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Drache Year End Newsletter - 2006

   Happy Holidays
   Spouse v. Kids: Wills for 2nd Marriages
   Principal Residence Exemption for Home Held in Personal Trust
   Adoption Law and Estate Planning and Administration
   Une planification testamentaire est intrinsèquement reliée à une bonne planification fiscale.
   I Guarantee It!! But What does it mean?
   A Bonus from Drache LLP - Non Taxable Gifts to Employees
   The Giving Spirit Meets the Tax Advisor
   Buying a New Home – Hidden Costs
   Personal Benefit for Members?
   T'is The Season

Happy Holidays
It is that time of year again, when everything, except the life of a tax lawyer is winding down over the holiday season. At Drache, LLP, it has been an eventful year. We moved to larger premises, added new associates and have broadened our scope to be able to better serve our friends and clients in the Francophone community. We look forward to a new year of helping our clients in their family, tax and estate planning. Have a happy holiday.
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Spouse v. Kids: Wills for 2nd Marriages - Douglas Buchmayer
How do you fairly divide your estate between your new spouse and the children of your former marriage? (Your new spouse probably has the exact same issue.) It is often awkward balancing the needs of your surviving spouse against those of your intended ultimate capital beneficiaries (especially when your surviving spouse is indifferent or perhaps even hostile to your choice of beneficiaries). On the one hand, your surviving spouse will normally require the entire “family wealth” to maintain the same standard of living enjoyed prior to your death, but on the other, you may have a real concern that if your entire estate is given to your surviving spouse your choice of beneficiaries may see their inheritance wiped out in favour of those selected under the Will of your surviving spouse.
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Principal Residence Exemption for Home Held in Personal Trust - Arthur Drache
Most Canadians, even those who are not particularly tax oriented are aware of the fact that there is no capital gain payable when a principal residence is sold. This rule has become a source of huge tax free gains for a whole generation which owned a house which has risen significantly in value. Tax experts (and Department of Finance officials) have had to come to grips with myriad situations where the exemption should be available but where the residence in question is either not lived in by the owner or may not be a conventional house. On the whole, the rule granting the exemption has been generously construed and from time to time there have been amendments to the Income Tax Act to ensure that the exemption is available.
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Adoption Law and Estate Planning and Administration - Elizabeth Lockhart
Adoptees, adoptive parents and biological parents should all be aware that adoption orders made pursuant to the Child and Family Services Act (the legislation dealing with adoption in Ontario) are final and irrevocable, subject only to narrow appeals and cannot be questioned or reviewed in any court. This has significant implications in the administration of estates, both those which are distributed pursuant to a last will and testament and those that are distributed pursuant to the rules of intestate succession.
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Une planification testamentaire est intrinsèquement reliée à une bonne planification fiscale. - Sebastien Desmarais
Un vieux dicton affirme qu’il n’existe que deux certitudes dans la vie : la mort et les impôts. Lorsque l’on associe impôts à payer et décès, le sujet devient encore plus pénible et tout aussi décourageant. C’est pourquoi une bonne planification testamentaire soulagera le fardeau fiscal légué à nos héritiers et par ce fait même, allègera ces pénibles moments. On se doit de clarifier qu’une planification testamentaire n’est pas synonyme de planification fiscale. Cependant, omettre de considérer l’impôt à payer lors d’une succession peut faire de l’Agence du Revenu du Canada (ARC) un des principaux héritiers au détriment de vos proches bien-aimés. Ce fâcheux résultat peut être évité et cet article abordera certaines approches préconisées afin que les dernières intentions du testateur se concrétisent au détriment de l’ARC tout en demeurant tout- à-fait légal.
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I Guarantee It!! But What does it mean? - Tracy Molino
A husband eager to purchase a new business agrees to put his wife’s name on his business lease to speed up the negotiation process. A father acts as a guarantor for his daughter’s line of credit at a bank thinking his obligations end there. A wife interested in buying into a franchise wonders about the risks of allowing her disabled husband to guarantee the Franchise Agreement personally should her corporation declare bankruptcy. Every day, hundreds of people are asked to sign contracts about anything from business loans to gym memberships. Often these contracts are set up not only to obligate us to do something, but also to guarantee that if we can’t perform some part of the contract, someone else (often a family member) will step in on our behalf and get the job done. But what do these guarantees really mean? Are they always necessary? Are they always binding on the guarantor?
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A Bonus from Drache LLP - Non Taxable Gifts to Employees - Steven Szilagyi
As city streets and department stores are being lit up with coloured light bulbs and parliamentarians are gearing up for a six week long vacation we are reminded that the holiday season is right around the corner. For most taxpayers that means they can expect some form of a Christmas bonus from their employers. Therefore, I wish to devote this newsletter article to explaining the current position of the Canada Revenue Agency with regards to bonuses both from the employer and employee’s perspective.
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The Giving Spirit Meets the Tax Advisor - Adam Aptowitzer
This is the time of year where parents spend time with their children, co-workers revel in collegiality, retailers rejoice with their profits, and taxpayers look to generate tax deductions and credits. This year may be particularly beneficial for individuals in the latter category because of the unique opportunity afforded donors in the Conservative government’s tax changes announced in the May 2006 budget. The most prominent of the changes allowed for the donation of shares in public companies to public charities (i.e. all but private foundations) on a tax free basis. Last year at this time, if one were to donate shares with a capital gain of $100 and a fair market value of $110, the gift would create a tax liability of $11.50 (assuming a combined tax rate of 46%) and a donation tax credit of $46 for a net value of $34.50. This year, the same donation would result in no tax liability and so have a net value of $46 to the donor.
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Buying a New Home – Hidden Costs - Chad Boyd
Ah, the joys of buying a new home. First one in, no hidden surprises lurking in the closets, in the basement or in the attic. Right? Well hopefully but there may be some surprises lurking in the agreement of purchase and sale that you signed buying the home. Several times over the past year when acting for purchasers of new homes I was put in the unfortunate position of having to inform purchasers of various surprises in their agreements. These surprises mainly consisted of ‘undisclosed’ costs that purchasers would be responsible for on closing.
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Personal Benefit for Members? - Victor Au
A question that often comes up with charitable organizations is whether a certain disbursement or expense is a proper expense. For example, can a charity pay the costs of training its staff or volunteers? What if the people attending the training are members of the charity? Can a charity hold and pay for a celebration dinner? As most of you are aware, a registered charity obtains its status under the Income Tax Act, which permits the charity the advantages of tax exempt income and the ability to issue tax-deductible receipts. One of the conditions of the charitable registration is that the charity’s “income” not be “payable or otherwise available to personally benefit any proprietor, member, shareholder, trustee or settlor”. This principle is also echoed in the proposed penalty provisions for registered charities. So what exactly is a “personal benefit” and what payments or reimbursements are permitted under the law?
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T'is The Season - Charles Rotenberg
December is always a time for reviewing your tax situation and, except for RRSP contributions, is the last chance for minimizing your current year’s taxes With the ongoing reductions in tax rates some of the traditional year end planning takes on additional significance.
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