CANADA Law and Practice Contributed by: Ian Hull, Suzana Popovic-Montag and Nick Esterbauer, Hull & Hull LLP
An “estate freeze” is another option for transferring corporate business interests to family members or the future sale of a business. Estate freezes can be used to transfer future increases in value of a business to family members, who will subsequently receive the business interest. Although estate freezes can be complex and expensive, they can be utilised to facili - tate business succession and avoid the issue of insuf - ficient funds for the next generation to purchase the interest, while spreading tax liability on the disposition of the business over several years. Inattention to one’s business succession plan may result in unintended consequences, such as the fail - ure of the business if no one is authorised to manage it, or the sale of the family business if liquid assets are required. 4.3 Transfer of Partial Interest When valuing interests in companies, if the rights associated with different classes of shares and differ - ent proportions of shares differ, the value of any given share in a company may not be the same as others in respect of how much control the shareholder can exert. The fair market value of a minority interest in a corporation in Canada, even when considered on a pro rata basis, is worth less than the same number of shares that are part of a majority interest. The term “minority discount” is used to refer to the difference between the fair market value of shares and their pro rata value. The reduced market value results from the inability of a minority shareholder to unilater- ally elect the majority of directors, to direct the pay - ment of dividends, and to make most major decisions affecting the corporation.
earlier relationship or between a surviving partner and a spouse from whom the deceased was separated but not legally divorced. As the value of Canadian homes continues to rise owing to inflation, a house, condominium or other interest in real property is often the primary asset of the average Canadian estate and may justify estate litigation, depending on the property’s value. In met - ropolitan areas such as Toronto, the average price of a detached home exceeds CAD1 million. Today, more Canadians are also living longer lives and may require assistance from family members or professional caregivers. Parents may wish to provide a greater benefit to relatives who assist them on a regular basis and to give less to family whose involve - ment has been limited. Disgruntled beneficiaries who would otherwise have received a greater share of the estate may commence legal proceedings with the fol - lowing aims: • to challenge the validity of the deceased’s will or the validity of inter vivos gifts; or • to require the family member who assisted the deceased to account for transactions attended to on the deceased’s behalf. 5.2 Mechanism for Compensation Various remedies may be available to the parties involved in wealth disputes, depending on the nature of the dispute and the assets available to fund the compensation or damages ultimately payable to the successful party. Parties who are successful in asserting unjust enrich - ment, quantum meruit and/or joint family venture claims may be entitled to a constructive trust in respect of certain estate assets. Where joint assets pass by right of survivorship to a surviving joint tenant, a beneficiary of the estate may assert that the presumption of resulting trust applies and that joint assets are held in trust for the estate by the survivor. On hearing dependants’ relief applications, Canadian courts can make a variety of orders, including award -
5. Wealth Disputes 5.1 Trends Driving Disputes
It appears that several demographic trends are cur - rently driving an increase in wealth disputes in Can - ada. Second marriages and common-law relationships are one such demographic trend. Disputes can arise between a surviving spouse and adult children from an
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