d'amico family wealth management group of rbc dominion

D'Amico Family Wealth Management Group Of RBC Dominion Securities

Presents

Patricia Fourcand and Nathalie Marchand

from

Miller Thomson, Lawyers

“Family, trust and estate planning issues”

Angelo D’Amico FCSI, CIM, CPA, CMA, CGA, CSWP Vice President - Portfolio Manager Tel: (514) 878-5196 Email: [email protected]

Web : http://www.damicofamilywealthmanagementgroup.ca

October 11th, 2016

Dario Falso Associate Tel: (514) 878-5049 Email: [email protected]

Christiana Kavadas B. Comm. Associate Tel: (514) 878-5056

Email: [email protected]

Celina Toia, LL.B. Bachelor of Laws Marketing Consultant Tel: (514) 878-5196 Email: [email protected]

mailto:[email protected]

http://www.damicofamilywealthmanagementgroup.ca/




Pot-Pourri on Family Law, Trusts

and Estate Planning Issues

Nathalie Marchand and

Patricia Fourcand October 11, 2016

WELCOME

Added experience. Added clarity. Added value.

VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENER-WATERLOO GUELPH TORONTO MARKHAM MONTRÉAL

20535515

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CONTENT

1. Limits to Freedom of Willing

2. Various Things to Consider in Will Planning

3. De facto Spouses vs. Married Spouses

4. Protecting Inheritances

5. Recent Changes to the Principal Residence

Exemption Rules for Trusts

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1. Limits to Freedom of Willing

• Freedom of willing in Québec, subject however to the alimentary

rights of the surviving spouse and dependants and the rights of

the surviving spouse under the family patrimony and the

matrimonial regime (if partnership of acquests)

What is the family patrimony?

In 1989, the Family Patrimony Legislation was enacted in Quebec which

is mandatory and applies regardless of the matrimonial regime.

The family patrimony consists of the family residences, furniture and

decorations in the family residences, cars used for family travel, and

pension plans accrued during the marriage (including RRSPs) (414, 415

C.c.Q.)

1. Limits to Freedom of Willing (Cont’d)

Property devolved to one of the spouses by gift or inheritance is

excluded from family patrimony (415 C.c.Q.)

What is the Partnership of Acquests Regime?

Spouses who do not formally choose a matrimonial regime

(generally separation as to property) are subject to the partnership of

acquests legal regime (art. 432 CCQ.)

Private property:

• Property owned or possessed by that spouse when the regime

comes into effect (art. 450 (1) CC.Q.)

• Property acquired by that spouse during the regime by succession or

gift (art. 450 (2) CCQ)

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• Property acquired by that spouse to replace private property and any

insurance indemnity relating thereto (art. 450(3) CCQ)

• Income derived from the operation of an enterprise that is private

property of either spouse, if it is reinvested in the enterprise (art. 457

CCQ)

• Intellectural and industrial property rights (art. 458 CCQ).

Acquests:

• The proceeds of a spouse’s work during the regime (art. 449(1) CCQ)

• The fruits and income derived from property which devolves to a spouse

by succession or gift, if the testator or donor has not provided that it is

private (art. 450(2) CCQ)

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• Property acquired with private property and acquests, if the value of the

acquests used is equal or greater than one-half of the total cost of

acquisition (art. 451 al. 1 CCQ)

• Income derived from the operation of an enterprise that is the private

property of a spouse, if it is not reinvested in the enterprise (art. 457

CCQ a contrario)

• Fruits and income arising from intellectual and industrial property rights

and collected or fallen due during the regime (art. 458 CCQ)

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• Important to avoid “double-dipping”: even if the RRSP and the

matrimonial home are bequeathed to the surviving spouse, she

would still have a right to 50% of their value in the partition of the

family patrimony (monetary claim not a right in the assets)

Solution: provide in the Will that the spouse must renounce to the

partition of the family patrimony and to his/her rights in the matrimonial

regime in order to benefit under the Will

• Survival of alimentary rights: not possible to require renunciation

from spouse as a condition to benefit under the Will. Consider

providing for lump-sum in the marriage contract.

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• RRSP

– RRSP: uncertainty in Québec in connection with the validity of

beneficiary designations – important to specifically provide for

the designation under the Will as well as a direct bequest of the

RRSP to the spouse

– Tax efficient: rollover of RRSP to spouse on death. However,

must be outright. Important to provide that the income taxes in

connection with the RRSP will be assumed by the surviving

spouse.

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(Cont’d)

• Blended families

– Necessary to be addressed clearly in the Will, to avoid conflicts.

– May be more appropriate to provide for a bequest of specific

property to the spouse or for a monetary bequest and leave the

residue of the estate to the children.

– Spousal Trust.

– Usufruct.

– Inter vivos gifts to children.

2. Various Things to Consider in Will

Planning (Cont’d)

• Family Patrimony

– If spouse is not the beneficiary of the residue of the Estate,

consider bequest of rights in family patrimony to the surviving

spouse.

– Otherwise, the Estate will have a claim against the surviving

spouse and the result may not be appropriate.

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2. Various Things to Consider in Will

Planning (Cont’d)

• Have a Will!

– Otherwise:

• 1/3 to spouse

• 2/3 to children

– Outright to children even if minors.

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(Cont’d)

• Avoid outright bequests to minors

– Tutorship rules:

• parents are legal tutors

• tutors are “administrators charged with simple administration”

• numerous obligations when the minor’s property is worth $25,000 or more

• minor is entitled to the property upon attaining 18 years

– Uncertainty of “prolonged administration”

– Perfect solution: trust

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There have been significant legal developments with

respect to the rights of de facto spouses

– For estate law purposes, who is considered to be a “spouse”? Married spouses only

– Rights of a de facto spouse in respect of social assistance,

pension plan benefits, employment insurance benefits, medical

and dental coverage


De facto spouses: what rights do they have?

The Lola case: Quebec: Quebec (Attorney General) v. 2013 SCC 5

The judgement holds that articles 401 to 430, 432, 433, 448 to 484 and 585 of the

Civil Code of Quebec, which provide rights for married couples only, do not create a

disadvantage by perpetuating prejudice or stereotyping. The provisions therefore do

not violate the right to equality guaranteed by s. 15 of the Charter.

Droit de la famille 132495 – 2013 QCCA 1586

The Court of Appeal reminds us that "domestic activities” can be taken into account

in a motion for unjust enrichment and that a flexible approach must be adopted.

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The Court also points out that following the Peter c. Beblow, [1993] 1 RCS 980

decision from British Columbia, Quebec courts now apply the prima facie

presumptions set forth by the Supreme Court that there exists in long-term unions:

1. a correlation between the enrichment and the deprivation;

2. an absence of reason for the enrichment.

The Court of Appeal concludes that the spouse that performs the household tasks

can expect to share the properties of the parties at the moment of separation.

An indemnity of $398 000 was awarded to the appellant.

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3. De facto Spouses vs. Married Spouses (Cont’d)

What recourses does a surviving de facto spouse have

against the estate of the deceased spouse

– If deceased spouse has a Will and left nothing to surviving de

facto spouse?

No rights except alimentary support specifically provided for under a

co-habitation agreement or a separation agreement or, in exceptional

cases, claim for unjust enrichment

– If deceased spouse died without a Will?

Same as above

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If the de facto spouses would like to protect their own

assets prior to cohabitating together:

– What should each of them do?

– How effective are cohabitation agreements?

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Prior to marriage:

– What are some of the things that one should consider/do to

preserve/protect personal and family assets from marital

property claims and any other family law issues?

• Separation as to property

• “Managing” of assets

– What are some of the things that one could do/consider if

already married?

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Separation:

• Specific provision in Civil Code of Québec (article 764) that provides

that a bequest to a spouse prior to divorce is automatically revoked

upon divorce

• Revocation of designation as liquidator as well

• Applies only once the divorce is effective. Prudent to modify the Will

• Would not apply if de facto spouses – so imperative to modify Will

4. Protecting Inheritances

• Many parents are concerned about the inheritance they

leave their children and many feel that their children’s

spouses should not benefit from their hard-earned

money.

• How are inheritances and gifts treated for family law

purposes?

– Inheritances: excluded from family patrimony and partnership of

acquests

– Gifts: excluded from family patrimony and partnership of acquests:

private property clause

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4. Protecting Inheritances (Cont’d)

• In instances where parents would like to pay for the

matrimonial home for a child, what are some of the

strategies used to ensure that property will be protected

from the child’s estranged spouse?

– Gift of the home or of the funds required to purchase the home by the

parents

– If in partnership of acquests: private property clause

– Subsequent renovations

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4. Protecting Inheritances (Cont’d)

• How can parents protect the gifts and inheritances they leave for their children from their children’s spouses?

– Outright bequest or gift to a child: the child can dispose of it at his own discretion during his lifetime and on his death

– Solution:

• Testamentary trust for the benefit of the child during his lifetime and to the grandchildren on his death

• Discretionary family trust

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5. Changes to the Principal Residence

Exemption Rules for Trusts

• Proposed measures announced on October 3rd, 2016 by

Finance Canada.

• Generally, will limit availability of principal residence

exemption to certain types of trusts:

– spousal trusts;

– joint-partner trusts;

– alter ego trusts;

– “self-benefit” trusts;

– disability trusts; and

– trusts for “orphaned” minors.

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5. Changes to the Principal Residence

Exemption Rules for Trusts (Cont’d)

• For other types of trust, gain accrued on the property up

to December 31st, 2016 will continue to benefit from the

exemption (to the extent that it otherwise qualifies).

• For non-qualifying trusts, it will still be possible to “roll-

out” the property to a beneficiary who would then claim

the principal residence exemption on the sale (provided

all the other conditions are otherwise met).

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