Who Gets The Airmiles…….?
By Andrew Rogerson LLB (Hons) TEP
Martin was 56 when he was diagnosed with prostate cancer. A successful oil company executive, he had married his glamorous wife when he was thirty. She was ten years younger than him and had briefly been his secretary. They had two children, both now in university. The end came within three months. The whole family was in a state of shock, which continued for many months after his death.
The last thing anyone had in mind during this time was air miles. And the last thing Martin had in mind during his frenetic career was making a will.
Elisabeth Kubler-Ross, in her best selling work “On Death and Dying”, describes five different stages of grieving: denial, anger, bargaining, depression and acceptance. Her theory can help to explain the somewhat strange behavior often indulged in by the bereaved ones. Lawyers involved in administration of estates frequently see family members quarreling over seemingly trivial possessions of the deceased. To those left behind, the article may be something to remember the deceased by; to make the survivor feel better for not being particularly appreciative of the deceased during his or her lifetime. Or just to get one over on a sibling. Whatever the reason, in an estate valued at $5m, an unholy feud developed between two of the children as to who should have the air miles. They were both the type of children who had grown up only turning left as they entered the plane. Perhaps they were fearful of having to fly economy class. Or more accurately, they were consumed by the myriad emotions Dr Kubler-Ross describes in her book.
It is not widely known that one may direct who shall receive one’s air miles after one’s death. Sadly, many people fail to seek legal advice as to how their estate may devolve on death. This is rarely high on the agenda: if it is on the agenda at all. Little would Martin have thought that a few hours with his lawyer could have avoided the petty quarrel described above. Perhaps one of the keys to tranquility in the hereafter is putting one’s affairs in order before one dies.
Of course, the issues go well beyond which child obtains a particular possession. Very real and pressing questions arise as to which assets should pass into the estate and which should be retained outside. Thus a nomination as to the beneficiary for one’s RRSPs should be made, to ensure that the proceeds are paid directly to such person, without incurring liability for probate fees. The same applies to insurance policies. Provision can easily made for this in a well-drawn will
In discussing these matters with your lawyer, you should arrive prepared with a list of assets held in your name and also of those assets held indirectly – say in a closely held corporation. You should also be prepared to advise your lawyer as to the level of indebtedness you currently have and that which your estate is likely to have in the near future. Your lawyer will then be able to address the issue of liquidity. At its most basic, how is the mortgage on one’s house to be paid? Life assurance paid directly to the lending institution to extinguish the debt completely, is often the simplest and easiest means of ensuring that those who are left behind do not have to worry about meeting mortgage payments on a much reduced income.
The next thing you should give consideration to is that of possible candidates for the role of executor. Be prepared to discuss with your lawyer various candidates from amongst your long term friends and family. It is fair to say that in the majority of wills, the surviving spouse is appointed to this role. It may not be wise to impose these duties on a grieving widow / widower. So, what are the duties of the executor? Essentially to “call in” the assets, pay off debts and taxes and distribute what is left in accordance with the wishes of the deceased. Having someone who is ‘one step removed’ – such as a family friend with experience in business – is often a more satisfactory solution. Whoever is appointed will likely need legal advice. Accordingly, the will should make provision for professional fees to be paid for out of the estate. Winding up a deceased estate is often a complex and time consuming task, so consideration should also be given to allowing compensation to be give to the executor. Accountants, lawyers, banks and trust companies often act as executors. Again, take time to discuss and decide.
Lawyers who have practiced in this field for a number of years, will attest to recurring problematic themes. One concerns the desire of some testators to “rule from the grave”. Some of the most impractical desires arise when instructions are being taken from the client. For example, a desire, for the best of motivations, to have the surviving spouse and / or adult children (and often their partners!) continue to live in the former family home. The house in question may become unsuitable both in terms of size or location. Stipulations to the effect that this should be retained often cause enormous problems for those left behind. The basic point to be gleaned, is that one’s executor and the surviving spouse should be allowed, either immediately or in the future, to reduce all or part of the estate to cash and utilise such cash in the manner that is then appropriate.
Another problematic and very emotional issue is “who gets the cottage?” Cottages are places where children spend happy times with their parents. As the years pass, children in their turn give birth to their own children. And the cottage becomes a scene for activities in which the parents and children recreate for the grandchildren, the activities that brought them so much pleasure. Expertise bears out that siblings, especially when the influence of their partners is brought to bear, have difficulty in ‘sharing’ the best weeks of the year. Or of making sensible decisions as to maintenance and upkeep of the property. Some testators have sought to deal with the cottage issues by bequeathing it to all the children jointly. This rarely works well, for reasons advanced previously. Another alternative is to leave it to a trust, with each child appointed a beneficiary, with some scheme implemented to provide each child and his or her respective family with a right to use the cottage at a particular time of the year. Again, experience proves that, sadly, this type of attempted solution is unlikely to achieve the desired effect. The neatest solution to the problem is to provide an option for any one child to purchase the cottage from the estate of the last to die of the parents. Purchase will be at fair market value. Although somewhat painful for those children who are left without legal ownership, they are compensated by cash that may be used towards the purchase of their own cottage. The more the “successful” child pays the estate for the cottage, the more that is available to be divided amongst the other children. No solution is ever perfect. Just as both spouses on divorce usually end up with a much smaller and less desirable home than they shared during the currency of the marriage; the children in this example will no doubt be able to purchase less of a cottage than Mum and Dad provided for them all those years ago. But at least the issue is determined.
Now to the very serious issue, of who looks after a couple’s minor children if both spouses die in a common accident, or if the survivor dies whilst the children are still in their minority? Bear in mind that the overriding issue at law is “the best interests of the child”. Avoid sentiment in your selection of guardian. Make a choice based upon observation as to who will genuinely apply themselves to the (quiet frankly, onerous) task of raising your child on your behalf. There are no easy answers. At the very least, you should discuss the issue with any person you propose to nominate to this position. Ensure that the person you appoint genuinely wishes to act. Ultimately any issue concerning a minor child is subject to review by the courts.
Concurrent with the issue of guardianship, is the question of how assets are to be safeguarded and funds advanced to minors (or responsible adults persons on their behalf). A means has to be found to allow sufficient funds to be made available for education, food, clothing and other necessities of life, whilst ensuring that capital remains as intact as possible to assist children in later life. For example, to have funds for a deposit on a house. How can funds be safely looked after? Very commonly, a trust is created in the will to achieve these ends. A trusted person holds the assets that the minor is entitled to, on strict terms designed to safely keep, but judiciously apply funds.
A will is possibly one of the most important documents that one is likely to execute. Sadly a perception has arisen in some quarters that “one size fits all”. Will kits costing $60.00 in newsagents are likely the cause of this misconception. There can never be such a thing as a ‘standard will’. The few examples given above illustrate the need for careful thought to be given to arranging one’s affairs, having obtained the advice of a lawyer who practices in this area.