Is Beneficial? page 4

The Paradise Papers: A Slippery Slope page 2 Using a Usufruct or Substitution Instead of a Trust page 6 Can a in Bankruptcy Seize Funds from a Registered Disability Savings Plan? page 8 STEP Inside The Paradise Papers: A Slippery Slope EDITORIAL BOARD

Shamim Panchbhaya, Chair KIM G.C. MOODY, TEP Katy Basi Member, STEP Calgary; Past Chair, STEP Canada Paul Festeryga Moodys Gartner Tax Law Elena Hoffstein Joyce Lee n less than 30 years, it has become possible for Barbara Novek Pam Prior individuals to perform criminal activities elec- Susannah Roth Itronically, without being physically present at a Christine Van Cauwenberghe crime scene. For example, the traditional way of Corina Weigl robbing a bank is to appear with guns, masks, and a get-away vehicle. Today, this method is outdated. STEP Inside is published three times a year by the Society A criminal with sufficient expertise can much more of Trust and Estate Practitioners (Canada), an organization effectively rob a bank of information (such as credit of individuals from the legal, accounting, corporate trust card data or bank account numbers) or steal funds and related professions who are involved, at a specialist level, with the planning, creation, management of and by electronic means. The electronic thief is no less accounting for trusts and estates, executorship adminis- criminally culpable than the robber of the bricks- tration and related taxes. STEP Canada has branches in and-mortar bank. the Atlantic region, Montreal, Ottawa, Toronto, Winnipeg, Like a bank, a law firm can be the victim of elec- Edmonton, Calgary, and Vancouver; and three chapters in tronic theft. An electronic thief is arguably just as London and Southwestern Ontario, the Okanagan Valley, culpable as a robber who appears at the front desk, and Saskatchewan. threatens the staff at gunpoint, and speeds away Articles appearing in STEP Inside do not necessarily repre- with documents to later distribute. Moreover, con- sent the policies of STEP Canada and readers should seek sider a situation in which an electronic criminal the advice of a suitably qualified professional before taking steals funds and deposits them in a third person’s any action in reliance upon the information contained in this bank account, and that third person then uses the publication. funds. The involvement of the third person is no All enquiries, comments and correspondence may be less offensive than the involvement of an individual directed to: to whom a bricks-and-mortar bank robber simply passes some cash. STEP Canada 45 Sheppard Avenue East, Why then does public opinion generally con- Suite 510 sider it morally acceptable for a hacker to elec- Toronto, ON, M2N 5W9 tronically steal documents from a law firm and pass www.step.ca them to the press for public consumption? In general, there has been no outcry against these Tel 416-491-4949 Fax 416-491-9499 criminal acts; instead, the public appears to have E-mail [email protected] welcomed them, and in many instances the press has sensationalized the stolen information. Ever Copyright © 2018 Society of Trust and Estate Practitioners since the theft and release of this sort of information (Canada)

ISSN: 14960737

2 STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 has become commonplace, it has also tax avoidance or evasion. However, tax administrators and in compliance become commonplace for the public while there is no doubt that criminal with domestic tax laws. and the press to jump to conclusions activities do occur in offshore juris- It is improper for stolen informa- tion to be made available to the public In less than 30 years, it has become and for conclusions to be drawn about it on the basis of a less-than-thorough possible for individuals to perform criminal understanding of the circumstances. activities electronically, without being Moreover, it is highly offensive for the media and others to draw attention to physically present at a crime scene. the people whose private information has been the object of electronic theft. about it. The latest example of crimi- dictions, these jurisdictions are fre- Social media and other electronic nal wrongdoing is the theft of 13.4 quently used for legitimate non-tax forms of communication should not million electronic documents (the so- reasons: privacy, confidentiality, be used to normalize criminal activi- called Paradise Papers) from Appleby, safety concerns, creditor-protection ties and disseminate clients’ informa- a reputable law firm, which has planning, and succession planning. tion to a public audience. It is time to caused a media frenzy and prompted Clients who have sought profes- eradicate this phenomenon and to exaggerated responses from the gov- sional advice about the use of off- consider the possibility of criminal- ernment. shore jurisdictions have a legitimate izing the possession and public dis- It is unfortunate that offshore expectation of privacy from public semination of information obtained industries – banking, law, insurance, scrutiny, provided that their taxation by electronic theft. n and others – are often associated with particulars are fully transparent to the

STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 3 Is Probate Beneficial?

RICHARD NIEDERMAYER, TEP The statutes governing probate in representatives, family members, and Member, STEP Atlantic; Director at each province and territory have built- related corporate entities with the finan- large, STEP Canada in protections for third parties, such as cial institution, an institution will some- Stewart McKelvey banks, when dealing with the personal times allow the transfer of accounts that representative who holds a grant of greatly exceed the stated policy limits. ollins Estate (Re), [2016] BCJ No. probate or administration. An example However, the Collins Estate case high- 840 (BCSC (In Chambers), high- can be found in section 39 of the Nova lights the fact that these remedies are Clights the question of whether Scotia Probate Act: discretionary and should not be relied probate is desirable in certain circum- 1. Where a grant is revoked, a pay- on when the estate-planning goal is to stances. Much of the practice of estate ment made in good faith to a avoid probate. and trust planners is focused on cre- under In any event, probate will invariably ating structures that avoid probate, the grant before its revocation be required in a Canadian jurisdiction such as inter vivos trusts, joint tenan- is a legal discharge to the extent if real property is held solely in the cies, and designations. of the payment to the person name of a deceased person. Further, Although the goal of many clients is making it. the grant in these cases must be made to keep their estates out of probate 2. Where a grant is defective or in the province or territory in which the altogether, is such a goal appropriate there are circumstances affect- land is situated (either as an original in all cases? ing the validity of the grant, no grant or as a resealed ancillary grant). In Collins Estate, the executor of the action or proceeding lies against However, it is also clear that an estate of a deceased customer of the a person by reason of that person executor of a will (as compared with an Bank of Nova Scotia sought to compel making or permitting to be made administrator of an intestate’s estate) the bank to release the deceased’s any payment or transfer rely- derives authority from the will itself assets without a grant of probate. ing on the grant in good faith and not from a grant. This well-estab- While the will of the deceased was and without actual notice of lished principle of the a non-standard document, the case the defect or the circumstances was expressed in the seminal case of focused on the bank’s position that affecting the validity of the grant. Stump v Bradley (1868), 15 Gr 30 (Ont a grant was required before it would Ch). A grant of probate is merely evi- release funds. While all banks have pol- Following argument, Master Wilson dence of the executor’s authority, not icies that allow for the release of small concluded that the bank was entirely the prima facie creator of that author- amounts from accounts of deceased justified in requiring probate before ity. This principle creates opportuni- persons to their personal representa- paying funds held on account of a ties for probate planning through the tives without a probated will, the bank deceased individual to his or her pur- use of primary and secondary wills in took the position that its policy did not ported personal representatives and some jurisdictions in Canada, inter- create a binding requirement to pro- awarded costs to the bank. jurisdictional wills covering assets in ceed in the absence of a grant of pro- Nevertheless, it is anticipated that various jurisdictions, different execu- bate. The bank indicated that it wanted banks and other financial institutions tors dealing with different assets, and to ensure that the funds were paid to will continue to exercise discretion in related planning opportunities. How- the correct person and to protect transferring accounts to personal repre- ever, these planning opportunities itself from a future claim if it were later sentatives without probate. Depending can be thwarted when estates include determined that a different personal on the nature of the deceased’s rela- assets that require probate, such as representative should have received tionship with the financial institution real property or accounts in financial the funds, or if the will were set aside. and the relationships of the personal institutions that do not waive probate.

4 STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 The following are some of the rea- sor . It can also provide better the terms of a trust if the purchaser is sons why a person would want to avoid incapacity planning than a power of aware of a trust, and is not bound by the probate: attorney (more comprehensive powers, trust terms, unless they are registered • avoiding the built-in delays in the more continuity of management, better in the land registry: see, for example, process, which can impede the protection for the incompetent person Hoback Investments Ltd. v Loblaws Ltd. transfer of assets to beneficiaries; and his or her beneficiaries, and greater (1981), 120 DLR (3d) 682 (Ont HC). • avoiding probate taxes/fees, which recognition in foreign jurisdictions), Similar principles exist for personalty. A are levied in each province and ter- among other benefits. third party who pays valuable consider- ritory (some provinces and territo- Does a bare trust go that far? The ation for movable trust property in good ries, such as Alberta, Quebec, and short answer is no. Bare trusts can be faith and without notice of a defective Yukon, are very modest; others, extremely effective tools for avoiding title similarly obtains good title from the such as Nova Scotia, Ontario, and probate in a tax-efficient way; however, vendor. British Columbia, have very high the trustees/nominees of bare trusts The other parties to consider are rates that are based on the value of (whether true bare trusts involving a those interested in the estate directly: the probated assets); full transfer of legal title to a third party the executors/trustees and the ben- • seeking enhanced protection from or bare trusts implemented through eficiaries. As noted above, an execu- creditors or dependant relief claims a joint tenancy arrangement) derive tor draws authority from the will, and (if an alternate succession structure authority after the settlor’s death from therefore any provisions in the will is used); the unprobated will. Accordingly, third that provide for an executor’s discre- • simplifying the succession pro- parties must rely on the ownership of tion, duties, obligations, or protec- cesses for multijurisdictional legal title, rather than the statutory tions apply irrespective of whether assets; protections afforded under the various the estate is probated. Similarly, the • simplifying the succession process statutes that address probated wills. common-law trust duties of an execu- generally, and In most instances, it is legal owner- tor or trustee to the beneficiaries, such • ensuring confidentiality, which is ship that provides third parties with the as the duties of good faith, impartiality, the most important consideration appropriate protection. Both successor even-handedness, and accountability, for many clients. title holders for real property and the apply whether or not a will is probated. financial institutions that hold bank or While probate can have advantages Ultimately, the question comes down brokerage-type accounts obtain their in some cases, it can also have signifi- to this: can a structure be created to instructions from the holder of legal cant disadvantages, such as delays in provide sufficient safeguards for the title of the assets. They need not look administering the estate, payment of However, it is also clear that an executor of a will … derives authority from the will itself and not from a grant. beneficiaries and for the integrity of behind legal title. However, it should be probate taxes, and loss of confidential- the ’s estate plan without pro- noted that where a financial institution ity. While the provisions of the Income bate? Typically, a probate-avoidance or other third party is aware of the trust Tax Act are applicable regardless of plan involving the use of an inter vivos relationship (which applicable regula- whether a will is probated, high net trust can provide these safeguards. Cer- tions and/or account agreements may worth Canadians and those whose tainly, a traditional inter vivos trust (such require the trustee to disclose), in some principal concern is confidential- as an alter ego, joint partner, spousal, cases there may be an obligation on the ity will continue to look for planning or self-benefit trust) can address many financial institution to review the trust opportunities that avoid probate. The of these concerns. In addition to the terms so as to not be knowingly assist- challenge for estate and trust planners benefits noted above, such a trust can ing in a breach of trust. Courts have is to ensure that client and beneficiary provide continuity of management held that a purchaser of real property interests are safeguarded sufficiently and administration of assets by succes- is under no obligation to inquire into when probate is not being sought. n

STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 5 Using a Usufruct or Substitution Instead of a Trust

This article was published in its original usufructs and substitutions as if they the trust itself; rather, it nullifies the form as “Three Advice” (November 2017) were trusts. actions undertaken by the trust until a 25:9 STEP Journal 43-45. suitable appointment is made. Trusts To avoid the difficulties surround- DANIEL FRAJMAN, TEP Since 1994, the CCQ has required ing Quebec trusts, can usufruct or sub- Chair, STEP Montreal trusts to have at least one independent stitution be used instead? Spiegel Sohmer Attorneys trustee (that is, a trustee who is neither a settlor nor a beneficiary of the trust), Usufruct nlike almost all other jurisdic- which is an uncommon requirement Like a trust, a usufruct can be estab- tions in North America, Quebec in North America. This has led to inter- lished by onerous (with cause, Uhas a predominantly civil law pretative difficulties involving whether which is similar to consideration), gra- system. The Civil Code of Quebec tuitous contract (inter vivos gift), or (CCQ) does not recognize a distinction will. In essence, a usufruct provides between legal and beneficial owner- The general view is the usufructuary with a right of use ship for trusts governed by Quebec that the lack of an and enjoyment of property owned by law, although non-Quebec trusts another (the bare owner) for a certain from a common law jurisdiction can independent trustee time, including a right to the fruits and generally own property and operate does not nullify the revenues produced. Subject to the usu- in Quebec free of the law governing fructuary’s rights, the bare owner has Quebec trusts. (Quebec has not ratified trust itself; rather, it the power to sell the property. Since the Hague Convention on the Law Appli- nullifies the actions no trustee is required, the interpretive cable to Trusts and on Their Recognition; question of independence is irrelevant. however, this treaty’s conflict rules are undertaken by the essentially included in the CCQ.) The trust until a suitable Like a trust, a usufruct CCQ defines “ownership” as “the right appointment is made. to use, enjoy and dispose of property can be established by fully and freely,” and defines “trust” as a “patrimony by appropriation, auton- the independence of a trustee is to be onerous contract (with omous and distinct from that of the set- determined objectively or subjectively; cause, which is similar tlor, trustee or beneficiary and in which interpretative difficulties have also none of them has any real right” or a surrounded the penalty for breach of to consideration), right in rem. Other dismemberments this requirement. The objective test gratuitous contract and restrictions on the right of owner- requires that at least one trustee is ship, such as usufruct and substitution, neither a present nor a future ben- (inter vivos gift), were included in the first CCQ in 1866; eficiary (see, for example, C.T. v. D.J., or will. trusts were added 20 years later. 2009 QCCA 2460), and the subjective In many situations, the use of a test seems to require that at least one trust, usufruct, or substitution is neu- trustee is not related to the beneficia- Usufruct, which is often called tral from an income tax point of view. ries (see, for example, Graham v. Boyer- “a right of use,” can be employed The federal Income Tax Act (ITA) and Richard, 2004 CanLII 20712 (QSC)). to allow the enjoyment and use of a its Quebec equivalent provide that the The general view is that the lack of an family home, for example. In such a taxation rules for trusts are applied to independent trustee does not nullify case, the user is required to maintain

6 STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 the property and is responsible for and was recognized recently by the tax trust (CRA TI 9709555, “Legs other usual charges, such as insur- Quebec Court of Appeal (Boudreault en substitution de residuo après ance. A usufruct is often employed c. Boudreault, 2015 QCCA 1781). The 1990,” May 13, 1997). when residential real estate is to be institute may change the substance of • Revenues paid or payable to an placed in the hands of a user for a the capital, unless otherwise provided. institute are taxed in the hands of period of time. As in the case of usufruct, creditor the institute. If protection from creditors is a protection under a substitution may be • A substitution must file a trust tax concern, a usufruct may be problem- a concern because, while an institute’s return within 90 days of the year- atic because, subject to the rights of right is in effect, the institute is seen as end. the bare owner, creditors are able • Unless an exemption is provided to seize the rights of the usufructu- for (as in the case of spousal sub- ary. Similarly, however, the Supreme In substitution, stitutions), there is a deemed dis- Court of Canada has observed that the ownership lies with a position of capital assets in the rights of a beneficiary under a trust substitution every 21 years. are not always entirely shielded from first rank of beneficiary • The institute or the institute’s creditors. (For example, in Bank of (the institute) and estate should obtain tax clearance Nova Scotia v. Thibault, 2004 SCC 29, or distribution certificates before the court stated that “[t]he trust argu- then with one or two transmitting property to substi- ment [regarding creditor protection] ranks of substitutes. tutes (ITA subsection 159(2) and is, to a certain extent, a mirage. The Quebec Tax Administration Act sec- [property held in trust] may not be tion14). seized to pay the debts of … the ben- the owner of the property. Another dis- • The tax deferral of the spousal trust eficiary because the property does not advantage is that there is no power to applies also to a spousal substitu- belong to [the beneficiary]. However, appoint institutes, although it is pos- tion (CRA TI 2012-0432201E5, the patrimonial rights of the benefi- sible to have several institutes or sub- “Payment of Tax by an institute,” ciary … under the trust contract, like stitutes in a particular rank. This means March 11, 2013). any personal patrimonial right, are that there is no discretion to choose • Real estate in the substitution is seizable.”) who will benefit at the institute rank; subject to the same Quebec pro- however, there is a power to appoint at vincial land transfer tax rules as real Substitution the substitute rank from a list of poten- estate held in a trust (section 20 of In substitution, ownership lies with a tial substitutes. Substitution can there- the Quebec Act Respecting Duties on first rank of beneficiary (the institute) fore be ineffective in estate freezes, but Transfers of Immovables). and then with one or two ranks of sub- should remain effective for spousal stitutes. As in the case of a usufruct, substitutions (in which the spouse is Conclusion no trustee is required. Unlike a trust entitled to all income and, while alive, In summary, practitioners should note or usufruct, substitution can be estab- has the sole right to income or capital) that in Quebec the civil law vehicles of lished only by inter vivos gift or will. for which a power to appoint in the first usufruct and substitution are available Under the CCQ, the institute must rank is not relevant. Therefore, substi- for use in appropriate circumstances “act with prudence and diligence, tution is useful when investment assets instead of a trust – especially if the having regard to the rights of the (including securities and real estate) Quebec independent trustee rule is substitute.” The institute has a right are to pass among ranks of users, but meant to be avoided. This situation to income (unless otherwise stipu- there is no need for a power of appoint- provides a good example of how dif- lated) and must preserve the capital, ment in the first rank. ferent legal systems can work together not encroaching on it or disposing of Because under the ITA a substitu- with a large degree of coherence. n the property for less than fair market tion is a deemed trust, several basic value, unless given a specific right to trust tax concepts apply: do so. Substitution with encroach- • The institute is deemed to be both a ment is called “residual substitution” trustee and a beneficiary under the

STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 7 Can a Trustee in Bankruptcy Seize Funds from a Registered Disability Savings Plan?

SUZANNE MICHAUD, TEP TIBs, and the professional advisers to ability assistance payment, the portion Member, STEP Toronto any of these people. of the payment that consists of the RBC Law Group, Royal Bank of Canada original contributions is not included Background in the beneficiary’s income. The author wishes to thank her colleagues, An RDSP is a savings plan that is Canada disability savings grants Katherine McEachern and Thomas Groz- intended to ensure the long-term and Canada disability savings bonds inger, for their valuable comments. The financial security of a person who may be added to RDSP contribu- views expressed in this article do not has a prolonged and severe physical tions for qualified beneficiaries, and necessarily reflect those of Royal Bank or mental impairment such that the these benefits can total a maximum of Canada and its affiliates, and no lia- person is entitled to receive the dis- of $70,000 and $20,000, respectively. bility is assumed for any use or reliance ability tax credit. Details about RDSPs When amounts attributable to grants, on this article. The comments made are are provided on the Canada Revenue bonds, and earnings are withdrawn offered for general information purposes Agency’s (CRA’s) website: http:// as part of a disability assistance pay- only and are not to be acted on without www.cra-arc.gc.ca/tx/ndvdls/tpcs/ ment, they are taxable in the hands of independent consideration of individual rdsp-reei. the beneficiary. circumstances by legal and tax advisers. Under paragraph 146.4(4)(a) of the Income Tax Act, the arrangement he Royal Bank of Canada has governing an RDSP must stipulate the An RDSP is a savings been involved in a number of following: plan that is intended Tsituations in which a client with 1. the arrangement is operated a registered disability savings plan exclusively for the benefit of the to ensure the long- (RDSP) has declared bankruptcy. beneficiary under the plan; term financial security In these situations, the trustee in 2. the designation of the beneficiary bankruptcy (TIB) typically demands is irrevocable; and of a person who has a funds from the RDSP for the purpose 3. no right of the beneficiary to prolonged and severe of paying the client’s creditors. The receive payments from the plan results of such an exercise of author- is capable, either in whole or in physical or mental ity by a TIB can be financially cata- part, of surrender or assignment. impairment such that strophic for the client. The withdrawal of funds from an RDSP can result in the Disabled persons can open an RDSP the person is entitled requirement to return grant money to for their own benefit, or another quali- to receive the the federal government, the ineligibil- fied person may open an RDSP on their ity of the client to reapply for a federal behalf. disability tax credit. grant, and, if all funds are depleted, the Contributions can be made to the closure of the RDSP. The recent case of RDSP by the beneficiary, the beneficia- Financial-planning advice for Alary (Re), 2016 BCSC 2108, has pro- ry’s parents, or others. These contribu- people with disabilities often focuses vided issuers of RDSPs with some clar- tions to an RDSP are not tax-deductible on government grants and tax deferral ity concerning a TIB’s authority. and can be made until the end of the as a way of providing for future finan- The court’s conclusions may inter- year in which the beneficiary turns 59. cial stability. est clients with an RDSP, families who There is a lifetime contribution limit of Before contributing to an RDSP contribute to an RDSP, creditors who $200,000, and, when the contributions that a beneficiary has opened, family lend money to people with RDSPs, are paid out to the beneficiary as a dis- members and others might ask them-

8 STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 selves about the beneficiary’s ability be valid within the terms of the RDSP 3:1 – a huge penalty for B as a benefi- to manage money and the financial trust and other applicable laws. ciary with a disability who would lose challenges that may lie ahead. If the these grants forever. In this case, credi- beneficiary might become insolvent Arguments tors could realize a maximum of only or bankrupt in the future, contributors The bank’s counsel was neutral in his $3,229, but B would suffer the loss of should consider whether the TIB might submissions, recognizing that the the balance of the entire RDSP. take possession of the contributions RDSP was a trust and that the bank and The TIB ultimately limited his claim and distribute them to creditors, which the Royal Trust Company, as trustee, to the monies contributed privately to would result in the loss of all govern- should not advocate for either the the RDSP and not to the government ment grants or bonds contributed to beneficiary or the TIB. The terms of grants and bonds, although as a result the RDSP. Alary provides some guid- the RDSP trust agreement stated that of this claim, the grants and bonds ance in this regard. no payments would be made from it would be forfeited to the government. The case is relevant both when the “other than Disability Assistance Pay- He argued that the RDSP vested in him bankrupt opens an RDSP and when the ments to or for a Beneficiary.” The bank as TIB as part of the bankrupt’s prop- bankrupt is the beneficiary of it. It also pointed out that the TIB had no greater erty. In addition, he made the following applies irrespective of whether contri- rights than B in the RDSP. As a result of argument: butions are made by the beneficiary, statutory limitations on withdrawals, family members, or others. if the TIB could demand a payment for In terms of public policy … while the benefit of the bankrupt’s credi- the RDSP is a benefit conferred on Facts tors, it would be limited to $3,229, the bankrupt by the Government B, a person with a disability, opened and such a withdrawal would lead to of Canada and federal legislation, an RDSP at the Royal Bank of Canada the statutory obligation to return the the ability to assign oneself into in 2010. She contributed $6,800, the government grant monies at a ratio of bankruptcy is also a benefit. As funds apparently coming from her parents. With the government grants and bonds that were also contributed, the value of the RDSP at the time of the case was $32,250. In 2015, with $24,000 in unsecured debt, B filed an assignment in bankruptcy. Her TIB requested that the bank (as agent for the RDSP trustee, the Royal Trust Com- pany) withdraw all funds and remit them to the TIB for the benefit of her creditors. As expressly permitted by the trust agreement governing the RDSP trust, the bank required a court order con- firming the TIB’s authority to make the request. Although there is currently no express exemption for RDSPs under the Bankruptcy and Insolvency Act, on the court application the bank noted the requirement that the RDSP trust be “operated exclusively for the benefit of the beneficiary” and asked the court whether a payment to a TIB for the ben- efit of the beneficiary’s creditors could

STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 9 such, the bankrupt should not be interest in the funds is limited in persons with severe disabilities are entitled to rely on both benefits to this manner, the Trustee’s inter- able to save for their retirement and the unfair advantage of creditors. est in and ability to deal with the that there is a societal interest in pre- In addition, the Trustee says funds is similarly restricted. serving the integrity of the RDSP trust that notwithstanding s. 146.4 Neither Ms. Alary, nor the funds. She also noted that because of of the Income Tax Act, s. 128(2) Trustee, may demand the release the degree of regulation of RDSPs by (a) of the Act deems the trustee of funds in the RDSP for the pur- the CRA, there are few opportunities in bankruptcy to be the agent of pose of satisfying creditors. for abuse by disabled persons. the bankrupt for all purposes of the Act. Because the trustee is the Because the RDSP trust gave the court Conclusion agent of the bankrupt, a seizure of discretion to release funds to satisfy RDSPs are complex instruments, the RDSP monies does not amount creditors, the judge enumerated prin- offering substantial government ben- to a transfer or assignment in con- ciples to be considered in exercising efits for qualifying persons. However, travention of s. 146.4. this discretion: people who open RDSPs for their own • be just and equitable from the per- benefit must be aware that in the event Decision spective of both the creditors and of a future insolvency or bankruptcy, The judge found as follows: the RDSP beneficiary, a creditor or trustee in bankruptcy • properly balance the interests of may attempt to lay claim to the con- In my view, these seemingly con- the parties and the prejudice that tributions to defray the debt. An RDSP flicting statutory provisions can be might be caused, trust agreement may be silent on the reconciled. Although s. 67(1)(c) of • be reasonable, and matter and a financial institution may the Bankruptcy and Insolvency Act • provide certainty to other commer- accept the directions of a TIB to pay vests in the trustee in bankruptcy cial parties in a similar situation. the funds to it. Finally, family members any property interest held by the or others making contributions to an bankrupt, the trustee can take no In applying these principles to the RDSP should be aware of this risk and greater interest than the bankrupt case, the judge found that it was not consider whether it might be wiser in such property. In Re: Lifshen fair and equitable to permit funds to to provide for the disabled person by (1977), 1977 CanLII 1514 (SK QB) be paid from the RDSP for the benefit other means, such as an absolute dis- … MacLeod J. held that the funds of B’s creditors as a result of the sub- cretionary trust. n held in RRSPs vested in a trustee in stantial penalty that such a withdrawal

… family members or others making contributions to an RDSP should be aware of this risk and consider whether it might be wiser to provide for the disabled person by other means …

bankruptcy (prior to their exemp- would impose on B. She would forego tion from the Act). However, the about $13,000 in order to reduce her plan in question accorded the ben- debt by $3,229, a minimal benefit to eficiary the right to redeem funds the creditors. The judge, who noted upon request. In contrast, Ms. that there was no that B Alary’s right to receive funds from contributed the funds to the RDSP to her RDSP is strictly limited by the defeat creditors, did not mention the trust instrument. In particular, no cost to the creditors of having a TIB funds can be paid out to creditors apply for a court order. or to her for the purpose of satisfy- Finally, the judge noted that the ing creditors. Because Ms. Alary’s purpose of an RDSP is to ensure that

10 STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 IN THE HEADLINES

RE ESTATE OF LE GALLAIS: WHEN such a gift is not void, provided that legal fees for administering the estate IS A GIFT TO A WITNESS NOT VOID the court is satisfied that the will maker was prima facie void because Ms. Ish- UNDER THE WILLS, ESTATES AND intended to make a gift to a specific erwood was a witness to the will. SUCCESSION ACT? person, even though that person (or Since Ms. Le Gallais had no spouse his or her spouse) witnessed the will. or children, she left the residue of her KATE MARPLES, TEP Such an application was the subject of estate (which was approximately $1.5 Member, STEP Vancouver the decision in Re Estate of Le Gallais, million) to be divided equally among Legacy Tax + Trust Lawyers 2017 BCSC 1699. six charities. The will of the late Ms. Le Gal- Ms. Isherwood brought an appli- ANDREA FRISBY, TEP lais was prepared by her lawyer and cation under WESA section 43(4) to Member, STEP Vancouver friend of 40 years, Ms. Isherwood. Ms. have the court declare that the gift Legacy Tax + Trust Lawyers Isherwood was named as the executor to her under the charging clause was under the will and was also one of the not void. The legal fees and expenses Under British Columbia law, a gift witnesses of Ms. Le Gallais’s signature. claimed by Ms. Isherwood were just made in a will to a witness of the will Ms. Le Gallais’s will contained the fol- over $17,000, and the remunera- maker’s signature (or a spouse of the lowing “charging clause,” which the tion claimed by Ms. Isherwood in her witness) is prima facie void. Several court confirmed to be a gift: capacity as executrix was approxi- cases decided under section 11 of the mately $38,950. former Wills Act, which was repealed in If the said Constance Dora Isher- Three of the six charities named 2014, when the Wills, Estates and Suc- wood should act as Executrix of in the will opposed Ms. Isherwood’s cession Act (WESA) came into force, this my will and should also attend application. They contended that Ms. strictly upheld this rule regardless of to the legal work of my estate, she Isherwood, as an experienced wills and the surrounding circumstances (see, shall be entitled to the usual and estates lawyer, should have met the for example, Hammond v. Hammond, proper charge for such legal work. expected standard of care by explain- 1992 CanLII 1745 (BCSC)). However, ing to Ms. Le Gallais the effect of wit- WESA section 43(4) provides that, on Therefore, without a declaration by the nessing the will on the charging clause. application, a court may declare that court, the gift to Ms. Isherwood of her The court, however, defined the

STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 11 question before it not on the basis of ish Columbia Law Society’s Code of the law related to the division of prop- whether Ms. Isherwood had made Professional Conduct, which directly erty on death for unmarried couples is a mistake in witnessing the will, but apply to the drafting of wills, testamen- in need of modernization. rather on the basis of whether the evi- tary gifts, and lawyers’ responsibilities dence established that Ms. Le Gallais in relation to these matters. Married Spouses Versus Adult had intended to make a gift to Ms. Ish- Interdependent Partners erwood through the charging clause. When a spouse or AIP dies, the bereaved The framing of the relevant question A COMMON-LAW RELATIONSHIP partner may make a number of claims. in this way seems to be appropriate in IS NOT A MARRIAGE However, a partner’s succession rights in the light of the language of WESA sec- Alberta depend largely on the category tion 43(4). SHANNON JAMES into which the surviving partner falls. In coming to the conclusion that Affiliate Member, STEP Calgary Ms. Le Gallais had in fact intended to Borden Ladner Gervais LLP Alberta offers make such a gift to Ms. Isherwood and that the gift was therefore not void, NANCY GOLDING, TEP substantial legislative the court focused on the length and Member, STEP Calgary; Member, STEP protection for depth of the relationship between Worldwide Board Ms. Le Gallais and Ms. Isherwood. The Borden Ladner Gervais LLP bereaved romantic two women had known each other for partners, provided 40 years at the time that the will was Alberta offers substantial legislative made. Ms. Isherwood had previously protection for bereaved romantic part- that they are married provided other legal services to Ms. Le ners, provided that they are married spouses. Gallais in relation to the administration spouses. Despite the fact that provin- of Ms. Le Gallais’s late mother’s estate. cial legislation increasingly recognizes This led the court to conclude that modern families and gives rights to Part 3 of the Wills and Succession Ms. Le Gallais would reasonably have people living in adult interdependent Act (Intestacies) understood that there would be legal relationships, these rights are more When a spouse dies without leaving a expenses incurred in the administra- limited than those available to mar- will, part 3 of the Wills and Succession tion of her own estate and therefore ried spouses. These people, known Act (WASA) establishes rules for the would have intended that Ms. Isher- as “adult interdependent partners” distribution of the estate, and provides wood be compensated for the neces- (AIPs), live in relationships of interde- for the division of property among the sary legal work. pendence, conjugal or otherwise, and deceased’s descendants and surviv- Although Re Estate of Le Gallais their rights derive from the Adult Inter- ing spouse. If the deceased spouse resulted in a declaration by the court dependent Relationships Act (AIRA). has no surviving descendants (or if the under WESA section 43(4) that the For estate and succession pur- descendants are children of the mar- evidence showed that the will maker poses, Alberta law recognizes three riage of the deceased and the surviving intended to make the gift, such a deter- different categories of relationships: spouse), the surviving spouse receives mination is highly dependent on the 1. legally married spouses, the entire estate. If the deceased dies individual facts of the case, and relief 2. legally married spouses who leaving a surviving spouse and one will not be given in all circumstances. are in the process of divorcing or more descendants who are not Therefore, this case should also serve or separating or who have been descendants of the surviving spouse, as an important caution for lawyers separated or divorced for less WASA part 3 provides the surviving who are named as executors in the than two years, and spouse with a preferential share, with wills that they draft or witness. Clearly, 3. AIPS. the residue to be distributed among the best practice is for lawyers not to the intestate’s descendants. witness these wills. Furthermore, law- Each of these categories has certain AIPs are treated in the same manner yers should also be mindful of rules features and protections to address as married spouses with respect to the 3.4-28, 3.4-37, and 3.4-38 of the Brit- succession and other rights. However, division of property on an .

12 STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 If the deceased and the surviv- Part 5 of the Wills and Succession the fundamental premise that mat- ing spouse are in the early stages of Act (Family Maintenance and rimonial property is to be divided divorcing or separating at the time of Support) equally between spouses. A court must the deceased’s death, the surviving Pursuant to WASA part 5, surviving then determine whether the surviving spouse has the same rights as a mar- married spouses and AIPs may make spouse has been adequately provided ried spouse. The same rights are not an application for family maintenance for, and may increase or decrease the accorded to AIPs, whose rights ter- and support against the deceased’s amount of the division in accordance minate when the relationship breaks estate within six months of the issu- with WASA part 5. down, in accordance with rules set out ance of the grant of probate or admin- This claim is not available to surviv- in AIRA. istration. The basis for the claim is that ing AIPs and no equivalent legislation individuals are required to provide currently exists in Alberta to deal with Dower Act for the maintenance and support of the division of the property of AIPs on Enacted to protect spouses who are their dependants, including married the breakdown of their relationship. not property owners from a disposi- spouses and AIPs. tion of the matrimonial home by their On such an application, courts con- Conclusion spouse, the Dower Act establishes sider all of the assets of both spouses Alberta estates and succession legisla- certain rights and claims both during and partners, the needs of the survivor, tion has come a long way in recogniz- the lifetime of the property-holding and the extent to which provision was ing the realities of modern family life by spouse and on the spouse’s death. The made for the survivor, both inside and creating a new class of claimants, AIPs, Dower Act provides that on the death outside the will. and providing them with their own legal regime and protections. How- Enacted to protect spouses who are not ever, there are still gaps between the rights and remedies available to AIPs property owners from a disposition of the and those available to married spouses, matrimonial home by their spouse, the such as the ability to make a claim for a in the matrimonial home Dower Act establishes certain rights and and to make a claim under the MPA. claims both during the lifetime of the Although the creation of the adult interdependent relationship has property-holding spouse and on the helped to equalize common-law rela- spouse’s death. tionships and marital relationships by creating similarities, the legal of the deceased spouse the surviving The provisions of part 5 may also rights and remedies available to these spouse is entitled to a life estate in a apply to spouses who were separated respective groups of people are still matrimonial home that was held solely for less than two years at the time of the significantly different. in the name of the deceased spouse. relevant death. The surviving spouse is entitled to live in the home until he or she dies or to Matrimonial Property Act TEIXEIRA V. MARKGRAF ESTATE receive rental payments until death. The Matrimonial Property Act (MPA) The provisions of the Dower Act governs the division of matrimonial KATY BASI, TEP apply equally to married spouses who property after the breakdown of a Member, STEP Toronto have been divorced or separated for marriage. It further provides that a Basi Law Professional Corporation less than two years, but they do not surviving spouse who could have apply to AIPs, and Alberta courts have made a claim immediately before the The facts of Teixeira v. Markgraf Estate, repeatedly stated that the distinction deceased’s death has the right to bring 2017 ONCA 819, are simple and in between married spouses and AIPs is a claim against the matrimonial prop- some respects heart warming. Mr. not discriminatory. erty in the estate after the death. Teixeira was a good neighbour to Ms. A claim under the MPA is based on Markgraf for many years, helping her

STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 13 with household maintenance, gro- no evidence of a contract. Mr. by virtue of the Bills of Exchange ceries, and so on. Shortly before her Teixeira’s good deeds were not Act. However, because a total death, Ms. Markgraf made a will that considered to constitute partial absence of consideration is a included a bequest to Mr. Teixeira of or total consideration, but rather complete defence to an action on $100,000. She also wrote and deliv- to be gratuitous acts of kindness. a bill of exchange, this argument ered a cheque to Mr. Teixeira in the 2. Mr. Teixeira argued the doctrine also failed to sway the court. amount of $100,000. Ms. Markgraf of estoppel by convention, which 4. Finally, Mr. Teixeira argued that died a few days later, and Mr. Teixeira holds parties to a shared assump- if the law of gifts applied, the received the $100,000 bequest under tion of facts or law that forms the gift was perfected by delivery her will. At issue in the case was the basis of a transaction into which (the other two elements of a per- $100,000 cheque. they are about to enter. In the fected gift, intention and accep- Mr. Teixeira attempted to cash the words of the Court of Appeal, tance, were both established and cheque twice, once while Ms. Mark- “Everyone assumed that the not at issue). The court noted graf was alive, at her bank, and once cheque was good.” However, that the delivery requirement after her death, at his bank. Because in order to rely on the doctrine, serves a number of purposes – Ms. Markgraf’s chequing account Mr. Teixeira was required to have for example, forcing a donor to did not contain $100,000, her bank refused to cash the cheque, although the bank did not inform Mr. Teixeira of Mr. Teixeira argued the doctrine of estoppel the reason for the refusal. Ms. Mark- by convention, which holds parties to a shared graf had more than sufficient funds to cover the cheque in other accounts at assumption of facts or law that forms the basis the same bank, but the bank required of a transaction into which they are Ms. Markgraf’s instructions to trans- fer funds between her accounts. On about to enter. her death, the chequing account was frozen, and hence Mr. Teixeira was not changed his legal position in reli- consider the consequences of able to cash the cheque at his bank. ance on the shared assumption, the gift and to create tangible Both the Ontario Superior Court and it must have been consid- proof that a gift has in fact been of Justice and the Ontario Court of ered “unjust or unfair” to allow made. For delivery to have been Appeal agreed that the $100,000 gift Ms. Markgraf’s estate to depart accomplished, the donor must failed for want of delivery: “[Ms. Mark- from the assumption. Because have “done everything necessary graf] could not give what she did not Mr. Teixeira did not act in reli- and in his or her power to effect have.” Mr. Teixeira made four main ance on the assumption that the transfer of the property.” arguments to the contrary, all of which the cheque would be honoured, Because a cheque is not money, were rejected. The four arguments are the doctrine did not apply. The but a direction to a bank to pay addressed below, as a potential road- Court of Appeal also gave short a sum of money to the payee, a map for those dealing with similar fact shrift to another principle of gift by cheque is not complete situations. equity argued by Mr. Teixeira: until the cheque has been cashed 1. Mr. Teixeira took the position “equity will not strive officiously or has cleared. Therefore, the that the cheque was payment to defeat a gift.” Instead, the court rejected the position that for services rendered and not an court indicated a preference for delivery had been made in this unperfected gift. This was there- the maxim “equity will not assist case, noting that the death of a fore a claim in contract, and the a volunteer” in a case such as this donor destroys an intended gift law of contract, unlike the law of one that deals with “well-settled during life by way of cheque if the gifts, does not require delivery. law.” cheque is not deposited before This argument was denied on a 3. Mr. Teixeira also took the position the donor dies. factual basis because there was that the cheque was enforceable

14 STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 It is tempting to feel a little bit sorry The Quebec Superior Court had terms of the arrangement required the for Mr. Teixeira, given the unfortunate observed that while the trust deed shareholders to assume a portion of timing of the various events in this bestowed broad discretionary powers Beauport’s tax debts personally. case, in which Mr. Teixeira refused a on the trustee, most of the trustee’s In 2009, a supplier petitioned “generous offer” of settlement. After actions were predetermined in the for Beauport’s bankruptcy because paying costs awards and his own trust deed, leaving little room for the of unpaid bills. Beauport’s bank- counsel’s fees, it is to be hoped that he exercise of discretion. The court also ruptcy was confirmed because it did retained at least some of the $100,000 focused on the tax motivations of the not appeal the judgment within the bequest from the will of Ms. Markgraf parties to the trust. The Court of Appeal, required time period. Serge did not as an expression of her gratitude for his however, clarified that the tax motiva- inform Carol and Karl of Beauport’s kindness. tion of the transactions did not deter- bankruptcy, blaming the error on the mine the trust’s residence. Rather, the lawyer. residence of the trust was determined Following Beauport’s bankruptcy, UPDATE: PROVINCIAL RESIDENCE by reference to facts that showed that Karl, Carol, and a new company incor- OF A TRUST the actual activities of the trust and the porated to receive the Beauport assets management of the trust’s affairs lay also became bankrupt. Karl and Carol JENNIFER LEACH with the settlor in Quebec and not the brought an action against Serge for Sweibel Novek LLP trustee in Alberta. The tax motivations breach of professional responsibility underlying the establishment of the and included S. Lavoie CPA Inc. (Lavoie The Quebec Court of Appeal has con- trust were merely a backdrop against Inc.) and the Serge Lavoie family trust firmed the decision of the Quebec which the factors determining the as defendants. The court held that Superior Court in the case of Boettger trust’s residence were considered. Serge had made numerous errors

… a creditor who sustains damage from a debtor’s juridical act … in of the creditor’s rights, “in particular an act by which the debtor renders or seeks to render himself insolvent, or by which … he grants preference to another creditor, may obtain a declaration that the act may not be set up against him.” c. Agence du revenu du Québec, 2017 Accountant’s Family Trust Made and should be held responsible for QCCA 1670. This case considered the Party to Professional Responsibility the damages caused to his clients as a residence of a trust settled in Quebec Case result of the breach of his professional by a Quebec resident to hold shares The Quebec Superior Court’s decision responsibilities. and promissory notes for the ben- in Latouche c. Lavoie, 2017 QCCS 2932, The court considered whether the efit of his Quebec-resident spouse. A opens the door to damages claims Serge Lavoie family trust could be trustee resident in Alberta, unknown to against family trusts for the actions of held liable to pay the damages claim. the settlor or beneficiary, was named their beneficiaries, trustees, and set- The trust was an asset protection trust and undertook certain transactions tlors in this cautionary tale for profes- created by the accountant in 2007. to ensure that the trust was resident sional advisers. Serge was the sole beneficiary of the in Alberta. These transactions were Serge Lavoie, an accountant, trust during his lifetime, and he acted planned in Quebec before the trust received a mandate from Carol and as trustee together with his wife and was created. Following its creation, the Karl Latouche, shareholders and direc- sister. The trust owned all of the shares trust was restricted to receiving pay- tors of Beauport, a roofing company, in Lavoie Inc., except the minimum ments from the settlor and the oper- to convince its creditors to accept an required by the Order of Accountants. ating company to cover its expenses. arrangement to avoid bankruptcy. The The trust was also a secured creditor

STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 15 of Lavoie Inc., owning a hypothèque a manner. Therefore, both Lavoie Inc. ship or romantic partnership), another on all of Lavoie Inc.’s assets up to and the family trust could be held person can represent the adult with $900,000. Serge did not earn a salary responsible for paying the damages respect to these specific kinds of deci- from Lavoie Inc., a company of which incurred by the clients. sions only. he was a director. Rather, all fees were paid and held in Lavoie Inc. The trust Key Provisions of the New Act thereafter disbursed funds to Serge GUARDIANSHIP LEGISLATION The IPA contains four main sections: and his wife, as necessary. IN NOVA SCOTIA: SIGNIFICANT (1) the appointment of a guardian of an In court, Serge testified that his CHANGE ON THE HORIZON incompetent person (defined in the Act family trust was invincible, untouch- as an adult who is incapable from infir- able, and immune from all claims. Fur- SARAH DYKEMA, TEP mity of mind of managing his or her thermore, he claimed that he himself Chair, STEP Atlantic own affairs); (2) the powers and duties was untouchable because everything McInnes Cooper of a guardian to manage the affairs of he owned and earned was transferred the incompetent adult to ensure “the to the trust. As of December 28, 2017, the Nova In assessing whether the plaintiffs Scotia Incompetent Persons Act, which could execute their damages claim was struck down by the Supreme The new law … begins against the trust, the court reviewed Court of Nova Scotia in June 2016, will with the premise that the provisions of the Civil Code of be replaced by the new Adult Capacity Québec (CCQ), which are designed to and Decision-making Act. In 2016, the all adults have the protect victims of fraud. CCQ article court found that parts of the IPA were right to make their 1631 provides that a creditor who unconstitutional because they gave sustains damage from a debtor’s juridi- a guardian complete control over all own decisions, unless cal act (such as the creation of a trust aspects of an incompetent person’s it can be shown that that owns all the debtor’s assets and decision making, even if the person receives all of his income) in fraud of under guardianship had the capacity they are incapable of the creditor’s rights, “in particular an to make some independent decisions. doing so. act by which the debtor renders or The new law, introduced on Octo- seeks to render himself insolvent, or ber 2, 2017 as Bill No.16, is meant to by which … he grants preference to comply with the Charter of Rights and comfortable and suitable mainte- another creditor, may obtain a decla- Freedoms. It begins with the premise nance” of the adult; (3) the removal of ration that the act may not be set up that all adults have the right to make a guardian, including a provision for a against him.” In other words, Serge their own decisions, unless it can be petition to the court by a person who could not avoid his financial responsi- shown that they are incapable of doing has regained competence to manage bilities by divesting himself of all of his so. Under the IPA, if an individual was all of his or her own affairs; and (4) the assets and all of his income in favour found to be incapable of making deci- custody of incompetent persons. of a trust. sions and a guardian was appointed, The new Act is significantly longer CCQ article 317 further provides the guardian had the ability to make all and more detailed, and contains the that the juridical personality of a legal decisions for the incompetent person, following provisions of note: person (such as a trust) may not be until the person could prove to the invoked in fraud, abuse of rights, or in court that he or she had the capacity 1. four principles governing the contravention of a rule of public order to make all decisions regarding the interpretation and administra- against a person acting in good faith. management of his or her own affairs. tion of the Act (section 4): The court held that Serge had struc- In contrast, under the new Act, if a. an adult is entitled to make tured his affairs to avoid all claims it can be shown that an adult cannot his or her own decisions, unless against him in a perfect example of make some decisions (for example, incapacity to do so is clearly fraud, and the family trust’s juridical decisions related to the handling of demonstrated; personality could not be used in such finances or decisions related to friend- b. making “risky” or “unwise”

16 STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 decisions does not mean that a values, and beliefs, when making issues related to the new Act will no person is incapable of making a decisions for the adult; doubt be highlighted. decision; 4. the restriction of a representa- On the release of Bill No.16, some c. how an adult communicates tive’s ability to make decisions groups advocating for the rights of is not relevant in determining if to areas only in which it has been people with disabilities and decision- he or she is capable of making shown that an adult is not capable making impairments noted their con- decisions; and of making decisions (section 27); cern that the new law lacks a process d. decisions made for the adult 5. a process for the review of rep- for appointing decision-making sup- must reflect the least intrusive resentation orders, including porters to assist disabled persons, as and least restrictive course of review by the adult who is the opposed to appointing a represen- action possible; subject of the order (sections 58 tative to make certain decisions for 2. detailed provisions regarding to 67); and them. In other words, some argue that capacity assessments (sections 6. specific penalties to be imposed on the new Act may not go far enough to 9 to 20), which can be carried out a representative who acts in bad ensure that sufficient decision-making only by health professionals who faith or causes harm (section 70). support is available for a person with a are authorized to do so under the cognitive disability before a represen- Act; Potential Concerns Relating to the tation order is made. 3. clearly defined duties and obli- New Legislation The new law grandfathers exist- gations of representative deci- As the new law comes into force, Nova ing guardianship orders, and it will be sion makers (sections 27 to 47), Scotia courts will begin to assess appli- interesting to see how many of them including a duty to consider the cations for representation orders, at are challenged under the new Act by adult’s prior instructions, wishes, which point concerns and contentious individuals under guardianship. n

STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 17 18 STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 RUTH MARCH, TEP Maureen Berry and David Stevens, continue to monitor the Department of Finance and its amendments to the Happy New Year! My best July 18 tax proposals. Thank you to the numerous mem- wishes to you all for a 2018 bers from both committees who contributed substantial that is filled with success, hours to the STEP submission on behalf of all members. health, prosperity, and hap- Feedback on the submission, from one member includes piness. the following statement: “I read the material that you put Certainly, 2018 brings together, and I thought it to be the best piece of work much to celebrate as STEP Canada marks its 20th anniver- covering this subject ever.” sary. Among other activities that honour this achievement Members of both committees produced a live com- is a special black tie gala planned for Monday, May 28, 2018 plimentary webcast on November 24th for over 500 del- in Toronto as part of our two-day national conference. I hope egates. The panel provided a short background about to see many of you there. the proposals and then addressed delegate questions In this issue, I’d like to ensure that members of STEP (collected in advance) in the following areas: the tax on Canada are aware of the activities, efforts, and initiatives split income (TOSI); attribution rules and planning; capi- of their organization. tal gains, including subsections 120.4(4) and (5) of the The Canadian board is made up of the eight branch Income Tax Act and the lifetime capital gains exemption chairs, three directors at large, and our six-member Exec- (subsections 110.6(12) and (12.1)); sections 84.1 and utive Committee. Special guests also participate in our 246.1; and passive income. national board meetings (some by phone, some in person), The committees are researching the TOSI rules in including the three chapter chairs, the national commit- other jurisdictions in preparation for another STEP sub- tee chairs, three Canadian STEP Worldwide (SWW) council mission to the Department of Finance after the antici- members, and senior staff members. I’m pleased to report pated changes to the current rules are announced. that the national board is very cohesive and works with a I remain confident in the strategy that the commit- common focus and complementary energies for the ben- tees have developed and are continuing to follow. efit of all members. In November, the STEP Canada board travelled to London to attend a full-day STEP Canada • A report from the Canadian SWW council members, Bill board meeting, followed by the full-day SWW branch chair Fowlis, Nancy Golding, and Kathleen Cunningham, high- assembly. lighted SWW’s focus on strengthening regions around At the Canadian board meeting, we heard reports from the world. our very active national committees. • Brian Cohen, chair of the 2018 National Conference • The governance committee, co-chaired by Rachel Program Committee, spoke on behalf of himself and Blumenfeld and Richard Niedermayer, is working on his co-chairs, Christine Van Cauwenberghe and Corina updates to the branch manual to clarify our structure Weigl. Plans for the technical sessions at the conference and elections. and the 20th anniversary gala are well underway. It will After hours of research, writing, computation, and be a very special year, and I encourage all members to compiling to prepare STEP Canada’s October 2 submis- mark their calendars for May 28-29 and watch for regis- sion to the Department of Finance, both the Public Policy tration to open in January. Sponsorship inquiries should Committee, co-chaired by Michael Cadesky and Pamela be directed to [email protected]. Cross, and the Tax Technical Committee, co-chaired by

STEP Inside • JANUARY 2018 • VOLUME 17 NO. 1 19 • STEP Canada will be working with STEP USA to produce The board supported the renewal of the family enter- a Canada-US webcast on US tax reform on January 23. I prise xchange partnership, which gives STEP members hope that this collaboration with our neighbours is the a discount on tuition. Details are noted on the insert first of many. included with this issue of STEP Inside. At the SWW branch chairs’ assembly, over 150 senior • A lot of you have attended our latest full-day course, Taxation at Death and Post Mortem Planning, as Chris leaders from around the globe met for a day to discuss Ireland continues his tour to all 11 branches and chap- SWW’s business goals, recent activities, and membership ters. The course and its materials have provided excel- growth trends, and to learn about new campaigns, initia- lent and extensive analysis of this topic. Specific areas tives, and potential changes to educational offerings around of this course material affected by the final outcome of the globe from senior STEP staff. George Hodgson, the chief the July 18, 2017 Department of Finance consultation operation officer of SWW, announced the 2017 Founder’s paper and draft legislation will be summarized for course Awards recipients for outstanding achievement, which delegates with planning considerations in early-spring included Canadians Tim Grieve and John Poyser. Congratu- via webcast featuring Chris Ireland. lations to both Tim and John for this well-deserved distinc- tion. This was the first time that many of our board members • The Education Committee, chaired by Peter Weissman, and guests represented Canada on the global stage and remains focused on phasing in the French and civil-law networked with their international peers. It is possible that versions of both the diploma and the certificate in estate some left London with a different perspective on SWW. and trust administration (CETA) programs. With 725 Early in the new year, the SWW 2018 Private Client professionals currently enrolled in our educational pro- grams, the committee is investigating ways to support Awards will open for entry. I encourage many of Canada’s students, including offering electronic examinations for deserving firms and practitioners to consider entering the the diploma course starting in May 2018. competition for these prestigious awards this year. In 2018, we anticipate that STEP Canada will hold over • Kyle McDonell, chair of the Student Liaison Commit- 115 events for its members, including branch and chap- tee, reported that every branch and chapter will hold ter seminars, programs, socials, annual branch meetings, an annual student event to help students expand their webcasts, full-day courses, and our two-day national con- networks. ference. Many of these events are accredited by industry- related regulators, and all of them provide continuing • The Member Services Committee, chaired by Leanne professional development, education, and/or valuable Kaufman, remains active in promoting membership networking possibilities. If you’re not attending, you’re through advertisements, brochures, and exhibiting at missing opportunities. Go to www.step.ca to learn what is industry events. being offered in your area, and get yourself registered! The committee also keeps track of STEP media cov- The Executive Committee of STEP Canada made up of erage, which was impressive this August in connection with the special symposium that STEP Canada hosted. myself, Deputy Chairs Pamela Cross and Chris Ireland, Trea- Coverage also included a public awareness advertise- surer Christine Van Cauwenberghe, Secretary Rachel Blu- ment and editorial in the November 20, 2017 issue of menfeld, and Past Chair Tim Grieve, look forward to seeing the Globe and Mail. you at events throughout this special anniversary year. n