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Tax Planning and Estate Law

Tax issues for Canadians Residing in the US

A Case Review of Rubner v. Bistricer1

We have written two other case reviews concerning the decision in Rubner v. Bistricer. The first addressed the determination of the validity of a testamentary document while the testator was still alive and the second addressed with whether a letter was sufficient to create a trust. In this blog we are focusing on what appears to have been Brenda Bistricer’s driving motivation in taking certain positions.

First we will provide a brief summary of the material facts that pertain to this particular analysis. Brenda Bistricer is the older sister of Marvin and Joseph Rubner. They are all the children of the late Karl and Eda Rubner. Eda is 90 years old and no longer has capacity. In 1969, Karl purchased a 10% interest in a joint venture seeking to redevelop farm land in Oakville into residential. As outlined in our previous blogs, Justice Myers concluded that it had always been Karl and Eda’s intention that the family’s ownership interest was to be divided equally between the three children. But, Brenda denied that she ever owned beneficial title2 to her interest and Justice Myers found that Brenda either renounced or disclaimed her interest in Lower Fourth.3 Much of the litigation was rooted in Brenda’s desire to avoid be considered to have a legal or beneficial interest in the 1/3 interest that her parents wanted her to own.

There apparently was a strategy set in place by Brenda to ensure that she would still receive her 1/3 interest notwithstanding her denial that she had any such interest. Brenda claimed that their mother gifted to her all the net income distributions after tax of that 1/3 interest and that she also gifted to Brenda a remaining one-third interest in Lower Fourth.4 In 2014, Eda no longer had capacity. Despite this, Eda Rubner,Joseph Rubner,Brenda and her husband, Alex Bistricer, met with a lawyer. Eda executed a new will which provided that Eda held legal and beneficial title to the remaining one-third interest in Lower Fourth and that she intended to bequeath it to Brenda Bistricer.5 Leaving aside whether the 2014 Will or whether the alleged gifts were valid – what drove Brenda to deny or renounce her entitlement which she clearly wanted as evidenced by the strategy employed? The answer is that Brenda resided in the USA and had to deal with the tax consequences. Justice Myers stated:

“Brenda Bistricer’s US tax problems were affected by issues involving the ownership of her one-third share of the family’s interest in Lower Fourth. The tax problems have been of sufficient importance to her that she has taken positions in relation to her Lower Fourth interest and the income derived on that interest that drive the outcome of these proceedings. Since Brenda Bistricer realized the scope of her US tax problem and obtained advice, she has denied that she owns the one-third of the family’s interest in Lower Fourth that had been earmarked for her by her parents. ..”6

Things came to a head when Marvin sold his 1/3 interest in the Lower Fourth Venture. There was a concern about there being a deemed disposition of the trust. The solution contemplated that by Brenda and her daughter disclaiming their interests in the Trust that would eliminate the tax problem that the Family Trust would otherwise have if the assets are distributed to non-resident beneficiaries.7

Conclusion

Our previous two blogs focused on some interesting estate and litigation nuances of this case. This blog reviewed how Brenda’s tax planning went awry. Our purpose was to underscore the need of clients and planners to contemplate the spectre of estate litigation in tax planning. We suggest one should ask how vulnerable to attack is this plan if today’s family and friends become tomorrow’s adversaries and estate litigants? Does the contemplated plan pass the smell test? In this case, Brenda’s tax plan handicapped her litigation strategy. It appears to have necessitated admissions damaging to her case so as to avoid US tax liability. The lesson should not be lost on clients, planners, accountants and lawyers. It can sometimes be counter-productive to adopt creative strategies to address legitimate tax concerns of Canadians whose children reside in foreign jurisdictions.

Footnotes
  1.   See Rubner v. Bistricer, 2018 ONSC 1934, 2018 CarswellOnt 4501; 2018 ONSC 1934, 2018 CarswellOnt 4501. (“Rubner”).
     
  2.   See Rubner paragraph 133 .
     
  3.   See Rubner Paragraphs 38 and 138.
     
  4.   See Rubner paragraph 23.
     
  5.   See Rubner Paragraph 85.
     
  6.   See Rubner paragraphs 9-10 and 89.
     
  7.   See Rubner paragraph 73 and 74.
     

Charles Wagner and David Wagner

The authors of this blog is Charles Wagner and David Wagner. Charles is a Certified Specialist in Estates and Trusts and partner at Wagner Sidlofsky LLP. David is an associate at Wagner Sidlofsky LLP.

This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.
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