Curing Deficiencies in Wills – Contrasting British Columbia and Alberta

In previous blog posts dated February 28 and May 27, we suggested that when the Wills, Estates and Succession Act (“WESA”) came into force, the legal landscape had changed and interesting court cases would follow.  One such change to the landscape is section 58 of WESA, which allows the Court to cure deficiencies in Wills.  If a document does not comply with the formal requirements for a Will, it may nonetheless be declared to have the legal effect of a valid Will.  To date, there have not been any British Columbia cases decided under section 58.

Before WESA came into force, Alberta’s updated wills and estates legislation came into force.  It contains a similar (but not the same) provision to section 58 of WESA.  A recent Alberta decision set out how the Alberta legislation is to be interpreted.  The decision serves as a contrast to how we predict the Court will interpret the British Columbia legislation.

In the Woods Estate decision, the deceased passed away suddenly.  A lawyer had attended the deceased’s home and took instructions for the preparation of a Will by filling out a wills questionnaire.  The questionnaire contained information about how the deceased wished her assets to pass on death.  Before a Will was drafted by the lawyer and executed by the deceased, the deceased died. The Alberta Court held that, indeed, the questionnaire contained the deceased’s intentions regarding her estate.  If a formal Will had been prepared, it would have contained the essential points as reflected in the questionnaire.  Nevertheless, based on an interpretation of the Alberta legislation, the Court held that because the questionnaire did not contain the signature of the deceased, it could not be admitted as a Will.  The judge appeared somewhat troubled by the decision, ending the judgment by stating, “…the Alberta legislature elected not to follow that recommendation [a broader curative power] when enacting the Act.  That is a policy decision upon which I make no comment.”

The British Columbia legislature made a different election than the Alberta legislature.  Section 58 of WESA includes the broader curative power that was contemplated and rejected in Alberta.  A document need not necessarily be signed by the deceased to be declared valid as a Will pursuant to section 58 of WESA.  If the Courts interpret section 58 as we expect that they will, decisions such as Woods Estate may be avoided in British Columbia.

Making Advance Health Care Decisions – Getting Started

Have you thought about what medical care you would like to receive in the event you become unable to express your wishes?  More importantly, have you shared those thoughts with loved ones and your medical professionals?  Like making your Will, planning for future incapacity can be difficult, and discussing it with your loved ones may be uncomfortable.    But this is one area where it is very much a case of an ounce of prevention being worth a pound of cure.  Discussions with your loved ones clearly setting out your wishes on the types of medical care you wish to receive will not only lessen the likelihood of conflict amongst your loved ones, but will also allow them to make hard decisions knowing the decision is truly in keeping with your wishes.

The hardest part may simply be getting started.  Fortunately, the BC government has a comprehensive step by step resource available, including an easy to follow guide with workbook.

The guide includes practical advice and specific examples to use as a starting point for your considerations and discussions.  While the larger decisions such as when or whether to refuse life support are included, so are other considerations such as the environment that would help you be comfortable (open windows, music playing, family nearby, etc.).  The guide includes a basic discussion of three advance care planning options: Representation Agreements, Advance Directives, and Enduring Powers of Attorney.  These are all documents that record your advance care decisions in written form.  The workbook included in the guide (beginning at page 26) contains worksheets for you to complete and then share with your loved ones, as well as precedents of certain advance care options.

This resource provided by the BC government is an excellent place to start considering you advance health care plan, and I encourage you to do so.

The “Family Tax Cut” is not income splitting

Proposed amendments to the Income Tax Act were released today which include the “Family Tax Cut”. The media is reporting this as an income splitting proposal. I’ve reviewed the amendments and I think at most I would call it simulated income splitting. In simplified terms, here’s how it works.

The Family Tax Credit is a limited tax credit for couples with young children and unequal incomes. You’re eligible for the credit if (i) you have an “eligible relation” – basically a Canadian resident married or common law spouse whom you’re not separated from, (ii) you have a child under 18 that lives with you or your eligible relation (and presumably with both of you since you’re not separated), (iii) you’re resident in Canada, and (iv) you didn’t spend 90 days or more in prison (!).

If you’re eligible, you run through the following steps:

Step 1. Calculate the combined tax liability for you and your spouse. (A)

Step 2. Now calculate the adjusted combined tax liability for you and your spouse, as though the higher income spouse had transferred enough income to the lower income spouse to equalize their taxable incomes, to a maximum of a $50,000 transfer (i.e. an income differential of $100,000). (B)

Step 3. If the difference between combined tax (A) and adjusted combined tax (B) is greater than $2,000, the higher income spouse gets a tax credit of $2,000. If (A) – (B) is less than $2,000, the credit is the amount of the difference.

So for eligible spouses, their respective taxable incomes aren’t changed in the end, and your applicable marginal tax rates will be the same. Instead, the higher income spouse simply gets a tax-reducing credit (up to $2,000) to simulate the effect of income splitting.

Given the limited scope of these proposals, structuring where possible to achieve actual income splitting will remain important for high income earners.