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When conducting our estate plans, we are often focused on the distribution of assets (such as homes, bank accounts, investments, and interest in private corporations), providing for dependents, and ensuring overall family harmony. However, softer issues may be overlooked. For example, some suggest that it may be useful to leave a video legacy for surviving family members to view after a loved one passes.

One app, RecordMeNow, allows users to make a video legacy through targeted question-prompting and video recording. Users can create a video library organized into different subject areas for the surviving loved ones. As an individual’s death can rarely be predicted with certainty, the founder advises recording a legacy due to the risk of an untimely death.

The service was originally developed such that children who lost parents at a young age would have something to connect with their deceased parent(s); however, it can be used by individuals of all ages.

For further information see the BBC article (If you die early, how will your children remember you?, Shaw, Douglas), or go to www.recordmenow.org.

ACTION ITEM: What would happen if you were to pass away unexpectedly? Is everything in place such that in the days and years following, the desired results would be achieved? Consider revisiting your estate plan, will, and any other communications you would like to leave for your family.

In a December 18, 2018 Tax Court of Canada case, the Court considered whether the new housing rebate was available where the taxpayer sold a newly developed property shortly after taking possession. The taxpayer entered into an agreement to purchase the land in 2012, took possession of it two years later when the building was completed, and then sold it three months later.

To qualify for the rebate, the purchaser, or a person related to the purchaser, must, at the time they become liable for the purchase, intend to use the property as their primary place of residence. Also, the taxpayer or a related person must either be the first individual to occupy it, or sell the property as an exempt supply before it was occupied by any person (normally meaning that it is simply sold before anyone moves in).

Condition 1: Initial Intention

The Court noted the following as a non-exhaustive list of factors to evaluate when considering original intention:

1. demarcation of primary place of residence by change of address;

2. the relocation of sufficient personal effects to the rebate property;

3. if the buyer never moved in, was there cogent evidence that the original plan to live in the property was frustrated?;

4. permanent occupant insurance versus seasonal or rental coverage;

5. disposition of previous primary residence; and

6. if dual occupancy continues, then the rebate property must be more frequently occupied, more convenient to third party locations such as work, have more convenient amenities, and be more suitable to the needs of the taxpayer.

The taxpayer argued that there was a frustration of original intent as listed in c) above. In particular, the taxpayer noted that the purchase occurred as a result of a divorce. The ex-spouse did not want his children to live in the same house as the taxpayer’s new partner. Therefore, a new residence was required. However, this requirement was later waived, which frustrated the taxpayer’s original intent.

The Court found conflicting testimony and insufficient proof of this separation requirement (and subsequent removal of the condition) and, therefore, was not able to find that the original intent was to live in the location.

Condition 2: Occupy or Eligible Sale (exempt supply)

Although it was argued that the taxpayer originally occupied the home, there were no receipts for moving expenses, the property sale listing described it as “unoccupied and never used”, and it was listed for short-term rental on Airbnb two months after possession. Further, the Court noted that the taxpayer was living at the new spouse’s residence at the time of acquisition and that there was insufficient evidence that a move had been made. As such, the Court determined that it was not first occupied by the taxpayer.

The Court also found that the property was not sold as an exempt supply before it was occupied by any person but did not give any specific reasons. While the Court did not specifically list it as a reason for not meeting the exempt sale possibility in condition 2, it did mention that there was at least one rental of the property on Airbnb prior to sale. It is uncertain whether this offended the exempt supply possibility.

ACTION ITEM: In order to make the claim, ensure that both conditions are, or will be, met. If one will not be met, consider whether the GST/HST new residential rental rebate will be available instead.

As of July 1, 2013, where receipt of OAS is delayed, the monthly pension is increased by a factor of 0.6% for each month deferred, to a maximum of 36% (60 months, commencing receipt at age 70). This option may be especially desirable for those whose OAS would be entirely clawed back due to high income. For 2019, every $1 of income in excess of $77,580 results in a $0.15 clawback. While it is best to do the analysis and make the decision appropriately from the outset, the following considers what happened when those opportunities were missed.

In a January 31, 2019 Federal Court case, at issue was whether an individual could apply for his OAS pension to be cancelled slightly more than one year after it had begun in order to benefit from the voluntary deferral option.

The individual applied for OAS on March 1, 2013. His first payment was received in February 2014, the month after he turned 65.

In April of 2015 he realized that his entire OAS pension for the previous year was lost due to high earnings, and also that recent changes allowed deferral of receipt in exchange for higher payments. As such, a request to cancel it was submitted.

An individual has the ability to cancel a pension within six months of the commencement (i.e. the first payment). There is no specific provision that allows for an extension to this time limit.

The taxpayer cited various reasons why the application was not made in time, primarily in connection with his argument that the Government did not provide timely notification of this new possibility. In particular, he noted that he did not receive the letter sent out to those eligible to begin receipt in 2013 which explained the changes. Also, no notification of the new option was included in the application form nor in the letter he received advising him that his application was accepted.

Taxpayer loses

Since there was no provision allowing for an extension of time, the Court was not able to assist the taxpayer. The Court did, however, question whether the matter should have been dealt with under other provisions which allow the Government to take remedial action for denied benefits resulting from erroneous advice or administrative error.

ACTION ITEM: Determine whether it is best to defer receiving OAS prior to applying. If an error has been made, consider whether it was due to error in government advice or administration.

Certain tax benefits, such as the Canada child benefit, the GST/HST rebate, and the recently implemented federal carbon tax incentive (where applicable) are normally paid entirely to the parent with whom the child primarily resides. Where the child resides with the parents on an equal or near equal basis, each parent is entitled to half of the credits/benefits which would be available if the child resided primarily with them.

A March 27, 2019 Federal Court of Appeal case addressed the proportion of time each parent is required to reside with the child in order to meet the “equal or near equal” condition. The Court noted that various lower court decisions consistently used “time” as a basis for determination. It also noted that, while the proportion of time residing with the child considered to be “equal or near equal” varied, it was never accepted below 40%.

While it noted that 40% is the legislated threshold for determining shared-custody status for Federal Child Support Guidelines (FCSG), the Court found that a determination of “equal or near equal” status for purposes of these benefits should be made without reference to the FCSG. The Court determined that the income tax definition required that the percentage of time with the child must be able to be rounded off to no less than 50%. Percentages should be rounded to the nearest whole number that is a multiple of 10. In other words, 44% would be rounded to 40% while 48% would be rounded to 50%. As a result, a minimum of 45% would be required to meet the income tax definition.

This is the highest Court to make a determination on this issue thus far, which means it is a binding precedent. While previous decisions commonly accepted a threshold of approximately 40%, this case clearly states that the minimum is 45%. As such, there is a 5% spread between the shared-custody definition for tax law (residing with the child on a near-equal basis) and the definition of a shared custody arrangement under the FCSG (which explicitly requires physical custody of the child at least 40% of the time). This means that, for example, a child who spends 42% of their time with one parent, and 58% with the other, would be shared custody for FCSG purposes, but the parent with whom the child spends 58% of their time could be entitled to 100% of benefits determined under the Income Tax Act.

ACTION ITEM: Be aware that eligibility for the Canada child benefit may change where the child is residing with one parent between 40% and 45% of the time. This change should also be considered in future separation agreements.