Law Times

Law Times • OcTOber 22, 2018 Page 11 www.lawtimesnews.com Family can be saddled with burden Importance of preparing will be emphasized BY MARG. BRUINEMAN For Law Times W hen a person dies without a will, a complicated legal process can ensue, say lawyers. The process following a death intestate can be compli- cated, costly and could attract claims from those who may not typically be included in the will, they add. Family members then find themselves saddled with a bur- den they may not be prepared or willing to take on and are reticent to take on the role, says Marcia Green, an Ottawa law- yer who does estate litigation and estate administration with Nelligan O'Brien Payne LLP. "If there has been discord among the family members be- fore the death, it's difficult to find anybody who would like to accept that job after the death," she says. There are occasions when no one is interested in taking on that burden, which includes menial tasks such as cleaning out the home of personal be- longings as well as the respon- sibility of having to deal with the financial concerns of the deceased. That includes going through bank accounts, determining out- standing debts and dealing with outstanding tax liabilities, ensur- ing the deceased did the previous tax return in order to do the es- tate tax returns, says Green. That it could take 18 months to two years to administer an es- tate is a further turnoff for fam- ily members, she adds. An option is for the fam- ily members to hire a financial institution or trust company to take it on, and those costs would be paid for through the estate, she says. "It makes it difficult, and it costs the estate much more when the person died intestate because you need to find some- one to take up the job and they might want a fee for the work they might be doing," she says. Once that hurdle is cleared, the legislation spells out who gets what with priorities placed on the spouse and children. If the spousal relationship is a common-law one, however, that spouse gets nothing and every- thing goes to the children. That's where's where litiga- tion is likely, says Green. "This common-law spouse will then have to bring a depen- dent's support claim against the estate" and they'll have to make a case that they were supported before death and then demon- strate how much money they would need, says Green. But that's dependent on there being enough money in the estate to allocate funds to the common-law spouse and also to continue to provide a bequest to the children. The complications continue when there are children under the age of 18, adds Toronto- based wills and estates lawyer Lisa Laredo. "If you die without a will and you have minor children, then you lose the ability to appoint the guardian," she says. "You would be losing the power to state in writing who you want to take care of the kids." Instead, the state gets the power and, with the involve- ment of the Office of the Chil- dren's Lawyer, determines what happens to the children, she says. And when it comes to the as- sets, the children get the portion prescribed by the legislation in one lump sum, she says, adding that the absence of a will means there's no ability to provide spe- cific instructions on how any money should be distributed and when. "You are losing the ability to decide how your assets will be held for your children and how they will be distributed is huge, because no 18-year-old I'd ever met is responsible to manage money like that. And people don't usually manage money if they haven't earned it," says Lar- edo. "It just causes so much con- fusion for the people you leave behind." According to legislation, if someone dies without a will and there is a spouse, everything goes to the spouse, says Laredo. "There's absolutely no op- tion about how your estate is to be divided. It all falls within the Succession Law Reform Act," she says. "The statutory for- mula for distributing the assets of an estate when there's no will can't be varied. You also lose the ability for any of your intended wishes." If there is a spouse as well as children, the first $200,000 goes to the spouse, she says. If the es- tate is worth more than $200,000, the rest goes to the children, but the spouse is entitled to one- third of the remainder, she adds. But if there's no spouse and only children, she says, the legislation determines that it's all divided equally among the children. In a situation in which there is no spouse and no children, the es- FOCUS I t's been over three years since the European Succession Regulation (the "Regulation") came into effect. It seems timely to check the pulse and see what impact it is having on estate plan- ning and administration. The Regulation came into effect on August 17, 2015 and applies to all European Union member states with the exception of the U.K., Ireland, and Denmark, each of which decided to opt out. Although it is a EU regulation, it can have significant impact on Canadians with ties to EU member states. That's why it is important to understand how it operates and can be beneficially applied for Canadians doing their estate planning. As a brief overview, the Regulation tries to harmonize the law to govern succession on death so that one law will apply - generally the law of the deceased's "last habitual residence". It does not cover tax or family law, and is restricted in scope to passing assets on death. If a person has a nationality different from their place of last habitual residence, they have the option to choose the law of their nationality to apply to their succession. In a federal country such as Canada, the Regulation provides that if succession matters are not governed at the national level, the choice to be made is the jurisdiction with which a person has the closest connection. In Canada, succession matters are governed by each province or territory. Choice of law requires choosing the laws of Canada, and the law of the province or territory with which a person has the closest connection. For Canadians with a vacation property abroad, such as in France, Italy, Portugal or Spain, it is important to take these considerations into account in estate planning. These jurisdictions do not allow for testamentary free- dom on death. You cannot, in general, leave all of your assets just to your spouse if you have children, and instead there is a mandatory scheme of distribution in favour of spouse and children, called forced heirship. To avoid this result, a Canadian with a vacation home in one of those countries can choose the law of the province or territory they have the closet connection with to apply. Likewise, a Canadian living in a EU member state and habitually resident there can choose the law of the Canadian province or territory they have the closest connection with, so that the local law of the EU member state will not apply. Slowly, on a practical level, practitioners including lawyers and notaries in EU member states are coming to terms with the intricacies and every day application of the Regulation, and the body of professional literature and education on the topic is evolving and growing. A recent case of notoriety involving the Regulation concerns the estate of celebrity French rock singer Johnny Hallyday, a French citizen who died in Decem- ber, 2017 leaving two children from a former marriage. Johnny left his estate to his fourth wife and two adopted children under his California will. His French children from a prior marriage are asserting that he was habitually resident in France at his death, and therefore French succession law should apply under which they would be entitled to a forced share of his large estate. They recently obtained a French court order freezing his estate's French assets. His widow takes the position that at his death he was habitually resident in California, and that Califor- nia law should be referred to to determine succession to his property. The case will be interesting in terms of determination of his habitual residence. Surprising- ly, the Regulation contains no definition for this term, which is one of the criticisms that has been made of it. For anyone who believes they may be impacted by the Regulation, it is important to get proper legal advice. With growing mobility of people and assets, when it comes to estate planning, it can no longer be done in a domestic vacuum. Update on the European Succession Regulation - What Every Canadian with EU Connections Needs to Know Margaret O'Sullivan, O'Sullivan Estate Lawyers LLP Sponsored by O'Sullivan-Sponosored_LT_Oct22_18.indd 1 2018-10-16 3:05 PM Marcia Green says if a person dies without a will, family members may find them- selves saddled with a burden they may not be prepared or willing to take on. The statutory formula for distributing the assets of an estate when there's no will can't be varied. You also lose the ability for any of your intended wishes. Lisa Laredo See Half, page 12

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