CANADA Law and Practice Contributed by: Ian M Hull, Suzana Popovic-Montag and Nick Esterbauer, Hull & Hull LLP
Joint Ownership Property may also be transferred inter vivos by add- ing another person to title as a joint tenant or tenant in common. Where property is held by joint tenants, the donor may transfer either a full beneficial interest in the property, or only a right of survivorship. If only a survivorship interest is intended, the donee receives legal title only while the donor retains beneficial own- ership during their lifetime. In such cases, any rights exercisable by the donee are held in trust for the donor until the donor’s death, at which point the beneficial interest passes to the surviving joint tenant. 6.2 Tax and Regulatory Constraints Lifetime succession planning techniques, such as trusts, inter vivos gifts, and transferring property into joint ownership are desirable because they allow property to pass outside the estate and therefore avoid probate and estate administration tax. They may also reduce the income tax payable by the donor’s estate. Because the property has already been transferred and is no longer included in the deceased’s estate, it is not subject to the deemed disposition rule that otherwise applies on death. As a result, the property is not included when calculating any capital gain realised by the estate for income tax purposes. Canada has no comprehensive protocol for dealing with digital assets, like email accounts, social media accounts, and cryptocurrency, after an account holder passes away. Some jurisdictions, including Prince Edward Island, New Brunswick, Saskatchewan and the Yukon, have enacted legislation granting fiduciaries, including estate representatives, limited authority to access digital assets. Fiduciaries are permitted to access digital assets in accordance with the deceased account-holder’s will, letters of administration, power of attorney, trust instrument, or court order. The leg- islation also addresses the circumstances in which service agreements may restrict a fiduciary’s access 7. Succession of Digital Assets 7.1 Legal Framework
principal residence. However, the exemption may be claimed on only one property in a given tax year, even if the deceased owned multiple residences. In addition to income tax consequences, the estate be required to pay probate fees or estate administration tax on assets subject to probate.
6. Lifetime Succession Planning Mechanisms 6.1 Common Planning Techniques
Common lifetime succession planning mechanisms used in Canada include trusts, inter vivos gifts, and transfers of property into joint ownership with a right of survivorship. Trusts Trusts are widely used in estate planning to achieve objectives like deferring taxes and sheltering assets from creditors. However, if a trust is not properly con- stituted, it may be deemed void, in which case the intended benefits are lost and the trust property may revert back to the settlor. Both standard inter vivos trusts and specialised forms, such as alter ego trusts and joint partner trusts recognised under the Income Tax Act, may be used for succession planning. Inter Vivos Gifts A valid inter vivos gift requires: (i) a clear intention to make a gift, (ii) delivery or transfer of the property during the donor’s lifetime, and (iii) acceptance by the donee. Such gifts can reduce estate administra- tion costs by avoiding probate, but they are gener- ally irrevocable once given, unlike wills, which remain revocable until death. Where evidence of donative intent is absent, the law presumes that the donee holds the property in trust for the donor. This doctrine, the presumption of resulting trust, was affirmed by the Supreme Court of Canada in Pecore v Pecore , 2007 SCC 17. If a transfer is chal- lenged and the presumption applies, the property will revert back to the donor’s estate on death.
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