— ANONYMOUS, CALGARY

A: Be it for a mistress or a love child, these kinds of arrangements are more common than you think, says Toronto estates lawyer Martin Rochwerg. One option is transferring funds to a trust company, which would administer the money to a chosen beneficiary when you die. Because the money is considered a lifetime gift, the trustee would not transfer any annual income back to you—meaning no paper trail. A simpler option is a secret trust where you leave money to a person in your will with the prearranged instructions that they will confidentially give the money to someone else. For example, you could leave money to your good buddy Jim, with the understanding that he would give the funds to your secret beneficiary behind closed doors.

Having witnessed it with my own eyes I know that often the abused doesn’t even know they’re being taken advantage of. Their love and sense of responsibility blind them to the fact that their child, grandchild or partner is a manipulating miscreant.

What exactly is financial abuse? It’s the illegal or unauthorized use of someone else’s money or property. It includes whining and bullying to get someone to hand over money or other valuables. Sometimes it’s fraud. Sometimes it’s theft. It includes tricking the people who love you into “saving” you, or pressuring elders who have always felt responsible to give away or “lend” you money. The elderly end up going without, living a meager and pathetic life as they “help” the ones who should know and do better.

You’re probably too smart, too strong, too savvy to get caught in such an emotional and financial mess as you get older. But what about your mom, dad, grandmother, grandfather or great-aunt? Is there some member of your family that’s bleeding them dry? Would you even know so that you could step in to help?

If you think a family member may be taking advantage of someone you love, don’t let the thought of the mess and the fight that will ensue stop you from stepping in.

Here’s what to watch for:

• Unexplained changes in bank accounts
• Unauthorized ATM withdrawals
• New joint accounts
• Suggested changes to wills or other financial documents
• A drop in cash flow or a change in financial holdings
• Suspicious signatures on cheques or other documents
• Credit charges that seem inappropriate
• Jewelry or other valuables that seem to be missing
• People living with the elder without contributing in any way

And here’s what to do:

Contact the Advocacy Centre for the Elderly for guidance. They have online resources, experts and publications that will help you figure out how to address the issue.

If the situation is serious enough and involves theft or fraud, call the cops. Many, like the Toronto Police offer help. Be prepared however for some push back since very often elder abuse isn’t seen as a crime but as a “family dispute.”

As a last resort, get in touch with the Office of the Public Guardian and Trustee. Know that they are underfunded but will do their level best if they deem the situation to be serious.

Take the idea of holding assets jointly. There are two ways to do this. The first option is to hold it jointly as “tenants in common,” in which case you each own exactly half, and when one dies, that person’s half would go to the estate. Option no. 2 is to own it jointly “with rights of survivorship.” This is the option people are seeking out in droves. With this option, you have simultaneous rights of ownership of the asset and upon death of one joint owner the interest in the asset automatically passes to the surviving joint owner(s). This works well for straightforward families where a hubby and wife hold everything jointly to simplify their estate. But the world’s changed a lot, and nuclear families are a rarity these days.

So what’s wrong with joint ownership? Well, it’s not the ownership, per se. It’s the implications involved in putting someone else’s name on your assets.

First, there’s the control you’ll give up. Since you’re no longer the only one with an interest in the asset, you don’t get to make all the decisions. That can be inconvenient. And it can cause a real conflict once you step off this mortal coil if you’ve named only one of your children jointly with rights of survivorship since the asset will pass directly and solely to that child, regardless of what your will says. Ditto if you’ve remarried and hold an asset using option no. 2 with your new spouse: upon your death, the asset will pass directly to your partner, leaving your children completely out of the mix. And since assets held jointly with rights of survivorship may form part of a creditor proceedings, if one of the owners becomes insolvent, the other could be affected.

Second, there’s the tax implication of adding an owner. If the Revenue Canada believes there has been a change in “beneficial ownership” when you execute option no. 2, then in the case of a non-registered investment portfolio, adding a child would be tantamount to selling half your portfolio to your kid. Even though no money changed hands, the tax man would be looking for his share of your capital gains. In the case of a home, the consequences are even more grave since the co-owner of the home may jeopardize his access to the principal residence exemption if he already owns a home. If he doesn’t, he’ll negate his ability to participate in the RRSP Home Buyer’s Plan.

In determining whether “beneficial ownership” has changed, Revenue Canada looks at such things as whether the account was initially set up jointly, there’s evidence that the transferor plans to gift the account to the transferee, both parties are using the income generated, and the transferee exercised any control over the account.

Some people go with joint title because they don’t know another option exits. Most people don’t realize that if you leave something to a person in trust through a will—or in the event that it is insurance proceeds, if you set up an insurance trust—you can establish a “testamentary trust.” That’s the legal term for a trust set up through your will, and it can be for the benefit of a partner or children, whomever you like. The great thing about a testamentary trust is that it’s perceived by Revenue Canada to be a separate entity. That means it enjoys a graduated tax rate similar to a living individual, sans the personal exemption amount. So by setting up a testamentary trust you have two streams of income that are being taxed all at the lowest marginal tax rate on their earnings.

Opting for the ease of joint ownership as opposed to doing a detailed estate plan may be cheaper in the short run, but often means you miss out on a long-term income-splitting opportunity. And it could cause aggravation even while you’re still alive. So while there may be instances where joint ownership does make good sense, doing it simply to avoid probate is a fool’s game.

As executor of Aunty Maud’s estate, you’ll be called upon to manage everything from her funeral arrangements to locating her assets, paying her bills, filing her tax returns (yes, there will be more than one), and divvying up the remains to the heirs, along with advising them what’s taxable and what’s not. So the job of executor carries important responsibilities. And it demands attention to detail. Mess up and you could be held personally liable.

You’ll need to present the original will and notify all the beneficiaries under the will. Having sworn an affidavit of service, which you’ll file with the court, about six to eight weeks later you’ll receive a certificate that gives you the authority to act so that anyone who needs proof—the bank, the brokerage house, the credit card company—knows you’re “legal.”

Your first step even before you’re certified should be to read the will to see if there’s anything that needs immediate action such as specifics for the funeral. While you’re not bound by Aunty Maud’s wishes, following through is preferable to being haunted. Are minor children left orphaned? If so, apply to put designated guardianships into effect quickly.

Take an inventory of the deceased’s assets and debts. You’ll be responsible for safeguarding and valuing the assets, dealing with banks, brokers, and insurance companies, and arranging for the investment or liquidation of assets.

Don’t rush to pay out Aunty Maud’s bequests too soon, no matter how much pressure your cousins are putting on you. If you do and then don’t have enough left to pay debts and taxes, the money will come out of your own pocket unless you can persuade beneficiaries to give back some money. Fat chance!

The tax man will want his pound (or six) of flesh too. You’ll have to file tax returns for any years for which returns haven’t been filed both in Canada and wherever else the deceased may have held assets. And you’ll have to file a return for each year the estate exists and earns income. Get a clearance certificate from Canada Revenue Agency to ensure no future disputes over property valuations and deductions claimed before you distributed the estate. Also make sure you’ve taken steps to uncover all debts owning. Advertisements to creditors that include a fixed date for distribution a month or two from the advertisement date followed by payment of all debts that have come to light should do it. Skip these steps and you could find yourself on the hook personally for unpaid bills or taxes.

For your time and trouble, you may bill the estate between 3-5% of the estate’s value, or more if the will specifically says so. Keep meticulous records of the time you spend and expenses you pay out of your own pocket so that if must you can prove your worth.

If the going gets tough, you don’t have to go it alone. Hire a professional to step in and be your guide. A lawyer, estate administrator or accountant can help. Be careful whom you choose. You can never give up your discretionary responsibility for how those assets are handled, so if your “helper” does a terrible job and the estate suffers losses as a result, you can be held liable for those losses. While the estate pays these blokes, it’ll be your responsibility to make sure their fees are reasonable.

Just because you’re named doesn’t mean you’re stuck with the job. You can say no.

When you tie the knot, your previous will is automatically revoked unless it was specifically made in contemplation of your new marriage. Time to make a new will. While you’re at it, there are a bunch of other things you need to review including your powers of attorney, both financial and personal care, and your beneficiary designations.

You know all those designation forms you signed on your RRSP, your TFSA, your insurance and your work policies? You’ll have to decide if you still want your money to go where you initially directed it or if you’re going to name new beneficiaries in light of the fact that you’ve got a new mate.

If this is a second marriage for either you or your partner, children will create wrinkles so get yourself some expert advice. Don’t assume a standard will is the best option unless you don’t much care whether you disinherit your kids. If you leave the whole kit and caboodle to your new bestie and she decides to spend it all, leave it to her kids, or remarry and pass the money on to the next bestie in line, your children would be left out in the cold.

If you die still in love with your partner, no doubt you’ll want to ensure he has access to the funds during his lifetime. But you may want the capital to go to your kids. You can use a trust to accomplish this. Or you could split the estate between your surviving spouse and the kids. Keep in mind that with option two, a surviving spouse may have legal right to specific portions of your estate. Hey, that’s where the expert help comes in. Alternatively, you could leave your estate to your partner and buy sufficient life insurance to ensure your kids receive the amount you intended them to get.

Any property you hold jointly with the right of survivorship will pass directly to your partner. You can choose to hold property as “tenants in common” in which case your partner would be entitled to his share, but you could pass your share on to the kids.

If you haven’t updated (or executed) powers of attorney for financial and personal care, it’s time. The last thing you want is your partner’s hands tied behind his back because you didn’t bother to give him permission to step in on your behalf.  Marriage doesn’t automatically give your mate the right to speak on your behalf; you have to do that through your powers of attorney.

If you think there may be a fight—sad how often we fight over dead people’s money, isn’t it?—once you shuffle off this mortal coil, then you better have your estate plan nailed down tight. And if you haven’t yet discussed just what you expect with your new hubster or wifey should you become incapable of making your own decisions, set a date for a talk and then make an appointment with an estate’s specialist to execute your plan.

—Nadir Harjee, Richmond Hill, Ont.

Gifts of property, stocks or funds from non-residents of Canada are not taxed, says Deloitte partner Lorn Kutner; whether it comes in the form of a living gift or an inheritance has no bearing. In fact, that income doesn’t even get reported. Of course, you must report any income earned on those investments, but any gains or losses would be measured against the fair market value of those assets when you received them. But Kutner warns there may be tax implications for the giftor in the other country, which may warrant separate tax advice.

Even though you don’t report the gift to the Canada Revenue Agency, Kutner encourages you to keep good records of the gift. If the CRA sees a significant jump in investment income they may do an audit. “There is a minimal chance the CRA would question it,” he says. “But if you can’t prove it then you might be fighting an uphill battle.”

My parents are healthy and active, but they are getting older.  Their wills are complete and stored in the safety deposit box, but I feel like there might be other questions about their money that I should be asking. Any ideas?

Answer

My parents are also healthy and active. In fact, my mom just returned from a trip to the Antarctic and is currently planning a canoe trip with “Wild Women Adventures.”  She is 76. My dad and stepmother are both are heading off to Alaska in a few months. Hopefully they will all be around for a few more decades, but no one ever really knows. It is really important to ask questions now, before you need the answers. Sure, it can be uncomfortable for all of you, but once you have the conversation you can put it aside and focus on living—like chasing after my 2 year-old daughter, their 12^th grandchild.

Kick starting the conversation with your parents

My big sister was the one who kick-started the process. She came across a book at the library called The Hard Questions for Adult Children and Their Aging Parents by Susan Piver. The book inspired us to come up with our own list of questions. My sister sat down with our dad, and just last week I sat down with my mom to have that conversation. Many of the answers I already knew, like where to find the wills, but I was surprised by what I didn’t know, like where do you keep your old tax returns?

Here is an abridged version of the questions we used that relate to finances. (You can review the book itself for other important categories like health care, spirituality and burial details). My recommendation is that you ask the questions, type up their responses, and then have your parent think about them for a bit to ensure that they’re comfortable with their answers. After that I would print it off, have them sign it, and include it with the legal documents.

Questions to ask your parents

Will: Do you have a will? Where is it kept? Who is the attorney of record? What is their contact information? Who is/are the executor(s) of your will? Is/are the executor(s) aware of his/her role?

Safety deposit box: Do you have a safety deposit box? If so, who besides you has keys, where are all copies kept? Where is the location of the box? Is the person holding the second key aware of the procedures for and means of access? Where do you keep your birth certificate?

Banking and credit cards: How many bank accounts do you have and where are they each located? How might we access these accounts should you become incapacitated? If you bank online, what passwords are required to access the accounts? Where do you keep your credit card statements?

Taxes: If we need them, where could we locate your last seven years of tax returns? Do you have an accountant, and if so, what is his/her contact information?

Investments: Who is your financial planner, and what is their contact information? Who would you like to make financial decisions for you if are unable to make them for yourself? Can we review your investments with your financial planner so I understand your complete financial picture? Based on what you know now, will your investments and/or pension be sufficient to pay your expenses in retirement?

Property: Are all of your assets owned jointly or are some in the name of one of you only? If the latter, what happens to those assets if the one who “owns” them is the first to die? Would you like your home to remain in the family, or do you have any other preferences concerning the ownership or occupation of the family home? Where are your household repair/purchase records? Where are the deed and title to your house and any other property? Are there any possessions or property we might not know about or be able to locate that you would like to tell us about now?

Long-term care: If you can’t take care of yourself physically, where would you prefer to live? At home, with care? In an assisted living facility? What if only one of you becomes incapacitated; have you made arrangements for such an eventuality? If so, what are they? If not, what can we do to support and carry out your wishes? Do you have money set aside and specifically designated for long-term health care or assisted living should either or both of you become unable to live alone? Do you know what services are covered by your health insurance?

Belongings: Would you like to speak to us now about your belongings and how you would like them to be divided, even though this may be specified in your will? Which of your belongings would you like us to keep? Are there any special family heirlooms we should know about? If so, what are they and who would you like to have them? Do you have any assets in custodial care, that is, in someone’s name (such as a broker, lawyer or other relative) for safekeeping that you may not want to remain with that person after your death?

Unfinished business: Is there any unfinished (or intended) business such as property sales, banking issues or credit issues we should know about? If you have unfinished business you feel unable to complete, is there any way we can help? Is there any unfinished legal business (such as real estate transactions, complaints or lawsuits) that we should know about? If there is a lawyer involved, what is his/her contact information?

Insurance: Do you have life insurance? If so, is there anything about the policy or the way you would like the money used that we ought to know now? Who are the beneficiaries? Is your policy referenced in your will? Has the face amount been reduced by loans against the policy? Do you have health insurance benefits? Does it cover all your medical needs? Would you like me to review the policy with you?

Burial: Do you have cemetery plots? Where are they? Where is the paperwork? Are they paid in full? What’s the perpetuity agreement (arrangements to care for the plots over time)?

Wildcard: Is there anything that I haven’t asked about that you think I should know?  Is there anything you don’t want to tell me, but you know would be important? Is there anything online or on your computer that you want protected or disposed of? Paypal accounts, Facebook, Linkedin etc.  Are there any other passwords I might need for anything?

It is a long list of questions, I know. But it is worth the investment of time and emotional energy. If there are to be any surprises, it will be better for everyone to know about them now instead of when you’re are dealing with the grief of loss.

Oh, and one final tip: Finish the conversation with a toast to whatever you hold dear: family, health, happiness, golf or gardening.