When one considers how to define the term ‘estate plan’, a few items likely spring to mind. The preparation of testamentary instruments including a Will and powers of attorney, converting solely-held assets including real property and bank accounts into joint tenancy with another to minimize estate administration tax, the implementation of an estate freeze, and a myriad of other steps that can be taken by an individual to ensure their affairs are in order.
However, one topic that may not cross one’s mind as part of fulsome estate planning is the mitigation of litigation risk – specifically, the risk of litigation commenced by beneficiaries or other interested parties once the testator has passed away. Often, this litigation arises as a result of the testator meaning well and intending to prepare a fulsome estate plan, but without having sought advice beforehand.
The effects of estate planning in theory and of estate planning in practice often diverge, and an individual preparing an estate plan without the benefit of legal advice to mitigate litigation may create hardship for family and loved ones after the fact.
In theory, a testator may believe that transferring a property or a bank account into joint ownership with an adult child of theirs is an effective way of conveying ownership to that child once they have passed away. In practice, generally speaking, the child would be presumed to hold such assets in trust for the testator’s estate.
In theory, a testator has broad discretion to decide the terms on which their estate is to be distributed following their death, and has no obligation to provide entitlements to their next-of-kin. In practice, the law in Ontario provides that testators have a moral and legal obligation to provide for their dependants, and the court has broad discretion to order that adequate support be provided.
As a consequence of the differences between estate planning in theory and in practice, beneficiaries are often compelled to engage in lengthy and expensive litigation to resolve issues that might have been avoided had the testator mitigated litigation risk by reviewing their estate plan with a lawyer. Whether the beneficiaries bear the costs of such proceedings personally, or whether the costs are ordered to be paid out of the estate, invariably all parties are impacted financially, if not emotionally, by the ensuing litigation which might well have been avoided if proper steps had been taken.
Making the decision to consider one’s estate plan and to determine whether one’s affairs are in order prior to their passing is an admirable goal. Doing so without the benefit of proper legal advice and in reliance on one’s own presumptions as to how the law will view such planning, however, may create a ripple effect that impacts one’s family and loved ones for years.
At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business law, family law, real estate law, estate law, employment law, health law, and tax law. For over 130 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge. Contact us online or at (416) 863-0125.