managing investments. It may give limited or general authority to act.

A

financial power of attorney

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16
Q

A clause in a will that requires a certain period to pass (30 days) after the death of the testator before assets are distributed to a particular beneficiary so as to avoid going through probate twice within a short time.

A

survivorship clause

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17
Q

A document that provides detailed directions on the treatment a person wishes or does not wish to receive in the event of a terminal illness or incurable injury.

A

advanced health care directive, sometimes referred to as a living will

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18
Q

A person who makes a will.

A

testator

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19
Q

In Quebec, a will that is drafted and attested by a specific type of legal professional. Such a will is not subject to probate upon the testator’s death.

A

notarial will

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20
Q

In what situation must the executor produce a final account, showing the succession’s residual assets, which must be accepted by the heirs?

A

If the liquidation of an estate lasts more than a year

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21
Q

If the liquidation of an estate lasts more than a year, the executor must

A

prepare an account of his or her management to the heirs and creditors at least once per year.

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22
Q

In Ontario, executors are also called

A

estate trustees

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23
Q

In the common law provinces, when a person dies without a valid will, a ______ _________ is necessary before any of the deceased’s assets can be distributed. Assets are then distributed in accordance with provincial _________ laws.

A

court application

Intestacy

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24
Q

Under this Act, a surviving (married) spouse takes a preferential share of the deceased spouse’s estate (currently
$200,000), plus a proportional share of the balance.

A

Succession Law Reform Act

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25
Q

A will has two main purposes:

A
  • Identify the persons whom the testator wants as beneficiaries.
  • Appoint an executor.
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26
Q

Wills can be made in three basic forms:

A
  • Conventional or formal will
  • Holograph will
  • Notarial will in Quebec
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27
Q

A conventional/formal will in Quebec is known as a

A

will made in presence of witnesses

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28
Q

Who can prepare a formal/conventional will?

A

Anyone, but clients should consult a legal expert to ensure proper working and compliance with the province’s formal rules of execution

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29
Q

For a conventional will in the common law provinces, the testator must sign the will in the presence of…

A

two witnesses

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30
Q

In Quebec, a notarial will is a will that is drafted and attested by a notary. It is signed by the notary, the testator, and a witness (who is not required to know the contents of the will). Such documents are considered _______ _____ and are not subject to probate upon the testator’s death.

A

notarial deeds

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31
Q

Deathbed gift made by a dying person. It is made with the intent that the person receiving the gift shall keep it if death ensues.

A

Gift Mortis Causa

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32
Q

A typical will has the following components:

A
  • Identity of the testator
  • A statement revoking all former wills or codicils
  • Appointment of the executor or executors and substitute executors
  • Instructions to pay all just debts and taxes, as well as funeral and estate-related expenses
  • Identity of the beneficiaries (heirs or legatees) to receive specific assets and the residue of the estate, and the terms on which they are to receive them
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33
Q

Under the relevant law, the executor is restricted to making only conservative, often low-return investments for the estate. This clause will allow more flexibility in making investment decisions for the estate.

A

Investment discretion clause

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34
Q

This clause allows you to appoint a friend or family member as guardian (or tutor, in Quebec) of minor children

A

guardian appointment clause

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35
Q

This clause allows the executor to make various income tax elections on the estate’s tax return, where appropriate and advantageous.

A

the tax election clause

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36
Q

In Ontario (and in some other provinces), the surviving spouse has the right to file a ________ _______ within six months. This states that the surviving spouse wishes to take division of net family property under the Family Law Act rather than under the will. It is the executor’s duty to inform a surviving spouse of this right.

A

Spousal Election

37
Q

a common clause to avoid going through the probate process

twice within a short time span, thereby avoiding probate tax being paid twice.

A

survivorship clause

38
Q

If drafted properly, the survivorship clause requires a survivorship period (usually ___ days) before assets are distributed to a particular beneficiary. If that beneficiary does not survive the prescribed period, the deceased’s estate is distributed to alternate beneficiaries.

A

30

39
Q

Are witnesses required for a holograph will?

A

Witnesses are not required because it is expected that a holograph will is executed by the testator alone, in circumstances that prevent the execution of a conventional will.

40
Q

A codicil is typically used only to amend or add a provision to the existing will; however, the signing of a codicil legally revokes the existing will in most provinces. Therefore, the codicil must include a

A

statement by the testator affirming the validity of the existing will, other than the amendment or addition to the will that the codicil is making.

41
Q

The signing of a _______ must comply with the same formal execution rules as the signing of a will.

A

codicil

42
Q

_______ ____ may be effective in certain situations, particularly when assets are held in several jurisdictions

A

Multiple wills

43
Q

People may also use multiple wills to avoid _______ _____ on certain assets

A

probate fees

44
Q

Probate fees are also known as

A

estate administration tax

45
Q

composed of rules laid down by the courts in their decisions and is, therefore, judge-made law, as opposed to Quebec’s _________ system.

A

Common law

codified

46
Q

In Quebec, heirs are known as

A

legatees

47
Q

In Quebec, without a will, the heirs must act jointly as __________ of the estate, a task that may be complicated and which they may not wish to perform. However, they can appoint one or more by _________ _____.

A

liquidators

Majority Vote

48
Q

In Quebec, the legal right to use and enjoy an asset, such as the right to use the family cottage.

A

Usufruct

49
Q

Testators have considerable latitude in drafting their wills. However, they are restricted under most provincial legislation in two regards:

A
  • They cannot cut a family member out of their will if that person is a next of kin and financially dependent on them at the time of their death.
  • They must provide for their spouse, according to the minimum required in the province they reside in at the time of death, subject to a marriage contract.
50
Q

A __________ executor is the best choice in many circumstances, particularly if the assets are of significant value.

A

corporate

Such as a trust company

51
Q

Corporate executors offers the following advantages:

A
  • Experience in financial and estate planning
  • Continuity
  • Availability
  • Impartiality
  • Multi-faceted expertise
  • Financial Security
52
Q

Regarding executor compensation. Although there is no statutory rule, the executor is entitled to a

A

fair and reasonable allowance

53
Q

For example, if an estate is settled relatively quickly, the executor’s compensation is typically ___% of the estate’s gross value. The compensation is split between

A

5%

2.5% of the value of the assets gathered and 2.5% of the value of the assets distributed

54
Q

If the estate’s funds are held and invested in a trust, the trustee who is responsible for the management of the trust and the distribution of income or capital to the beneficiaries over an extended period is typically entitled to receive trustee compensation. Typically, compensation is approximately

A

two-fifths of 1% of the average value of the trust

55
Q

If no agreement is reached on compensation, the executor of an estate or the trustee of a trust may apply to the courts to determine what the compensation should be. This method of obtaining approval for compensation is often included in the proceeding and is known as the

A

formal passing of the accounts.

56
Q

The new will normally starts with a __________ clause, such as “I hereby revoke all my former wills and codicils”.

A

revocation

57
Q

Another way of revoking a will is by

A

deliberately destroying it

58
Q

The following assets are not subject to the terms of the will and are not included in the estate

A
  • Assets for which there is already a named beneficiary on a stand-alone document, such as a Beneficiary Designation Form. (These assets may include a life insurance policy, pension plan, TFSA, RRSP, or RRIF.)
  • Assets that have been gifted before death.
  • Assets for which the owners are registered as joint tenants with rights of survivorship (in common law provinces).
  • Assets held in an inter vivos trust.
  • Business interests covered by a buy-sell agreement.
  • Assets covered by a pre-nuptial, cohabitation agreement, or matrimonial regime.
59
Q

THE EFFECT OF MARRIAGE ON A WILL

Marriage results in a _________ of an existing will in some common law provinces.

In Quebec, a valid will drafted before marriage…..

A

revocation

remains valid

60
Q

THE EFFECT OF DIVORCE ON A WILL

A divorce does not _______ a will; however, the benefits in favour
of the former spouse are cancelled

A

revoke

61
Q

In Ontario, the executor’s first duty is to apply to the Ontario Court (General Division) for a

A

Certificate of Appointment of Estate Trustee with a Will

62
Q

Certificate of Appointment of Estate Trustee with a Will may be referred to as

A

Letters Probate

63
Q

The _________ has the responsibility to ensure that the application package is actually delivered into the hands of the intended recipients

A

executor

64
Q

In Ontario, if a person dies intestate, the deceased’s nearest relative is entitled to apply to court to have an estate trustee appointed by the courts. The documents required,

A

Certificate of Appointment of Estate Trustee without a Will, also known as Letters of Administration in some provinces.

65
Q

Probate fees are charged on the total value of the deceased’s estate. The total value of the estate is the market value of all assets owned by the deceased at the time of death. No deductions are made for debts, other than

A

for mortgages on personal real property, such as a house.

66
Q

Probate fees in Ontario are ____% of the estate value in excess of $50,000.

A

1.5% (or $15 per $1,000)

For example an estate worth $1,000,000
$1,000,000 - $50,000 = $950,000 * 1.5% = $14,250

67
Q

The only other provinces where the probate rate is as high are Nova Scotia and British Columbia. British Columbia’s rate is approximately ___%, and Nova Scotia’s rate is approximately ___%.

A
  1. 4% BC

1. 7% NS

68
Q

Certain assets owned by a deceased person are excluded from the estate for probate fee purposes. Excluded assets include

A
  • assets held in joint tenancy with right of survivorship
  • life insurance proceeds
  • registered accounts with named beneficiaries
69
Q

Clients can reduce the size of their estate for this purpose through the following means:

A

• Transferring ownership of property to someone else during their lifetime
• Transferring assets to an inter vivos trust during their lifetime
• Establishing a spousal trust under the testator’s will (although this strategy will only avoid probate fee on the death of the survivor spouse, not on the death of the first spouse to die)
• Holding properties jointly with right of survivorship (so that when one of the joint owners dies, the other
automatically gets title)
• Gifting money or assets to family members or to a charity during the person’s lifetime
• Converting personal debt into mortgage on personally held real estate or corporate debt
• Using multiple wills where permitted.

70
Q

Probate is necessary only for holograph wills and for those made in the presence of witnesses. Meaning that _________ wills in Quebec don’t go through probate

A

Notary

71
Q

In Quebec, a ____ search is an important task following a death

A

Will Search

72
Q

In Quebec, probate proceeds as follows:

A
  • The existence of the will is publicized, and the will is deposited in the record of the Superior Court of Quebec.
  • It is established that the will appears to be valid.
  • Interested parties are then able to obtain certified copies of the original will.
  • The applicant (generally, the liquidator of the estate), a notary, or a lawyer completes the probate of the will.
73
Q

In Quebec, If the liquidation of an estate lasts more than a year, the liquidator must prepare an account of his or her management to the heirs and creditors at least _____ per year.

A

once

74
Q

POWER OF ATTORNEY

The person granting authority is the _____, and the person or corporation given authority is the ______, more commonly referred to as the __________.

A

donor

donee, attorney

75
Q

Quebec, a power of attorney is called a _________, the donor is called the ________, and the donee is the _________.

A

mandate

mandator

mandatary

76
Q

What is limited vs general power of attorney?

A

If the power of attorney is limited, the donee is restricted to the power specified in the document.

General power of attorney doesn’t have restrictions outlined in the document.

77
Q

What must donors have in order to grant a power of attorney (mandate in Quebec)?

A

They must still be mentally competent, that is why it is advisable for the execution of POA to be witnessed by a doctor, who can testify about the donor’s mental capacity.

78
Q

Granting power of attorney involves the following formalities:

A
  • Naming the donor and appointing the donee
  • Specifying the authority being granted
  • Signing of the document by the donor in the presence of two witnesses
79
Q

In Quebec, two powers of attorney may be required:

A
  • A mandate that is effective while the mandator is capable

* A second mandate, called a protection mandate, that becomes effective if the mandator becomes incapacitated

80
Q

A continuing power of attorney is sometimes called

In Quebec it is called a

A

enduring power of attorney

Protection mandate

81
Q

POA for personal care can make decisions for you such as:

A

The donor’s place of residence, food, or medical treatment.

82
Q

If you do not have a POA for your property when you die, then who assumes the decision-making duties?

A

The Public Guardian and Trustee

Family members or associates can apply to the court to replace the Public Guardian and Trustee and become the incapacitated family member’s court-appointed guardian of property

83
Q

Legal requirements for powers of attorney documents vary among the provinces. In Ontario, there are three types of powers of attorney:

A
  • Continuing power of attorney for property
  • Non-continuing power of attorney for property
  • Power of attorney for personal care
84
Q

There is also the concept in which power of attorney is activated, at some point in the future, when the donor is deemed incapable of managing their own financial affairs.

A

springing power of attorney

85
Q

provides instructions on the treatment a person wishes or does not wish to receive in the event of a terminal illness or incurable injury

A

A living will or advanced health care directive

In Quebec it is a protection mandate

86
Q

This often contains more detailed directions than a living will about the types of medical treatment that may or not be desired, depending on the specific medical condition involved

A

advance health care directive

87
Q

Today, financial abuse as an elder abuse issue is second only to the psychological abuse of seniors. In fact, it is estimated that adult children, spouses, and grandchildren are responsible for close to ___% of reported financial abuse cases.

A

40%

88
Q

Apart from appointing a power of attorney, registered firms are also encouraging elderly clients to provide information about a _______ ______ ______, similar to an emergency contact person for children at school.

A

trusted contact person (TCP),

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