Estate Planning Council of CANADA

Some people in life are private. It is hard to believe this statement when we look at the number of social media posts that take a revealing look at people’s lives, their feelings and their relationships – good and bad.

Privacy is valued and sacred to many. Individuals may choose to be closed about their financial assets and matters surrounding their families and businesses. So, when the discussion turns to estate matters, efforts to ensure privacy continue to be of upmost priority.

The determination of what financial and estate planning tools should be considered, usually have us turn to will substitutes such as trusts, beneficiary designations, etc.

Beneficiary designations allows clients to consider the potential for:

• -  Bypassing the estate

• -  Avoiding probate (estate administration tax)

• -  Having beneficiaries receive funds directly

• -  Avoiding delays in settling the estate

• -  Privacy

  However, when not coordinated in an overall plan and not taking into consideration family dynamics, it perhaps is not surprising that litigation can arise out of beneficiary designations. The desire for privacy is lost when disputes over who is entitled to receive the proceeds can escalate when it reaches the courtroom.

  In Simard v. Simard Estate 2021 BCSC 1836, the loss of privacy plays out when Verna Simard (the matriarch) passed away leaving only one of her children, Julie, as the beneficiary of various registered accounts and joint bank account holder (for the purposes of this article, the other assets in dispute will not be addressed). Verna’s other children did not agree with their mother’s testamentary decision and took Julie to court. The use of the beneficiary designations may have seemed as a simple way for the proceeds to bypass the estate. However, based on court documents, the how and why this family ended up in the courtroom is a history of estrangement, tragedy, and other family dynamics that Verna probably never wanted disclosed.

The Result: The court applied the presumption of resulting trust from Supreme Court of Canada Pecore v. Pecore, [2007] S.C.R. 795 (“Pecore”) to Verna’s joint account, but also to some RRIF accounts of which Verna designated Julie as beneficiary.

The Concern: The application of Pecore again has lead practitioners to consider the impact of this and other similar cases where the named beneficiaries of plans, funds and life insurance policies are not the same residuary beneficiaries of an estate.

At this point, what should we be doing:

1. Review our beneficiary designations

2. Take a whole view of the assets and beneficiaries we have in our lives

3. Compile a Net Worth Statement – what assets are being held jointly

4. Are our Executors prepared – Access to professionals and Executor Checklists

5. Does the estate have liquidity to address the estate debt?

For Practitioners:

1. Make it a point in your practice to review beneficiary designations

2. Encourage ourselves and our clients to compile a Net Worth Statement – what assets are being held jointly, etc.

3. Provide Executor Checklists

4. Consideration of the use of insurance trusts, contingent beneficiaries, will substitutes, etc.

5. Provide a comprehensive review of testamentary documents and do they match the beneficiary designations made.

The commentary in this article is meant to be general in nature and should not be considered legal or tax advice to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation.

Jos Herman, BComm, CPA, CA, CFP, TEP Director, Wealth, Tax & Estate Planning

jherman@resourcesandsolutions.ca