Trusts work – as confirmed by the BC Supreme Court

BC Supreme Court confirms that trusts work

By CV TrustCoJanuary 14, 2020

In the Spring of 2017, we blogged about the use of Alter Ego and Joint Partner trusts (‘Trust(s)”) for those over 65 as excellent estate planning tools. We mentioned that benefits range from probate savings to protection from wills variation litigation. A recent BC Supreme Court Decision has confirmed that when properly constructed and executed, Trusts are a strong defence against family litigation claims.

However, before we get to the decision, it may be useful to quickly summarize the benefits of a Trust.

Benefits of a Trust

There are 4 primary benefits:

Privacy – a Trust is a private document, whereas a will is a public document.

Probate fees – savings on probate fees of $14 of tax for each $1,000 of value. $10M of value saves $140K in probate fees. This can pay for a lot of legal and trustee fees.

Tax treatment – The transfer of assets to this type of Trust is tax deferred and any gain in their fair market value is deferred until death (Alter ego) or second to die (Joint Partner).

Litigation risk – Protection against family and other disputes. Done properly, there is nothing to argue about with regards to your will as you are – sarcastically – NSF. The Trust owns everything of value and your will has at best, your personal effects.

The case of Al Soucie

Al, a widower passed away in 2013 at the age of 78 with a significant estate. He and his wife raised three children in BC’s interior. Al also had a daughter from another relationship, Shirley. Shirley didn’t find out that Al was her dad until she was an adult, and even after, Al and Shirley were not close.

Al didn’t want any fights between his children. So, shortly after his wife’s death he engaged a seasoned trust and estate lawyer, Geoffrey White of Kelowna, to help him plan his affairs.

Geoffrey, through extensive discussions with Al and in-depth analysis of Al’s assets concluded that a Trust would best suit his needs. In effect, Al would transfer his assets to a Trust that Al would control throughout his life. On his demise, the Trust would contain provisions for the three children he raised. There would be no provision for Shirley.

Documents were drafted that included the Trust, bare trust agreements for land transferred to the Trust, etc. and then executed on October 18, 2018.

Al passed away 4 days later on his way to a long-planned vacation with a close friend. The three children soon engaged lawyers to deal with their father’s estate and the Trust. Shirley was not part of this process.

When Shirley found out about her father’s death, she ultimately commenced litigation to get Al’s will varied and to secure what she believed she was entitled to.

After a 9-day trial the judge concluded that Al had effectively transferred his assets to the Trust and the Trust and its terms were valid. Left in his estate was app. $6,000 in CPP, WCB and IOUC death benefits. Al passed away NSF – there was nothing for Shirley to argue about.

Where can it all go wrong?

A Trust can minimize litigation risk, but for the Trust to work as intended, the trustee(s) must take steps ensuring it is administered properly. As an example:

  • Time to mature – Al’s Trust only had the benefit of 4 days. In our view, it’s best to have a Trust in place for several years.
  • Have a separate bank account for the Trust – often a Trust account is set up and then ignored. Don’t use a personal bank account to deposit funds and pay bills ignoring the Trust’s account.
  • Have quarterly or annual meetings of the Trust’s trustee(s) with minutes prepared and signed. These meetings should deal with the Trust’s income and capital distributions, expenses of the Trust, etc.
  • And finally – consider independence. An independent trustee can help ensure that the Trust is administered properly and that its intended objectives are met.

As Al (and Geoff) proved, Trusts are an excellent estate planning tool if properly planned, executed and administered. The price of doing it right pales in comparison to the cost of not. As Red Adair said:

“If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur.”  

Prohibition on gifts of life insurance policies to charities in British Columbia by BC residents

Prohibition on gifts of life insurance policies to charities in British Columbia by BC residents

We have recently reviewed redacted correspondence from the BCFSA (BC Financial Services Authority, formerly FICOM), the regulator of the Insurance Act, to a registered charity in British Columbia that advises that:

  • accepting life insurance policies as donations is trafficking in insurance in contravention of section 152 of the Insurance Act (which is an offence); and
  • the charity in question cannot solicit gifts of life insurance policies or accept any life insurance policies as donations from BC residents.

The letter goes on to direct that information be added to the charity’s website regarding the inability of BC residents to donate life insurance policies.

Certainly this is a matter of grave concern for charities and advisors, as gifts of life insurance policies are routinely considered in gift and estate planning discussions. We are aware that a number of organizations are reviewing the matter and considering submissions to the BCFSA on the issue. However, at the present time, charities should be aware of and consider the BCFSA’s position. At this time, we recommend charities in British Columbia remove information regarding donations of life insurance policies from their websites and suspend any discussions with potential donors of life insurance policies until more information is forthcoming.

BC Business – Clearing up the confusion regarding family offices

A true family office comprises a team of full-time professionals that entrepreneurs can afford.

It’s hardly news that B.C. is home to wealthy business owners ranging from successful mom and pop entrepreneurs to billionaires. But Cindy David, president of Cindy David Financial Group Ltd., says that “a growing number of wealthy businesspeople are falling into the $10-to-$50-million category, with that parameter defining what their business is worth.”

Click here to read the full article.

BC Business – Trends in Financial Services

Legislation, education, licensing and product changes affect plans for your wealth.

It is an understatement to say that the changes and trends affecting the financial services landscape are voluminous. Cindy David, president of Cindy David Financial Group Ltd., and the Senior Estate Planning Advisor for Raymond James Financial Planning Ltd., notes that her industry is fundamentally changing.

Click here to read the article on bcbusiness.ca.

2019 Canadian Business Hall of Fame Inductees Announced

Each year, the Canadian Business Hall of Fame recognizes and celebrates the accomplishments of some of the country’s most distinguished business leaders. Today, the Canadian Business Hall of Fame is pleased to announce its 2019 Class of Companion Inductees:

  • Claude Lamoureux, Retired President & Chief Executive Officer, Ontario Teachers’ Pension Plan
  • Chief Clarence Louie O.C., First Nations leader, Chief of the Osoyoos Indian Band
  • Stephen J.R. Smith, Chairman & CEO, First National Financial
  • Annette Verschuren, Chair & CEO, NRStor Inc.
From left to right: Claude Lamoureux O.C., FCIA, Chief Clarence Louie O.C., Annette Verschuren O.C., Stephen J. R. Smith. Photo credit: Tom Sandler (CNW Group/JA Canada)

“The 2019 Class of Companion Inductees is a very special group. The Canadian Business Hall of Fame is honoured to recognize their enduring contributions to the business community and our country,” said Mr. David Denison, Chancellor of the Order of the Business Hall of Fame. “On June 19, 2019, we will have the great privilege of highlighting their excellence in business leadership, outstanding professional achievements and dedication to bettering Canada’s social fabric.”

The Canadian Business Hall of Fame was established by JA Canada in 1979 to honour Canada’s pre-eminent business leaders for their professional and philanthropic achievements. Companions are nominated by their peers and are chosen by an independent selection committee. As the national partner of the Canadian Business Hall of Fame, Lee Hecht Harrison Knightsbridge is responsible for managing the overall search process and identifying potential nominees according to key criteria.

“The dedication and achievements of the 2019 Companion Class sets an excellent example for our JA youth, who are Canada’s future leaders” said Scott Hillier, President and CEO, JA Canada. “We are honoured to recognize these Canadian business leaders for the inspiration they provide to our students, as they work towards recognizing their dreams and creating lives that enrich us all.”

This year’s Class of Companions will formally be inducted into the Canadian Business Hall of Fame at the 2019 Gala Dinner and Induction Ceremony at the Metro Toronto Convention Centre on June 19, 2019. Proceeds from this gala help JA Canada meet the growing demand for financial literacy, work readiness, and entrepreneurship programs for Canadian students, which are essential to youth’s future success.

About The Canadian Business Hall of Fame
The Canadian Business Hall of Fame celebrates the outstanding achievements of Canada’s most distinguished business leaders, past and present. Over 170 Order of the Business Hall of Fame Companions serve as inspiring examples for all young Canadians and are featured in a display in the Allen Lambert Galleria located at Brookfield Place in Toronto, Ontario. For more information, visit www.cbhf.ca.

About JA Canada
Junior Achievement is the largest youth business education organization in Canada and plays an important role in developing future leaders by providing them with the knowledge and confidence needed to define personal success, gain financial responsibility and enhance their workforce readiness. JA programs are developed in alignment with three pillars: entrepreneurship; financial literacy; and work readiness. For more information, visit www.jacanada.org.

SOURCE JA Canada

Wealth Professional’s Women in Wealth Management conference a great success!

Wealth Professional’s inaugural Women in Wealth Management conference was a rip-roaring success with thought-provoking speakers and insights & experiences from women in leadership roles. I am proud to be able to speak on how I built my brand and reputation, and most importantly how to turn a “no” into a “yes”!

Stay tuned for a video on my presentation!