Recently the James Bond actor, Daniel Craig, made headlines when he declared that inheritances are "distasteful" and noted that he planned to dispose of his estimated $160-million fortune before his death. Daniel Craig is in good company; Warren Buffett, whose fortune is estimated at more than $100 billion, has also indicated that he would not be leaving his wealth to his children.
Although many of us do not have the fortunes of Warren Buffet and Daniel Craig to deal with, their sentiments about estate planning may still ring true. We may want to leave substantial parts of our estate to a cause that we are passionate about, or we may feel that we have already provided our children with the tools and financial support to succeed, so an inheritance is not as necessary as it once was. Further, the idea of giving your wealth away during your lifetime is not a new one; it has long been encouraged by estate planning professionals in jurisdictions with taxes on inheritances or high probate fees. However, are there some presumptions in the law about how we ought to deal with our estate that may prevent us from making such choices? To avoid potential litigation of your estate, you should consider some things when you decide not to leave a large proportion of your estate to traditionally expectant beneficiaries (children and grandchildren):
Understand whom your Estate must provide for.
Estate law has now developed to compel the estate of a deceased person to provide for family members who require maintenance and support from the deceased.1 Generally, those parties who require maintenance and support from an estate are spouses, minor children, adult children with disabilities and any other party that the deceased was standing in the place of a parent for at the time of their death, which could encompass grandchildren and great-grandchildren.
When someone dies without providing for family members who require maintenance and support, the court may order that the deceased's estate provide for those individuals regardless of the deceased's wishes.
Document, Document, Document (and then document some more).
If you are considering giving away your wealth during your lifetime, ensure that you keep records of the gifts and let the recipient know that you are giving them the gift in lieu of a bequest in your estate. In the event that your estate is litigated, the documents evidencing your gifts during your lifetime will be very important.
Tell them often.
No one likes surprises, unless it is free money.
If you do not plan to leave your estate to your children and grandchildren, ensure that they know why and that they plan accordingly. Many children expect to benefit from their parents' estate, and they may factor that in to their own retirement planning. Although these conversations can be difficult, to avoid future litigation it is essential to ensure that traditionally expectant beneficiaries understand that they will not benefit for your estate and why.
Seek legal advice and ensure the party you leave your bequest to receives it.
Seeking legal advice for the drafting of your estate planning documents is an important step in ensuring that your wishes are observed when you pass away. Working with estate planning professionals and keeping your estate planning documents up to date will decrease the chances of your estate being litigated on issues of ambiguity or capacity.
Additionally, if you are planning on charitable gifting it is important that your gifts are legally enforceable and that the correct party can receive them. Many charitable organizations have preferred language that they would like used to ensure that your financial gifts are able to be accepted.
Footnote
1. In Alberta see the Wills and Succession Act, SA 2010, c W-12.2
For more information, visit our Canadian Securities Litigation blog at www.canadiansecuritieslitigation.com/
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