Our American counterparts make use of an estate planning mechanism known as a “revocable trust” in their estate planning, and thus leave everything to the trust, rather than to the beneficiaries. While the Will may become a matter of public record, the trust – and the beneficiaries of that trust – are not.

So what is a Canadian resident – celebrity or otherwise – to do?

While multiple will plans are an option for assets that do not require probate to administer, if you are over the age of 65, the Income Tax Act allows you to create a revocable trust for your own benefit during your lifetime, and the benefit of others after your death, which is commonly referred to as an “Alter Ego Trust”.

Unlike a traditional Canadian trust, the Alter Ego Trust does not require the original owner of the assets (legally referred to as the “Settlor”) to divest themselves of any future interest in the assets. A Settlor of an Alter Ego Trust continues to be the beneficiary of the assets during their lifetime. The Settlor can also be – but is not required to  be – the Trustee of the Alter Ego Trust.

The Alter Ego Trust Document (referred to as a “Trust Deed”) will also set out who will act as the Trustee of the assets after the Settlor has become incapable or died, and who will receive the assets upon the death of the Settlor. The Trust Deed can set out instructions for future trusts to be established for the Settlor’s beneficiaries, to achieve similar planning goals and considerations as a Will (for example, for incapable beneficiaries or minors).  

When a Will is submitted for probate to the courthouse, it becomes a part of the court file, as do the documents required to be filed in companion for a probate application, including the value of assets, and information regarding beneficiaries. These court files are public record and therefore available for access by anyone who attends the Courthouse and requests this information.  An Alter Ego Trust, however, remains private.

In addition to this privacy, assets passing under an Alter Ego Trust are not subject to estate administration tax (more commonly referred to as “probate fees”), which in Ontario are currently 1.5% of the value of assets over the first $50,000, and continue to benefit from a deferral of accrued capital gains on applicable property transferred to the trust.

If you are over the age of 65 and think you can benefit from this type of planning, the specialists in our Business and Estate Succession Group would be happy to assist.

The post Alter Ego Trusts: The Public and Private Nature of Estate Planning appeared first on FREEDIN & ROWELL LLP.

What is probate tax, how much is it, and when is probate required?

Probate tax, formally known as Estate Administration Tax, is a provincial tax that is payable to the Ontario government when an executor submits a will to Court to be validated; a process commonly referred to as “probate”. If probate of a will is required, the probate tax payable is about 1.5% of the total value of assets that pass under the will submitted to Court.

Probate is generally required to satisfy financial instructions, the land registrar, or other third parties that the executor has the authority to act on behalf of the estate.

Let’s take an example: John dies with an estate worth $5 million. He has one will. His estate is made up of a home that he owns in his sole name worth $2 million, private company shares in a family business worth $1 million, and solely-owned bank accounts/investments worth $2 million. The financial institutions where John’s bank accounts/investments are held require probate of his will in order for his executor to deal with the funds on deposit. Probate is also required for John’s executor to deal with his home. John’s executor submits John’s will for probate and John’s estate pays $74,250.00 in probate tax (about 1.5% of $5 million, with the first $50,000.00 being non-taxable).

In John’s case, probate tax was calculated on $5 million, being the total value of his estate. Even though probate was not required for John’s executor to deal with his private company shares, because the other assets in the estate needed probate, and because probate tax is payable on the total value of the estate, the value of the shares were included in the probate tax calculation. This is because probate tax is paid on the value of all of that assets that are governed by the will that is submitted to the Court for probate.

How could two wills have reduced the probate tax in John’s estate? With two wills, John could have allocated the assets that would have likely required probate, namely the home and bank accounts/investments, to one will, and the assets that would have not likely required probate, namely the private company shares, to a second will. John’s executor could have submitted only the first will to probate, and probate tax would have been paid only on the assets that were governed by that will. In other words, if the private company shares were allocated to a second will and the second will was not probated, John’s estate could have saved the probate tax on the value of the private company shares. In John’s case, with private company shares worth $1 million on death, his estate could have saved about $15,000.00 in probate tax.   

The strategy of having more than one will is often used by individuals who own closely-held private company shares, but similar considerations apply to other classes of assets that may not require probate, such as some personal effects significant value, certain loans, assets held in trust, or real property that falls under certain exemptions. An estate planning lawyer can help to navigate what assets may fall into this category.

While the law in Ontario currently permits the use of multiple wills, and while it is very popular strategy, especially among business owners of closely-held private corporations and professionals (doctors, accountants, lawyers, who have professional corporations), there is no guarantee that this strategy will be effective on death. There could be reasons why both wills could end up in probate (for example, if the law changes to disallow such planning, or if the estate is involved in litigation, etc.). This strategy also tends to be best suited for business owners of closely-held private companies where the other shareholder are immediate family members. When the other shareholders are arms-length business partners, there is always a chance that the surviving shareholders may require probate of the second will so as not to take the risk of dealing with the deceased’s shareholder’s will without probate. An estate planning lawyer can canvass your particular situation to assess whether the multiple will strategy is right for you.

Despite its risks, multiple will planning remains a common strategy to save probate tax on death. While multiple-will plans can be more complex and relatively more expensive in terms of up-front legal fees, we have seen many instances where the strategy is very effective in reducing or even eliminating probate tax. Do you own shares in a closely-held private company or other assets that you think could benefit from having more than one will? If so, you should contact us to learn if the multiple will structure could benefit you. 

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1. “If I don’t make a Will, the government will get everything.”

This is not necessarily true. In Ontario, if an individual dies without a valid Will (called dying “intestate”), his or her estate will be distributed according to a government distribution scheme called the law of intestacy that is set out in Ontario’s Succession Law Reform Act (the “SLRA”). It is only in the scenario that someone dies without a legally married spouse, lineal descendants or relatives that the estate would “go to the government” i.e. becomes property of the Crown.

Simply put, if you die without a Will, it is not likely that the government will get your estate, but the law will determine how your estate is distributed. An important reason to make a Will is so that you have a say in who your estate goes to.  

2. “I don’t need a Will because I am married so everything will go to my spouse”.

The SLRA only provides for legally married spouses, not common-law spouses. This means that if you have a common-law spouse and die without a valid Will, he/she will inherit nothing under the SLRA. If you would like to benefit your common law spouse, you would need to do so in a Will.  

If you die without a valid Will and are legally married and have a child or children, your surviving (legally married) spouse would be entitled to what is called a “preferential share” of your estate, which is currently prescribed at $350,000, and anything over this amount is split among the surviving spouse and the children. What often comes as a surprise to parents is that, if a minor child inherits in this scenario, and if the amount is over $35,000, the surviving parent does not get to hold the child’s inheritance on his or her behalf – it is “paid into court” and paid out to the child when he/she turns 18 years old.

3. “My family is on good terms, they will sort everything out”.   

If you die without a valid Will, no one, not even your closest family, will  have the legal authority to administer your estate until someone makes an application to court to be appointed as your estate trustee (also known as an “executor”). One of the important things a Will does is appoint an estate trustee, who is responsible for administering the estate, which can save time and reduce complexity after you die.

It is not a given that your family dynamic will remain the same after you are gone. Not having an estate plan, or not having a good one, can lead to confusion and friction between even the closest of families. Making a plan is one of the best things you can do for your loved ones so as not to leave a mess at an already difficult time.

4. “My Will applies to all of my assets”.   

Your Will may not necessarily apply to all of your assets. How assets are owned and held on death determines how they pass. While there are always exceptions, generally assets held jointly as “joint tenants” as between spouses pass automatically to the surviving spouse when one spouse dies, by right of survivorship, outside of the estate. Similarly, proceeds of plans or policies, such as RRSP/RRIFs, TFSA, life insurance and segregated funds can pass outside the estate by beneficiary designation, if a beneficiary is named on the plan/policy and if that beneficiary survives. A good estate plan focuses not only on the Will but on the entire plan.

One point that individuals are often surprised to learn is that separation or divorce does not automatically override any existing beneficiary designations naming an ex-spouse. This means that if, at one point in time, you named your now former spouse as the beneficiary of your plans and policies, did not update the beneficiary designations, and you pass away, the ex-spouse could inherit the proceeds of the plans and policies because they are still the named beneficiary. A good estate planning lawyer will draw attention to these types of matters to avoid unexpected or undesirable outcomes.

5. “I don’t need a will because I already have a Living Will, and/or “In my Will I can appoint someone to make decisions for me if I lose capacity”.

There is often confusion around this point. A Last Will and Testament, Power of Attorney for Property, and Power of Attorney for Personal Care are three separate legal documents. A Will takes effect on death, while Power of Attorney documents do the opposite: they apply during life and are no longer effective on death.

A Will appoints an estate trustee, responsible for administering an estate on death. Power of Attorney documents appoint an attorney, responsible for decision-making during life. An attorney for property deals with decisions regarding financial affairs, while an attorney for personal care deals with decisions regarding health and well-being. The word “attorney” also sometimes causes confusion – the attorney is the person appointed as the decision-maker, not the person’s lawyer (and they do not have to be a lawyer).

Ontario law does not use the term “living will”, although sometimes people use this term to refer to written wishes regarding medical treatment and/or personal care. This is also known as an advance directive.

6. “Having a Will prepared by an estate planning lawyer is expensive”.

The expense is relative, as there are several great estate planning strategies and opportunities that could lead to tremendous savings in estate administration tax (i.e. probate tax), income tax and legal costs down the road, which could far outweigh the cost of working with an estate planning lawyer to design a tailored estate plan. A well-crafted estate plan could also reduce the prospect of a disputed estate, which could be eaten by legal cost, expense and delay that could have been avoided with a solid plan.      

Completing or updating your estate plan should not be a stressful or difficult experience. We encourage you to work on your estate-planning project today with one of the specialists in our Estate Succession Group.

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Remote Execution

The virtual execution of wills and powers of attorney, which had been introduced originally as a temporary measure in response to the Covid-19 pandemic and the corresponding stay-at-home orders, have now become a permanent fixture. Section 4(3) of the SLRA now permanently allows that signings of Wills and Powers of Attorney taking place virtually through audio-visual communication technology in the presence of a licensed lawyer or paralegal will satisfy the requirements for the proper execution of a will.

Marriage no longer revokes a Will

Section 15(a) and 16 of the SLRA was repealed as of January 1, 2022. This means that a marriage no longer revokes an existing will. The purpose of this amendment is to protect vulnerable persons from “predatory marriages”. Prior to this change, a marriage after the execution of a will would have automatically revoked that will and the new spouse would have benefited under the estate of their deceased spouse as if there was no will. This change means that marriage will no longer have any legal effect on the will and that non-married individuals will not need to make their will in contemplation of marriage. This change, while a positive step towards modernizing estate law in Ontario, could also present other challenges therefore it is still important that when an individual marries or remarries after making a will, they consult an estate planning lawyer and update their will if they do wish to provide for that new spouse.

Separated Spouses

As of January 1, 2022 the SLRA has been amended so that separated spouses are treated the same as divorced spouses and will no longer benefit from the estate of a deceased. Section 17, which states that divorced spouses who have been appointed as executors under a will and/or are named as beneficiaries under a will are to be treated as if they had predeceased the testator and those particular sections of the will are revoked. Subsection 17(3) has been added so that this treatment expands to spouses separated at the time of the testator’s death.

For situations where there is no will, what is known as an intestacy, the new Section 43 of the SLRA provides that a separated spouse will not benefit from the estate. Prior to this change, any legally married spouse, whether separated or non-separated, would benefit from the preferential share, which for deaths prior to March 1, 2021 was the first $200,000 of the estate and for deaths after March 1, 2021 the first $350,000 of the estate plus either the balance of the estate or an equal share if there are children.  Section 43 no longer extends this entitlement to separated spouses and they will not be entitled to this preferential share or any other portion of the estate.

Validity of Testamentary Documents

As of January 1, 2022, Ontario will shift from a strict compliance approach to a substantial compliance approach in validating a will. This means that if the courts are satisfied with the testamentary intentions set out by the document, they will be able to order this document as a valid and effective will. For example it is possible that a will that was drafted but not signed may, on an application be admitted as the last valid will and testament of the deceased.

This is a very brief summary of some of the major changes to Ontario’s estate law, however every family situation is unique and requires a more nuanced discussion with a specialist in estate planning. For any questions about these changes to the law or to discuss your estate plan in more detail, the Business and Succession Group at FREEDIN & ROWELL LLP is happy to help.

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Testators have the ability through the instrument of a Will to dispose of all of the assets held by their estate at the time of their death in a free and discretionary manner as they may choose.

This notion of testamentary freedom although regularly upheld in common law courts in the West, may see real and costly court challenges when certain considerations are often overlooked by the testator at the time the Will is being drafted.

A common court challenge arises when certain beneficiaries are expressly left out of a Will. Some of the reasons why a testator may elect to leaving a beneficiary out of the Will include the following:

• having an estranged or fractured relationship with a son or daughter;
• a beneficiary has already have received a significant share of the estate during the life of the testator, for example where parents provided a down payment for their child when the child was purchasing his or her first home;
• gifting a cottage property to the beneficiary during the testator’s lifetime;
• Funding the purchase of an investment property in the beneficiary’s name;
• having already designated the beneficiary on a life insurance policy;
• the need to offset a child’s debts owed to the parents at the time of their death proportionate to his or her  share of the estate;
• having financially supported one child more so than another child in the family;
• testator is against funding a beneficiary’s possible involvement in criminal activities; and last but not least,
• not wanting to support a gambling or drug addiction of a loved one.

Although a court challenge contesting the validity of a Will may be brought at almost any time, testators should be aware of the following points when thinking about whether or not to write a beneficiary out of their Will:

1. Leaving a beneficiary a minimal gift in the Will – This could be done in the event the testator isn’t on the best of terms with a beneficiary, and wants to spare the estate the potential cost of litigation if they explicitly disinherited a beneficiary. Along with this minimal gift, a properly signed and witnessed letter/memo as to why such a gift was left would aid estate trustees in the event there was a court challenge, as they can use the contents of the letter to show the testator’s real and true intentions. The witnesses may be called upon to testify to the capacity of the testator at the time of execution of that specific letter/memo which would accompany the Will.
   
2. Explaining within the Will why a beneficiary is being left out – If the testator is set on not leaving a minimal amount to the beneficiary, a detailed explanation with facts surrounding the disinheritance of that beneficiary is important to withstand a court challenge. This would typically be in the form a clause inserted in the body of the Will elaborating on their reasons, whatever they may be.
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3. Dependent’s Claim against the Estate – Section 58(1) of the Succession Law Reform Act, R.S.O 1990 (SLRA), states that where a dependent has not been provided adequate provisions by a deceased whether they died testate or intestate, the dependent may have a legitimate claim against the estate. Section 57(1) of the SLRA describes a dependent as a child, spouse, parent or sibling of the deceased. An adult child is usually prevented from relying on this definition unless they can produce convincing evidence to a judge outlining their dependence on the deceased. If a dependent has certain physical or mental disabilities that prevent them from providing for themselves, it is likely that a Court will allow the dependent’s claim to proceed if adequate provisions aren’t in place, barring any evidence introduced to the contrary by the estate trustees.

​Adequate estate planning during the lifetime of the donor and clear and express intentions in testamentary documents are some of the mechanisms which may protect estate trustees from unnecessary challenges to the validity of the testator’s Will.

Feel free to contact the author at ssidhu@freedinrowell.com or at 905-276-0423 to discuss the issues highlighted in this article or any of your estate planning needs. 

The post Real Considerations When Contemplating Writing A Beneficiary Out Of A Will appeared first on FREEDIN & ROWELL LLP.

1. Establishing a non-exhaustive list of factors for the determination of the “best interests of the child”, including consideration of the views and preferences of the child and the willingness of each parent to support the child’s relationship to the other parent;
   
   
2. Measures to assist the courts in addressing family violence in the context of the best interests of the child in parenting disputes such as defining what constitutes “family violence”, and to make protection of the safety and well-being of the child a “primary consideration””; and 
3. Establishing a new framework for dealing with the relocation of a child (or parent).[vii]

 

What about Provincial Legislation?  

 

Provinces, such as British Columbia and Nova Scotia, have already incorporated some of the above-mentioned changes to language and an overall child-focused approach into their provincial legislation. In November 2020, Ontario introduced Bill 207, the Moving Ontario Family Forward Act, 2020, which incorporates a majority of the Federal amendments to the Children’s Law Reform Act. This bill came into force on March 1, 2021.

 

This legislation introduced many amendments, including jurisdiction of parenting issues across provinces and territories and efforts to become more in line with international law such the Hague Convention. The amendments are a concerted effort on the part of the provincial government to have family law legislation reflect evolving Canadian society.

 

If you have any questions how these legislative changes may impact your family law matter, please contact our family law department.





[i]Divorce Act, RSC 1985, c 3 (2nd Supp).



[ii] Section 2(1)



[iii]Ibid.



[iv]Section 16.1(1).



[v]Sections 7.2, 7.3, and 7.6



[vi]Section 16.1(6).



 

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The 2020 case of Calmusky v Calmusky https://www.canlii.org/en/on/onsc/doc/2020/2020onsc1506/2020onsc1506.html?autocompleteStr=calmusky&autocompletePos=1  has created an uproar among estates practitioners with respect to beneficiary designations on registered accounts.

In this case, we have two brothers disputing what their father’s intention was as to banking arrangements and certain asset entitlements.

Henry Calmusky died in 2016 leaving two sons, Randy and Gary, surviving him. He had a will prepared in 2014 directing that the residue of the estate was to be divided between his nephew, Norman, and his grandson, Kyle, who was one of Randy’s children.
At the date of his death, Henry had two bank accounts, which he held jointly with a right of survivorship with Gary. Holding an asset jointly with a ‘Right of Survivorship’ means that if one owner dies, the other holder of the asset automatically becomes the owner. Henry also had a Retirement Income Fund (“RIF”) to which he designated Gary as beneficiary. Up until this case was argued, it was an accepted legal principle that assets with a designated beneficiary do not form part of the deceased’s estate.

Randy brought a court application arguing that the joint bank accounts as well as the RIF were being held in trust for the benefit of the estate. His position was that the legal principle in the well-established Supreme Court of Canada case of Pecore v Pecore applied not only to the joint bank accounts but also to the account where there was a designated beneficiary. The Pecore principle states that where an adult child holds an account jointly with an adult parent, notwithstanding that it is held with a right of survivorship, the adult child holds the account in trust for the benefit of the adult parent. The reasoning behind this principle is that typically bank and other accounts held between adult children and parents are set up that way to facilitate day to day dealings on the account, for example, helping an elderly parent pay bills.

In Calmusky, it was not surprising that the judge found the two joint bank accounts Henry held with Gary to be held in trust for the estate, but what was surprising is that the judge agreed with Randy’s position regarding the RIF and applied the principle in Pecore to find that it was also held in trust for the benefit of the estate.

As mentioned initially, this has created quite a stir within the estates bar because it will potentially create litigation which may be based on bad law and could potentially defeat a testator’s intent with respect to the disposition of registered investments upon their death. The decision in this case is problematic as it also conflicts with legislation that is in place that specifically provides that a designation may be made to certain registered assets and insurance proceeds without the need to flow through the estate and therefore be subject to probate.

While this case has not been appealed in court, the Ontario Bar Association Trusts and Estates division has made a submission to the Attorney General citing the potential problems this case could create and proposed that legislation should be introduced under the Succession Law Reform Act as well as the Insurance Act to make it clear that the Pecore principle should not apply to registered beneficiary designations.

It remains to be seen what will come of this.

If you have any questions about how this court decision may impact you and your estate, contact our Wills and Estate Succession Group:

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Equalization is the process of dividing assets to help address the financial disparity between two spouses after the breakdown of their marriage. This process consists of calculating each spouse’s Net Family Property value (“NFP”), which is all assets owned on the date of separation, including assets owed solely by one spouse, minus any liabilities as of the date of separation. Equalization is premised on the understanding that all assets built during the marriage were built together and therefore they should be equally divided. But what happens when an asset is acquired by one spouse as a gift or inheritance?

As set out in section 4 (2) of the Family Law Act, R.S.O. 1990, c.F. (“FLA”), there are some assets that may be excluded from a spouse’s NFP. If the purpose of equalization is to divide the assets built together during the marriage, then gift or inheritance do not form part of this notion. Gifts and inheritances are an exception to the rule of equalization. The value of gifts and inheritances that a spouse acquires during the marriage may be excluded from their NFP and not equalized. However, there are conditions to this exception.

In order for an asset to qualify as an exclusion, not only does it need to exist on the date of separation, but it must also be: 1) an asset other than the matrimonial home; 2) acquired by gift or inheritance; 3) from a third party; and 4) received after the date of the marriage.

It is important to note that, section 4(3) of the FLA, superficially provides that the spouse seeking the exclusion bares the responsibility of proving that the asset should be excluded, which includes proving that it existed on the date of separation, the value of the asset, and that it was a gift or inheritance received during the marriage.

Notwithstanding the above, gifts or inheritances received before the marriage are treated much differently. A gift or inheritance owned on the date of marriage is deducted from a spouse’s NFP even if that asset does not exist on the date the marriage ended. Though the value of the asset increases from the date of marriage to the date of separation, the increase in value will be divided.

Another consideration to make is that if a gift that existed on the date of marriage generates income, such as a rental property, then the income is never excluded or deducted. But, income generated from a property gifted from a third party during the marriage, may be excluded from the spouse’s NFP, if the donor or testator expressly state that the income is to be excluded. By way of example, where a spouse acquires property during the marriage and the property is not the matrimonial home, then the entire value of the gift, including the capital appreciation will be excluded.

Lastly, parties ought to be mindful of the way gifted or inherited property is handled. For instance, if a spouse deposits the gifted asset into a joint account it loses its exclusionary character to the extent that the half interest is presumed to be gifted to the other spouse. Though the courts have been fairly inconsistent when determining whether an exclusion should be applied in this case.

The law around equalizing gifts and inheritances is complicated and fact specific. Many considerations must be made when equalizing an asset. Questions about how to protect your gifted or inherited asset or whether or not it should be equalized are best addressed by seeking legal advice from family law counsel.
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Estate litigation is an emotionally charged area of law. While family disputes over inheritance are nothing new, we are seeing more of these types of claims. Below is a brief overview of the common sources of estate and trust disputes.

1) Blended families and dependent relief claims

The amount of beneficiaries’ inheritance is often the subject of disputes. In a typical example, the deceased leaves a will in which a beneficiary(s) feels that they have not received enough of an inheritance or they may have been excluded completely. Blended families can find themselves in the middle of an estate dispute if children from a previous marriage of the testator have been excluded or feel they have received less than the testator’s new spouse and/or children.  Documenting reasons for the differences in amounts is important when arguing the will should be upheld.

Similarly, common-law spouses may be under the assumption that they have the same rights as legal spouses, which is not the case in Ontario. Therefore, if proper estate planning is not undertaken by the testator/deceased to ensure their common-law partner is provided for, that spouse may have no other alternative but to make claims against the estate for dependent relief. The risk of such claims is much higher if a deceased did not leave a will so it is very important for individuals with blended family situations to have a proper estate plan in place.

2) Estate Trustee conduct

Another source of disputes is the conduct or the perceived conduct of an estate trustee. If an estate trustee is not being forthcoming with information about the estate or is difficult to communicate with, the beneficiaries can feel that the estate trustee is being evasive which in turn fuels suspicion that they are hiding something. While an estate trustee is not required to advise of every single step they are taking with respect to the administration of the estate, there are important steps where it is especially important to notify beneficiaries, for example when the estate trustee is applying for probate, and it is wise to generally keep beneficiaries informed as to the status of the administration of the estate. If beneficiaries feel that the estate trustee is being dishonest or hiding something and they are having trouble communicating, it is highly likely that they may retain a lawyer to start court proceedings to remove the estate trustee.

In order to mitigate the risk of removal as estate trustee, it is best that an estate trustee consult with lawyers specialized in this area of estates and trusts law about communicating with beneficiaries and generally their rights and obligations concerning the administration of the estate.


3) Power of Attorney Challenges

As people are living longer, we are starting to see an increase in challenges to powers of attorney. Typically, questions are raised as to whether powers of attorney may have been procured by undue influence or that an individual lacked the capacity to sign such  powerful documents, which in turn has led to alleged abuse of an elderly individual’s finances or improper decisions with respect to personal care have been potentially been made.

4) Accounting and Trustee compensation and expenses

Disputes regarding compensation and the expenses the estate trustee is entitled to recover from the estate can be another source of contention with the beneficiaries.

Problems may arise if an estate trustee has pre-taken compensation prior to completion of the administration of the estate, especially if they were not authorized to do so under the will or without consent of the beneficiaries.

Problems also arise if an estate trustee has not properly accounted for their dealings and provided a breakdown of receipts and payments of the estate, which would assist with the proper calculation of compensation.

5)Joint accounts/property and beneficiary designations

Another source of estate disputes is where joint accounts are held by an aging parent and adult child. The case law is well established, specifically in the leading case of Pecore v Pecore, which has created the presumption that an account is held this way not with the intention that the adult child is the beneficial owner of the account but is a legal/registered owner simply to assist the elderly parent with the day-to-day management. The beneficial owner is solely the elderly parent and upon the death of that parent, that asset will then form part of the estate. This is what we call a resulting trust.

Recently, the court has taken the approach in Pecore and applied the presumption of the resulting trust to accounts with beneficiary designations such as a RRIF (Calmusky v Calmusky). It remains to be seen as to whether this decision will be challenged, however it highlights the need to have a clear documented instrument or declaration from the parent who owns the account as to their intentions in order to avoid disputes.

For further questions on the information in this article or questions on how we can help you navigate your estate planning needs, please contact any member of our Business and Estate Succession group.     
​This article is provided for general information purposes and should not be considered a legal opinion. Clients are advised to obtain legal advice based on their specific situations.

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Let’s say that you have a great idea that you want to take to the market and you want to work with an investor. Maybe you operate a business and a competitor approaches you about a potential deal. Before saying “yay”, think: NDA. Signing a non-disclosure agreement (“NDA“) is the first step to proceeding with the above types of transactions. Before letting someone “look under the hood”, agree in writing to terms that deal with how the parties will treat what they find.

An NDA is also commonly referred to as a confidentiality agreement because principally, an NDA sets out the parties’ agreed on procedure for the sharing and use of confidential information. Obligations can be one-way (meaning what duties are owed by the receiving party to the party disclosing confidential information) or mutual (meaning the reciprocal duties that the parties owe to each other with respect to each others’ confidential information).

Some argue that an NDA is little more than paperwork getting in the way of progressing with a business transaction. However, an NDA can set the tone and parameters of how the parties will treat each other throughout the life of their business relationship and establishes the processes for the transmission of confidential information, the terms of its use and its return and/or destruction. NDAs (or even confidentiality clauses) are used in a variety of contexts: purchase and sale transactions, licensing agreements for intellectual property, employment and hiring of contractors and dispute resolution.

​As with any type of contract, a ‘one size fits all’ approach is rarely appropriate. An NDA should be crafted so that it deals the specific context of the transaction(s) being contemplated and accordingly, the specific goals and obligations that the parties reasonably owe each other. However here are some considerations (among others) that should be captured in an NDA:

• Scope and Purpose: Who should be a party to the NDA? What type of information does the NDA cover and for what purpose? While the context in which the NDA is born relates to a transaction (such as a potential investment) the confidentiality obligations of the parties may be wider in scope than simply the transaction contemplated.
• Who? Who can see the information? Employees? Advisors? Lenders? The NDA should address this issue, as well as the terms of third party disclosure of confidential information.
• Term: How long will the NDA be effective for and how may that period be extended or terminated, and on what terms?
• Exclusions: What information should be excluded from the terms of the NDA? Often, information that was public knowledge (but not because a party breached the NDA) or developed independently.
• Indemnity: What remedies follow should a breach of the NDA occur and at what expense? While the entering of an NDA (much like the larger transaction) will have practical limits on the ability to enforce the provisions and terms on a breaching party (for example, if the breaching party is located outside of the province or country, or if they have limited financial means) often an NDA has very strong language in favour of the disclosing party to allow them to make the breaching party liable for the full cost and consequences associated with a breach of the NDA itself.

The material provided above is for the purposes of assisting parties to discuss the nature of the obligations entrenched in an NDA and what impact they will have on those parties working together going forward.

We in the Corporate/Commercial Practice Group at FREEDIN & ROWELL, LLP draft NDAs as part of the normal course of our practice. Should you have any questions regarding this or any aspect of your business, please do not hesitate to get in touch – we’re here to help.

You may reach the author at kfernandes@freedinrowell.com or (905) 276-0431.

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