Having an Estate Plan is essential part of organizing your finances and ensuring the well-being of your family. You want to make sure that your beneficiaries will be looked after and will be able to make the most out of the assets you leave to them. We strive to maximize the wealth transferred to your beneficiaries and to minimize taxes. At the same time our goal is to protect your estate from claims or conflict. Professional Estate Planning can save your estate from paying too much tax, probate fees and other costs of estate administration, and ensure your wishes are carried out. A professional Estate Plan will allow for stress and conflict-free estate administration designed to ensure the preservation of family relationships. Too often avoidable family conflict results from an ill-considered estate plan.
An Estate Plan begins with a discussion of your objectives and wishes for your estate. This is followed by a detailed review of your assets, including pensions, life insurance, registered investments and business assets. Family circumstances must be carefully and honestly considered as issues such as inability of a beneficiary to handle money or possible family law conflict in the life of a beneficiary can be taken into account in your Estate Plan with various types of trusts. The implementation of the Estate Plan typically involves the drafting of one or more Wills, Powers of Attorney and Trusts, where needed, to address the objectives of your Estate Plan and the needs of the beneficiaries. For some families a Domestic Contract, such as a Marriage Contract or Cohabitation Agreement is also included as an important part of the Estate Plan.
There are many different types of Trusts which are used to achieve a wide range of purposes. Trusts can be set up during your lifetime (an inter vivos Trust) as an Estate Planning tool to transfer property to other people or charities. More commonly Trusts are established in Wills (Testamentary Trusts) to provide direction for the distribution of estate assets. Trusts can help to protect assets and income from creditors; they can be useful for income-splitting to minimize taxes; and Trusts can be set up to provide for income or assets to be distributed over time to minors, or to people who can’t manage their own money for various reasons.
A Henson Trust is a type of Trust put in place to provide financial support to a disabled beneficiary who is receiving or is expected to receive government support payments. This type of Trust is designed to ensure that the beneficiary is able to receive the maximum benefit possible from the Trust without jeopardizing the beneficiary’s entitlement to continued government support.
Where a testator wants to provide for his or her spouse for their lifetime while ensuring that assets are preserved for their children, a Spousal Trust can be included in the Will. A Spousal Trust will ensure that the spouse receives the income from the investments held by the estate during their lifetime and, may also allow the spouse to receive some of the capital of the estate if required. The remaining capital of the estate will be held in trust until the death of the spouse. After the spouse dies, the remaining assets will be divided amongst the surviving beneficiaries of the estate.
Domestic Contracts are often an important part of an Estate Plan. A Marriage Contract or Cohabitation Agreement may be recommended for a client or they may be recommended for certain intended beneficiaries of an estate. Whether living together or getting married, a Domestic Contract may be the best way to protect your estate from a costly and destructive family law dispute Domestic Contracts are legal written agreements which deal with issues arising when couples live together, marry, separate or die. The primary focus is often on the division of the couple’s property and the amount of spousal support to be paid, if any. At Morgan and Phillips LLP, we have more than 30 years of combined experience in negotiating, drafting and contesting all types of Domestic Contracts.
The law in Ontario encourages people to try to settle their own affairs outside of the court process. Domestic Contracts are generally respected by Ontario Courts provided that:
- they are fair to both people;
- both people know what exactly they are getting into by signing the agreement;
- each person provides full details about their finances;
- each person has enough time to properly consider and negotiate the terms of the contract; and
- both people received or have the opportunity to receive independent legal advice.
In circumstances where a client is entering into a second marriage or common law relationship, a Domestic Contract is often recommended as a means of balancing the client’s wish to preserve their wealth for their children while also ensuring their spouse is well provided for. In situations where a client owns a business which they intend to pass to their children, the client’s children may be encouraged to enter into a Domestic Contract with their partner in order to protect the business from any future Family Law Act claims, which could jeopardize the health of the company.
Moving in with a partner can sometimes bring legal obligations and consequences that neither person planned on, or even thought about. It is important to know your rights and what living together could mean for you, your property and your estate. When you live with someone certain rights and responsibilities might arise with respect to spousal support – whether you intended them to or not. In addition, common-law partners may over time become entitled to an interest in their spouse’s property – including any businesses or real estate the other partner might have an interest in.
A Cohabitation Agreement can help by setting out the terms that both partners agree are fair for dividing their property and payment of spousal support, if any, if the relationship doesn’t work out or if one of the spouses dies. The agreement will also say what will happen if the couple decide to marry. Terms may be included in the Cohabitation Agreement which provide for an increase over time in the amount of support to be paid or the sharing of property purchased during the relationship. Different provisions may be included in the agreement for sharing of assets and payment of support when one of the spouses dies or when the couple separate. Many people live in common law relationships their whole lives. Sometimes common law couples assume that the law considers them the same as married couples, but this is not the way it is in Ontario. There are big differences in property division laws for common law and married couples, which apply on either separation or death. A Cohabitation Agreement can help to ensure that both parties are treated fairly whether their relationship ends after only a couple of years together or after a lifetime.
Marriage Contracts or Prenuptial Agreements
A Marriage Contract (sometimes referred to as a Prenuptial Agreement) is a legal contract that people who are married or who intend to marry may enter into which deals with their respective rights and obligations on separation or the death of one of the spouses. The law in Ontario sets out rules for the sharing of wealth accumulated during a marriage and for the payment of support. If a couple who are getting married or are already married chose to opt out of some of these laws, they can agree on terms that are fair to them. A Marriage Contract will usually deal with issues concerning property division, responsibility for debts, and the amount and duration of spousal support, if any. The contract may provide for different provisions in the event of the relationship ending with a separation or the death of one spouse