Real Estate and Estate Planning in the 6ix

It’s no secret Canada’s over 65 population is swelling. With 7.6 million Canadians now aged 65 or older, the importance of having affairs in order is more important than ever.

Guest Garry Cass explains the difference between a power of attorney and a will, and the importance of updating wills regularly. He also discusses the complications that can arise when someone dies without a will, and the challenges of having family members on the title of a property.

Cass advises you to be proactive rather than reactive in estate planning, and to treat every will as if it's the last one you’ll ever make.

Listen For
1:31 The Critical Role of Wills and Powers of Attorney
9:14 Real Estate Considerations in Estate Planning
7:02 Executor Selection and Responsibilities
15:02 Challenges of Dying Intestate

Guest: Garry Cass, BA, LLB, TEP, Barrister & Solicitor
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Recorded in Sep 2023

Transcript

Desmond Brown (00:02):

We have an aging population in Canada. It's those Baby Boomers stats show that we have 7.6 million Canadians who are now 65 years of age or older. That's about 21% of our population. These older people could be your parents, a family member, a close friend, or even you. I was born in 1958 and I'm considered to be near the tail end of being a baby boomer. So if you're in this age group, are you ready? Are your affairs in order or if you have loved ones in this age group, are they ready? I'm Desmond Brown and today on Sold in the 6ix, my guest will tell you what you need to know to be ready, not just in real estate, but for every aspect of your life. Garry Cass is a lawyer who specializes in estate planning and he joins us today on Sold on the sixth. Garry, welcome back to the podcast.

Garry Cass (01:14):

Thank you very much. It's a pleasure to be here.

Desmond Brown (01:16):

Oh, I really love having you on and talking to you about these things. So what is the importance of getting things in order and what is the first thing someone should do? Should they look at the power of attorneys or should they get a will?

Garry Cass (01:31):

Well, the two documents are not mutually exclusive. A power of attorney is only effective when somebody is alive. The minute somebody passes away, it is no longer of any use, and that's when a will takes over. So the two of them dovetail at the point of death.

Desmond Brown (01:48):

Okay, so here I am around 65. I do have a will and what else should I start looking at right now just to make sure that things are not too complicated if things were to go the way I don't want 'em to go for me myself.

Garry Cass (02:08):

Okay, so the first question and everybody should answer is how old is the will? Because if people made a will 20 years ago or 25 years ago, a lot has changed in that timeframe. Even 10 years is a long time if there's children and the children have gotten older and have met the parents' maturity test. So that's the first thing. And the other thing with old wills is the personnel, whoever you name is alternate executors, guardians for kids or things like that are probably out of the picture, either because they're too old, they've died or they were neighbors or friends that you moved away from.

Desmond Brown (02:53):

Okay, so update the will.

Garry Cass (02:55):

Update the will. Second thing, and this is all homework to get ready to do a new will, is to prepare a net worth statement so you know exactly how much money you're dealing with. And a net worth statement is a rough current value for real estate values of investment accounts, values of rifs and TFSAs, as well as including any life insurance policies that may get paid out in the event that you pass away. And if somebody's got a job where they get a pension, they've got to find out what the pension is worth and how long the guarantee period is. So they may have to figure something out about that as well.

Desmond Brown (03:36):

So the average person can do that on their own with a little bit of help though I guess from a financial advisor or what have you found That

Garry Cass (03:45):

Kind of stuff is relatively easy to put together. The other thing somebody has to be very honest about is if there are any problem areas and problem areas may be irresponsible children, it may be somebody with a disability that has to be looked after. It may be the complication is a second or subsequent marriage that has children on both sides, and how do you deal with that scenario? So once you've at least got the things on paper that have to be considered, that's the time to go to the lawyer because the lawyer is not going to look to you initially for answers to everything. The lawyer hopefully will take your scenario and give you an awful lot of, have you thought about and tell you always that there's more than one way to achieve a goal and give you some choice.

Desmond Brown (04:42):

Yeah, I guess that's really, really important. You mentioned some of the, I'm not sure if I've got the exact wording right here about problem children or children who could put some type of challenge when it comes to the will as well, and we've had that happen where people have come forward and said, I don't think this will is fair,

Garry Cass (05:05):

As long as somebody is fully capable of making decisions fair in the estate planning context is the most elastic word in the English language because what's fair to me may not be fair to you, but it's my will.

Desmond Brown (05:21):

Yeah, yeah. I remember, I think I have referred somebody on to you and her spouse had passed away and they each had a child from previous marriages and the spouse who passed away was kind enough to leave something behind for each of the children, but then the kids got together and they weren't that pleased about the will and figured that they wanted more or figured that they were entitled to more. And just can you quickly touch on that?

Garry Cass (05:55):

So one of the things that the lawyer is going to do is going to take a complete set of notes about why somebody made the decisions that they made in certain circumstances. It's also a good idea to videotape somebody that, pardon my age, make a video or a recording of somebody saying why they have done what they have done and hopefully that will be enough to stop somebody. You can't stop somebody from going to the courtroom door. What you hope to do is stop them from actually succeeding. And so if you anticipate there may be problems, then you basically deal with them and set up the defense in advance of somebody passing away.

Desmond Brown (06:48):

And that's really, really too bad because it can get quite messy and family just starts turning on each other. So you do the best you can to make it as foolproof as possible when you are putting it together. And I think the video is a fantastic idea.

Garry Cass (07:02):

It's something that I've done a number of times, I know other lawyers have done a number of times because it just makes sense and if you get a proper videographer to do it, who can certify that the thing hasn't been tampered with? It's the best evidence there is because coming from the mouth of the testator himself or herself.

Desmond Brown (07:27):

So I want to just stay on will's here for a little while. Let's talk about executors or as we're calling 'em trustees here in Ontario and who you should choose. A lot of people choose family members.

Garry Cass (07:45):

One of my hot button issues and it's a hot button issue, not because people shouldn't necessarily trust family members, but most people who become executors for the first time have not got any idea what they're going to be become involved in. And most of the time they are seriously over their head in trying to figure stuff out, which is not to say that somebody shouldn't do it, but the other thing is that being an executor is a full-time job and if the person you're naming is a younger person, then you're putting a full-time job on top of a full-time job, which is not necessarily the best for anybody. The other thing that happens a lot is people don't want to somehow off offend a particular child. It usually happens in children's scenario and not name that person as an executor because they think they'll hurt their feelings. What I can tell you from my experience is everybody wants to be the beneficiary and get the gift and nobody wants to do the work to get it to them.

Desmond Brown (09:02):

Okay, so what is some of the work? It sounds really simple. That sounds really simple. Here's the will, this is the executor slash trustee and everything goes smoothly. But like you said, there's a lot of work that goes into being that executor.

Garry Cass (09:14):

Well, as for instance, since this is the sold in the six podcast, let's talk about real estate.

Desmond Brown (09:23):

Okay,

Garry Cass (09:24):

Perfect. In the city of Toronto, when a will has to be probated, it generally takes between eight months and a year to probate. During that time, whoever the executor is has to look after a property, but they don't get to sell it, so they're responsible for it. They've got to make sure that the property stays in good repair. They've got to make sure that the insurance doesn't lapse on the property. They've got to arrange for inspections to make sure that the insurance doesn't lapse. If there's any repairs that have to be done, they have to make sure that those repairs get done and before you get probate, it's not so easy because the banks don't really want to release money if they don't have to. So it's a major responsibility. You and I have had a number of those properties, it takes time and that's a major headache for a lot of people.

(10:26):

Then there's also the question, when you actually do sell the property of whether or not the beneficiaries are going to be disappointed in the price that you get. So one of the things that has to be thought up very carefully at the beginning is who's going to do the appraised value of the property? My particular preference is to get a professional appraiser to do it because they have to defend their value in court. When a realtor does it, they generally give you a range, but they also put in an escape clause that says you can't rely on this for court purposes. Correct? Correct. Yeah. So if you get anywhere close to what the appraised value is or more, nobody's going to complain. It's when the value that you get on a sale is less that somebody's going to take a look and then you need the homework done.

(11:27):

Beyond that, there's dealing with somebody's income tax returns and if they have other capital assets, they've got to deal with deemed dispositions and reporting capital gains and dealing with CRA. They eventually have to cash those in. And one of the other major jobs that an executor has to do is do a full accounting of the money, the values they started with, the monies that they realized the expenses that they paid and how much they have left. Wow. And that for a lot of people is problematic because most people like to throw things into a folder and when you throw things into a folder, it's easy to forget what you did when you did it.

Desmond Brown (12:15):

Yeah. Do you find that if somebody is very, very wealthy that they would turn to having a non-family member as an executive slash trustee as opposed to the more simple people like me?

Garry Cass (12:35):

Depends on the individuals. It depends on the individual making the will. It depends on who's in the talent pool for that person. So as for instance, you are way more sophisticated than most people that would be tapped for the role, but that doesn't mean that you necessarily wouldn't want to be paired with a professional or with a trust company. And I say that I don't often recommend trust companies except in particular cases. Sometimes there's the need for them. If it's a big estate and there's going to be complicated accounting and things like that. Sometimes a trust company is good partner.

Desmond Brown (13:23):

And I was going to ask you about payments for executors. They can actually get paid for what they're doing as well. Right.

Garry Cass (13:32):

Executor compensation generally runs about 5% of the value of the estate and it's earned income. So if somebody makes a hundred thousand dollars as an executor, they have to open an account with CRA, pay the necessary deductions in and get a T slip to report with their next income tax filing.

Desmond Brown (13:57):

So I have a question here from one of my loyal listeners, Jay Dahliwal, and she heard that I was doing this podcast and she had a couple of questions and she sent them along to me. So thank you for this. Jay. She's asking, are there plans to have a searchable registry by the government to allow a search for a will easier than someone having to hunt through the covers or drawers to find that will after someone's passed away?

Garry Cass (14:24):

So in order for that to happen, there would have to be some kind of a change to the law that says after you do a will, you must record it somewhere. You must file it right now. If somebody wants to, they can file their will with the court. It's not easy to get out after somebody passes away, and if you end up making a new will, then what's sitting in court then revoked and of no value what is coming however, are electronic wills and there may be something like that that comes along to support electronic wills.

Desmond Brown (15:02):

Oh, okay. So that leads me to my next question, and that's somebody dying in test state, which means that somebody's died without a will and what happens there?

Garry Cass (15:14):

Hell

Desmond Brown (15:16):

Yes. You've dealt with that. You have dealt with that and walked away from that too as well from somebody I refer to you. So

Garry Cass (15:26):

Okay, I am currently dealing with two intestate situations that have just come in. One was a gentleman who passed away and he's got, before I go into those scenarios, just generally the scheme of an intestate distribution is that if somebody dies with a spouse and no children, the spouse gets everything. If somebody dies with only children, the spouses has passed away, then the estate will be divided amongst the children. If there is a spouse and surviving children, the spouse gets the first $350,000 of the estate and then one third of the rest and the children get the other two thirds. So depending on the size of the estate, there's a lot of money that could end up going to the children rather than to the surviving spouse

Desmond Brown (16:29):

So quickly. So that would be in a situation where the person has remarried and has children from a previous marriage when you're talking about the third and then

Garry Cass (16:41):

Rest any situation,

Desmond Brown (16:43):

Oh, it's in any situation. Okay.

Garry Cass (16:44):

That's any situation. If I didn't have a will and I were to pass away, then my wife would get the first three 50 and one third of the rest that's a second. Or subsequent marriage adds wrinkles and layers and whatever, and I really suggest anybody in that situation get a cohabitation agreement, a marriage contract or whatever to govern how all that stuff is going to go. Most people don't take my advice though. Yeah,

Desmond Brown (17:23):

Maybe they should all sit down and have family counseling before anybody passes away. That might help a little bit.

Garry Cass (17:30):

Yeah. Then there would probably be a little bit less litigation, but people are going to say, I'm not dying tomorrow, so how does this apply to me? And I call that Manana standard time, and the problem with that is sometimes Ana never comes. So I've got these two situations where manana never came. In one case, the gentleman who passed away has one sibling living here. He has six siblings living around the world, and they all have to sign renunciations of their right to be an estate trustee and consents for their brother to be the estate trustee before we can do anything. Okay? Yeah. So in an intestacy until there is an actual court paper, there is nobody who can do anything on behalf of the estate. In the other situation, which is similar to the first one in a way, oh, then there's real estate in that first estate. There's also real estate in the second estate, and what makes it a little bit more interesting is that the gentleman has three siblings here, but he is got a 90-year-old brother in a nursing home in England and not too much younger sister in a nursing home in Australia that we have to get consent from.

Desmond Brown (18:53):

And what if they're not of sound mind saying it's whoever has their power of attorney and we'll get into power of attorneys next.

Garry Cass (19:03):

Then we got a problem,

Desmond Brown (19:06):

Another

Garry Cass (19:06):

One. Then we have to either get it, I start getting doctor's letters from England and Australia and if there's a power of attorney, the power of attorney, hopefully we'll sign the consent to support and be supported by the letter. But ultimately the thing is this, that when somebody applies for a probate, they do it over the counter, which is basically you submit your paper, the paperwork gets reviewed, and in most cases gets signed off by a judge and you get your certificate back. But at any point in time, a judge has the right to say, this is not an over the counter situation. I need this proved in open court. And if it gets proved, it has to be proved in open court. You are now into a whole court application and appearances and a very expensive procedure.

Desmond Brown (20:05):

Garry, like I said, we're going to get in the power of attorneys, but can you just please explain what probate is and we hear this term, I know what it is, but just for the average person out there so they can understand exactly what it is.

Garry Cass (20:18):

Okay, so when somebody makes a will, they appoint an executor or an estate trustee as they're called these days after they pass away. The will is an effective document. You can use it for whatever you have to use it for. However, if you were to take the will and a death certificate into a bank or a financial institution or you were to ask somebody to rely on it in a real estate transaction, they're going to say, how do we know that that's the last will? How do we know that that's the person who really is appointed to be the estate trustee? Well, when you apply for probate and you get the certificate back with the gold seal, that validates the person who is named as the executor in the will who's made the application. Okay. And that in turn says to the third parties, you can rely on what this person is telling you.

(21:21):

So that's the importance in the first place. Now, we've all heard the horror stories of trustees who have taken off with the money, they've cashed everything in and then disappeared to parts unknown, and then a new person is appointed as a trustee in place of the first one, and they go back to the same financial institutions and said, that million dollars you gave to Joe, you shouldn't have given it to him, and the financial institution is going to pull out the original certificate and said, here's Joe's certificate. It was valid at the time. We followed his instructions. We're sorry for the loss, but it's not our problem.

Desmond Brown (22:03):

Yeah,

Garry Cass (22:04):

Exactly. That's what the value of probate is and why people have to get it.

Desmond Brown (22:08):

Okay. And like you had mentioned, so in Toronto right now we're looking eight months to a year,

Garry Cass (22:16):

My

Desmond Brown (22:16):

Experience, and then when we start getting into the surrounding areas of the GTA, like let's say York Region, Durham region, Peel Region, it could be a little bit shorter. Correct?

Garry Cass (22:28):

It's a lot shorter in most cases. Toronto unfortunately moves to the beat of its own drummer,

Desmond Brown (22:35):

Of course, of course center of the universe, so powers of attorney, the importance of them and the importance of being specific about a power of attorney.

Garry Cass (22:49):

There are two separate powers of attorney. One is for managing finances and the other is for making healthcare and treatment decisions. When you are appointing somebody to manage your finances, in most cases it's going to be a spouse, but you always need to have a plan B. And the plan B attorney is somebody who is going to step in and manage the finances and pay bills and do income tax returns and everything in the event that you're not capable of doing them. And your first choice is not capable of doing them. So you need somebody who's willing to devote time and has an idea what's going on and somebody who philosophically is going to be the same kind of investor that you are if you're a GIC investor, don't want somebody to be your attorney who's going to suddenly buy you risky stock. So you need somebody that you're going to be comfortable with and trust, and they're very important because when there is no power of attorney and somebody becomes incapable, then by default the power of attorney becomes the public guardian and trustee of Ontario or whichever other province that they're in this applies to.

(24:15):

And if you want to take over doing the management, you can do so, but that involves making an application to the public guardian and trustee and giving them a full management plan and having them review everything you do. It's expensive, and if you can do the power of attorney and have it in place, you get your preferred individual without having to make them go through hoops. With respect to the personal care power of attorney, it covers a whole host of topics, ranges to everything from shelter, food, and clothing on one end of the spectrum to rights to die. At the other end of the spectrum, you can customize them with a lot of causes, which basically mean you're making decisions in advance that your attorneys don't have to make or you leave everything up to your attorney to decide if you are doing a personal care power of attorney. You have to make sure that the person you're appointing has the courage of your convictions. So if you say, I don't want to be treated if I go into a comatose state or whatever, you need to make sure that the person who has to follow that instructions is not going to be ruined for life because that's just so against who they are and their sensitivities and whatever. So there's a lot that goes into the personal care as well.

Desmond Brown (25:49):

Yeah. Garry, I'm running into a situation right now with a client, and this has happened to a couple of my clients actually who have power of attorney for a parent and for a financial power of attorney for one of their parents. And the parent had signed the power of attorney, let's say five years ago when they were of sound mind over the last five years this parent has, they've deteriorated a little bit and is very forgetful actually. We think this woman has dementia, so the daughter stepping in and wants to release some of her mother's money to pay some bills for her condo and some other things, but has run into some obstacles at the bank. I've had this happen with other clients too, where they've had financial power of attorney and the bank has just said, no, you have to prove to us number one, that your parent is no longer has the capacity to look after their financial affairs. We need a doctor's letter, we need a lawyer's letter, we need a lawyer. The lawyer who was there when she signed the Power of attorney to swear that it was signed when she was of Sound mind. Have you run into a lot of this?

Garry Cass (27:15):

I haven't run into a lot of it. I've run into some of it because a number of the banks have been burned a couple of times, so they want to make sure, but the fact of the matter is that most people don't activate a power of attorney before they have to. So for the bank to do this is counterintuitive. You're taking in a power of attorney. They may ask for a letter from somebody like myself or whatever, if I'm a witness to say, can you verify that this person in your professional opinion was of sound mind when they assigned it? Yeah, I can do something like that. But there are a lot of powers of attorney that are not signed with a lawyer. The public guardian and trustee has power of attorney kits and people will get them. They're free often have neighbors sign them. So are you going to ask the neighbor whether the person was competent or not? So the banks go out of their way to make life difficult because

Desmond Brown (28:25):

There's a lot of fraud out there.

Garry Cass (28:26):

Their threshold.

Desmond Brown (28:28):

Yeah, yeah, there is. Okay. And just before we just start wrapping up here. Oh, sorry. Go on you. Something else going to ask

Garry Cass (28:35):

Just one other thing in passing, just because somebody activates a power of attorney doesn't mean the person who gave the power of attorney loses their ability to write checks or spend money on the same account. Yeah,

Desmond Brown (28:48):

That's key.

Garry Cass (28:49):

So that's something that has to be monitored as well.

Desmond Brown (28:52):

Okay, that's good to know. Okay, and like I said, just before we wrap up here, I wanted to talk to you about family members on title when it comes to real estate and does it make it easier in the end, let's take a look at the different types of ownership that can be obtained when you buy a property. So we have tenancy in common, which means that if one of the people who owns the property passes away, then their portion goes towards their estate. But we also have joint tenancy, which means the right of survivorship, and that means if one person passes away, the other one gets full ownership of the property. So I think I've run into a few situations where parents are actually bringing in their children now as joint tenants so they don't have to worry about taxes later on and so on. Anyway, just talk a little bit about that for us before we finish up, Garry.

Garry Cass (29:50):

Okay. So the situation that you described for me works in very, very limited circumstances. I'm not a fan of putting kids on title. So there's a number of things that go on in that scenario. So if it's a situation where there's a parent and the child is living at home with the parent and has for 20 or 30 years to look after the parent and they want to do a joint ownership, that's usually been well discussed with the family and everybody knows what's going to be going on. I'm not a person to try and save a few bucks in probate fees to distort a total plan. So if you create joint tendencies with children, the question is how many children are you going to put on title? If there's more than one, are you going to put more than one child on title?

(30:49):

Then the thing is just creating a joint tenancy does not solve your problem. You need to have a full agreement to support that because if there is no agreement explaining what you're doing, then the law says that even if there's a joint tendency with the child, that property technically is part of the estate, so you've got to drag it back in anyway. And then there's the question of if there's only one child and you have an agreement and that joint, generally it's going to be a trust agreement where the child says, okay, I'm going to own the property when you pass away and I'm going to split it amongst my siblings the way you want me to split it amongst my siblings, that sometimes doesn't happen, which is another issue.

Desmond Brown (31:33):

Yes, exactly.

Garry Cass (31:34):

Yeah. And then there's the live issue, the practical one where the parent puts one or more children on title and the children sign a trust agreement that says, we own no equity in the house, we're bear trustees for our parent, but parent then wants to sell the house and the children or one of them or Morris says, we don't think it's a good idea to sell it now. Well, now the parent is.

Desmond Brown (32:02):

Yeah, exactly. Handcuffed

Garry Cass (32:04):

It is stuck. Yeah,

Desmond Brown (32:07):

I get it. Yeah, it's really interesting. And with our aging population too, and you and I did an estate sale a couple of years ago where the children were in their seventies, and then I did another one just a few months after that. Again, one of the children was close to 80 in the house still and things were finally being settled because usually the parents have been so kind as to say that Johnny can stay in the house in the will. They'll say Johnny can stay in the house for 15 years after I pass away. So the rest of the siblings are like, oh my goodness. And then that 15 years comes and boy, they're on it right away to sell the house. And that's happened a couple times for me.

Garry Cass (32:55):

So that in itself is a serious discussion with the parents because if the parents want to be fair to everybody, they give Johnny the ability to live in the house till we can get his act together and get out of the house, whether that's a year or two or something like that. If they leave Johnny in the house for too long, I guarantee you things are going to fester because everybody said, my inheritance is being held up by you being in the house for so long, and that's just not fair.

Desmond Brown (33:29):

Yeah, no, exactly. And if you're not getting your act together by the time you're 75, there's a problem there. Garry, I wanted to thank you so much for coming on Soul in the Six. Now, if you need to get in touch with Garry, you can reach him through email Garry@Garrycast.com, and his last name is spelled CASS, and his website is Garry cast.com. And before you leave Garry

Garry Cass (33:51):

And Garry has two Rs

Desmond Brown (33:53):

In it and two R's in it. Yes. So Garry cast.com and Garry, as we are getting ready to leave here, is there any last thing you'd like to say about getting your affairs in order?

Garry Cass (34:05):

In a nutshell, two things. Every time you make a will, you'll have to assume it's the very last will you'll ever be able to make. So treat it seriously and put everything in it that you want to put in it. And number two, be proactive rather than reactive. Do it because it's the right thing to do, not because somebody that has gotten sick or die.

Desmond Brown (34:28):

Great. Wonderful. Garry. Garry, thanks very much for joining us today.

Garry Cass (34:32):

You're very welcome. Thank you for having me.

Desmond Brown (34:35):

And that's our latest episode of Sold in The Six. Garry gives such great information and advice, and I really, really hope that this was really helpful today in helping you plan for the future.

(34:50):

I want to thank my producer, Doug Downs of Stories and Strategies for this latest podcast. And if you like this podcast, please subscribe. And most importantly, please leave a rating. It's really easy, just go to my show notes and there's one click there for you to leave me a five star rating. And of course, please feel free to send this podcast on to a friend To get in touch with me. You can email me a des@desmondbrown.ca and you can also follow me on all of the social media platforms. And my handle is Des in the six, and that's number six ix. And if you're a realtor outside of Toronto and you need someone to look after your clients either moving to or from the greater Toronto area, please keep me in mind. I promise that your clients will be well looked after. Next time. I'm Desmond Brown.