Starting a new year is always a good time to ensure that your personal affairs are in order, including your estate plan. Not only is it important to have an up-to-date will and powers of attorney, but it is important to have an estate plan which can, to the extent possible, provide the utmost flexibility.
One way to ensure that your estate plan is flexible is to make sure that your will is well-drafted and sophisticated enough to provide a wide range of powers to your executors and trustees (many of which can also be provided to your attorneys for property and the trustees of any trusts you have established). Otherwise, if your will is too restrictive, your executors and trustees or beneficiaries may have to seek legal advice and in some situations have to turn to the Court for guidance or approval, which will be costly and time consuming.
There are a number of ways to keep your will flexible. A few key examples are provided below:
- Trustees’ Administrative Powers
The Trustee Act (Ontario) sets out default powers for trustees for the administration of an estate, which would apply unless your will provides otherwise. Unfortunately, the Trustee Act (Ontario) has not been updated for a very long time, and the scope of the powers are limited and do not reflect current times. It’s important to include a broad range of powers in your will to enable your trustees to administer your estate in a timely and efficient manner, as well as to allow flexibility to deal with future unknown circumstances which may impact the administration of your estate.
- Powers Relating to Trustee Appointments
Your will can provide for the appointment of additional trustees, the replacement of trustees and the removal of trustees. There are circumstances provided for under the Trustee Act (Ontario) where changes to the office of the trustee can be made by a written document, and they do not apply to executors in that role, but only to the role of trustees. In Ontario, changes to the office of executor often require a Court application.
The power under the Trustee Act (Ontario) to replace a trustee can be exercised where the trustee has died, remained outside Ontario for more than a year, wishes to stop acting, is convicted of a serious offence, or is bankrupt or insolvent. Otherwise, an application to Court will be required to replace a trustee. Similarly, an application to the Court will be required to appoint an additional trustee where the will does not include such provision.
- Power to Move a Trust to a Different Jurisdiction
A power can be included to provide trustees with the power to change the governing law or to resettle a trust in a different jurisdiction. This may be beneficial where a beneficiary of a long-term trust created under a will moves to a different jurisdiction and it would be advantageous to move the trust to the other jurisdiction for tax and non-tax reasons.
No one knows the future. In your estate plan, it’s important to have flexible provisions in place to provide for changes needed down the road. An increasingly common situation is if a beneficiary of a trust moves to the U.S. and becomes subject to U.S. estate and gift tax, where in many cases it would be preferable to have local law and tax rules apply. Having flexible provisions in your will can minimize fees and the need to get the Court involved.
Proper legal advice is key to ensuring that your estate plan is versatile and equipped to deal with future unknown circumstances. Taking shortcuts in your estate plan today, may cause unnecessary costs, time and aggravation for your family tomorrow. In these cases “less is not more”, except more legal fees and complication!
— Marly Peikes