Living Wills

/in , /by

Thanks to the adult guardianship legislation that became law on February 28, 2000, “living wills” are now legally valid in BC. A living will is a written statement that expresses your wishes regarding medical treatment and personal care in case you are unable to express your wishes at the relevant time. Living wills are also referred to as advance directives, health care authorizations or declarations of belief.

A living will specifies the treatments that should or should not be given in specified circumstances. For example, many living wills provide that “heroic measures”, such as cardiopulmonary resuscitation (CPR), should not be used to prolong life if the person suffers from a severe irreversible condition. However, it may direct that medication be administered to alleviate suffering in those circumstances.

Living wills can prevent conflict and guilt among family members. If family members ask the doctors to do “everything” to keep a loved one alive and that person dies, the family may feel guilt for putting the person through needless tests and treatments. On the other hand, if they let their loved one “die with dignity”, they may feel later that they should have done more.

Conflict can also arise if family members cannot agree. Children who have been out of contact for years may return and want the doctors to do “everything” to try to bring a parent back so they can make peace. Other family members who remained in close contact are more likely to accept the person’s death, and want only palliative care for the parent. Further complications can arise when children from divorced marriages resent stepparents or common law spouses from making decisions. These conflicts can leave lasting bitterness.

If you have stated your wishes clearly in a living will, your doctor and family won’t have to second-guess what kind of treatment you would want. You will receive the treatment you want and your family will be “off the hook”.

Under the new Representation Agreement Act, you may make a Representation Agreement authorizing a representative to give consent or refuse consent to specified kinds of health care, including life-supporting care. This authorization is valid only if you consult with a lawyer before making the Representation Agreement, and the lawyer completes a certificate to that effect. (Representation Agreements replace enduring powers of attorney in B.C.)

Although a Representation Agreement is the most effective form of living will, other less formal methods of leaving directions are available which still have legal effect. A living will that is not a Representation Agreement is given effect under the new (and unfortunately named) Health Care (Consent) and Care Facility (Admission) Act. Under this Act, if a patient is incapable of giving or refusing consent to medical treatment, the health care provider is to go to the highest ranking of the following people who are available and willing to decide:

  • the patient’s court appointed guardian (committee), if any, or representative under a Representation Agreement, if any
  • the patient’s spouse (including common law or same sex spouse)
  • adult children
  • a parent
  • a sibling
  • anyone else related by birth or adoption
  • if no one else is available, someone authorized by the Public Guardian and Trustee.

The person making the decision will be bound to comply with any wishes expressed by the patient while the patient was still capable. Accordingly, a living will that is not a Representation Agreement can still be binding (although it won’t authorize who can make the decision for the patient – that can only be done in a Representation Agreement). If no wishes are expressed, the person must decide on the basis of the patient’s known beliefs and values. If the patient’s beliefs and values are not known, then the decision must be made on the basis of the best interests of the patient.

In the past we recommended that our clients plan for the possibility of disability by considering an enduring power of attorney. A Representation Agreement is an even more effective tool, as it gives you the ability to include legally valid instructions for your future medical treatment and health care. The ability to make these decisions is long overdue in B.C. For more information about living wills and Representation Agreements, please contact us.

Homeowner Protection Act – Rules for Builders

/in , /by

In response to the leaky condo crisis, the B.C. government passed a new law called the Homeowner Protection Act. The Homeowner Protection Act creates the Homeowner Protection Office, and requires compulsory licensing for builders and mandatory warranty coverage on new homes. (In addition, recent regulations under the Act introduced licensing and warranty requirements for building envelope repairs – click here for more information.)

Builder Licensing

All residential builders (including developers and general contractors) must be licensed by the Homeowner Protection Office. Licenses are for one year only and must be renewed annually. The Homeowner Protection Office has the authority to monitor builders and cancel their licenses.

New Home Warranties

To obtain a building permit, builders must provide proof of third-party warranty coverage for the home. The warranty provider must be licensed with the government. Warranties must provide the following minimum coverage:

  • 2 years for materials and labour
  • 5 years for building envelope (including water penetration)
  • 10 years for structural defects

Owner-Built Homes

The Act sets out special rules for owner-built homes. An owner-builder is a person who builds a single, detached home for their own personal use, not more than once in any 18 month period. An owner-builder does not have to be licensed or provide a third-party warranty on their home. Instead, they must file an Owner-Builder Declaration and Disclosure Notice with their building permit application. If an owner-builder sells a home within 10 years of completion, they must give the buyer a copy of the Owner Builder Declaration and Disclosure Notice. The Disclosure Notice alerts buyers to the fact that the home is not protected by a third-party warranty.

If you have any questions about the requirements under the Homeowner Protection Act, please contact us, or visit the Homeowner Protection Office.

STRATEGIES TO AVOID PROBATE FEES

/in , , /by

What are Probate Fees?

Probate fees are payable to obtain a Grant of Letters Probate (or, if there is not a Will, Letters of Administration). Letters Probate means the court has confirmed the validity of a Will and the authority of the executor of the Will. An executor’s authority, however, comes from the Will and not the Letters Probate. There is, therefore, no requirement that every Will be submitted to probate. In fact, with proper planning, many estates can be processed without a probate application, saving thousands of dollars in probate fees. Some of the strategies to achieve this are discussed below.

 

Probate usually becomes necessary because third parties, such as financial institutions,ICBCor the Land Title Office, want assurance that the executor has the authority to deal with a particular asset. If probate is required, the entire value of estate assets located within B.C. is subject to probate fees. This is true even if probate is required because of only one asset, such as a car or term deposit.

The fee is 1.4% of that portion of an estate in excess of $50,000 of value, and 0.6% for that portion of an estate valued between $25,000 and $50,000. For example, the probate and filing fees for an estate worth $250,000 are just over $3,000.

Strategies to Reduce or Avoid Probate Fees

The following strategies can be used to reduce or avoid probate fees:

Gifts Prior to Death

You can reduce the value of your estate by giving assets away prior to death. Certain legal requirements must be met for the gift to be valid. For example, you must actually give up control of the gift. You should also remember that if the fair market value of the gift exceeds its cost, the accrued gain may be subject to tax. Gifts of real estate may also require payment of property transfer tax.

Joint Tenancy

Property can be owned jointly in two ways: joint tenancy or tenancy in common. On the death of one joint owner, property held in joint tenancy normally passes by right of survivorship to the surviving joint owner(s). It is normally not considered part of the estate of the deceased joint owner, can be transferred without probate and is not subject to probate fees.

However, joint tenancy, especially when not between spouses, may have disadvantages, including the following:

  • loss of control – co-operation of the other joint owner will be required to sell or mortgage the property;
  • future litigation – if the surviving joint owner is not the only beneficiary of the estate of the deceased joint owner, the other beneficiaries may claim that the surviving joint owner holds the property in trust for all of the beneficiaries while the surviving joint owner may claim that the right of survivorship applies. This is most common where the deceased joint owner is a parent and the surviving joint owner is a child, and there are other children;
  • tax consequences – capital gains tax and property transfer tax may become payable when property is transferred into joint tenancy. If the property is a principal residence and the new joint owner does not live there, that owner’s share of any future increase in value of the home will not be exempt from capital gains tax;
  • exposure to creditors – joint property may be subject to claims by creditors, or the spouse, of the other joint owner;
  • death of joint owner – the new joint owner may pass away before the original owner;
  • the new joint owner can sever the joint tenancy, and create a tenancy in common, without notifying the other owner.

As well, recent decisions of the Supreme Court of Canada have changed the law regarding the transfer of property by a parent into joint names with their child.

In these cases the law presumes that a child who contributed nothing toward the property holds his or her interest in trust for the contributing parent. An exception is the presumption of advancement (meaning that the transfer will be presumed to be a gift). However, the presumption of advancement only applies to transfers of property from one spouse to both spouses, or from a parent to a minor child.  The 2007 decisions of the  Supreme Court of Canada in  Pecore v. Pecore and Madsen Estate v. Saylor have stated that the presumption of advancement does not apply to transfers between parents and adult children.  An adult child who holds assets jointly with a parent can no longer rely on the presumption that the parent wanted the child to take the asset at death. Additional evidence is required to prove that a transfer into joint tenancy was intended to be a gift and that the survivor was intended to receive the asset on the death of the deceased.

For more detailed information about the pros and cons of joint tenancy, click here.

Corporate Debt

Probate fees are based on the gross value of estate assets (except for real estate for which the amount of outstanding mortgages may be deducted). Outstanding debts, other than mortgage debts, are not deducted to determine the value your estate. If you purchase an asset with borrowed money that is not secured by a mortgage, transferring the asset and the debt to a limited company will reduce the gross value of your estate. The asset and the debt are no longer owned by you, but by your company. While the company’s shares will be part of your estate and subject to probate fees, the share value would be the value of the asset less the debt to acquire the asset.

Named Beneficiaries

Designating a beneficiary under insurance policies, RRSPs, RRIFs, TSFAs and pensions will allow the proceeds to be paid directly to the named beneficiary. The proceeds will not form part of your estate and are not subject to probate fees. Probate fees are only payable if the proceeds are payable to the estate, or if the named beneficiary dies before you. In some cases you may want to designate an alternate beneficiary to avoid the proceeds being paid to your estate.

Property Transferred to a Trust

A trust can be created to hold property on your behalf, with provisions providing for the distribution of the property after your death. Because the property is owned by the trust, it is not considered part of your estate, and is not subject to probate fees. Trusts are generally taxed at high rates and the cost of creating and administering the trust may be prohibitive. However, two new types of trusts, called alter ego and joint spousal trusts, are now available thanks to recent changes to Canada’s Income Tax Act. For more information, click here for our article on these new trusts.

These strategies will result in probate fees being reduced or avoided. However, caution must be exercised to ensure that unintended or undesirable consequences do not outweigh the savings in probate fees. As well, any strategy should only be considered in the context of an overall estate plan.

For more information on this or any other estate planning issue, please contact us at your convenience.

 

FAQs About B.C.’s Builders Lien Act

/in , , /by

B.C.’s Builders Lien Act came into force on February 1, 1998. It updated and in some cases significantly changed the law under the former Builders Lien Act.

In this article we answer questions about the Act from the perspective of a landlord, an owner building a house, a purchaser, a contractor and a lender:

Q. I am a landlord of a commercial building. How can I protect myself from lien claims for work done for my tenants?

A. The Act permits you to file a Notice of Interest against your property at the Land Title Office. The notice warns that the your interest in the land  is not bound by a builders lien unless the work was done at your express request. Any trades who supply work or materials to your property for your tenants will not be able to claim a lien against your interest in the property, unless you authorized the work.

Q. I am having a house built for me. What is a builders lien holdback and is it necessary?

A. The Act requires you to hold back 10% of each payment to the contractor (the builders lien holdback) in a special account so that there is money available for payment of liens. Without a holdback, you could be responsible for the full amount of all lien claims even if the contract price was already paid in full.

Q. What do I do with the holdback?

A. As the owner, you are required to pay the holdback into an account at a savings institution. If you don’t, the contractor can stop working and sue you for damages arising from the work stoppage. If you don’t have a general contractor, a separate holdback account is required for every contract. Withdrawals from the holdback account will require the contractor’s signature as well as your own.

Q. Is a special holdback account always necessary?

A. Yes, with two exceptions. The first is where the value of work and material supplied is less than $100,000 (e.g. renovations). The second is where you have authorized the construction lender to disburse the mortgage money on your behalf, in which case the lender holds back 10% from each draw. However, this results in an area of liability for lenders that most will not be willing to enter.

Q. I am purchasing a new home. Should I be worried about builder’s liens?

A. Yes. If you purchase the home within 45 days of its completion, there could be lien claims filed after you become the owner. You could be in the position of having to pay the liens, even though you already paid the purchase price in full. The Act deals with this problem by permitting purchasers to hold back 10% of the purchase price from the seller until the time for filing liens expired, but these provisions have not been proclaimed. As a result, you must ensure that your contract permits you to hold back funds if the time for filing liens has not expired by closing.

Q. I am a framing contractor. Do I still have until 31 days after substantial completion of the building to file a builders lien?

A. No. You now have until 45 days after a payment certifier issues a certificate of completion for your contract. The payment certifier is usually the architect or engineer, but may be the owner or the owner and general contractor together if your contract does not identify the payment certifier. However, regardless of when or whether a certificate of completion is issued, you may not file a lien after 45 days from the date of substantial completion, abandonment or termination of the general contractor’s contract (or, if there is no general contractor, of the project).

Q. Do I still need to wait until 41 days after substantial completion of the entire building to receive my share of the builders lien holdback?

A. No. Under the multiple holdback system, the general contractor maintains a separate holdback for each subcontract, which will be released 55 days after the payment certifier issues a certificate of completion for that subcontract.

Q. I work for a bank. The bank is ready to advance a draw on a construction mortgage, but there are liens filed against the property. The draw is needed to complete the building. How can the bank’s advance have priority over the liens?

A. The general rule is that advances made by a lender after a lien is filed do not have priority over the lien. However, it may be possible for the bank to apply the advance to the payment of the liens. The Act also allows the bank to apply for a court order that the mortgage advance will have priority over the filed liens. The court will make the order if it is satisfied that the advance will be applied to complete the construction and will result in increased value to the property at least equal to the amount of the advance.

For more specific information on how the Builders Lien Act affects you, contact us at your convenience.