Joint Tenancy : 5 Common Issues

It has become very popular in British Columbia to transfer property (assets) into joint tenancy.

Usually, it is done as a vehicle to reduce probate fees and legal fees upon the death of the owner of the property. Generally speaking, it is good to have joint tenancy between a husband and wife, because it simplifies matters and saves money. Furthermore, when couples have joint tenancy, it becomes a fairly simple procedure to transfer property from a deceased joint tenant into the name of the surviving joint tenant(s). What complicates joint tenancy is when other parties are added to the title, such as children.

Below outlines 5 common problems:

1. Gift or Trust?

If the property is transferred from one parent into the names of the parent and one of the parent’s children, it can become an issue as to exactly what interest the child holds in the parent’s property. For instance, if the interest is solely held for estate planning purposes and there was no real intention to gift the property to the child, then the child would not hold the property in trust for the parent and parent’s estate.

Bare Trusts: Advantages and Disadvantages

Bare Trusts

A bare trust is a legal structure that facilitates the separation of legal and beneficial ownership over a property.

Generally, it's used in a real estate context. A bare trustee company is created which is a BC corporation that holds the legally registered title on the property.

The beneficial ownership remains with the person who originally purchased the property. The beneficial owner is the person or persons who continue to make all arrangements; they're responsible for leasing the property, receiving rents and reporting income.

The beneficial owner is the real owner of the property.

The bare trustee company is the one that is actually on the title, the company name is registered in the land title office (the “LTO”). From a tax perspective, the trustee company isn't going to be reporting any taxes at all because they don't actually beneficial ownership of the property.

Essential Elements of an Employment Contract

As your small business begins to grow you may start considering hiring additional employees. When undertaking this process, it is important that you not only protect your business but also your employees. A good way to do this is through an employment contract. An employment contract is a legal document that outlines the terms and conditions for both, the employer and employee. Here are some essential elements that should be included in all employment contracts.

Terms of employment

The terms make up one of the most important elements. You want to specify whether it is a full-time, part-time, or temporary position. You may also want to indicate the length of the employment with a specific end date if the position is temporary. It is also important to indicate if you are going to implement a probationary period. Details such as the length of this probationary period should be included.

Making a Charitable Legacy Part of Your Estate Plan

Throughout drafting many Wills in our law practice, we have noticed the majority of people do not provide for charity. Here are four top reasons why the current generation does not provide more to charity:

1. Misunderstanding of the Benefits of charitable giving

There is substantial misunderstanding surrounding the taxation of estates and the benefits of charitable giving. Many people do not realize that RRIFs and RRSPs will go into their income at the time of death (or, if there is a surviving spouse and a rollover of funds, on the spouse’s death). Obviously, this can create a substantial tax liability with items such as RRSPs, RRIFs, and capital gains. Because most charitable bequests are tax-deductible, there is a substantial benefit to providing for charity within your estate plan.

Having a Power of Attorney is a huge responsibility. If one is ever granted a power attorney by a loved one, the person who grants that authority (the “Grantor”) is putting you in charge of them if they were ever to become mentally incapacitated.

Here are 10 important things to know if you are holding a Power of Attorney.

1. Ensure you have a valid Power of Attorney and financial representation agreement.

Make sure your agreement is valid under the Power of Attorney Act (British Columbia). For instance, if you are appointed an enduring Power of Attorney prepared by a lawyer or notary public in British Columbia, it is likely valid and will continue throughout the Grantor’s incapacity. However, if the document is specific, conditional, prepared, signed in another jurisdiction, or hand-drawn, the document might not be valid. If this happens, you may not have the authority to act under the Power of Attorney.

5 Mistakes to Avoid When Incorporating Your Business

Incorporating your small business is a big step and if done correctly, it can result in great growth for your business. However, you need to be aware of some common mistakes that small business owners tend to make when incorporating their business.

1.Not naming your business

Many people are so concerned with the process of incorporating their business that they may forget to choose a name for their company. This does not stop the corporation from operating, but instead an incorporation number is used as its legal identifier. This number is used in place of a name for all business-related activities. It is therefore recommended to prepare a company name beforehand, as it will help the growth of your business from a branding perspective.

6 Ways to Build a Successful Partnership

A partnership can be the make it or break it moment for many businesses. If done right, it can produce great growth and results. However, quite often a business partnership will end badly and not only ruin the business but relationships as well.

There are many important factors that need to be considered when choosing your business partner and addressing these issues can help establish a successful partnership.

1.Shared vision

The first and maybe the most important conversation with a potential partner should be about expectations for the business. It is crucial to understand what exactly each partner wants out of the business. Multiple conversations regarding expectations and goals will only prove beneficial in the long-term. There are many questions you should ask, such as:

Who can Challenge my Will?

A death in the family is often a very emotional time and although a Will may not be the topic of discussion at that time, it is nevertheless very important to know the basics surrounding Wills and potential issues that may arise. In almost every province, a testator is allowed to exercise almost complete discretion over the distribution of their estate. However, BC has some of the most sympathetic laws in all of Canada.

In BC, the Wills, Estates and Succession Act (WESA), provides dependents such as a spouse and/or child with a legal right to challenge a Will. Under s.60,

if the will-maker dies leaving a Will that does not, in the court’s opinion, make adequate provisions for the proper maintenance and support of the will-maker’s spouse and/or children, the court may order a provision that it thinks just and equitable in the circumstances.

Transferring Your Business to the Next Generation

So, there are some common mistakes that people often make when they are transferring a business to the next generation. The biggest mistake is that business owners will set the value of their business at a dollar and sell it for a nominal value to the next generation because they essentially want to gift it to the next generation. The problem with this is that the Canada Revenue Agency (CRA) will take a look at that transaction and will assess the value of the shares at the actual fair market value of the shares. So, if the Canada Revenue Agency discovers that the actual fair market value of your business is a million dollars, then they will adjust the selling point of those shares from a dollar to a million dollars, which means that the seller will be hit with the capital gains tax on that amount.

Trademarking 101

What is a trademark?

A trademark is defined as letters, words, sounds, or designs that are used to distinguish one company’s goods and/or services from another. Over time a trademark evolves from representing goods and services to also representing the reputation of the company.

Types of trademarks

Ordinary trademark: includes words, designs, tastes, textures, moving images, mode of packaging, holograms, sounds, scents, 3D shapes, colours, or a combination of these are used to differentiate your goods and/or services from other companies.

Certification mark: can be licensed to multiple people or companies. They are used for the purpose of demonstrating that certain goods/services meet a defined standard.

What are the important tax benefits of a family trust?

Family trusts are both powerful and poorly understood structures that can provide significant tax benefits for high-income Canadians. Family trusts are a complex subject and should be reviewed in-depth with your accountant and your lawyer to determine if they are a good fit for you. Today I’m going to discuss two of the most important tax strategies that can be used through a family trust.

First, the multiplication of the lifetime capital gains exemption.

If your family trust is structured to own shares of your privately held corporation, you can multiply the lifetime capital gains exemption on the sale of those shares by making use of the exemption for each of your beneficiaries. A family trust with four beneficiaries, such as yourself, your spouse and two children, could potentially use the LTCGE four times, permitting you to enjoy an exemption of $3.5m on the sale of your company shares at 2020 rates.

5 Reasons Why Using Free Legal Contracts Isn’t Helpful

Free legal contracts are widely available online and using them may seem like the perfect way to save money while protecting your business. However, free legal contracts can end up costing you more while not protecting your business as you had hoped. Here are a few reasons why you should not use free legal contracts.

1.Choosing the wrong contract

Free legal contracts are available for you to use at your discretion. Most people will select one based on the title, but this may result in different consequence than intended. This means that your small business may not have the protection that you think it does. Each contract has important differences and determining which one is best suited for your particular situation should be discussed with a small business lawyer.

Should I Incorporate my own Company?

It is possible to incorporate yourself. You can do this without any legal help as BC has an online incorporation system. It is important to note however, that even with online resources, it is still possible to make mistakes before, during, and after your incorporation.

Common mistakes

Although the government website provides forms for incorporation, this does not include all of the forms that you require. Relying on government-provided forms alone will not be sufficient for you to incorporate your company. In addition, the forms or online incorporation system may prove confusing to some people and a small business lawyer can help clear up that confusion. There is also the possibility that you may make mistakes when completing the forms and that is why it is always good to have a lawyer look them over.

Key Elements of a Strong Shareholders’ Agreement

A shareholders’ agreement can go a long way in helping set up your business for long-term success. Thinking about unpleasant situations is never fun but it will help in the long run if and when these situations arise. Putting in place a shareholders’ agreement will equip you and your fellow shareholders with the necessary tools to tackle those situations. Here are some elements that should be included in all agreements.

Process for appointing directors and their duties

This section should outline how directors will be appointed. Some examples include each shareholder appointing a director, each class of shares appoints a director, or appointing them through a majority vote. Potential investors may also want a representative on the board, so that must be considered. The responsibilities of the directors should also be laid out clearly.

What Is Fair Market Value – What does this really mean?

A public company is one whose shares are freely traded on the stock exchange. Because the shares are traded on the stock exchange, the price of shares can be easily ascertained online. This is not the case with private companies. They do issue shares and have shareholders, but these shares are not traded on public exchanges, thus, making it much harder to determine the value of these shares. However, determining the fair market value of these shares on a regular basis is important when it comes to dispute resolution, taxes, obtaining insurance and a variety of other circumstances.

Fair market value

Fair market value is essentially the price an asset would sell for on the open market. However, certain conditions need to be met for the price to be considered fair market value. First, the buyer and seller must be well informed about the asset. Next, they must be acting in their own best interest and this must be free of undue pressure. Finally, the transaction must not be too rushed so that the parties have time to make an informed decision.

What is a Shareholders' Agreement | Why They're Essential To The Success Of Your Business

These agreements are some of the most notorious agreements because they are very challenging for clients to actually get around and sign. They're very long. There can be 15 to 60 Pages. They contain a lot of language that is very difficult for a non-practitioner to understand and they just seemed like something that just gets pushed to the end of the list. It's one of those things that you know is good for you but you just don't want to get done. It's kind of like going to the dentist. So let's take a look at these agreements because while they're not all that sexy they're extremely important and they can be essential to the success of your business over the long haul.

What's a Convertible Note? | Startup Funding Option Explained

Today we're going to talk about startup funding and one of the ways that you can do that is through something called a convertible note and there's a lot of confusion over how a convertible note works. When companies are raising capital to expand their business they have two ways of going about it. They can either take out loans from the bank, friends, or family or they can issue equity in their company.

Convertible Note

What a convertible note does is it blends those two different models. So what a convertible note is it's a short-term loan or a short-term debt instrument that has the option of being converted into equity at a later point in time. So when an investor first agrees to provide your company with a convertible note they are essentially providing you with a short term loan that can be later converted into Equity into shares in your company.