Death, of course, has major implications for families. When a person dies all their assets transfer to the heirs. Under our law there are two ways for this to happen:

  • By a will – a written expression of the person’s intention for his/her property; or
  • By operation of law where no will exists.

Wills (provincial law – the Wills Act) – a will is simply a written expression of what the person wants to have happen to their property upon their death (it also can cover such things as who raises their minor children).

To be valid, it is important to note the following:

  • the person writing the will must be at least 19 years of age (in BC) or married or in the military and on active duty,
  • the document (will)  must be written out (no such thing as a verbal will);
  • the document (will) must be witnessed by at least two individuals and they must sign the will (a witness cannot be a person who will receive property under the will or they will lose their inheritance!).

Note: All wills become invalid if after writing the person marries (they only exception is when you state in the will that you are writing the will in contemplation of marriage).  Wills are not invalid upon divorce though sections in regard to your spouse are considered void (the rest of the will remains valid).

Important Terms

    • Testator – person who wrote the will.
    • Beneficiary – a person who receives something from the will
    • Executor – person appointed by the testator to carry out the will
    • Administrator – person appointed by the court to distribute the deceased person’s assets when they do not have a will.

No Will (provincial law – the Estate Administration Act)– if a person dies and doesn’t leave a will, the law will effectively write a will setting out will receive the deceased person’s property. For example, in BC the law says if you die without a will your property will go to:

    • First, if you are married without any children – all your property goes to your spouse.
    • If you are married with children, your spouse gets the first $65,000 in value and the remainder is divided as follows:
      • Only one child – ½ to spouse and ½ to child;
      • More than one child – 1/3 to spouse and 2/3 divided equally among children.
    • If you have children but no spouse, the estate is divided equally among your children.
    • If you have no spouse or children, your estate goes to your mother and father in equal shares if they are living.
    • If you have no spouse, children, or parents, your estate goes to your sisters and brothers in equal shares.
    • If you have none of the above, your estate goes to your nieces and nephews.
    • If you have none of the above, your estate goes to your next of kin who are equal in degree of consanguinity (same degree of relatedness).
    • If you have no next of kin, the estate goes, yes, you guessed it, the government!

Wills Variation Act (BC Provincial law)

Generally it is accepted that a person is free to do whatever they wish with their own property. Thus, when you die you should be free to give your property to anyone you like. That being said, the Wills Variation Act allows a limited group of people (spouses and children of the deceased) to apply to a court to have your will changed on the basis that you were treated unfairly. These cases usually involve situations where the deceased favours one child over others without any valid (according to the court!) reason.

In order to ensure that your wishes are carried out, the following steps may be taken to limit the likelihood that the Act will be used:

  • Inter vivos gifts – give away most of your property before you die. This way there is nothing left in your will upon your death.
  • Give a small inheritance to all children and your spouse and give good reasons why you are favouring some of them over the others.
  • Transfer your assets before death to a trust that will hold the assets for the benefit of the children/spouse you prefer. Once again this means there are few assets left in your estate upon your death.

Other Planning Issues

  • Powers of Attorney – while you are still alive there may be times when you wish another person to be able to act on your behalf because you are either away or incapacitated. This is achieved by use of the document called a Power of Attorney.
  • General Power of Attorney – allows the person appointed to do everything that you could have done yourself. Obviously with such sweeping powers you would only give this power to someone you really trust.  It is important to note that this power expires if the person who grants the power becomes incapacitated.
  • Limited Power of Attorney – specifies exactly what the Attorney is allowed to do on your behalf – ie it is not unlimited in scope.
  • Enduring Power of Attorney – is valid even if the grantor becomes incapacitated due to mental or physical illness.
  • Bank Power of Attorney – due to their concerns about potential fraud, all banks require their own forms to be completed before they will allow an individual access to another person’s bank accounts. Thus, you may have to have a number of different Powers of Attorney to allow the person appointed to do everything you want them to.
  • Living Wills – Medical Directives – unlike regular wills, Living Wills take effect while you are still alive. They are generally drafted to ensure that in the case the person suffers a catastrophic illness only certain medical measures will be taken. Another person is appointed to ensure that these wishes are enforced. Typical directives cover things such as life support, resuscitation and use of extraordinary measures. While family is often appointed, it is not uncommon to have someone other than family appointed to remove the emotional issues that arise at such times.

Business Organization

While we interact with businesses every day, we rarely pause to think about the legal implications.  First, we should perhaps define business as an activity that has as its primary objective the pursuit of profits.  Fine, but what is profit?  Profit is when one is able to sell a good or service for more than it costs to provide that good or service.

Example:

For a summer job, Lindsey believes it would be a great idea to bring in some cool t-shirts from Hong Kong and sell them at markets around the lower mainland. Assume she buys a total 400 t-shirts at a cost of $5.00 per shirt (total of $2 000.00) and sells them for $15.00 per shirt. If she is able to sell all the shirts, her revenues will be $6 000.00 and her profit would be $4 000.00.  This is the essential nature of all business – sell it for more than it costs you!

Revenues – Expenses = Profit

As we have already mentioned in class, there are a few ways to organize a business. Each has certain advantages and certain disadvantages.  Let’s compare them in the following chart.

Sole ProprietorshipPartnershipCorporationLimited Partnership
Owners
  • One owner
  • Two or more owners called partners
  • Unlimited number of potential owners called shareholders
  • One general partner, one or more limited partners
Life of Business
  • Limited to life of owner
  • Limited to life of partners
  • Unlimited life – Hudson Bay Company has been around over 300 years
  • Perpetuity
  • Limited to life of partners
Taxation
  • All profits taxed in the hands of the owner.  Business is not taxed separately
  • All profits are taxed in the hands of the partners. Partnership is not taxed directly
  • Profits are taxed at the corporation level.
  • Shareholders are only taxed if the corporation pays out the profits as dividends or if the shareholder sells their shares for more than they paid for them (capital gain)
  • Limited partnership is not taxed separately.
  • Each partner taxed according to its share of the profit.
Liability
  • Owner is personally liable for all debts and legal judgments
  • Partners are personally liable for all debts and legal judgments of the partnership
  • Corporation is a separate legal person.
  • Corporation is responsible for all debts of the business and legal judgments.
  • Shareholders are not liable for debts or legal actions
  • General partner is personally responsible for all debts and legal actions.
  • Limited partners are not personally liable.
Management
  • Owner makes day-to-day decisions
  • Partners collectively make day-to-day decisions.
  • Shareholders elect directors who sit on the board of directors.
  • Directors hire officers (executives) who are employees and run the day-to-day operations of the company.
  • Directors have a responsibility to the corporation and not just the shareholders that elected them.
  • General partner runs the partnership.
  • Limited partner(s) do not take part in the active management of the business.
Cost to set up and maintain business
  • Simple – just start selling!
  • Partnerships are a factual matter – are the parties acting as partners?  If so, they are a partnership
  • Legal process to establish (incorporation)
  • Periodic steps must be done to maintain (annual meetings, annual reports, quarterly reports).
  • Must file corporate tax return each year
  • If a large number of shareholders (generally more than 50) company must make public disclosure which is costly
  • Complicated to establish and maintain.
  • Used mainly in projects where limited partners act as “silent” investors

Leave a Reply

Be the First to Comment!

avatar
wpDiscuz