Sample Exam Questions for Wills, Trust, and Estate Administration

Transcription

1 Sample Exam Questions for Wills, rust, and Estate Administration he following questions are offered to provide a sense of the type of questions you might expect on the exam. hey do not reflect an entire exam. Every exam will differ. In this case, you are required to select from a list of responses to indicate if statements are true or false, to match statements to questions, and to answer multiple-choice questions. he remaining questions will require you to analyze scenarios in order to identify and apply relevant legal principles. You are reminded to always read the question carefully. or example, questions that may seem similar to questions from Review Questions or Supplementary Materials may be slightly different. hese changes will affect the answer and/or the scope of the answer required. ull text answers are not provided to the questions requiring analysis. Rather, for the purpose of this sample, key points that should be raised are noted in bullet form. ull text answers would be required on the exam. You should also refer to: SEP Diploma for Canada Exam Rules & Regulations, and ips for Preparing for and Writing a SEP Diploma for Canada Exam. Sample Exam Questions and Answers Page 1

2 QUESIONS: ype A: rue/alse Questions Indicate whether the statement is true or false by circling the letter or [5 marks] A1 An individual who is incapable of managing his or her own financial affairs is not capable to grant a power of attorney for property. A2 Bob leaves a gift of $ in his Will to his son Junior with no other instructions. Bob dies when Junior is 11 years old. he executors may use their discretion and distribute the funds to Junior s mother. A3 If the original cannot be found but a Will is known to have existed and the terms of the Will are known, then the provincial rules for proving a lost Will may apply, permitting the grant of probate to be issued, although this requires additional steps and paperwork. A4 An executor has no obligation to accept the appointment under a Will, but once an executor has commenced to act an executor can no longer renounce unilaterally, but must obtain Court approval to withdraw. his underscores the importance of potential executors seeking legal advice at the start to fully appreciate their duties and make an informed decision as to whether they should accept or renounce the appointment. A5 Under choice of law rules for Wills and estates, in general, i.e. for most issues, the law of the domicile of the deceased at the relevant time applies to immovables and the law of the situs of the property applies to moveables. ype B: Yes-No Questions B1. Identify whether or not each of the following statements are consequences of intestacy that should encourage individuals to consider estate planning by indicating yes or no for each. [5 marks] B1 (a) Without a Will, any children of the deceased who are under age of majority will be entitled to full distribution upon attaining the age of majority in the province unless they are too immature to handle the inheritance in which case the surviving parent may apply to the court for a guardianship order to manage the inheritance on the child s Sample Exam Questions and Answers Page 2

3 behalf until a later time when the child will be better able to handle the financial responsibility. B1 (b) In some cases the spouse will inherit the entire estate if there is an intestacy, but this depends on the value of the estate, the value of property passing to the spouse outside the estate, and the particular jurisdiction. B1 (c) he additional steps required to administer an intestate estate and the complexities that arise will add to the cost of the administration of the estate and delay the ultimate distribution of assets to the beneficiaries and these costs exceed by far the cost of preparing a Will in most cases. B1 (d) When an individual dies without a Will, they cannot take advantage of possible strategies that are available to reduce probate fees and income taxes. Any savings that happen will be by chance as opposed to by design. B1 (e) When an individual dies intestate, common-law spouses or partners are entitled to receive a preferential share of the estate as they are treated identically to married spouses or partners after the required period of co-habitation under provincial law. B2. or each of the following situations identify whether the conditions imposed are contrary to public policy or otherwise repugnant and not enforceable by circling Yes or No for each. [4 marks] B2 (a) A condition is placed on a gift that does not allow the beneficiary to receive the gift until they are married and have children. Otherwise, the gift passes into the residue. B2 (b) he gift will only pass to the individual if he or she can break into the home of the deceased s estranged spouse and remove it by force if necessary. Yes Yes No No B2 (c) he gift can only be received on condition that the beneficiary agrees not to sell the property to anyone who intends to will build a place of worship on the land. Yes No B2 (d) he testator gives his cottage jointly to his two siblings, whom he knows absolutely hate each other and can never get along. Yes No ype C: Scenarios for Analysis Sample Exam Questions and Answers Page 3

4 C1: Joanna and powers of attorney [15 marks] Joanna is a 56 year old widow who has a Will. She has heard about something called the continuing power of attorney for property and is curious as to what she would have to do in order to set one up. She has two children and in her Will she has named a trust company as a co-executor along with her trusted friend, Maria. a) Joanna asks you what the procedure is to appoint a person to be her attorney for property who can act immediately and in the event she becomes incapacitated. Include the formal requirements for executing a valid power of attorney. [5 marks] b) After explaining the process that is required to set up a continuing power of attorney for property, Joanna looks doubtful. She thinks that the whole process seems very arduous and difficult and asks you whether you think it is a good idea or not. Explain the benefits and the potential adverse consequences of not having a continuing power of attorney for property if Joanna were to become unable to manage her own affairs or even grant a power of attorney. [10 marks] C.2 [20 marks] Ryan is a hardworking 15 year old high school student with excellent grades. He wants to attend medical school eventually and become a doctor. However, Ryan s family are in constant financial difficulties and will not have the funds for Ryan s post-secondary education. Estelle is Ryan s elderly aunt. Ryan visits her frequently and does her yard work and other chores around the house. On his visits, Ryan often discusses his desire to become a doctor with his aunt and also reveals that he will never achieve his dream because of his family s financial difficulties. Estelle had a previous Will which was made about 20 years ago. Recently, Estelle s health began to decline rapidly and she wanted make a new Will that was up-to-date with her intentions. he old Will provided that $20,000 was to be distributed in equal shares among Estelle s nieces and nephews, including Ryan. Estelle s new Will adds a new provision that $100,000 is to be set aside in an educational trust for Ryan, and retains the same $20,000 gift to be divided among all her other nieces and nephews in equal shares as was in the old will. urthermore, Estelle s old Will provided for her husband, Greg, and son, Ben. However, Estelle s new Will leaves nothing for Ben because their relationship had deteriorated since the old Will was made to the point where the Estelle and Ben has ceased communicating with each other. Estelle wants to know whether there are any problems with her new Will. Advise her on potential challenges that can be made against her new Will. Discuss the arguments that could be made to defeat these challenges. Sample Exam Questions and Answers Page 4

5 ANSWERS Note: or ype A and questions and ype B questions the explanations are given here only for study purposes. No marks will be given for an explanation on the exam for these types of questions unless you are specifically asked to provide an explanation. ype A: rue/alse A1 -alse he degree of capacity required to grant a power of attorney for property is not necessarily the same degree of capacity required to manage one s financial affairs. After all, one can still appreciate all the elements of the four-part test set out in Re K without being able to actually manage one s own financial affairs. A2 alse A gift to minors that is not held in trust will usually come under the supervision of the public guardian for the province or other provincial authority and funds may have to be paid into court depending on the jurisdiction and the amount A3 rue A4 rue A5 alse. It is actually the other way around. In general the law of the situs applies to immovable such as land, and the law of the domicile of the deceased at the relevant time, depending on the issue applies to moveable property. he construction of the Will is an exception where the law intended by the testator, presumed to be domicile at the time the Will is made, applies to both movables and immovables. ype B: Yes/No Questions B1 Consequence of intestacy B1 a) No. he child will receive the funds upon attaining the age of majority. A guardianship order is available after age of majority only if the child is mentally incapable. B1 b) Yes. he spouse may be entitled to a preferential share, and property passing outside the estate may be included in this amount. However the spouse will not receive 100% of the excess if there were any children, as the rules of intestacy often divide the estate between the spouse and any children of the deceased. Manitoba may be one exception as surviving children do not share with the surviving spouse if they are children of both the surviving spouse and the deceased. B1 c) Yes. B1 d) Yes. B1 e) No. In a many number of provinces, common-law spouses are not recognised on intestacy in the same way a married spouse is recognised. Sample Exam Questions and Answers Page 5

6 B2 Limits on testamentary freedom B2 a) No. A restraint on marriage is contrary to public policy but there is no prohibition on encouraging marriage or children. B2 b) Yes. A condition that requires an illegal or immoral act will not be allowed by the courts. B2 c) Yes. A condition that restricts what the beneficiary can do with the land will not be allowed. B3 d) No. A joint gift is permissible. ype C: Scenarios for Analysis C1: Joanna a) A power of attorney must be in writing, and in order to be effective when the person becomes incapable, it must state that it is intended to be a continuing power of attorney i.e. that the attorney continues to have authority after the grantor becomes incapable. In order to be effective immediately it should contain no condition precedent. Provincial legislation requires a power of attorney be in writing, signed by the grantor, and witnessed by one or two persons, depending on the province. he identity of the witness is restricted by law. Some provinces prohibit the attorney and the attorney s spouse from being a witness. Some provinces also prohibit other family members from being a witness. Note that in Manitoba, the witness must have special qualifications. In Quebec, a mandate need not be witnessed if made by a notary. urther, the grantor must have legal capacity to grant the power of attorney, and the attorney must also qualify under the rules to act as an attorney. Note: While the requirement for capacity may be specified in the particular legislation, at common law, a grantor must have attained the age of majority and have the required mental capacity to understand the nature and effect of the power being granted. he four part test in the common law (set out in Re K) sets out the elements that a grantor must have the mental capacity to understand before granting a valid enduring power of attorney. hey are as follows: 1) he attorney will have the power to take complete control of the grantor s financial affairs. 2) During the lifetime of the grantor, the attorney will be able to do anything the grantor could do with the grantor s property. 3) he authority granted will continue in the event the grantor subsequently becomes mentally incapable. 4) Once the grantor becomes mentally incapable, the power of attorney will be irrevocable. Sample Exam Questions and Answers Page 6

7 Note also that the degree of capacity required to grant a power of attorney for property is not necessarily the same degree of capacity required to manage one s financial affairs. A person may be incapable of managing one s financial affairs and still be capable of granting or revoking a power of attorney. b) In the absence of a continuing power of attorney for property, there may be a vacuum of decision-making authority and no one will be legally able to make financial decisions unless or until the public trustee becomes involved. Instead of Joanna getting to decide who will make these financial decisions for her, it will either be the Office of the Public Guardian and rustee making all financial decisions or a family member that applied to the court to be appointed as the guardian for the financial affairs of Joanna. he disadvantages to this are many and include the following: - Delay - Cost - Risk of litigation - inancial Loss - Emotional Stress - inancial hardship for Dependents - Onerous conditions for court appointees here are various statutory regimes that establish certain requirements for court-appointed guardians that can be quite tedious or financially burdensome. A continuing power of attorney can avoid all the administrative requirements and the necessity for a bond to be posted to the court by the guardian. - Loss of choice. - Limited powers of guardian he court, at their discretion, has the power to limit the powers of a court-appointed guardian. his may be less than optimal for the proper management of Joanna s financial affairs. C.2 Ryan and Estelle A claim can be made on the grounds that Ryan exerted undue influence on Estelle. Since Ryan brought up his family s financial problems and his desire to attend medical school frequently with Estelle, and Estelle subsequently made a new Will providing a sum of money for Ryan s education, the gift to Ryan can be construed as the result of an expression of Ryan s intentions rather than the voluntary intentions of Estelle. Challengers of the Will can also raise a claim that the Will was made under suspicious circumstances for a number of reasons: Estelle made the new Will when she was especially vulnerable since her health was failing at the time and because she was elderly It can be argued that Estelle was dependent on Ryan as her health declined and she required help for household chores. Sample Exam Questions and Answers Page 7

8 he old Will and new Will are very different, since the new Will makes a substantial gift to Ryan and disinherits Estelle s son, Ben. However it can also be argued that Estelle was not dependent on Ryan for her care or financial well-being since the chores he provided were non-essential, occasional and there was no threat of their withdrawal. Estelle could have changed her Will in response to a genuine fondness for Ryan and a desire to provide him with financial assistance that he needed to achieve his calling in life. here was no suggestion by Ryan or others that she make such a gift in her Will, and although the relationship with Ryan and awareness of his needs and aspirations no doubt influenced her, the influence was not overpowering to the extent that the provisions in the Will were not voluntary. he exclusion of the Ben from the Will was as a result of circumstances unrelated to Estelle s relationship with Ryan. See Sample Exam Questions and Answers Page 8