What Happens to Real Property Upon Death?

Author: Allison Rudzitis

When two or more people own real property together, ownership of that property can take the form of either tenancy in common or joint tenancy. In the tenancy in common scenario, two or more people hold title to the real property in a manner by which each is entitled to occupy the entire property but each may also dispose of his or her interest independently of the other. Tenants in common are able to hold different portions of the property (i.e. it does not have to be equal. If one of the tenants in common dies, the deceased's interest forms part of his or her estate upon death, and is subject to probate.

Property held by way of joint tenancy means that each person has an undivided interest in the land with equal rights to possession and equal title acquired by the conveyance. A major distinguishing feature of joint tenancy is that, unlike tenancy in common, the right of survivorship applies. This means that upon the death of one joint owner, the land as a whole vests with the survivor(s), and can only be disposed of by will of the last surviving owner. In this circumstance, real property does not form part of the estate and is not subject to probate fees.

The process for transferring property upon the death of a joint tenant is easy and straightforward. A statutory declaration must be signed by the surviving joint tenant attesting to the fact that the other joint tenant has passed away. This statutory declaration must be accompanied by a death certificate (either an original or notarized copy) confirming the death of the deceased joint tenant. These documents are then submitted to Land Titles, and a new title is issued describing the name(s) of the surviving joint tenants.

Both types of land ownership are appropriate for different reasons. It is important to consult with a lawyer when determining how land will be held, so that your specific circumstances can be ascertained and the ideal form of land ownership is determined.

Life Insurance - Uses, Tips and Traps

Author: Crista Osualdini
 
Life insurance is a familiar product to many of us and can be an element of estate planning that should not be overlooked. It is typically used to either create or preserve wealth and can be used in a variety of ways in structuring an estate plan. For example:
 
Creating Liquidity to Pay Debts -  When completing your estate plan, an analysis should be done of the nature and extent of anticipated debt and expenses upon death. In Canada, upon death we are notionally deemed to have disposed of all our assets for tax purposes. This means that any unrealized capital gains at the time of death will be taxed. This can often result in a significant tax bill - family cottages often being a prime example. Life insurance can create the necessary liquidity so that assets do not need to be sold in order to pay associated tax debt or any other forms of debt.
 
Creating Wealth Outside the Estate - When developing an estate plan, the law requires you to ensure that certain persons are properly provided for. These people include, but are not limited to, spouses, minor children and dependent adult children. This can become problematic, especially in blended family situations, where there is a need to provide for a second spouse, but also a desire to provide for non-dependent adult children of the first marriage. Life insurance can be used to create wealth and increase the "size the pie" that is available for persons you would like to provide for.
 
Funding Buy/Sell Agreements in Privately Held Corporations - It is typical that in a small business upon the death of a shareholder, either the remaining shareholders or the corporation will purchase the deceased shareholder's shares. This can be a substantial cost. The expense could interfere with the company's ability to carry on business with the added cost of new financing or reduced capital availability. Life insurance can be a tool used to fund the share purchase so that the impact of the shareholder's death on the operation of the corporation is minimized.
 
When working with life insurance, the following are 10 Tips and Traps from my experience in working with individuals to develop their estate plan:

1. In light of the aging baby boomer generation, it is anticipated that over the course of the next thirty years there will be an unprecedented inter-generational wealth transfer. It will likely follow that estate litigation will be on the rise. Consider naming beneficiary on your life insurance other than your Estate, this will assist in protecting it from claims of disappointed beneficiaries and creditors.
2. Consider the need for life insurance earlier rather than later. Life insurance is often prohibitively expensive later in life and thus renders it an uneconomical solution.
3. If you name your Estate as the beneficiary of your life insurance, it will be subject to probate fees. While Alberta currently has low flat rate probate fees, this may not always be the case. In certain Provinces, probate fees are calculated as a percentage of estate value.
4. In addition, if you name your Estate as the beneficiary of your life insurance, your executors will likely need to wait for a Grant of Probate to be issued prior to the insurance provider releasing funds. At the time of writing, a Grant of Probate takes approximately three to four months to issue at the Court of Queen's Bench.
5. Make sure your beneficiaries are aware that you have life insurance in place. Or alternatively, provide this information in your Will. If your executor or beneficiaries do not know that you have life insurance in place, it is possible that it may go unclaimed upon your death.
6. When life insurance is used to fund a corporate buy out of share upon death, make sure your shareholders' agreement sets out whether those funds will be paid through the Capital Dividend Account and thus on a "tax free" basis to the estate of the deceased shareholder. If this is unclear in the agreement, it can lead to litigation as to who receives the tax benefit generated by the payment of life insurance to the corporation.
7. Ensure that your beneficiary designations are not in violation of any existing separation or divorce agreements. If they are, this will likely lead to litigation. The result of such litigation could be that a remedial trust is imposed by the Court over the insurance proceeds for the benefit of whomever the insurance was supposed to be paid pursuant to the agreement.
8. Make sure initial and any subsequent amendments to beneficiary designations are done correctly. The Insurance Act sets out the requirements for making a beneficiary designation  amendment and must be complied with. Far too often these designations are completed incorrectly which can lead to expensive and time consuming litigation. Make sure the designation is signed by you and specifically names the insurance policy that you are referring to and who you are naming as the beneficiary.
9. Insurance can be a great tool to use when you are desirous of making a charitable donation upon death. There are different ways to structure such a gift, so ensure you receive tax advice on what method is best for your circumstances.
10. For couples with young children, an important consideration in estate planning is appointing guardians for the children in the event of the death of both parents. Part of this discussion usually pertains to where the children would live. Quite often parents will want to maintain continuity for the children and for them to continue living in the family home. Do not forget about mortgage insurance and considerations as to how the Estate will be able to afford to continue to maintain the family home.