Someone asked me today, “What kind of lawyer?” to which I replied, “Oh just a country lawyer“. Anyone who knows me recognizes in an instant that there is nothing either humble or dismissive about my response. Typically the inquirer was himself from the city and therefore had little if any acquaintance with or sensitivity to the deliberate disparagement of country people generally. This is especially so for one such as I who, being originally from the metropolis, graduated to the bucolic Town of Almonte over 44 years ago. Soon thereafter I hung out my shingle for the practice of law. I quickly learned from my predecessor Raymond A. Jamieson, QC that the local economy was governed by the “trades” not businessmen. Aligned with this intelligence was the discrete annotation that there was frequently considerable capital involved, a vulgarity which common decency insisted be naturally avoided.

It later occurred to me – no doubt on the heels of the earlier reminiscence – that notwithstanding the numbers associated with my rural law practice there was never anything nefarious.  I say this somewhat facetiously because theatre has glamorized the backroom deals of scoundrels and their legal counsel. My preoccupation was always shamefully unimaginative. I cared only for detail – both factual and legislative. An example is the Inter Vivos Declaration of Trust I was forced to create for an adamant client seeking to steer clear of probate fees. It was a challenge equivalent to a new game of chess for the next four decades for an increasingly expanding clientele interested in the identical pursuit.

The starting point is the division of powers between the federal government of Canada and the provincial governments of Canada.  The Constitution stipulates broadly in Sec. 92 that property and civil rights are within the dominion of the provinces. This has been interpreted as sufficient to dispose of the province’s entitlement to levy tax (probate fees) upon the value of assets of the deceased. It was characterized as a “fee” because it was levied at the provincial court house upon submission of the application to the court for authentication (“probate”) of the last Will and Testament of the deceased. The root of the avoidance of probate fees – and the necessity to authenticate or legitimize the last Will and Testament of the deceased – was a “strict” (here read: pernicious) attempt to remove the evaluation of the assets of the deceased.

As complicated as I am making what may appear to be a difficult issue, most are familiar with a common scheme to do precisely what I proposed. The everyday example is the ownership of assets by the deceased and his/her spouse/partner as Joint Tenants (that is, with Right-of-Survivorship).  In other words, if Jack dies owning a million dollar home, his probate fees would normally be about 15% thereof or $150,000.  If however Jack and Mary owned the house as Joint Tenants, then on Jack’s death by “operation of law” the ownership of the property devolves upon Mary as the surviving joint tenant (owner). Therefore there is no need to do a new deed to Mary (because she is already on title) and likewise there is no need to probate (“prove”) Jack’s Will because there is nothing to prove. More importantly there is nothing to pay to the provincial court for probate fees.

So as you can see the concept is rudimentary.  Where however it becomes more complicated is to align the Joint Tenancy feature not just to Jack and Mary (who are after all of a similar age and capacity) but also to a Third Party (the “Trustee”) who, no matter who dies (Jack or Mary) will “inherit” the property by operation of law a surviving Joint Tenant.  The singular feature of the Trustee is that he/she has no “beneficial” interest in or ownership of the property; rather the Trustee (as the name obviously suggests) acts only as a fiduciary of the interest of the beneficial owners (in this case Jack and Mary). Thus if Jack and Mary both die – and their combined estates are worth $4M – the Trustee will “inherit” the property as Joint Tenant survivor SUBJECT TO the critical qualification that he “holds” the ownership upon the trust to fulfill the terms of the Wills of deceased.  If the parents leave their estates to children or grandchildren, the Trustee then transfers to them their respective share.  But no probate; and no probate fees.

An important notation is that the Trustee and Beneficiaries (Jack and Mary) must sign a written acknowledgment of the arrangement.  The document is sometimes called an Inter Vivos Declaration of Trust. The significance of Inter Vivos is that this particular trust is between living persons – as opposed to the connection between a deceased person and his Executor commonly called a testamentary trust.

Another feature I should have mentioned from the outset is that the Trustee can be any legal person – natural or corporate. The Declaration need not involve the Beneficiaries but it obviously maintains at least the appearance of control to have Jack and Mary part of the continued ownership with the Trustee.  Most often the Trustee is a child or children of Jack and Mary.  It is abnormal for the lawyer to be a trustee.  I only performed that duty when my client had no other option because of age or other factors.

Because my particular Declaration of Trust was my own creation, and because the process of setting up a client’s affairs in joint tenancy is sometimes arduous, the use of the scheme to side-step the coffers of Her Majesty in Right of the Province of Ontario was not exactly popular. Like any other esoteric undertaking its cost depends upon its savings. Thus the common clientele for this taxation advantage was the well-to-do.  While the scheme is available to anyone who wants to do it, it only makes sense if is “worth it” in the end.

My final observation in what I am certain has been a tedious venture for my dear reader, is that the government of the Province of Ontario is I understand making noises about blocking the avoidance of taxation by “gerrymandering” the precise meaning of ownership at the precise moment of death.  The government has no objection to Joint Tenancy or the surviving owner taking over control; but the government wants to say that the value of a deceased’s estate is calculated at the moment of his/her death before ownership is effectively transferred to the surviving joint tenant. In other words the government abuses its constituents by provoking what I consider to be a well constituted Common Law entitlement.